----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      20-F**

**(Mark      One) **

| o  | **REGISTRATION                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE                ACT                OF 1934** |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------|

**OR**

| x  | **ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---------|---------------------------------------------------------------------------------------------------------------------------------------|

**For      the fiscal year ended December 31, 2006**

**OR**

| o | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|-------------------------------------------------------------------------------------------------------------------------------------------|

**Commission      file number 333-7616**

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**Distribución      y Servicio D&S S.A.**

*(Exact      name of Registrant as specified in its charter)*

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**Distribution      and Service D&S Inc.**

*(Translation      of the Registrant’s name in English)*

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**The      Republic of Chile**

*(State      or other jurisdiction*

*of      incorporation or organization)*

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**Avenida      Presidente Eduardo Frei Montalva 8301**

**Quilicura**

**Santiago,      Chile**

**(56-2)      200-5000**

*(Address      and telephone number of principal executive offices)*

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| **Title                of each class**                                                                      |   | **Name                of each exchange on which registered** |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
| Common                Stock of Registrant represented by American Depositary Shares, or                ADSs |   | New                York Stock Exchange                       |

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** **

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**TABLE      OF CONTENTS**

|                                                                       |                     |   |                                                                                                       |   | **Page** |
|----------------------------------------------------------------------------|--------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|----------|
|  INTRODUCTION                                                         |                     | 1      |
|  PRESENTATION              OF FINANCIAL AND CERTAIN OTHER INFORMATION |                     | 2      |
|  PART              I                                                  |                     | 3      |
|                                                                       | Item                1.   |   | IDENTITY                OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                                       |   | 3        |
|                                                                       | Item                2.   |   | OFFER                STATISTICS AND EXPECTED TIMETABLE                                                     |   | 3        |
|                                                                       | Item                3.   |   | KEY                INFORMATION                                                                             |   | 3        |
|                                                                       | Item                4.   |   | INFORMATION                ON THE COMPANY                                                                  |   | 21       |
|                                                                       | Item                4A.  |   | UNRESOLVED                STAFF COMMENTS                                                                   |   | 44       |
|                                                                       | Item                5.   |   | OPERATING                AND FINANCIAL REVIEW AND PROSPECTS                                                |   | 44       |
|                                                                       | Item                6.   |   | DIRECTORS,                SENIOR MANAGEMENT AND EMPLOYEES                                                  |   | 69       |
|                                                                       | Item                7.   |   | MAJOR                SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                           |   | 76       |
|                                                                       | Item                8.   |   | FINANCIAL                INFORMATION                                                                       |   | 78       |
|                                                                       | Item                9.   |   | THE                OFFER AND LISTING                                                                       |   | 78       |
|                                                                       | Item                10.  |   | ADDITIONAL                INFORMATION                                                                      |   | 80       |
|                                                                       | Item                11.  |   | QUANTITATIVE                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                  |   | 99       |
|                                                                       | Item                12.  |   | DESCRIPTION                OF SECURITIES OTHER THAN EQUITY SECURITIES                                      |   | 100      |
|  PART              II                                                 |                     | 100    |
|                                                                       | Item                13.  |   | DEFAULTS,                DIVIDEND ARREARAGES AND DELINQUENCIES                                             |   | 100      |
|                                                                       | Item                14.  |   | MATERIAL                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF                PROCEEDS |   | 100      |
|                                                                       | Item                15T. |   | CONTROLS                AND PROCEDURES                                                                     |   | 101      |
|                                                                       | Item                16.  |   | [Reserved]                                                                                                 |   | 102      |
|                                                                       | Item                16A. |   | AUDIT                COMMITTEE FINANCIAL EXPERT                                                            |   | 102      |
|                                                                       | Item                16B. |   | CODE                OF ETHICS                                                                              |   | 102      |
|                                                                       | Item                16C. |   | PRINCIPAL                ACCOUNTANT FEES AND SERVICES                                                      |   | 102      |
|                                                                       | Item                16D. |   | EXEMPTIONS                FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                                  |   | 103      |
|                                                                       | Item                16E. |   | PURCHASES                OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED                PURCHASERS       |   | 103      |
|  PART              III                                                |                     | 105    |
|                                                                       | Item                17.  |   | FINANCIAL                STATEMENTS                                                                        |   | 105      |
|                                                                       | Item                18.  |   | FINANCIAL                STATEMENTS                                                                        |   | 105      |
|                                                                       | Item                19.  |   | EXHIBITS                                                                                                   |   | 105      |
|  INDEX              TO EXHIBITS                                       |                     | 106    |
|                                                                       |                     |   | *SIGNATURE*                                                                                                |   | 107      |

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**INTRODUCTION**

*Bolsa      de Comercio de Santiago*
*Bolsa      Electrónica de Chile)*
*Bolsa      de Valores de Valparaíso)*

**Special      Note Regarding Forward-Looking Statements**

|  | · | our                new strategy; |
|--|--------|----------------------------------|

|  | · | general                economic, political and business conditions in                Chile; |
|--|--------|---------------------------------------------------------------------------------------------|

|  | · | any                new store openings and same store                sales; |
|--|--------|----------------------------------------------------------------------------|

|  | · | our                expectations regarding ongoing litigation, and particularly the likelihood                of recovery on the purchase price owed on our sale of *Ekono*Argentina; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our                capital expenditure plans; |
|--|--------|-----------------------------------------------|

|  | · | industry                trends; and |
|--|--------|-------------------------------------|

|  | · | other                expectations, intentions and plans contained in this annual report                that                are not historical fact. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

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**PRESENTATION      OF FINANCIAL AND CERTAIN OTHER INFORMATION**

|  | · | “U.S.                dollars”, “dollars”, “$”, or “US$” refer to United States                dollars; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | “pesos”                or “Ch$” refer to Chilean pesos, the legal currency of                Chile; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------|

|  | · | “Argentine                pesos” or “A$” refer to Argentine pesos, the legal currency of                Argentina; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | “UF”                refers to *Unidades                de Fomento*,                an inflation-indexed, peso-denominated monetary unit. The UF rate                is set                daily in advance based on changes in the previous month’s inflation rate;                and |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | “€”                refers to euros, the legal currency of the European Union. |
|--|--------|-------------------------------------------------------------------------------------------------|

*Instituto      Nacional de*
*Estadísticas*

*Superintendencia      de*
*Valores      y Seguros*

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**PART      I**

**Item      1.**
**IDENTITY      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

**Item      2.**
**OFFER      STATISTICS AND EXPECTED TIMETABLE**

**Item      3.**
**KEY      INFORMATION**

***General***

***Recent      Developments***

*Corporate      Reorganization.*
*Presto*

*Changes      to Board of Directors and Audit Committee.*

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*Settlement      Agreement with the Fiscalía Nacional Económica.*
*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica, *
* *
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento*

*Launch      of New Stores under the Ekono Brand. *
*Ekono*
** **
*Ekono*
** **
*Ekono*
** **
*Líder*
*Ekono*
** **
*Ekono*

*Agreement      with Farmacias Ahumanda S.A.*

*Merger      with S.A.C.I Falabella*

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*Banco      Falabella*
*Saitec*
*Sociedad      de*
*Rentas      Falabella*

*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*

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*Overview      of S.A.C.I Falabella *

*sociedad      anónima abierta*

|  | · | *Department                stores:*                Falabella’s flagship retail units are its department stores operating                under the “Falabella” brand. These stores offer a broad selection of                merchandise including clothing, household accessories, electronics,                home                decorations, media, beauty products, computers, sporting goods and                gifts.                As of December 31, 2006, Falabella operated 36 Falabella department                stores                in Chile, seven in Argentina and one in Colombia with an average                selling                space of 5,442, 5,688 and 10,268 square meters (approximately 58,577,                61,225 and 110,524 square feet), respectively. Falabella also operated                11                department stores in Peru. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Home                improvement centers:*                Falabella operates home improvement centers under its “Sodimac” brand. The                Sodimac brand is strongest in Chile, where, as of December 31, 2006,                Falabella operated 56 stores with an average selling space of 7,442                square                meters (approximately 80,105 square feet). Falabella also operated                ten                home improvement centers in Colombia and three in Peru with an average                selling space of 10,654 and 10,047 square meters (approximately 114,679                and 108,145 square feet),                respectively. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Hypermarket                and supermarkets:*                Falabella operates hypermarkets and supermarkets under its “Tottus” and                “San Francisco” brands. Falabella acquired its San Francisco supermarkets                in 2004*.*                As                of December 31, 2006, Falabella operates 16 supermarkets in Chile                under                both the “San Francisco” and “Tottus” brands and four hypermarkets in Peru                under the “Tottus” brand. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  | · | *Financial                  Services:*                  Falabella’s financial services business includes its “CMR” credit card,                  retail banking operations, an insurance brokerage and a travel                  agency.                  Falabella’s CMR credit card has a market presence in Chile, Peru,                  Argentina and Colombia. As of December 31, 2006, there were over                  four                  million CMR credit card accounts throughout the four countries                  where the                  CMR credit card was offered, including approximately 2.6 million                  in Chile,                  1.0 million in Peru, 490 thousand in Argentina and 200 thousand                  in                  Colombia. Separately from its CMR operation, Falabella offers retail                  banking services under its “Banco Falabella” brand. Banco                  Falabella                  offers mortgage loans, savings and checking accounts and credit                  cards,                  among other services, and                  is                  currently in the process of developing new products. As of December                  31,                  2006, Banco Falabella, has 73 branches and a 5.8% share of the                  consumer                  credit market in Chile. Through Falabella Pro and Viajes Falabella,                  Falabella also offers comprehensive insurance and travel services,                  respectively. Falabella Pro currently operates in Chile, Peru and                  Colombia. Viajes Falabella, maintains operations in Chile, Argentina                  and                  Peru and is in the process of developing new operations in                  Colombia. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Real                estate development operations:*                Falabella maintains several real estate holdings, including a 64.5%                stake                in seven shopping malls and a 45% stake in the Plaza Vespucio shopping                mall. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Other                  operations:*                  Falabella maintains a 20% stake in the Farmacias Ahumada S.A.,                  a Chilean                  pharmacy chain. It also owns a 100% stake in Mavesa, a clothing                  manufacturer, and a 50% stake in Italmod, also a clothing manufacturer. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Selected      Consolidated Financial and Operating Data of Falabella      S.A.C.I.(1)**

|                                                                      |   | **At                and for the year ended December 31,**                                                                                                    |       |
|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                      |   | **2005**                                                                                                                                                     |       | **2006** |   | **2006(2)** |   |
|                                                                      |   |                                                                                                                                                         |       |   |   |   |   |
|                                                                      |   | **(amounts                in millions of constant Ch$ and millions of US$, except for percentages                or                as otherwise indicated)** |       |
| **INCOME                STATEMENT DATA:****Chilean                GAAP:** |   |                                                                                                                                                         |       |   |   |   |   |
| Revenues                                                                  |   | Ch$                                                                                                                                                          | 2,016,038  |   | Ch$ | 1,239,185 |   | US$ | 4,375.0 |   |
| Costs                of goods sold                                        |   |                                                                                                                                                         | (1,434,668 | ) |   | (1,653,251 | ) |   | (3,105.3 | ) |
| Gross                margin                                               |   |                                                                                                                                                         | 581,370    |   |   | 675,935 |   |   | 1,696.6 |   |
| Selling,                general and administrative expenses               |   |                                                                                                                                                         | (364,761   | ) |   | (434,243 | ) |   | (815.6 | ) |
| Operating                income                                           |   |                                                                                                                                                         | 216,608    |   |   | 241,692 |   |   | 454.0 |   |
|                                                                      |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
| Non-Operating                Profit (Loss)                                |   |                                                                                                                                                         | (25,787    | ) |   | (1,882 | ) |   | (3.5 | ) |
|                                                                      |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
| Profit                Before Income Tax & Extraordinary Items         |   |                                                                                                                                                         | 190,842    |   |   | 239,810 |   |   | 450.4 |   |
|                                                                      |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
| **Profit                (Loss) in the Fiscal Year**                       |   |                                                                                                                                                         | 164,586    |   |   | 197,788 |   |   | 371.5 |   |
|                                                                      |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
|                                                                      |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
| **Operating                Information:**                                 |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
| Number                of department stores (at end of period):            |   |                                                                                                                                                         |       |   |   |   |   |   |   |   |
| *Falabella                (Chile)*                                        |   |                                                                                                                                                         | 35         |   |   | 36 |   |   |   |   |
| *Falabella                (Argentina)*                                    |   |                                                                                                                                                         | 7          |   |   | 7 |   |   |   |   |
| *Falabella                (Colombia)*                                     |   |                                                                                                                                                         | —    |   |   | 1 |   |   |   |   |
| *Saga                Falabella (Peru)*                                    |   |                                                                                                                                                         | 10         |   |   | 11 |   |   |   |   |
| Total                                                                     |   |                                                                                                                                                         | 52         |   |   | 55 |   |   |   |   |
| Total                selling space                                        |   |                                                                                                                                                         | 274,382    |   |   | 312,119 |   |   |   |   |
| Average                selling space per store (square meters)            |   |                                                                                                                                                         | 5,276.6    |   |   | 5,674.9 |   |   |   |   |

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|   |   | **At                  and for the year ended December 31,**                                                                                                        |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |   | **2005**                                                                                                                                                           |   | **2006** |   | **2006(2)** |   |
|   |   |                                                                                                                                                               |   |   |   |   |   |
|   |   | **(amounts                  in millions of constant Ch$ and millions of US$, except for percentages                  or                  as otherwise indicated)** |   |

| Number                of Home Improvement Centers (at end of period): |   |   |    |   |   |    |   |   |   |   |
|-----------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|
| *Sodimac                (Chile)** *                              |   |   | 54      |   |   | 56      |   |   |   |   |
| *Sodimac                (Peru)** *                               |   |   | 2       |   |   | 3       |   |   |   |   |
| *Sodimac                (Colombia)** *                           |   |   | 9       |   |   | 10      |   |   |   |   |
| Total                                                                 |   |   | 65      |   |   | 69      |   |   |   |   |
| Total                selling space                                    |   |   | 493,343 |   |   | 553,438 |   |   |   |   |
| Average                selling space per store (square meters)        |   |   | 7,589.9 |   |   | 8,020.8 |   |   |   |   |
|                                                                  |   |   |    |   |   |    |   |   |   |   |
| Number                of Super and Hyper Markets (at end of period):  |   |   |    |   |   |    |   |   |   |   |
| *San                Francisco (Chile)** *                        |   |   | 10      |   |   | 10      |   |   |   |   |
| *Tottus                (Chile))** *                              |   |   | 1       |   |   | 6       |   |   |   |   |
| *Tottus                (Peru)** *                                |   |   | 3       |   |   | 4       |   |   |   |   |
| Total                                                                 |   |   | 14      |   |   | 20      |   |   |   |   |
| Total                selling space                                    |   |   | 58,895  |   |   | 88,853  |   |   |   |   |
| Average                selling space per store(9)                     |   |   | 4,206   |   |   | 4,443   |   |   |   |   |

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| (1) | Income                Statement data of Falabella S.A.C.I. is derived from the financial                statements of Falabella S.A.C.I., audited by its independent auditors.                This information does not take into account any future synergies                or                effects that may result from its merger with our company. This information                is presented for illustrative purposes only and does not purport                to                represent the financial statements of the merged companies nor is                it                necessarily indicative of their future operating                results. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Chilean                peso amounts (except dividends) have been translated into U.S. dollars                at                the rate of Ch$532.39 per U.S. dollar, the Observed Exchange Rate                at                December 31, 2006. Dividends are translated at the Observed Exchange                Rate                on the date of payment. Such U.S. dollar transactions are presented                for                the convenience of the reader and should not be construed as                representations that the Chilean peso amounts have been or could                be                converted into U.S. dollars at that rate or any other                rate. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Selected      Financial and Operating Data of D&S**

|                                                                           |   | **At                and for the year ended December 31,**                                                                                                                                                            |      |
|--------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                           |   | **2002**                                                                                                                                                                                                             |      | **2003** |   | **2004** |   | **2005** |   | **2006** |   | **2006(1)** |   |
|                                                                           |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   | **(amounts                in millions of constant Ch$ and millions of US$, and except per share                and****per                ADS information and percentages or as otherwise                indicated)** |      |
| **INCOME                STATEMENT DATA:****Chilean                GAAP:**      |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |
| Net                revenue                                                     |   | Ch$                                                                                                                                                                                                                  | 1,147,863 |   | Ch$ | 1,260,924 |   | Ch$ | 1,523,657 |   | Ch$ | 1,632,341 |   | Ch$ | 1,696,665 |   | Ch$ | 3,186.9 |   |
| Cost                of sales                                                   |   |                                                                                                                                                                                                                 | (885,876  | ) |   | (976,989 | ) |   | (1,171,905 | ) |   | (1,175,299 | ) |   | (1,229,418 | ) |   | (2,309.2 | ) |
| Gross                profit                                                    |   |                                                                                                                                                                                                                 | 261,987   |   |   | 283,935 |   |   | 351,752 |   |   | 457,041 |   |   | 467,246 |   |   | 877.6 |   |
| Selling                and administrative expenses                             |   |                                                                                                                                                                                                                 | (215,730  | ) |   | (246,714 | ) |   | (320,527 | ) |   | (387,543 | ) |   | (402,958 | ) |   | (756.9 | ) |
| Operating                income                                                |   |                                                                                                                                                                                                                 | 46,257    |   |   | 37,221 |   |   | 31,224 |   |   | 69,498 |   |   | 64,288 |   |   | 120.8 |   |
| Non-operating                income                                            |   |                                                                                                                                                                                                                 | 1,431     |   |   | 1,609 |   |   | 3,056 |   |   | 4,191 |   |   | 5,021 |   |   | 9.4 |   |
| Non-operating                expenses                                          |   |                                                                                                                                                                                                                 | (22,498   | ) |   | (20,089 | ) |   | (23,309 | ) |   | (23,809 | ) |   | (26,103 | ) |   | (49.0 | ) |
| Net                price-level restatement and foreign exchange gain (loss)    |   |                                                                                                                                                                                                                 | 5,947     |   |   | (945 | ) |   | 2,235 |   |   | (1,694 | ) |   | 1,267 |   |   | 2.4 |   |
| Non-operating                loss                                              |   |                                                                                                                                                                                                                 | (15,120   | ) |   | (19,425 | ) |   | (18,018 | ) |   | (21,311 | ) |   | (19,815 | ) |   | (37.2 | ) |
| Income                before income taxes                                      |   |                                                                                                                                                                                                                 | 31,137    |   |   | 17,796 |   |   | 13,206 |   |   | 48,187 |   |   | 44,473 |   |   | 83.5 |   |
| Income                taxes                                                    |   |                                                                                                                                                                                                                 | (5,099    | ) |   | (5,039 | ) |   | (2,251 | ) |   | (4,930 | ) |   | (4,821 | ) |   | (9.1 | ) |
| Net                income                                                      |   | Ch$                                                                                                                                                                                                                  | 26,038    |   | Ch$ | 12,757 |   | Ch$ | 10,955 |   | Ch$ | 43,257 |   | Ch$ | 39,653 |   | Ch$ | 74.5 |   |
| Basic                and diluted earning per share(2)                          |   | Ch$                                                                                                                                                                                                                  | 4.72      |   | Ch$ | 2.31 |   | Ch$ | 1.68 |   | Ch$ | 6.63 |   | Ch$ | 6.12 |   | US$ | 0.011 |   |
| Basic                and diluted earning per ADS(3)                            |   |                                                                                                                                                                                                                 | 283.02    |   |   | 138.66 |   |   | 100.82 |   |   | 398.07 |   |   | 366.93 |   | US$ | 0.69 |   |
| Dividends                per share(4)                                          |   | Ch$                                                                                                                                                                                                                  | 2.50      |   | Ch$ | 2.50 |   | Ch$ | 3.1 |   | Ch$ | 2.00 |   | Ch$ | 4.00 |   | US$ |  0.008 |   |
| Dividends                per ADS(3)(4)                                         |   |                                                                                                                                                                                                                 | 150.0     |   |   | 150.0 |   |   | 186.0 |   |   | 120.0 |   |   | 240.0 |   | US$ |  0.45 |   |
| Weighted                average shares outstanding (in millions)(5) (16)  |   |                                                                                                                                                                                                                 | 5,520     |   |   | 5,520 |   |   | 6,520 |   |   | 6,520 |   |   | 6,484 |   |   |   |   |
| **U.S.                GAAP:**                                                  |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                revenue                                                     |   | Ch$                                                                                                                                                                                                                  | 1,058,035 |   | Ch$ | 1,158,255 |   | Ch$ | 1,531,462 |   | Ch$ | 1,480,327 |   | Ch$ | 1,534,004 |   | Ch$ | 2,881.4 |   |
| Operating                income                                                |   |                                                                                                                                                                                                                 | 39,685    |   |   | 33,993 |   |   | 27,963 |   |   | 65,889 |   |   | 52,808 |   |   | 99.2 |   |
| Net                income                                                      |   |                                                                                                                                                                                                                 | 31,360    |   |   | 15,980 |   |   | 10,131 |   |   | 47,377 |   |   | 38,339 |   |   | 72.0 |   |
| Basic                and diluted earning per share(2)                          |   | Ch$                                                                                                                                                                                                                  | 5.68      |   | Ch$ | 2.89 |   | Ch$ | 1.55 |   | Ch$ | 7.27 |   | Ch$ | 5.91 |   | Ch$ | 0.011 |   |
| Basic                and diluted earning per ADS(3)                            |   |                                                                                                                                                                                                                 | 340.87    |   |   | 173.70 |   |   | 93.23 |   |   | 435.98 |   |   | 354.8 |   |   | 0.68 |   |
| Weighted                average shares outstanding (in millions)(5) (16)  |   |                                                                                                                                                                                                                 | 5,520     |   |   | 5,520 |   |   | 6,520 |   |   | 6,520 |   |   | 6,484 |   |   |   |   |
| **BALANCE                SHEET DATA:****Chilean                GAAP:**         |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                current assets                                            |   | Ch$                                                                                                                                                                                                                  | 271,037   |   | Ch$ | 338,100 |   | Ch$ | 403,604 |   | Ch$ | 392,542 |   | Ch$ | 341,973 |   | Ch$ | 642.3 |   |
| Property,                plant and equipment-net                               |   |                                                                                                                                                                                                                 | 536,110   |   |   | 541,716 |   |   | 629,380 |   |   | 618,917 |   |   | 646,844 |   |   | 1,215.0 |   |
| Total                assets                                                    |   |                                                                                                                                                                                                                 | 827,042   |   |   | 906,034 |   |   | 1,095,966 |   |   | 1,127,451 |   |   | 1,205,405 |   |   | 2,264.1 |   |
| Short-term                debt                                                 |   |                                                                                                                                                                                                                 | 125,592   |   |   | 146,419 |   |   | 106,987 |   |   | 218,368 |   |   | 137,319 |   |   | 257.9 |   |
| Long-term                debt                                                  |   |                                                                                                                                                                                                                 | 150,542   |   |   | 189,805 |   |   | 245,637 |   |   | 123,642 |   |   | 268,614 |   |   | 504.5 |   |
| Total                shareholders’ equity                                |   |                                                                                                                                                                                                                 | 329,315   |   |   | 327,186 |   |   | 482,245 |   |   | 498,560 |   |   | 517,911 |   |   | 972.8 |   |
| Ratio                of shareholders’ equity to capitalization(6)        |   |                                                                                                                                                                                                                 | 62.3      | % |   | 59.8 | % |   | 64.3 | % |   | 69.0 | % |   | 64.7 | % |   | 64.7 | % |
| **U.S.                GAAP:**                                                  |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                                    |   | Ch$                                                                                                                                                                                                                  | 832,988   |   | Ch$ | 906,242 |   | Ch$ | 1,098,073 |   | Ch$ | 1,137,155 |   | Ch$ | 1,224,051 |   | Ch$ | 2,299.2 |   |
| Long-term                debt                                                  |   |                                                                                                                                                                                                                 | 150,542   |   |   | 194,464 |   |   | 249,007 |   |   | 129,853 |   |   | 283,871 |   |   | 533.2 |   |
| Total                shareholders’ equity                                |   |                                                                                                                                                                                                                 | 314,177   |   |   | 316,017 |   |   | 478,973 |   |   | 501,044 |   |   | 520,165 |   |   | 977.0 |   |
| **OTHER                FINANCIAL INFORMATION****Chilean                GAAP:** |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital                expenditures                                            |   | Ch$                                                                                                                                                                                                                  | 76,584    |   | Ch$ | 47,877 |   | Ch$ | 159,792 |   | Ch$ | 63,434 |   | Ch$ | 79,686 |   | Ch$ | 149.7 |   |
| Depreciation                and amortization                                   |   |                                                                                                                                                                                                                 | 37,510    |   |   | 41,198 |   |   | 52,119 |   |   | 56,305 |   |   | 54,512 |   |   | 102.4 |   |
| Net                cash provided (used in) from operating activities           |   |                                                                                                                                                                                                                 | 30,775    |   |   | 36,268 |   |   | (14,263 | ) |   | 65,049 |   |   | 54,436 |   |   | 102.2 |   |
| **Financial                Ratios(7)****(Chilean                GAAP):**       |   |                                                                                                                                                                                                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross                margin                                                    |   |                                                                                                                                                                                                                 | 22.8      | % |   | 22.5 | % |   | 23.1 | % |   | 28.0 | % |   | 27.5 | % |   | 27.5 | % |
| Operating                margin                                                |   |                                                                                                                                                                                                                 | 4.0       |   |   | 3.0 |   |   | 2.0 |   |   | 4.3 |   |   | 3.8 | % |   | 3.8 | % |
| Net                margin                                                      |   |                                                                                                                                                                                                                 | 2.3       |   |   | 1.0 |   |   | 0.7 |   |   | 2.6 |   |   | 2.3 | % |   | 2.3 | % |
| Current                ratio                                                   |   |                                                                                                                                                                                                                 | 79.5      |   |   | 88.6 |   |   | 111.2 |   |   | 78.9 |   |   | 83.2 |   |   | 83.2 |   |
| Financial                debt/total shareholders’ equity                 |   |                                                                                                                                                                                                                 | 83.9      |   |   | 102.8 |   |   | 73.1 |   |   | 68.6 |   |   | 78.4 |   |   | 78.4 |   |

----

|                                                             |   |  **At                  and for the year ended December 31,**                                                                                                                                                                 |    |
|------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                             |   | **2002**                                                                                                                                                                                                                               |    |   **2003** |   |  **2004**  |   |  **2005** |   |  **2006** |   |  **2006(1)** |   |
|                                                             |   |  **(amounts                  in millions of constant Ch$ and millions of US$, and except per                  share and****per                    ADS information and percentages or as otherwise                    indicated)** |    |
|                                                             |   |                                                                                                                                                                                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  Information:**                      |   |                                                                                                                                                                                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number                  of stores (at end of period):            |   |                                                                                                                                                                                                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Almac*                                                          |   |                                                                                                                                                                                                                                   | 4       |   |   | — |   |   | — |   |   | — |   |   |   |   |   |   |   |
| *Ekono*                                                          |   |                                                                                                                                                                                                                                   | 23      |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| *Líder                  Express(8)*                         |   |                                                                                                                                                                                                                                   | — |   |   | 26 |   |   | 23 |   |   | 27 |   |   | 44 |   |   | 44 |   |
| *Líder*                                                     |   |                                                                                                                                                                                                                                   | 21      |   |   | 23 |   |   | 31 |   |   | 32 |   |   | 33 |   |   | 33 |   |
| *Líder                  Vecino*                             |   |                                                                                                                                                                                                                                   | 13      |   |   | 19 |   |   | 24 |   |   | 26 |   |   | 26 |   |   | 26 |   |
| *Líder                  Mercado*                            |   |                                                                                                                                                                                                                                   | 1       |   |   | — |   |   | — |   |   | — |   |   | — |   |   |   |   |
| Total                                                            |   |                                                                                                                                                                                                                                   | 62      |   |   | 68 |   |   | 78 |   |   | 85 |   |   |   |   |   |   |   |
| Total                  selling space                             |   |                                                                                                                                                                                                                                   | 309,361 |   |   | 333,344 |   |   | 404,467 |   |   | 426,126 |   |   | 464,980 |   |   |   |   |
| Average                  selling space per store(9)              |   |                                                                                                                                                                                                                                   | 5,005   |   |   | 4,902 |   |   | 5,185 |   |   | 5,013 |   |   | 4,735 |   |   |   |   |
| Average                  sales per store (in millions)(10)(11)   |   | Ch$                                                                                                                                                                                                                                    | 16,949  |   | Ch$ | 16,858 |   | Ch$ | 16,982 |   | Ch$ | 17,266 |   | Ch$ |  14,619 |   | US$ | 27.5 |   |
| Increase                  (decrease) in same store sales(11)(12) |   |                                                                                                                                                                                                                                   | -1.40   | % |   | 0.30 | % |   | 1.60 | % |   | -1.30 | % |   | -                  3.4 | % |   |   |   |
| Sales                  per square meter (in millions)(11)(13)    |   | Ch$                                                                                                                                                                                                                                    | 3.4     |   | Ch$ | 3.4 |   | Ch$ | 3.3 |   | Ch$ | 3.4 |   | Ch$ |  3.2 |   | US$ | 0.006 |   |
| Total                  number of employees(14)                   |   |                                                                                                                                                                                                                                   | 17,912  |   |   | 19,494 |   |   | 26,333 |   |   | 30,124 |   |   | 29,389 |   |   |   |   |
| Sales                  per employee(11)(15)                      |   | Ch$                                                                                                                                                                                                                                    | 61.5    |   | Ch$ | 67.5 |   | Ch$ | 64.1 |   | Ch$ | 56.2 |   |   | 57.3 |   | US$ | 0.11 |   |

----

| (1) | Chilean                peso amounts (except dividends) have been translated into U.S. dollars                at                the rate of Ch$532.39 per U.S. dollar, the Observed Exchange Rate                at                December 31, 2006. Dividends are translated at the Observed Exchange                Rate                on the date of payment. Such U.S. dollar transactions are presented                for                the convenience of the reader and should not be construed as                representations that the Chilean peso amounts have been or could                be                converted into U.S. dollars at that rate or any other                rate. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Net                income per share expressed in constant Chilean pesos by dividing                net                income by number of shares outstanding at period-end. In U.S. GAAP,                earnings per share are calculated on the basis of the weighed average                shares outstanding. The figures for 2004 reflect a capital increase                of                250,000,000 shares of common stock in August 2004 and a stock split                of                one-to-four in December 2004. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Earnings                per ADS reflect a ratio of 60 common shares per                ADS. |
|-----|---------------------------------------------------------------------------------------------|

| (4) | Figures                are in constant Chilean pesos and U.S. dollars. U.S. dollar amounts                for                dividends are calculated by applying the Observed Exchange Rate on                the                dividend payment date to the nominal peso                amount. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Calculated                on the basis of the number of shares outstanding and fully paid. |
|-----|--------------------------------------------------------------------------------------------|

| (6) | Capitalization                is equal to the current portion of long-term debt plus long-term                debt plus                minority interest and equity. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | These                ratios, which are expressed as percentages, were calculated as follows:                Gross margin = Gross profit/Net revenues; Operating margin = Operating                income/Net revenues; Net margin = Net income/Net revenues; Current                ratio =                Current assets/Current liabilities. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes                stores formerly operated under the *Almac*                and *Ekono*                brands. |
|-----|----------------------------------------------------------------------------------------------------------------------|

| (9) | In                square meters. Calculated by adding the average monthly selling space                for                each month during the year and dividing the result by 12. Average                monthly                selling space is defined as total selling space as of the last day                of the                month divided by the number of stores open on the last day of such                month.                Sales area of *FarmaLíder*                stores not included (marginal). Each square meter is equivalent to                10,764                square feet. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Sales                for the period divided by the average number of stores at the end                of each                month during the period. Includes sales from *FarmaLíder*                stores. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | “Sales”                set forth net revenues under Chilean GAAP, excluding vendor allowances.                As                such, sales are equal to net revenues under U.S.                GAAP. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Reflects                increase (decrease) in net revenues of all stores open and operated                by our                company through out two corresponding financial periods and, consequently,                excludes net revenues of stores opened or closed or which underwent                renovation during either of such                periods. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Sales                for the period divided by the average square meters of selling space                at                the end of each month during the period includes sales from *FarmaLíder*                stores, sales area of these stores is not                included. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Number                of full-time equivalent employees at period-end (company total). |
|------|----------------------------------------------------------------------------------------|

| (15) | Sales                for the period divided by the average number of employees at the                end of                each month during the period (full time shifts in stores) including                employees in *FarmaLíder*                stores. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | In                August 2004, we made a capital increase at 250,000,000 common shares,                which was entirely subscribed and paid. As a result of this, the                number of                our outstanding shares increased from 1,380,000,000 to 1,630,000,000                shares. Effective December 6, 2004, we conducted a one-to-four stock                split                of our common shares in Chile. As a result of the stock split, the                number                of our outstanding shares increased from 1,630,000,000 to 6,520,000,000.                In order to maintain the same economic and corporate rights for the                ADRs                as the underlying common shares, the number of shares representing                each                ADS was increased from 15 common shares per ADS to 60 common shares                per                ADS. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Exchange        Rates**

*Mercado        Cambiario Formal*
*Mercado        Cambiario Informal*

|                             |   | **Observed                Exchange Rate (4)** |   |
|----------------------------------|--------|-----------------------------------------------|--------|
| **Period**                       |   | **Low                (1)**                    |   | **High                (1)** |   | **Average** |   | **Year                End** |   |
|                             |   |                                          |   |   |   |   |   |   |   |
| 2002                (2)          |   | Ch$                                           | 641.75 |   | Ch$ | 756.56 |   | Ch$ | 694.46 |   | Ch$ | 718.61 |   |
| 2003                (2)          |   |                                          | 593.10 |   |   | 758.21 |   |   | 691.40 |   |   | 593.80 |   |
| 2004                (2)          |   |                                          | 557.40 |   |   | 649.45 |   |   | 609.53 |   |   | 557.40 |   |
| 2005                (2)          |   |                                          | 509.70 |   |   | 592.75 |   |   | 559.86 |   |   | 512.50 |   |
| 2006                (2)          |   |                                          | 511.44 |   |   | 549.63 |   |   | 529.64 |   |   | 532.39 |   |
| December                2006 (3) |   |                                          | 524.78 |   |   | 534.43 |   |   | 527.83 |   |   | NA |   |
| January                2007 (3)  |   |                                          | 534.42 |   |   | 545.18 |   |   | 541.06 |   |   | NA |   |
| February                2007 (3) |   |                                          | 535.29 |   |   | 548.67 |   |   | 542.05 |   |   | NA |   |
| March                2007 (3)    |   |                                          | 535.36 |   |   | 541.95 |   |   | 538.45 |   |   | NA |   |
| April                2007 (3)    |   |                                          | 525.96 |   |   | 539.69 |   |   | 531.64 |   |   | NA |   |
| May                2007 (3)      |   |                                          | 517.64 |   |   | 527.52 |   |   | 521.98 |   |   | NA |   |
| June                2007         |   |                                          | 524.10 |   |   | 529.78 |   |   | 526.80 |   |   | NA |   |

----

| (1) | Reflects                pesos at historical values rather than constant pesos. |
|-----|--------------------------------------------------------------------------------|

| (2) | The                average of observed exchange rates for pesos on the last day of each                full                month during the relevant period. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The                average of closing observed exchange rates for pesos for each day                of                transactions during the month. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Transactions                carried out on the previous bank business day reported by the Central                Bank. |
|-----|------------------------------------------------------------------------------------------------------------------------|

----

**RISK      FACTORS **

*An      investment in our common shares involves a high degree of risk. Investors in      our      common shares should carefully consider the following risk factors and the      other      information in this annual report.*

**Risks      Relating to Our Company**

***Our      current strategy may not have the expected results on our      profitability.***

|  | · | we                depend upon high sales volume and we may generate less additional                sales                volume than expected; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | we                may fail to achieve desired reductions in selling and administrative                expenses; |
|--|--------|-----------------------------------------------------------------------------------------------------------------|

|  | · | our                competitors may decide to match or undercut some or all of our reduced                prices, making it difficult to sustain a sufficient price differential                to                attract the desired increase in                customers; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | we                  may encounter difficulties obtaining additional vendor allowances                  from                  suppliers in the expected amounts and within the timeframe we currently                  anticipate; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | we                  may encounter difficulties expanding our operations due to factors                  beyond                  our control, including increased competition and unfavorable                  macroeconomic, sociopolitical and demographic conditions;                  and |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | even                if we are successful in implementing our strategy, it may take longer                than                planned to achieve the desired                results. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Our      merger with Falabella may not occur or may be set      aside.***

*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*

----

*Tribunal      de Defensa de la Libre Competencia*

***Our      merger with S.A.C.I Falabella may be difficult and expensive and may not result      in the benefits that we currently expect.***

|  | · | inconsistencies                in standards, controls, procedures and policies, business cultures                and                compensation structures between us and S.A.C.I Falabella and the                need to                implement, integrate and harmonize various business-specific operating                procedures and systems, as well as the financial, accounting, information                and other systems of our operations and those of S.A.C.I Falabella; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | diversion                of management’s attention from their other responsibilities as a result of                the need to deal with integration issues; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | inability                to create synergies in the management of the combined assets of the                surviving company; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------|

|  | · | failure                to retain our and S.A.C.I Falabella’s customers and suppliers or                resistance from advocacy groups representing such                constituencies; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | difficulties                in achieving full utilization of our and S.A.C.I Falabella’s assets and                resources; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|  | · | inability                to complete or satisfy, in a timely manner, certain asset sales or                other                conditions, in the event such conditions are imposed on us by authorities;                and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | difficulties                in reducing overhead costs, including the combination of call centers                and                customer service centers. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Increased      competition may adversely affect our results of operations and sales volume.***

*Líder*

----

***The      Chilean retail and supermarket industries may become saturated and prevent      us      from carrying out our plans for expansion through development and      growth.***

***The      growth of our credit card operations may expose us to increased credit and      financial risk, which may adversely affect our financial condition and results      of operations.***

*Presto      *
*Presto      *

|  | · | *Economic                Downturns*-                Our credit card business is affected by general economic conditions                beyond                our control, including employment levels, consumer confidence and                interest                rates. A downturn in the Chilean economy may lead to a decrease in                credit                sales; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Increased                Delinquencies and Charge-offs*-                Subject to our credit standards, we seek to increase the in-store                credit                available to our customers, particularly to permit the purchase of                more                expensive, higher-margin durable goods. As a result, our credit card                operations accept a significant portion of applicants otherwise rejected                by credit card operations administered by local Chilean banks. These                customers generally have higher rates of charge-offs and delinquencies                and                are more adversely affected by downturns in the Chilean economy than                customers with better credit                profiles; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | *Inability                to Predict Future Charge-offs*-                The approaches we use to select our customers may not be as effective                at                predicting future charge-offs due to changes in the economy, which                may                result in higher incidence of delinquencies among our                customers; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Changes                in Credit Card Use*-                A                variety of social factors may cause changes in credit card use, including                changes in consumer confidence levels, the public’s perception of the use                of credit cards, and changing attitudes about incurring debt;                and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **·** | *Increased                Regulation*-                During 2005, Servicios                y Administración de Créditos Comerciales Presto S.A.                voluntarily requested and obtained the authorization of the Central                Bank                of Chile and the Chilean *Superintendencia                de Bancos e Instituciones Financieras*                (Superintendency of Banks and Financial Institutions) to issue and                operate                our *Presto*                credit card as an “open credit card”; that is, such authorization allowed                expanding the use of the *Presto*                credit card as a valid payment method with respect to stores and                businesses throughout Chile which form part of our network of affiliated                businesses or entities. It also made Servicios y Administración de                Créditos Comerciales Presto S.A. and the *Presto*credit                card subject to the rules and regulations applicable to such “banking                credit card” issuers. These rules and regulations lead to, among other                things, higher levels of provisions for payment defaults than those                required under our previous policy. Effective as of April 30, 2006,                the                Chilean Central Bank enacted new rules regulating non-banking credit                card                issuers and operators, which were further developed and complemented                by                new regulation issued by the Superintendency of Banks and Financial                Institutions in May 2006, as amended from time to time. Although                new                regulation issued by the Superintendency of Banks and Financial                Institutions is substantially different regarding regulated non-banking                credit cards issuers and operators, it remains largely unaltered                for what                banking credit cards relate to. As *Servicios                y Administración de Créditos Comerciales Presto S.A.*                already fulfilled the highest level of obligations and requirements                imposed by the Superintendency of Banks and Financial Institutions,                equalizing those applicable to banking credit cards, therefore, new                regulations, however, do not significantly affect the issuance and                operation of our *Presto*                credit card. See “Information on the Company―Regulation”. |
|--|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***If      we are unable to access capital markets in the future, our financial condition      may be adversely affected.***

***A      change in antitrust law, regulation or regulatory oversight in Chile could      require that we take certain compliance measures including the incurrence of      significant incremental expenses which could adversely impact our ability to      expand our business.***

*Fiscalía      Nacional Económic *
*Tribunal      de Defensa de la Libre*
*Competencia      *
*Fiscalía      Nacional Económica *
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica, *
* *
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento*

----

*Físcal      Nacional Economico*

***The      default on the payment of the deferred amount of the purchase price for      Ekono-Argentina may adversely affect our results of      operations.***

*Ekono-Argentina,      *

***Our      controlling shareholders own a substantial majority of our share capital and      exercise significant influence over board decisions.***

|  | · | the                election of a majority of the members of our board of directors; |
|--|--------|-------------------------------------------------------------------------------------|

|  | · | the                determination of the amount of dividends we distribute (subject to                the                legally mandated minimum of 30% of net                income); |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                    acquisition of assets; |
|--|--------|-----------------------------------------------|

|  | · | the                  disposition of assets not exceeding 50% of the company’s assets;                  and |
|--|--------|------------------------------------------------------------------------------------------------------------------|

----

|  | · | future                issuance of debt securities not convertible into                stock. |
|--|--------|----------------------------------------------------------------------------------------------|

***The      decision of our controlling shareholders to dispose of a significant number      of      their shares could adversely affect the trading price of our shares and      ADSs.***

***Increased      labor and employment regulation may adversely affect our results of      operations.***

*Ley      de Subcontratación*

***Our      management has identified a material weakness and significant deficiencies      in      our internal controls.***

----

**Risks      Relating to Chile**

***Our      growth and profitability depend on the level of economic activity in Chile      and      other emerging markets.***

|  | · | the                economic or other policies of the Chilean government, which has a                substantial influence over many aspects of the private                sector; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | other                political or economic developments in or affecting Chile; |
|--|--------|--------------------------------------------------------------------------------|

|  | · | regulatory                changes or administrative practices of Chilean authorities; |
|--|--------|---------------------------------------------------------------------------------------|

|  | · | inflation                and government policies to combat inflation; |
|--|--------|-----------------------------------------------------------------------|

|  | · | currency                exchange movements; |
|--|--------|---------------------------------------------|

|  | · | global                  and regional economic conditions; |
|--|--------|-----------------------------------------------------------|

|  | · | copper                prices, which influence the profitability of Chile’s copper exports;                and |
|--|--------|---------------------------------------------------------------------------------------------------------------------|

|  | · | other                factors. |
|--|--------|-------------------------------|

***Currency      fluctuations could adversely affect our financial condition and results of      operations and the value of our shares and ADSs.***

----

*** ***

***The      Chilean market for our shares may be volatile and illiquid and such volatility      and lack of liquidity may have adverse effects on the market for our      ADSs.***

***Chile      imposes controls on foreign investment and repatriation of investments that      may      affect your investment in, and earnings from, our      ADSs.***

*Mercado      Cambiario Formal, *

----

***Chile      has different corporate disclosure, governance and accounting standards than      those you may be familiar with in the United States.***

----

**Item      4.**
**INFORMATION      ON THE COMPANY**

**Overview**

|  | · | Comercial                D&S S.A., which oversees our supermarket                operations; |
|--|--------|--------------------------------------------------------------------------------------------------|

|  | · | Servicios                Financieros D&S S.A., which oversees our financial businesses,                including our *Presto*                credit card; and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Sociedad                Anónima Inmobiliaria Terrenos y Establecimientos Comerciales S.A. (Saitec                S.A.), which oversees our real estate development                operations. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Líder      *
*Líder      *
*Ekono*
** **
*Ekono*
*Líder*
*Express*
*Líder      *
*Líder*
*Express*
*Ekono*

*Líder      *
*      FarmaLíder*
*Ekono*

|  | · | Our                33 *Líder*                hypermarkets have an average selling space of 8,940 square meters                (approximately 96,229 square feet), and offer “one-stop” shopping for                traditional food items and non-food items such as home appliances,                electronics, apparel and toys. In 2006, our hypermarkets generated                54.4%                of our net revenues. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Our                26 *Líder* *Vecino*compact                hypermarkets have an average selling space of 4,048 square meters                (approximately 43,572 square feet), and seek to combine the proximity                and                friendly atmosphere of neighborhood supermarkets with the advantages                of                low prices and a broad non-food product assortment that allows one-stop                shopping. In 2006, our compact hypermarkets generated 20.7% of our                net                revenues. As of January 2007, we began the process of rebranding                our                *Líder*                hypermarkets and *Líder* *Vecino*compact                hypermarkets under the *Hyper                de* *Líder*brand.                We expect to complete this process by the end of 2007. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **·** | Our                44 *Líder* *Express*                supermarkets have an average selling space of 1,471 square meters                (approximately 15,834 square feet), and emphasize quality groceries                and                perishables at low prices. In 2006, our supermarkets generated 15.0%                of                our net revenues. As of January 2007, we began the process of rebranding                our *Líder* *Express*                supermarkets under the *Express                de* *Líder*brand.                We expect to complete this process by the end of 2007. |
|--|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **·** | Our                15 *Ekono*                discount food stores (as of May 31, 2007) have an average selling                space of                350 square meters (approximately 3,767 square feet), and emphasize                a                limited assortment of quality food items at low prices in a convenient                neighborhood setting. Our *Ekono*                stores are positioned as a low-cost food store and will compete with                mom-and-pop grocers in                neighborhoods. |
|--|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*FarmaLíder*

***Our      Core Strengths***

*Líder*

|  | · | ***Chile’s                value leader***.                Based on market surveys and our own monitoring of our competitors’                pricing, we believe we offer consumers the lowest overall prices                of any                major supermarket or hypermarket chain in Chile with the best                quality-price ratio. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | ***Chile’s                leading supermarket company***.                Based on information on sales reported by the INE and public financial                information provided by some companies, we estimate that at December31,                2006 our market share in the Chilean hypermarket and supermarket                industry                was 33.3%, compared to an estimated market share of 29.8% for our                nearest                competitor. We believe our leading market position gives us access                to the                largest customer base of any Chilean supermarket company and helps                us                establish and maintain strong supplier                relationships. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | ***Strong                brand with a reputation for best quality-price                ratio***.                We believe that our stores derive substantial benefit from the widespread                recognition of the *Líder*brand                name in Chile and its reputation for                value. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Our      Strategy**

|  | · | ***Continuing                to improve our competitive position.***                We                believe improving our competitive position is essential to maintaining                our                leadership in the highly competitive markets in which we operate.                To                further improve our competitiveness we are: |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Offering                Exceptional Value*.                Our strategy aims to provide our customers with a superior shopping                experience, delivering a greater variety of quality products and                services                at a lower price than our competitors. Our focus on providing exceptional                value includes: |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Offering                higher quality perishables.                Perishables have historically formed the core of our business,                representing 34.9% of our sales in 2006. We believe that by working                closely with suppliers and investing in quality control we will be                able to                offer higher quality perishables, an essential factor to improving                customer loyalty and, thus, increasing customer traffic at our stores. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Expanding                our lines of private label products.                In                2006, we re-launched our *Líder*                line of products, improving quality standards, redesigning and repackaging                such products and expanding the line to include over 400 new products.                We                intend to continue expanding such private label products, focusing                on the                development of innovative products, premium brands and a non-food                brands. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Building                our “*Mi                Club Líder*”                loyalty program.                In                June 2006, we instituted the “*Mi                Club Líder*”                or “*My                Líder Club*”                loyalty program at our supermarkets. The program offers our customers                special discounts and rewards on a variety of the products we offer                at our                supermarkets, as well as cross-promotions with some of our financial                services products. We believe this program will allow us to expand                and                consolidate the loyalty of our customers, while allowing us to monitor                their needs, preferences and                habits. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | Continuing                to expand our *Presto*                credit card.                We                aim to make our *Presto*                credit card the most convenient payment option for customers in our                stores. In order to further consolidate this position, we intend                to                continue expanding the services, benefits and promotions available                to                holders of our *Presto*                credit card. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Focusing                  on Operational Excellence*.                  We believe that the benefits of a lower cost structure can be passed                  on to                  our customers in the form of lower prices. We intend to steadily                  improve                  the productivity of our operations, elevating it to the standards                  of major                  international retailers, by reducing operational, supply and sales                  costs                  as well as improving our internal controls over all aspects of                  our                  business. To implement this strategy, we intend to ensure our employees                  and managers continue to focus on productivity and                  innovation. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | ***Expanding                our operations in Chile and abroad***.                We continuously explore and evaluate opportunities to expand our                operations both in Chile and in other countries in Latin America.                As part                of this growth strategy, we intend to expand our supermarket operations                and our complimentary business (such as our financial services business                and our real estate development operations) by opening new units                and                developing new commercial formats. We also intend to capitalize on                the                favorable conditions of other underserved and underdeveloped markets                outside Chile and expand to other Latin American countries. Our growth                strategy includes: |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Expanding                our coverage*.                We opened 19 new *Líder*stores                in 2006, including one *Líder*hypermarket,                four *Líder                Vecino*                hypermarkets and 14 *Líder                Express*supermarkets.                We also opened three new shopping centers under our real estate                subsidiary, Saitec S.A. We intend to continue investing in our expansion                and plan to have 16 and 20 additional*Líder*stores                by the end of 2007 and 2008, respectively. As such, assuming no further                acquisitions, we project increased year-over-year selling space of                8% at                year-end 2007 relative to 2006 and 19% at year-end 2008 relative                to                December 2006. We also plan to continue investing in the development                of                additional shopping centers, purchases of properties for development                and                refurbishing existing stores. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Developing                new commercial formats.*                In                January 2007, we began the process of launching discount stores under                the                *Ekono*** **brand.                As of May 31, 2007, we operate 15 discount food stores under the                *Ekono*** **brand                name. We plan to have 25 and 55 such stores in operation by the of                2007                and 2008, respectively. Our primary focus on the expansion of these                stores                will be the more densely populated residential neighborhoods of the                Metropolitan Region. *Ekono*** **stores                combine the convenience that characterize neighborhood food stores                with                the lower costs of our *Líder*                stores. Relative to our other store formats, these stores emphasize                a                limited assortment of quality food and non-food items, including                our                private label products.*Ekono*** **stores                follow a simple and austere design, presenting all products in a                pre-packaged format so as to eliminate the need for assisted sales.                While                these stores have low margins, we believe their low operating costs                and                low capital requirement make them an attractive investment. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | *Expanding                beyond Chile.*                We                intend to expand our operations to other Latin American countries                with                underserved and underdeveloped markets. Our focus will be on those                markets                that exhibit favorable macroeconomic, sociopolitical and demographic                conditions, creating not only profitable operations, but also those                with                attractive growth potential. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**History**

*sociedad      anónima abierta*
*Latibex*
*Bolsa      de Comercio de Santiago*
*Bolsa      Electrónica de Chile)*
*Bolsa      de Valores de Valparaíso)*

----

*Supermercado      Almac*

*Ekono      *
*Almac      *
*Ekono      *
*Líder      *
*Líder      *
*Presto*
*Líder*
*Ekono*
*Líder*
*Líder*
*Vecino      *
*Hyper      de*
*Líder      *
*Líder*
*Express*
*Express      de*
*Líder      *

*Líder      *
*Líder*
*Vecino      *
*Líder*
*Express      *

*FarmaLíder*

----

**Market      Overview**

***Supermarket      Industry in Chile***

**Our      Business**

***Retail      Division (Comercial D&S S.A)***

**Our      Store Formats**

*Líder      *
*Líder      Vecino*
*Líder      Express *
*Ekono*

|                                                                    |   | **Number                of****Stores** |   | **Total                Selling Area(1)** |   | **Average**** Selling                Area per****Store(1)** |   | **Average                Sales per Square**** Meter(2)(3)** |   | **Number                of Employees(4)** |   | **Sales                Per Employee(2)** |   |
|-------------------------------------------------------------------------|--------|----------------------------------------|--------|------------------------------------------|--------|------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------------|--------|
|                                                                    |   |                                   |   |                                     |   |                                                             |   |                                                             |   |                                      |   |                                     |   |
| Hypermarket                - *Líder*                               |   |                                   | 33     |                                     |   | 295,025                                                          |   |                                                             | 8,940  |                                      |   | 2.8                                      |   |   | 13,269 |   |   | 62.7 |   |
| Compact                Hypermarket - *Líder                Vecino* |   |                                   | 26     |                                     |   | 105,251                                                          |   |                                                             | 4,048  |                                      |   | 2.9                                      |   |   | 5,751 |   |   | 55.3 |   |
| Supermarket                - *Líder                Express*        |   |                                   | 44     |                                     |   | 64,704                                                           |   |                                                             | 1,471  |                                      |   | 4.1                                      |   |   | 5,198 |   |   | 48.2 |   |
| Total                                                                   |   |                                   | 103    |                                     |   | 464,980                                                          |   |                                                             | 4,514  |                                      |   | 3.1                                      |   |   | 24,218 |   |   | 57.3 |   |
| *FarmaLíder*                                                       |   |                                   | 72     |                                     |   | 7,056                                                            |   |                                                             | 98     |                                      |   | 5.2                                      |   |   | 692 |   |   | 52.2 |   |

----

| (1) | In                square meters. Each square meter is equivalent to 10,764 square feet. |
|-----|-----------------------------------------------------------------------------------------|

----

| (2) | In                millions of constant Chilean pesos. “Sales” sets forth net revenues under                Chilean GAAP, excluding vendor allowances. As such, sales is equal                to net                revenues under U.S. GAAP. Considers sales for the period divided                by the                average number of full-time employees at the end of each month during                the                period. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Average                square meters. |
|-----|---------------------------------------|

| (4) | Full-time                equivalent employees at December 31, 2006 working in stores. |
|-----|---------------------------------------------------------------------------------------|

|                                   |   | **Year                ended December 31,**       |      |
|----------------------------------------|--------|--------------------------------------------------|-----------|
|                                   |   | **2004**                                         |      | **2005** |   | **2006** |   |
|                                   |   | **Net                Revenues**                  |      | **%                of Total Net Revenues** |   | **Net**** Revenues** |   | **%                of Total Net Revenues** |   | **Net****Revenues** |   | **%                of Total Net Revenues** |   |
|                                   |   | **(in                millions of constant Ch$)** |      |
| *Líder*(1)                        |   | Ch$                                              | 911,484   |   |   | 59.8 | % | Ch$ | 939,763 |   |   | 57.6 | % |   | 922,347 |   |   | 54.4 |   |
| *Líder                Vecino*(2)  |   |                                             | 349,294   |   |   | 22.9 |   |   | 391,650 |   |   | 24.0 |   |   | 351,251 |   |   | 20.7 |   |
| *Líder                Express*(2) |   |                                             | 162,421   |   |   | 10.7 |   |   | 162,464 |   |   | 9.9 |   |   | 254,844 |   |   | 15.0 |   |
| *FarmaLíder*                      |   |                                             | 32,267    |   |   | 2.1 |   |   | 36,065 |   |   | 2.2 |   |   | 38,709 |   |   | 2.3 |   |
| Other(3)                               |   |                                             | 68,191    |   |   | 4.5 |   |   | 102,399 |   |   | 6.3 |   |   | 129,514 |   |   | 7.6 |   |
| Total                                  |   | Ch$                                              | 1,523,657 |   |   | 100 | % | Ch$ | 1,632,341 |   |   | 100 | % |   | 1,696,665 |   |   | 100 | % |

----

| (1) | Figures                shown for the year 2004 include revenues from *FarmaLíder*. |
|-----|-----------------------------------------------------------------------------------------|

| (2) | Includes                stores formerly operated under the *Almac*and                *Ekono*brands. |
|-----|-----------------------------------------------------------------------------------------------------|

| (3) | “Other”                includes revenues from financial services, logistics services and                real                estate operations. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Hypermarkets      - Líder*

*Líder      *
*Líder      *
*Líder      *
*Líder      *
*Líder      *
*Líder      *
*Líder      *
*Líder      *

*Líder      *

*Compact      Hypermarkets - Líder Vecino*

*Líder      Vecino *
*Líder      Vecino *
*Ekono      *
*Líder      Vecino *
*Líder*
*Vecino      *
*Líder*
*Líder      Vecino *

----

*Líder      Vecino *

*Supermarkets      - Líder Express*

*Líder      Express *
*Líder      Express*
*Líder*
*Express      *

*Líder      Express *

*Discount      Food Stores - Ekono*

*Ekono*
** **
*Ekono*
** **
*Ekono*
** **
*Líder*
*Ekono*
** **
* *
*Ekono*

*Complementary      Businesses*

*Pharmacy      - FarmaLíder*
*FarmaLíder*
*Presto*
*FarmaLíder      *
*FarmaLíder      *
*FarmaLíder      *

----

*Real      Estate Development*

***Our      Pricing and Marketing Strategy***

*Pricing*
*Líder*
*El,      Akí*
*Acuenta      *
*Buffet*
*Presto      *

*Marketing*
*      Líder, Líder Vecino*
*Líder      Express *
*Líder’s      *

*Ekono*
*Ekono*

*Líder*
*Líder*
*Líder*

*Mi      Club Líder*
*My      Líder Club*
*Presto*
*Líder*

----

***Our      Products***

*Product      Mix. *

|                                |   | **Percentage                of Selling Space****by                Product Category****Year                ended December 31, 2006** |   |
|-------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                |   | **Groceries(1)**                                                                                                                    |   | **Perishables** |   | **Non-food**** Products(2)** |   | **Total** |   |
|                                |   |                                                                                                                                |   |   |   |   |   |   |   |
| *Líder*                        |   |                                                                                                                                | 50     |   |   | 13 |   |   | 37 |   |   | 100 | % |
| *Líder                Vecino*  |   |                                                                                                                                | 62     |   |   | 13 |   |   | 25 |   |   | 100 | % |
| *Líder                Express* |   |                                                                                                                                | 66     |   |   | 22 |   |   | 12 |   |   | 100 | % |
| *FarmaLíder*                   |   |                                                                                                                                | 20     |   |   | N/A |   |   | 80 |   |   | 100 | % |

----

| (1) | For                purposes of *FarmaLíder*,                “groceries” principally includes perfumes. |
|-----|-------------------------------------------------------------------------------------------------------------------------|

| (2) | “Non-food                products” includes apparel, electronics and appliances, housewares and                furniture, pharmaceuticals and general                merchandise. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Patios      de Comida *
*Líder      *

|                                      |   | **Percentage                Contribution to Sales by Product Category****Year                ended December 31,** |   |
|-------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------|--------|
|                                      |   | **2004**                                                                                                          |   | **2005** |   | **2006** |   |
|                                      |   |                                                                                                              |   |   |   |   |   |
| Groceries                                 |   |                                                                                                              | 47.2   | % |   | 46.7 | % |   | 46.7 | % |
| Perishables                               |   |                                                                                                              | 33.0   |   |   | 33.7 |   |   | 34.9 |   |
| Apparel                                   |   |                                                                                                              | 6.1    |   |   | 5.9 |   |   | 4.8 |   |
| Electronics                and appliances |   |                                                                                                              | 3.3    |   |   | 3.5 |   |   | 3.5 |   |
| Housewares                and furniture   |   |                                                                                                              | 2.5    |   |   | 2.3 |   |   | 2.3 |   |
| Other                non-food products(1) |   |                                                                                                              | 7.9    |   |   | 7.9 |   |   | 7.8 |   |
| Total                                     |   |                                                                                                              | 100.0  | % |   | 100.0 | % |   | 100 | % |

----

| (1) | Percentages                are of our total product sales from our retail operations and sets                forth                net revenues under Chilean GAAP, excluding vendor allowances. As                such,                sales are equal to net revenues under U.S. GAAP. “Other non-food products”                includes sporting goods, toys, office supplies, general merchandise                and                pharmacy products. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Groceries*

*Perishables*

----

*Non-Food      Products*

*Apparel*
*BLVD      *

*Electronics      and Appliances*
*Gröven      *
*Haus      *
*Presto*

*Housewares      and Furniture*
*Haus      *
*Haus      *
*Haus      *

*Other      Products*
*Paragon      *
*Toi      *
*Alquimia      *
*FarmaLíder      *

*Private      Label Products.*

|   | · | generate                customer recognition of our image as a low price provider of high                quality                products; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | increase                the profitability of sales of both food and non-food products;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | increase                brand loyalty by offering high quality goods that customers can only                find                at our stores. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

*Líder      *
*El      *
*      Akí*
*Ekono*
*Buffet      *
*Acuenta      *
*BLVD      *
*Haus      *
*Gröven      *
*Paragon*
*Toi      *
*Body      Plus*
*Alquimia*
*President’s      Choice*
* *
*President’s      Choice*
*Safeway*
*Safeway      Select*
*Organics*

***Customer      Service and Standardization***

*Líder      *
*      Líder Punta Arenas*
*Líder*
*Líder*
*Mi      Club Líder*
*Líder*
*Mi      Club Líder*
*Líder*
*Mi      Club Líder*

***Seasonality***

----

***Purchasing      and Distribution***

*Purchasing      and Supply*

*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento *
*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento *
*Defensoría      del Proveedor*
*Términos      y Condiciones Generales de Aprovisionamiento *
*** ***

*Distribution      and Inventory Management*

*Distribution*

----

*i.e.*

*Inventory      Management*

*** ***
***Financial      Services Division (Servicios Financieros D&S      S.A.)***

*Presto*

*Presto      Credit Card. *
*Presto      *
*Presto      *
*Líder      *
*Líder      *

----

*Presto      *
*Presto      *
*Líder      *

*Presto      *
*Presto      *

*Presto      *

*Superintendencia      de Bancos e Instituciones Financieras*
*Presto*
*Presto*
*Presto      *

*Servicios      y Administración de Créditos Comerciales Presto S.A.*
*Presto*

|                                                         |   | **Year                ended December 31,**       |    |
|--------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                         |   | **2004**                                         |    | **2005** |   | **2006** |   |
|                                                         |   | **(in                millions of constant Ch$)** |    |
|                                                         |   |                                             |    |   |   |   |   |
| Net                revenues                                  |   |                                             | 29,782  |   |   | 66,038 |   |   | 94,317 |   |
| Provisions                for doubtful accounts              |   |                                             | 19,629  |   |   | 28,315 |   |   | 29,025 |   |
| Financial                expenses                            |   |                                             | 2,589   |   |   | 2,534 |   |   | 8,231 |   |
| Other                expenses                                |   |                                             | 9,864   |   |   | 28,183 |   |   | 41,994 |   |
| Selling                and administrative expenses           |   |                                             | 32,082  |   |   | 59,032 |   |   | 79,250 |   |
| Operating                income (loss)                       |   |                                             | (2,300  | ) |   | 7,006 |   |   | 15,067 |   |
| Total                accounts receivable, end of period      |   |                                             | 149,356 |   |   | 191,278 |   |   | 203,842 |   |
| Allowance                for doubtful accounts (credit card) |   |                                             | 19,325  |   |   | 18,940 |   |   | 19,261 |   |
| Net                total accounts receivable, end of period  |   | Ch$                                              | 130,031 |   | Ch$ | 172,339 |   |   | 184,581 |   |

----

|                                                                      |   | **At                December 31,**               |      |
|---------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                      |   | **2004**                                         |      | **2005** |   | **2006** |   |
|                                                                      |   | **(in                millions of constant Ch$)** |      |
|                                                                      |   |                                             |      |   |   |   |   |
| **Allowance                for Doubtful Accounts, Detail**                |   |                                             |      |   |   |   |   |
| January                1, balance                                         |   |                                             | 15,148    |   |   | 18,654 |   |   | 18,940 |   |
| Provisions                for doubtful accounts                           |   |                                             | 19,673    |   |   | 28,380 |   |   | 29,025 |   |
| Write-off,                net                                             |   |                                             | (15,451   | ) |   | (28,094 | ) |   | (28,704 | ) |
| December                31, balance                                       |   | Ch$                                              | 18,654    |   | Ch$ | 18,940 |   |   | 19,261 |   |
| Number                of accounts in good standing (1)                    |   |                                             | 1,180,458 |   |   | 1,510,532 |   |   | 1,588,852 |   |
| Delinquent                accounts (2)                                    |   |                                             | 90,359    |   |   | 61,744 |   |   | 69,765 |   |
| Average                balance per account (in thousands of constant Ch$) |   |                                             | 123       |   |   | 127 |   |   | 132 |   |
| Allowance                for doubtful accounts/Total net receivables      |   |                                             | 14.9      | % |   | 11.0 | % |   | 10.3 | % |
| Allowance                for doubtful accounts/Total gross receivables    |   |                                             | 12.9      | % |   | 9.9 | % |   | 9.4 | % |

----

| (1) | Includes                all open accounts for which cards have been picked up and that have                not                been blocked by reason of                delinquency. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes                all accounts past due for 90 days or                more.. |
|-----|------------------------------------------------------------------------------------|

*Líder      *
*Presto*

*Presto      *
*Superintendencia*
*de      Bancos e Instituciones Financieras *

*Presto      Corredores de Seguros, Presto Telecomunicaciones and Líder      Viajes*
*Presto*
*Corredora      de Seguros Presto Limitada*
*Lídertel*
*Líder*
*carrier      151*
***.***
*Lídertel*
*Líder      Viajes*

----

***Real      Estate Development Division (Saitec S.A.)***

As      of      December 31, 2006, we operated nine shopping malls that house a total of 337      large and small stores (including nine of our *Líder*      stores)      that have a total of 267,484 square meters of sales area (approximately      2,879,174 square feet), 66% of which is rented to third-party merchants, with      the remainder rented to our stores (90,431 square meters, approximately 973,391      square feet). The real estate division also manages leases corresponding to      approximately 447 retail locations, including five large stores and 442 small      ones (442,312 square meters in total, approximately 4,761,007 square feet)      in      our supermarkets and hypermarkets (small shops usually located in the front      part      of the store, past the check-out counters and sales area). In total, at December      31, 2006, our real estate operations generated rental income from 709,798 square      meters of rental space (approximately 7,640,207 square feet), corresponding      to      833 retail locations in total: this includes nine *Líder*      stores      in shopping malls, 49 supermarkets, 15 large stores leased to department stores      or home improvement centers and 760 minor stores in shopping centers or      supermarkets. In 2006, our real estate operations generated consolidated net      revenues in the amount of Ch$21,718 million (US$40.8 million) in annual rental      income from our properties representing approximately 1.3% of our net revenues,      after deducting Ch$45,756 million (US$85.9 million) in rental income received      from our supermarkets.

*Líder      *
*Líder      *
*,*
*Líder      Vecinos *
*Líder      Express s*
*Líder      *
*Líder      *
*Líder      Vecino *
*Líder      Express *
*Ekono*
*Ekono*
*Líder      *

*Description      of Property*

*Lider*

----

|                                                                                                                                                                                                                                                           |   | **Undeveloped                Sites** |   | **Stores** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|------------|--------|
| **Region**                                                                                                                                                                                                                                                     |   |                                 |   |       |   |
| Valparaíso                and                Metropolitan Regions                                                                                                                                                                                         |   |                                 | 12     |       |   | 50 |   |
| Libertador                General Bernardo O’Higgins,                Maule,                Bíobío,                Araucanía,                Lagos,                Ríos, Magallanes                and Antártica Chilena Regions |   |                                 | 6      |       |   | 12 |   |
| Arica                and Parinacota, Tarapacá,                Antofagasta,                Atacama,                Coquimbo                Region                                                                                                          |   |                                 | 1      |       |   | 6 |   |
| Total                                                                                                                                                                                                                                                          |   |                                 | 19     |       |   | 68 |   |

**Information      Technology**

*Store      Systems*
*Presto      *

*Management      Information Systems*

|   | · | in                connection with distribution, JDA automated replenishment software,                which                includes AWR (formerly TRIM) and ASR (formerly SLIM), and Worldwide                Chain                Store System (a warehouse management system). In 2006 we began to                implement *Manhattan*                a                world class warehouse management system, in order to improve our                productivity; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | in                our stores, the IBM Supermarket Application platform (POS software).                We                started implementing the NCR AS@R, a new POS software product with                powerful promotional features which allows for greater flexibility; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | in                our headquarters, the SAP platform (back-office solutions) JDA, PMM                and                Arthur Planning and a platform developed in-house for core business                management, commercial tools, price and promotion management inventory                service levels for the Grocery and Food categories;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | for                CRM and Business Inteligence platforms, we implemented Teradata (NCR                Datawarehouse Division) that is connected to our promotional solutions                in                our POS platform. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Employees      and Human Resources**

*FarmaLíder      *
*FarmaLíder*
*FarmaLíder      *

----

**Competition      **

|         |   | **Percentage                of Sales** |   | **Number                of Stores****at                Year End** |   |
|--------------|--------|----------------------------------------|--------|-------------------------------------------------------------------|--------|
|         |   |                                   |   |                                                              |   |
| D&S(1)   |   |                                   | 33.3   |                                                              |   | 103 |   |
| Cencosud(2)  |   |                                   | 29.8   |                                                              |   | 141 |   |
| Falabella(3) |   |                                   | 4.1    |                                                              |   | 16 |   |
| Others       |   |                                   | 32.8   |                                                              |   | 471 |   |
| Total        |   |                                   | 100.0  |                                                              |   | 731 |   |

----

| (1) | Includes                *Líder,                Líder Vecino*,                and *Líder                Express.* |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes                Jumbo hypermarkets, Santa Isabel, Montecarlo and Las Brisas supermarkets. |
|-----|---------------------------------------------------------------------------------------------------|

| (3) | Includes                San Francisco and Tottus supermarkets. |
|-----|----------------------------------------------------------------|

**Trademarks,      Tradenames and Service Marks**

*Líder*
*Líder      Vecino, Líder Express *
*      Ekono, *
*      Hyper de Líder and Express de Líder,*
*Almac*
*Líder*
*Ekono,      Buffet*
*Acuenta      *
*BLVD*

----

**Insurance**

**Regulation**

*Servicio      Nacional*
*de      Salud *
*Servicio      Agrícola y Ganadero *
*Servicio      Nacional del Consumidor *
*Servicio*
*Nacional      de la Salud*

*Fiscal      Nacional Económico *
*Tribunal      de Defensa de la Libre*
*Competencia      *
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*

*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia *
*Fiscalía      Nacional Económica, *
* *
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento*

----

*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica, *
* *
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento*
*Fiscalía      Nacional Económica*
*Términos      y Condiciones Generales de Aprovisionamiento *
*Defensoría      del Proveedor*
*Términos      y Condiciones Generales de Aprovisionamiento *
*** ***

*Ley      de Subcontratación*

*Superintendencia      de Bancos e Instituciones Financieras*
*Presto*
*Presto*
*Servicios      y Administración de Créditos Comerciales Presto S.A.*
*Presto      *

----

*Presto*

**Capital      Expenditures**

*Líder*
*Ekono*

|                                                           |   | **Actual                for year ended December 31,** |       | **Projected** |   | **Total                Projected** |   |
|----------------------------------------------------------------|--------|-------------------------------------------------------|------------|---------------|--------|------------------------------------|--------|
|                                                           |   | **2004**                                              |       | **2005**      |   | **2006**                           |   | **2007** |   | **2008** |   | **2007-2008** |   |
|                                                           |   |                                                  |       |          |   |                               |   |   |   |   |   |   |   |
| Number                of stores at beginning of period         |   |                                                  | 68         |          |   | 78                                 |   |   | 85 |   |   | 103 |   |   | 142 |   |   | 103 |   |
| New                stores opened or acquired or reopened       |   |                                                  | 13         |          |   | 7                                  |   |   | 19 |   |   | 41 |   |   | 50 |   |   | 91 |   |
| Stores                sold or closed                           |   |                                                  | 3          |          |   | —                            |   |   | 1 |   |   | 2 |   |   | - |   |   | 2 |   |
| Existing                stores remodeled or expanded           |   |                                                  | 1          |          |   | 7                                  |   |   |   |   |   | 6 |   |   | 6 |   |   | 12 |   |
| Existing                stores transformed into another format |   |                                                  | 1          |          |   | —                            |   |   | 5 |   |   | — |   |   | — |   |   | — |   |
| Number                of supermarkets at end of period         |   |                                                  | 78         |          |   | 85                                 |   |   | 103 |   |   | 142 |   |   | 192 |   |   | 192 |   |
| Format                of stores at end of year:                |   |                                                  |       |          |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Almac/Líder                Express*                      |   |                                                  | 0          |          |   | 0                                  |   |   | — |   |   | — |   |   | — |   |   | — |   |
| *Ekono/Líder                Express*                      |   |                                                  | 23         |          |   | 27                                 |   |   | 44 |   |   | 54 |   |   | 68 |   |   | 68 |   |
| *Líder-Líder                Mercado*                 |   |                                                  | 31         |          |   | 32                                 |   |   | 33 |   |   | 34 |   |   | 37 |   |   | 38 |   |
| *Líder                Vecino*                             |   |                                                  | 24         |          |   | 26                                 |   |   | 26 |   |   | 29 |   |   | 32 |   |   | 32 |   |
| *Ekono*                                                        |   |                                                  | —    |          |   | —                            |   |   | — |   |   | 25 |   |   | 55 |   |   | 55 |   |
| Capital                expenditures(1) (in Ch$MN)              |   | Ch$                                                   | 159,792    |          | Ch$    | 51,401                             |   | Ch$ | 79,686 |   | Ch$ | 133,098 |   | Ch$ | 106,478 |   | Ch$ | 239,576 |   |
| Capital                expenditures(1) (in US$MN)              |        |                                                       | (US$)300.1 |               |        | (US$)96.5                          |        | US$ | 149.7 |  | US$ | 250.0 |   | US$ | 200.0 |   | US$ | 450.0 |   |

----

| (1) | In                millions of constant Chilean pesos and U.S. dollars. For 2004, it                includes                the €100 million (Ch$78,286 million) used to acquire Carrefour Chile S.A.                For 2005, it does not include Ch$12,033 million (US$22.6 million)                invested                to acquire 35% of the ownership of Alvi wholesale business. Exchange                rate:                US$1.00 = Ch$532.39 as of December 31,                2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Legal      Proceedings **

*Disco-Ahold      Litigation*

*Ekono-Argentina,      *
*Ekono-Argentina      *

*Ekono-Argentina*

----

*Merger      with S.A.C.I Falabella*

*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*

**Item      4A.**
**UNRESOLVED      STAFF COMMENTS**

**Item      5.**
**OPERATING      AND FINANCIAL REVIEW AND PROSPECTS**

**Basis      of Presentation**

*Unidades      de Fomento *

----

**Overview**

**Key      Factors Affecting Net Revenues and Results of Operations**

***Key      Factors Affecting Our Net Revenues***

*Our      Supermarket and Hypermarket Revenues. *

|   | · | *Pricing                policies.*  |
|--------|--------|------------------------------------------|

|   | · | *Pricing                strategy.*Our                pricing strategy is focused on offering the lowest possible prices                and                perceptual price positioning along with using incentives for holders                of                our *Presto*credit                card. Our pricing strategy is part of our broader commercial strategy,                which also includes delivering service and quality and developing                our                *Lider*brand                name. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Product                mix.*The                mix of products we sell has a significant impact on our net revenues.                In                particular, because non-food products generally have higher average                margins than our food products, our operating results are positively                affected as the proportion of non-food products in our product mix                increases. Sales of our non-food products (including pharmacy sales)                decreased by 4.3% in 2006 compared to 2005. Sales of non-food products                represented 18.4% of our net sales for 2006 compared to 19.1% for                2005.                The decrease of 50 basis points in our gross margin during 2006 as                compared to 2005 is partly explained by the higher proportion of                food                products in our total sales. Food products, especially dry groceries,                have                significantly lower margins than non-food                items. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Expansion                of sales area.*Opening                and acquiring new stores, and expanding existing stores, has been                one of                the principal drivers of sales volume in recent years, fueling much                of our                hypermarket and supermarket revenue growth. In 2006, new or remodeled                stores accounted for 6.1% of our net sales. We added 19 new stores                in                2006, and we plan to add 25 new stores in                2007. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Growth                in same stores sales (SSS)*.                Our same store sales showed a decline during the second half of 2005,                especially during the fourth quarter when SSS decreased by 3.5% due                to                increased competition resulting from new sales area added by our                competitors’ aggressive expansion programs and our own new stores, which                caused traffic reductions in our existing supermarkets. The full                year 2005                closed with a 1.3% decline in same store sales compared to the year                2004.                This declining trend continued during the first half of 2006, which                is                also explained by the tough comparison against higher SSS recorded                during                the first half of 2005. While our SSS improved during the second                half of                2006, our full year 2006 closed with a 3.4% decline in SSS. We have                implemented a comprehensive operating efficiency program that aims                at                improving processes and standardizing operating standards throughout                our                company, especially focusing in our stores. This program is expected                to                achieve expenses reductions that will be transferred to prices and                will                allow for more aggressive promotions resulting in traffic increases                in our                stores. We estimate that this should continue to improve our SSS                performance during the full year 2007, along with the fact that we                will be                facing an easier comparison in terms of SSS, especially for the period                between January and June, given the pronounced decline of SSS in                the first                half of 2006. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Chilean                economic conditions.*Our                net revenues are strongly influenced by changes in Chilean economic                conditions that affect the purchasing power and habits of our customers.                Chile recorded GDP growth of 6.1% for 2004, 6.3% for 2005 and 4.0%                for                2006. During the same period, unemployment, measured on the last                moving                quarter October-December declined from 8.9% for 2004 to 7.9% for                2005 and                further declined to 6.0% in 2006. Average unemployment rates for                the full                years 2004, 2005 and 2006 were 10.0%, 9.2% and 7.8%, respectively.                As of                April 30, 2007, (i.e., the moving quarter February-April), unemployment                was 6.8%, representing an increase as compared to 6.7% for the previous                moving quarter January-March; and a decrease compared to the 8.6%                in the                February-April quarter of last year at April 30,                2006. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | *Vendor                allowances.*Vendor                allowances, which are generally recorded at an agreed-upon percentage                of                sales to customers, have increased over the last three years, primarily                as                a result of our increased purchase volumes with our suppliers. We                expect                this trend to continue to the extent we continue to increase our                purchase                volumes with our suppliers. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                    |   | **Year                ended December 31,** |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                    |   | **2004**                                   |   | **2005** |   | **2006** |   |
|                                                                                                                    |   |                                       |   |   |   |   |   |
| Increase                in net revenues                                                                                 |   |                                       | 20.8   | % |   | 7.1 | % |   | 3.9 | % |
| Increase                in sales of groceries, perishables and non-food items                (including pharmacy sales) |   |                                       | 19.0   | % |   | 4.5 | % |   | 2.5 | % |
| Increase                (decrease) in same store sales                                                                  |   |                                       | 1.6    | % |   | (1.3) | % |   | (3.4 | )% |
| Increase                in suppliers fees                                                                               |   |                                       | 29.8   | % |   | 12.5 | % |   | 7.0 | % |
| Increase                in selling space(1)                                                                             |   |                                       | 23.1   | % |   | 5.4 | % |   | 9.1 | % |
| Increase                (decrease) in sales per square meter                                                            |   |                                       | (4.2   | )% |   | 3.1 | % |   | (6.1 | )% |
| Increase                in Chilean GDP(2)                                                                               |   |                                       | 6.2    | %(2) |   | 6.3 | %(2) |   | 4.0 | % |
| Increase                in Chilean consumption(2)                                                                       |   |                                       | 5.9    | %(2) |   | 8.2 | %(2) |   | 7.1 | % |

----

| (1) | In                square meters. Each square meter is equivalent to 10,764 square feet. |
|-----|-----------------------------------------------------------------------------------------|

| (2) | Preliminary                figures. |
|-----|-------------------------------------|

*Credit      Card Revenues. *
*Presto      *
* *
*Presto      *

|   | · | *Finance                charges*.                Since we currently use our *Presto*card                to help increase our total sales volume, our goal is to offer interest                rates that are competitive with those offered by the in-store credit                cards                of our principal competitors in order to complement our low prices                on our                products. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Average                account balances*.                Average account balances are generally a function of the credit limits                we                allocate to each account, and the frequency with which the cards                are used                as well as the average purchase volume. We set credit limits by analyzing                an applicant’s current income and credit record as obtained from Chilean                credit agencies. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Other                financial revenues*.                This refers to credit card commissions and fees. As Presto cards                are used,                a monthly statement is issued containing an invoicing fee. Also,                when                past-due accounts are collected, a collection fee is charged to the                customer. Additionally, as our card starts operating as an “open card”,                accepted by businesses unaffiliated to *Líder*stores,                its use generates a fee charged to these businesses referred to as                the                merchant discount. Finally, from January 2005, a monthly maintenance                fee                to the cardholder has been charged to offset the significant discounts                that *Presto*                cardholders are entitled to when shopping in our *Líder*stores.                These *Impactos                Presto*have                contributed to the growth in the number of new accounts opened and                active                accounts. As our financial services division further diversifies                its                services, including insurance brokerage among others, we expect to                derive                commissions from such sales. Other financial revenues including merchant                discounts, fees to cardholders and commissions are expected to grow                resulting in a reduction on the reliance of our financial services                division on revenues from credit, along with an increase of revenues                from                transactions or use of the card regardless of the use of                credit. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | *Mix                of sales- Food and Non-Food*.                In 2006, our *Presto*card                was used in approximately 20% of our sales with respect to food products                which has remained stable since 2005. Sales of food products represented                81.6% of our sales for 2006 as compared to 80.4% for 2005 resulting                from                our decision to increase competitiveness in our core business of                retail                food sales, and thus to open more supermarkets, which mainly sell                food                items. Our sales of non-food items have decreased as a result of                increased                competition from hyper-markets, department stores, and pharmacies.                For                2006, our *Presto*card                was used in approximately 31% of our sales in non-food areas as compared                to 35.1% in 2005. Sales of non-food products (including pharmaceuticals                in                our *FarmaLíder*stores)                represented 18.4% of our sales for 2006 as compared to 19.6% in                2005. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Other      revenues. *

***Key      Factors Affecting Our Cost Structure***

*Cost      of Sales and Gross Profit*

*Selling      and Administrative Expenses*
* *

|   | · | *Labor                and personnel expenses*:* *Our                labor and personnel expenses are the main component of the total                operating                expenses and they represented 36.8% during the year 2006, 35.2% during                the                year 2005 and 35.0% in 2004. As a percentage of net revenues, labor                and                personnel expenses represented 8.7% in 2006, 8.4% in 2005 and 7.4%                in                2004. During 2006, our labor expenses increased 8.7% compared to                2005,                explained by severance payments due to personnel                reductions. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Advertising                expenses*:                Our advertising expenses represented 6.5% of our total operating                expenses                in 2006, 7.8% in 2005 and 6.3% in 2004. As a percentage of net revenues,                advertising expenses represented 1.5% in 2006, 1.9% in 2005 and 1.0%                in                2004. During 2005, advertising expenses increased due to the cost                of                promotional incentives given to *Presto*card                holders and the implementation of the strategy which aimed to deliver                superior service and quality at the lowest possible price. During                2006,                advertising costs have decreased by 13.4% compared to 2005 as a result                of                the implementation of the “Operational Excellence” program, which is aimed                at reducing expenses throughout the                company. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | *Provisions                for doubtful accounts*.                In connection with our credit card operations, we record an allowance                for                doubtful accounts, which corresponded to 10.4% of net credit card                receivables or 9.4% of our gross credit receivables for 2006, which                is                used to offset write-offs and maintain an allowance deemed appropriate                to                the amount of total receivables. Our allowances for doubtful accounts                have                risen in recent years and are primarily a function of the total number                of                credit card accounts and delinquency rates. However, in 2006, this                allowance as a percentage of our total net and gross receivables                has                decreased as we have established tighter controls on risk. Moreover,                as a                result of electing to open our *Presto*card                to unaffiliated merchants, we are subject to the regulations of the                Chilean *Superintendencia                de Bancos e Instituciones* *Financieras*and                have, in accordance with its provisioning policies increased our                allowances for doubtful accounts. We record provisions of a set percentage                of outstanding balances for each past due credit card loan and evaluate                these provisions based on the number of days past due and the historical                behavior of our customers. As we continue to expand our credit card                business, we expect our aggregate allowance for doubtful accounts                to                increase, and as we control the risk of our portfolio, this allowance                as a                percentage of net and gross receivables should                decrease. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Other      Factors Affecting Our Net Income***

*Price-level      Restatement and Foreign Exchange Gain (Loss). *

*Income      tax expense*

***Our      Business Model***

*Presto*

|   | · | *Low                prices drive higher volume*.                According to market surveys, price is one of the key factors Chilean                consumers consider when deciding where to shop. We are committed                to                becoming more competitive, maintaining a discernible price difference                compared to our competitors, we expect to attract more customers                to our                stores. Additionally, we plan on further increasing the low prices                perception by consumers through increasing our offerings of private                label                products. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Preferred                price to quality ratio*.                With our actual, and even more prominent, perceptual price advantage                and                reputation for low prices, we have strengthened our commitment to                providing a superior shopping experience through the combination                of                different elements that allow customers to get more value for their                money,                such as quality perishables, attractive non-food offerings, low interest                credit, money for** **purchasing** **through*** ***the                *Mi                Club Líder*                loyalty program. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | *High                traffic provides opportunities for cross-selling*.                We intend to take advantage of the higher volume of customer traffic                we                expect to generate through our current strategy by cross-selling                an                expanding range of quality non-food products and complementary services                to                our customers, delivering service and quality at the lowest possible                price                by keeping a perceptual price positioning. By capturing a greater                share of                the consumer’s wallet and expanding our coverage both in Chile and                elsewhere in Latin America through our expansion program, we expect                to                increase our revenues. Our same store sales decreased in 2006 by                3.4%                compared to a 1.3% decrease in 2005, mainly due to lower traffic                as a                result of increased competition. Increasing our competitiveness in                terms                of our value proposition, and passing on the cost reductions achieved                through operational excellence to our customers in the form of even                more                competitive everyday prices, will allow us to increase our same store                sales. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Critical      Accounting Policies and Estimates**

***Vendor      Allowances and Distribution Network Revenue***

----

***Allowance      for Doubtful Accounts and Delinquent Credit Card Balance      Policy***

|                                                                                                                                  |   | **2004**                       |    | **2005**                       |   | **2006**                       |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|--------------------------------|--------|--------------------------------|--------|
|                                                                                                                                  |   | **Ch$                million** |    | **Ch$                million** |   | **Ch$                million** |   |
| Net                receivables (includes short and long term credit receivables plus                other                receivables) |   |                           | 130,031 |                           |   | 172,339                        |   |   | 204,601 |   |
| Allowance                for doubtful accounts                                                                                        |   |                           | 19,325  |                           |   | 18,940                         |   |   | 19,597 |   |
| Allowance                for doubtful accounts/total net receivables                                                                  |   |                           | 14.9    | %                              |   | 11                             | %      |   | 9.6 | % |
| Hypothetical                uncollectibility rose by 25%                                                                              |   |                           | 18.6    | %                              |   | 13.8                           | %      |   | 12.0 | % |
| Impact                on income statement (increase in expenses)                                                                      |   |                           | 4,860   |                           |   | 4,842                          |   |   | 4,955 |   |

***Receivable      from Disco S.A.***

*Ekono-Argentina      *

----

***Inventories***

|                                              |   | **2004**                       |   | **2005**                       |   | **2006**                       |   |
|---------------------------------------------------|--------|--------------------------------|--------|--------------------------------|--------|--------------------------------|--------|
|                                              |   | **Ch$                million** |   | **Ch$                million** |   | **Ch$                million** |   |
|                                              |   |                           |   |                           |   |                           |   |
| Shrinkage                                         |   |                           | 30,981 |                           |   | 28,098                         |   |   | 29,892 |   |
| %/sales                                           |   |                           | 2.3    | %                              |   | 2.0                            | %      |   | 2.1 | % |
| Hypothetical                increase by 25%       |   |                           | 2.9    | %                              |   | 2.5                            | %      |   | 2.6 | % |
| Impact                on cost of sales (increase) |   |                           | 7,325  |                           |   | 6,410                          |   |   | 6,891 |   |

***Purchase      Accounting and Goodwill***

|                                              |   | **2004**    |    | **2005**    |   | **2006**    |   |
|---------------------------------------------------|--------|-------------|---------|-------------|--------|-------------|--------|
|                                              |   | **Ch$**     |    | **US$**     |   | **Ch$**     |   | **US$** |   | **Ch$** |   | **US$** |   |
|                                              |   | **million** |    | **million** |   | **million** |   | **million** |   | **million** |   | **million** |   |
|                                              |   |        |    |        |   |        |   |   |   |   |   |   |   |
| Maquinsa                (ex Fullmarket S.A.)      |   |        | 9,636   |        |   | 18.1        |   |   | 8,822 |   |   | 16.6 |   |   | 8,008 |   |   | 15.0 |   |
| Magallanes                S.A. (Carrefour Chile)  |   |        | 23,551  |        |   | 44.2        |   |   | 22,312 |   |   | 41.9 |   |   | 22,113 |   |   | 41.5 |   |
| Alvi                Supermercados Mayoristas S.A. |   |        | — |        |   | —     |   |   | 7,068 |   |   | 13.3 |   |   | 6,711 |   |   | 12.6 |   |
| Total                                             |   |        | 33,187  |        |   | 62.3        |   |   | 38,202 |   |   | 71.8 |   |   | 36,832 |   |   | 69.1 |   |

| ·   | the                foreseeable life of the business or industry; |
|--------------------|------------------------------------------------------------------|

| ·   | the                effects of product obsolescence, changes in demand and other economic                factors; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | the                service life expectancies of key individuals or groups of                employees; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | expected                actions by competitors or potential competitors; and |
|--------------------|------------------------------------------------------------------------------|

| ·   | legal,                regulatory or contractual provisions affecting the useful life. |
|--------------------|---------------------------------------------------------------------------------------|

----

*Alvi*

***Severance      Indemnities***

| **Severance                Indemnities**                      |   | **Ch$                million** |   | **US$                million** |   |
|---------------------------------------------------------------|--------|--------------------------------|--------|--------------------------------|--------|
|                                                          |   |                           |   |                           |   |
| Short-term                and long-term with 6% discount rate |   |                           | 8,264  |                           |   | 15.5 |   |
| With                4% discount rate                          |   |                           | 12,467 |                           |   | 23.4 |   |
| Impact                on income statement (expense increase)  |   |                           | 4,293  |                           |   | 8.1 |   |
| With                8% discount rate                          |   |                           | 5,743  |                           |   | 10.8 |   |
| Impact                on income statement (expense decrease)  |   |                           | 2,521  |                           |   | 4.7 |   |

----

***Property,      Plant and Equipment***

| Buildings                and infrastructure | 20                to 60 years |
|---------------------------------------------|-------------------------------|
| Machinery                and equipment      | 4                to 7 years   |
| Leased                assets                | 5                to 7 years   |
| Fixtures                                    | 10                years       |
| Other                fixed assets           | 4                years        |

| ·   | the                estimated service life of the asset; and |
|--------------------|-------------------------------------------------------------|

| ·   | the                estimated technological life of the                asset. |
|--------------------|------------------------------------------------------------------------------|

|                                                       |   | **2004**                       |   | **2005** |   | **2006** |   |
|------------------------------------------------------------|--------|--------------------------------|--------|----------|--------|----------|--------|
|                                                       |   | **Ch$                million** |   |
|                                                       |   |                           |   |     |   |     |   |
| Depreciation                                               |   |                           | 50,402 |     |   | 54,489   |   |   | 52,058 |   |
| 10%                increase or decrease in depreciation(1) |   |                           | 5,040  |     |   | 5,449    |   |   | 5,206 |   |

| (1) | Not                an indication of a 10% increase in the useful lives of                assets. |
|-----|--------------------------------------------------------------------------------------------------|

***Impairment      of Long-Lived Assets***

**Results      of Operations**

|                                                                    |   | **Year                ended December 31,** |   |                             |
|-------------------------------------------------------------------------|--------|--------------------------------------------|--------|----------------------------------|
|                                                                    |   | **2004**                                   |   | **2005**                         |   | **2006** |   |
|                                                                    |   | **Ch$                millions**            |   | **%                of revenues** |   | **Ch$                millions** |   | **%                of revenues** |   | **Ch$                millions** |   | **%                of****revenues** |   |
|                                                                    |   |                                       |   |                             |   |   |   |   |   |   |   |   |   |
| Net                revenues                                             |   | 1,523,657                                  |   |                             | 100.0 | % |   | 1,632,341 |   |   | 100.0 | % |   | 1,696,665 |   |   | 100.0 | % |
| Cost                of sales                                            |   | (1,171,905                                 | )      |                             | (76.9 | ) |   | (1,175,299 | ) |   | (72.0 | ) |   | (1,229,418 | ) |   | (72.5 | ) |
| Gross                profit                                             |   | 351,752                                    |   |                             | 23.1 |   |   | 457,041 |   |   | 28.0 |   |   | 467,246 |   |   | 27.5 |   |
| Selling                and administrative expenses                      |   | (320,527                                   | )      |                             | (21.0 | ) |   | (387,543 | ) |   | (23.7 | ) |   | (402,958 | ) |   | (23.8 | ) |
| Operating                income                                         |   | 31,224                                     |   |                             | 2.0 |   |   | 69,498 |   |   | 4.3 |   |   | 64,288 |   |   | 3.8 |   |
| Non-operating                income                                     |   | 3,056                                      |   |                             | 0.2 |   |   | 4,191 |   |   | 0.3 |   |   | 5,021 |   |   | 0.3 |   |
| Non-operating                expenses                                   |   | (23,309                                    | )      |                             | (1.5 | ) |   | (23,809 | ) |   | (1.5 | ) |   | (26,103 | ) |   | (1.5 | ) |
| Price-level                restatement and foreign exchange gain (loss) |   | 2,235                                      |   |                             | 0.1 |   |   | (1,694 | ) |   | (0.1 | ) |   | 1,267 |   |   | 0.1 |   |
| Taxes                                                                   |   | (2,251                                     | )      |                             | (0.2 | ) |   | (4,930 | ) |   | (0.3 | ) |   | (4,821 | ) |   | (0.3 | ) |
| Net                income                                               |   | 10,955                                     |   |                             | 0.7 | % |   | 43,257 |   |   | 2.7 |   |   | 39,653 |   |   | 2.3 |   |

----

***2006      Compared to 2005***

***Net      Revenues***

|                                                                       |   | **Year                ended December 31,**       |      |
|----------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                       |   | **2005**                                         |      | **2006** |   | **%                change** |   |
|                                                                       |   | **(in                millions of constant Ch$)** |      |
| Hypermarkets                and Supermarkets (including *FarmaLíder*) |   | Ch$                                              | 1,529,942 |   |   | 1,567,151 |   |   | 2.4 | % |
| Financial                services                                          |   |                                             | 59,253    |   |   | 82,067 |   |   | 38.5 | % |
| Other                (real estate and logistics)                           |   |                                             | 43,146    |   |   | 47,446 |   |   | 10.0 | % |
| Total                                                                      |   | Ch$                                              | 1,632,341 |   |   | 1,696,665 |   |   | 3.9 | % |

|   |   | *Retail                Formats*(*Líder*and                *FarmaLíder*).                A 2.4% increase in net revenues derived from our hypermarkets,                supermarkets and pharmacies, totaling Ch$1,567,151                million (US$2,943.6 million) for 2006 compared to Ch$1,529,942                million                for 2005. This increase resulted principally from a 2.5% sales increase                due to the opening of new stores. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | *Financial                services*.                A                38.5% increase in net revenues derived from *Presto*                credit card operations compared to 2005, reflecting an increase in                our net                financial revenues including primarily interest and commissions,                to                Ch$82,067 million (US$154.1 million) for 2006 compared to Ch$59,253                million for 2005. This increase was attributable to increased use                of the                *Presto*                card reflected in a 37.0% average increase in *Presto* receivables                during the year (9.6% increase at year end) and the 30% average increase                of balance per account during the year (4.2% increase at year end).                At                December 31, 2006, the total outstanding of the *Presto*card                totaled Ch$209,204 million (US$393.0 million) compared to Ch$191,278                million at the same date of 2005, representing a 9.4%                increase. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | *Other                Revenues*.                A                10.0% increase in other revenues derived from real estate and logistic                operations to Ch$47,446 million (US$89.1 million) for 2006 compared                to                Ch$43,146 million in 2005. This increase resulted primarily from                increased                lease payments accounted for at the real estate division due to additional                store openings that include commercial locations for lease and to                the                opening of a shopping center in Linares in March 2006. Saitec also                opened                two additional malls in Las Rejas, Santiago and Los Andes. However,                these                malls were both opened in December 2006, they did not contribute                additional revenues in 2006. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Cost      of Sales and Gross Profit***

----

***Selling      and Administrative Expenses***

***Operating      Income***

***Non-operating      Income***

|                                             |   | **As                of December 31,**            |                          |
|--------------------------------------------------|--------|--------------------------------------------------|-------------------------------|
|                                             |   | **2005**                                         |                          | **2006** |   |
|                                             |   | **(in                millions of constant Ch$)** |                          |
|                                             |   |                                             |                          |   |   |
| Financial                income                  |   | Ch$                                              |     2,881 |   |   | 2,692 |   |
| Other                non-operating income(1)     |   |                                             | 933                           |   |   | 2,298 |   |
| Amortization                of negative goodwill |   |                                             | 375                           |   |   | — |   |
| Minority                Interest                 |   |                                             | 2                             |   |   | 31 |   |
| Total                non-operating income        |   | Ch$                                              | 4,191                         |   |   | 5,021 |   |

----

| (1) | “Other”                includes principally equity in earnings of related                companies. |
|-----|-----------------------------------------------------------------------------------------------------------------|

***Non-operating      Expense***

|                                          |   | **As                of December 31,**            |                           |
|-----------------------------------------------|--------|--------------------------------------------------|--------------------------------|
|                                          |   | **2005**                                         |                           | **2006** |   |
|                                          |   | **(in                millions of constant Ch$)** |                           |
|                                          |   |                                             |                           |   |   |
| Financial                expense              |   | Ch$                                              |     20,514 |   |   | 22,528 |   |
| Minority                interest              |   |                                             | —                        |   |   | — |   |
| Other                non-operating expense(1) |   |                                             | 1,104                          |   |   | 1,121 |   |
| Amortization                of goodwill       |   |                                             | 2,191                          |   |   | 2,454 |   |
| Total                non-operating expense    |   | Ch$                                              | 23,809                         |   |   | 26,103 |   |

----

| (1) | “Other”                  includes equity in losses of related companies and charitable                  contributions. |
|-----|------------------------------------------------------------------------------------------------------------------------------------|

----

***Price-level      Restatement and Foreign Exchange Gain (Loss)***

***Income      Taxes***

***Net      Income***

***2005      Compared to 2004***

*Líder      Express *
*Líder      Vecino*
*Líder*

***Net      Revenues***

----

|                                                                       |   | **Year                ended December 31,**       |      |
|----------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                                       |   | **2004**                                         |      | **2005** |   | **%                change** |   |
|                                                                       |   | **(in                millions of constant Ch$)** |      |
| Hypermarkets                and Supermarkets (including *FarmaLíder*) |   | Ch$                                              | 1,455,466 |   | Ch$ | 1,529,942 |   |   | 5.1 | % |
| Credit                cards                                                |   |                                             | 27,036    |   |   | 59,253 |   |   | 119.2 |   |
| Other                (real estate and logistics)                           |   |                                             | 41,155    |   |   | 43,146 |   |   | 4.8 |   |
| Total                                                                      |   | Ch$                                              | 1,523,657 |   | Ch$ | 1,632,341 |   |   | 7.1 | % |

| ·   | *Retail                Formats*(*Líder*and                *FarmaLíder*).                A 5.1% increase in net revenues derived from our hypermarkets,                supermarkets and pharmacies, totaling Ch$1,529,942 million (US$2,873.7                million) for 2005 compared to Ch$1,455,466 million for 2004. This                increase                resulted principally from an addition of 21,659 square meters of                sales                area, from 404,467 at December 31, 2004 to 426,126 at the same date                in                2005 ( due to the opening of four *Líder                Express*compact                hypermarkets, two *Líder                Vecino*hypermarkets                and the reopening of one *Lider*                hypermarket), an increase of 5.4% over the total sales area at December                31, 2004. Furthermore, during 2005, 10 new pharmacy stores were added.                These new stores accounted for 7.0% of our hypermarket and supermarket                sales for 2005, which reflect a 1.3% decline in same store sales. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | *Financial                Services*.                A                119.2% increase in net revenues derived from *Presto*                credit card operations compared to 2004, reflecting an increase in                our net                financial revenues including primarily interest and commissions,                to                Ch$59,253 million (US$111.3 million) for 2005 compared to Ch$27,036                million for 2004. This increase was attributable to a 28.0% increase                in                accounts in good standing at period-end, from 1,180,456 accounts                at                December 31, 2004 to 1,510,532 accounts in 2005, and to the promotion                of                sales of food and non-food products through our Presto card (21.2%                of                overall penetration of the credit card in total sales for 2005 compared                to                16.6 % for 2004). At December 31, 2005, the total outstanding of                the                *Presto*card                totaled Ch$191,278 million (US$359.3 million) compared to Ch$149,356                million at the same date of 2004, representing a 28.1%                increase. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | *Other                Revenues*.                A                4.8% increase in other revenues derived from real estate and logistic                operations to Ch$43,146 million (US$81.0 million) for 2005 compared                to                Ch$41,155 million in 2004. This increase resulted primarily from                increased                lease payments accounted for in the real estate division and higher                logistic revenues due to higher sales (4.5% increase in 2005 over                2004)                and increased centralization of merchandise in our distribution center                (63.2% of centralization for 2004 compared to 65.7% for                2005). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Cost      of Sales and Gross Profit***

*Presto      *

***Selling      and Administrative Expenses***

*Lider      Vecinos*
*Lider      Express*
*Lider*
*FarmaLider*

*Impactos      Presto *

----

***Operating      Income***

***Non-operating      Income***

|                                             |   | **As                of December 31,**            |        |
|--------------------------------------------------|--------|--------------------------------------------------|-------------|
|                                             |   | **2004**                                         |        | **2005** |   |
|                                             |   | **(in                millions of constant Ch$)** |        |
|                                             |   |                                             |        |   |   |
| Financial                income                  |   |                                             | 1,378       |   |   | 2,881 |   |
| Other                non-operating income(1)     |   |                                             | 1,172       |   |   | 933 |   |
| Amortization                of negative goodwill |   |                                             | 375         |   |   | 375 |   |
| Minority                Interest                 |   |                                             | 131         |   |   | 2 |   |
| Total                non-operating income        |   | Ch$                                              |  3,056 |   | Ch$ |      4,191 |   |

----

| (1) | “Other”                includes principally equity in earnings of related                companies. |
|-----|-----------------------------------------------------------------------------------------------------------------|

***Non-operating      Expense***

|                                          |   | **As                of December 31,**            |    |
|-----------------------------------------------|--------|--------------------------------------------------|---------|
|                                          |   | **2004**                                         |    | **2005** |   |
|                                          |   | **(in                millions of constant Ch$)** |    |
|                                          |   |                                             |    |   |   |
| Financial                expense              |   | Ch$                                              | 19,775  |   | Ch$ | 20,514 |   |
| Minority                interest              |   |                                             | ― |   |   | — |   |
| Other                non-operating expense(1) |   |                                             | 1,444   |   |   | 1,104 |   |
| Amortization                of goodwill       |   |                                             | 2,092   |   |   | 2,191 |   |
| Total                non-operating expense    |   | Ch$                                              | 23,309  |   | Ch$ | 23,809 |   |

----

| (1) | “Other”                    includes equity in losses of related companies and charitable                    contributions. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------|

----

***Price-level      Restatement and Foreign Exchange Gain (Loss)***

***Income      Taxes***

***Net      Income***

**Impact      of Inflation, Price-level Restatement and Foreign Exchange**

----

**Liquidity      and Capital Resources **

***Overview***

*Presto      *
*Presto      *

*Presto      *

| ·   | repayment                or refinancing of short-term contractual obligations in the amount                of                Ch$137,319 million (US$257.9                million); |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | budgeted                capital expenditures of Ch$133,098 million (US$250 million); |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | budgeted                cash dividends of approximately Ch$26,620 million (US$50.0 million);                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | increased                working capital needs, primarily in connection with our planned expansion                of our credit card operations in the amount of Ch$127,774 million                (US$240.0 million). |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | cash                flow from operations; |
|--------------------|-------------------------------------------|

| ·   | existing                cash resources and cash flow to be generated from our operations                in 2007;                and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | additional                short-term and long-term debt that we will incur as                necessary. |
|--------------------|---------------------------------------------------------------------------------------------------------|

----

**Sources      and Uses of Funds **

*Cash      and Working Capital*
**.**
*Presto      *

*Net      Cash Provided by (Used in) Operations*

*Net      Cash Used in Investing Activities*

*Net      Cash from Financing Activities*

*Contractual      Cash Obligations*

|                                                                   |   | **Payment                due by period****(in                millions of constant Ch$ as of December 31, 2006)** |    |
|------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|---------|
| **Contractual                Obligations**                             |   | **Total (1)**                                                                                               |    | **Less                than 1 year (2)** |   | **1-3                years (2)** |   | **3-5                years (2)** |   | **More                than 5 years (2)** |   |
|                                                                   |   |                                                                                                             |    |   |   |   |   |   |   |   |   |
| Long-term                bank debt, including current portion          |   |                                                                                                             | 121,828 |   |   | 2,039 |   |   | 20,963 |   |   | 35,338 |   |   | 63,488 |   |
| Short-term                bank debt                                    |   |                                                                                                             | 59,271  |   |   | 59,271 |   |   |   |   |   |   |   |   |   |   |
| Capital                lease obligations                               |   |                                                                                                             | 7,276   |   |   | 3,409 |   |   | 2,889 |   |   | 978 |   |   |   |   |
| Sundry                creditors                                        |   |                                                                                                             | 659     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bonds                and commercial paper                              |   |                                                                                                             | 216,899 |   |   | 72,600 |   |   | 25,426 |   |   | 5,610 |   |   | 113,263 |   |
| Total                contractual obligations (principal plus interest) |   |                                                                                                             | 405,933 |   |   | 137,319 |   |   | 49,278 |   |   | 41,926 |   |   | 177,410 |   |
| Principal                                                              |   |                                                                                                             | 400,214 |   |   | 132,259 |   |   | 49,278 |   |   | 41,926 |   |   | 177,410 |   |
| Interest                                                               |   |                                                                                                             | 5,060   |   |   | 14,870 |   |   | 28,008 |   |   | 17,868 |   |   | 67,020 |   |

----

| (1) | Interest                recognized as of December 31, 2006. |
|-----|-------------------------------------------------------------|

| (2) | Interest                amounts for each of the periods shown in table and included with                their                respective obligations have been estimated considering the interest                rate                as of December 31, 2006, whether variable or                fixed. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                         |   |   | **ThCh$**  |   |
|---------------------------------------------------------|--------|--------|------------|--------|
| 2007                                                    |   |   | 11,188,670 |   |
| 2008                                                    |   |   | 8,647,650  |   |
| 2009                                                    |   |   | 8,239,135  |   |
| 20010                                                   |   |   | 6,963,928  |   |
| 20011                                                   |   |   | 5,592,227  |   |
| Thereafter                                              |   |   | 37,725,515 |   |
| Present                value net minimum lease payments |   |   | 78,357,175 |   |

*Dividends*

*Capital      Expenditures*
*Líder      Express*
*Líder      Vecino*
*Líder*

*Working      Capital*
*Presto*
*Presto      *

***Debt***

*Debt      Status*

----

| ·   | long-term                debt including lease obligations of Ch$268,614 million (US$504.5                million),                which includes financial debt of Ch$264,088 million (US$496.0 million)                and                lease obligations in the amount of Ch$3,868 million (US$7.3 million)                and                sundry creditors in the amount of Ch$ 659 million (US$ 1.2 million);                and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | short-term                debt including the current portion of long-term debt of Ch$137,319                million                (US$257.9 million), including short-term financial debt of Ch$122,730                million (US$230.5 million) and the current portion of long-term debt                in                the amount of Ch$14,589 million (US$27.4                million). |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Bonds                and commercial paper placed in the local capital markets in an aggregate                principal amount of Ch$216,899 million (US$407.4 million) at December                31,                2006. We have issued four series of bonds in Chile which bear interest                at                a rate of 4.2%, 6.5%, 4.5% and 5.5% and commercial paper bearing                interest                at a rate of 6.0% and 6.12%. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Local                bank debt in aggregate principal amount at December 31, 2006 of Ch$181,099                million (US$340.2 million). We have a Series of Chilean peso, UF-                and U.S.                dollar-denominated loans, the bulk of which are payable in UF and                bear                market interest rates according to the terms of the debt                agreements. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Debt      Restrictions*

----

**Our      Principal Loan Covenants **

| UF119,788.5                million                Local Syndicated Banking Loan with Banco Santander- Santiago, Banco                BBVA,                Citibank,                N.A. (Agencia en Chile) y Banco del Estado de Chile |   | 1. Maintain                an indebtedness relationship lower than 1.2 times, defined as the                ratio                between current liabilities that accrue interest and                equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                   |   | 2. Minimum                coverage of interest expenses of 3.5 times (operating results plus                depreciation plus amortization of intangibles divided by interest                expenses).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                   |   | 3. Keeping                assets free from liens in a total amount equal to at least 1.3 times                the                outstanding balance of the total bonds issued for the issuer, which                are in                force, calculated and measured each quarter over the consolidated                balance                sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                   |   | 4. Keeping                consolidated total equity of an amount equal at least to UF13,000,000,                calculated and measured each quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                   |   | 5.                Prohibition                to grant collateral or to guaranty to secure payment of third party                obligations on a substantial portion of our assets if such security                may                adversely affect the interest of the lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                   |   | 6.  Prohibition                to substantially change corporate object or to perform a material                capital                reduction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                   |   | 7.                 Acceleration.                Loan will become immediately payable and enforceable under several                circumstances, among which the relevant cases   are as                follows:(a) Payment                default of interest accrued or principal under the loan or breach                of any                negative or positive pledges or representations under the                loan. (b) Attachment                of corporate assets amounting to US$10 million or more. (c) Condemnation                or imposition of any fine or award on us by any governmental authority                amounting or affecting 5% of our consolidated assets.                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                   |   | 8. Optional                Acceleration. Upon agreement by major lenders, the loan will become                immediately payable and enforceable under several circumstances,                among                which the relevant cases are as follows: (a) Cross                default or cross acceleration of indebtedness amounting to, at least,                US$10 million, provided such default is not remedied within the 15-day                term.  (b) Liquidation,                wind-up, dissolution, whether legal or contractual, or the discontinuation                of corporate businesses. (c) If                our current controlling shareholders dispose in any manner, change                or                loose control of our management or business. (d) Amendment                of our by-laws causing a material adverse effect and not noticed                to the                agent bank.                    (e)  Breach                of general *pari                passu*                indebtedness positive pledge. |

----

| UF1.2                million Loan by Citibank,                N.A. (Agencia en Chile) |   | 1. Maintain                an indebtedness relationship lower than 1.2 times, defined as the                ratio                between current liabilities that accrue interest and                equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 2. Minimum                coverage of interest expenses of 3.5 times (operating results plus                depreciation plus amortization of intangibles divided by interest                expenses).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 3. Keeping                assets free from liens in a total amount equal to at least 1.3 times                the                outstanding balance of the total bonds issued for the issuer, which                are in                force, calculated and measured each quarter over the consolidated                balance                sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 4. Keeping                consolidated total equity of an amount equal at least to UF13,000,000,                calculated and measured each quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 5.  Prohibition                to grant collateral or to guaranty to secure payment of third party                obligations on a substantial portion of our assets if  such security                may adversely affect the interest of the Lenders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 6.  Prohibition                to substantially change corporate object or to perform a material                capital                reduction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 7. Acceleration.                Loan will become immediately payable and enforceable under several                circumstances, among which the relevant cases are as follows: (a) Payment                default of interest accrued or principal under the loan or breach                of any                negative or positive pledges or representations under the                loan. (b) Attachment                of corporate assets amounting to US$10 million or more. (c) Condemnation                or imposition of any fine or award on us by any governmental authority                amounting or affecting 5% of our consolidated assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                  |   | 8. Optional                Acceleration. Upon agreement by major lenders, Loan will become                immediately payable and enforceable under several circumstances,                among                which the relevant cases are as follows: (a) Cross                default or cross acceleration of indebtedness amounting to, at least,                USD                10 million, provided such default is not remedied within the 15-day                term.                 (b) Liquidation,                wind-up, dissolution, whether legal or contractual, or the discontinuation                of corporate businesses. (c) If                our current controlling shareholders dispose in any manner, change                or                loose control of our management or business. (d) Amendment                of our By-laws causing a material adverse effect and not noticed                to the                Agent Bank. (e)  Breach                of general *pari                pasu*                indebtedness positive pledge. |
|                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

| Local                Bonds Series C, D and E |   | 1. Maintain                an indebtedness relationship lower than 1.2 times, defined as the                ratio                between current liabilities that accrue interest and                equity. |
|----------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |   |                                                                                                                                                                                                              |
|                                         |   | 2. Minimum                coverage of interest expenses of 3.5 times (operating results plus                depreciation plus amortization of intangibles divided by interest                expenses).      |

----

|                            |   | 3. Keeping                assets free from liens in a total amount equal to at least 1.3 times                the                outstanding balance of the total bonds issued for the issuer, which                are in                force, calculated and measured each quarter over the consolidated                balance                sheet. |
|---------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |   |                                                                                                                                                                                                                                                                                                                                                          |
|                            |   | 4. Keeping                consolidated total equity of an amount equal at least to UF13,000,000,                calculated and measured each quarter.                                                                                                                                                                                                    |
|                            |   |                                                                                                                                                                                                                                                                                                                                                          |
| Commercial                Paper |   | 1. Minimum                Coverage of interest expenses of 3.5 (operating income plus depreciation                divided by interest expenses) for March, June, September and                December.                                                                                                                                                  |
|                            |   |                                                                                                                                                                                                                                                                                                                                                          |
|                            |   | 2. Leverage                less than 1.2 (current liabilities divided by equity) for March,                June,                September and December.                                                                                                                                                                                                  |

**U.S.      GAAP Reconciliation and Accounting Pronouncements **

|                                                     |   | **Year                ended December 31,**                           |    |
|----------------------------------------------------------|--------|----------------------------------------------------------------------|---------|
|                                                     |   | **2004**                                                             |    | **2005** |   | **2006** |   |
|                                                     |   | **(in                millions of constant Ch$ and millions of US$)** |    |
|                                                     |   |                                                                 |    |   |   |   |   |
| Net                income (Chilean GAAP)                 |   | Ch$                                                                  | 10,955  |   | Ch$ | 43,257 |   | Ch$ |  39,653                (US$ 74.5 | ) |
| Net                income (U.S. GAAP)                    |   |                                                                 | 10,131  |   |   | 47,377 |   |   | 38,339                (US$ 72.01 | ) |
| Shareholders’                equity (Chilean GAAP) |   | Ch$                                                                  | 482,245 |   | Ch$ | 498,560 |   | Ch$ |  517,911                (US$ 972.8 | ) |
| Shareholders’                equity (U.S. GAAP)    |   |                                                                 | 478,973 |   |   | 501,044 |   |   | 520,165                (US$ 977.04 | ) |
|                                                     |   |                                                                 |    |   |   |   |   |   |   |   |

| ·   | our                company occasionally enters into forward exchange contracts designated                as                “cash flow” hedges under Chilean GAAP. Unrealized gains on these contracts                are deferred on the balance sheet but recorded in income under U.S.                GAAP.                Any unrealized losses on these contracts are recorded in income in                both                Chilean and U.S. GAAP. Chilean and U.S. GAAP also differ in the                documentation requirements related to the designation of these contracts                as “hedges” and the types of transactions which may be hedged. With the                exception of the forward exchange contract which our company entered                into                to “hedge” the €100 million purchase of Carrefour S.A. on January 7, 2004,                during the periods presented, there have been no significant adjustments                recorded between Chilean GAAP and U.S. GAAP for these forward exchange                contracts. However, as more fully explained in Note 25 to our financial                statements, Chilean GAAP included the loss on the “hedge” of the purchase                of Carrefour S.A. as part of the purchase price, while U.S. GAAP                recognized the loss in income due to restrictions on the types of                transactions which may be designated as “hedges” under U.S.                GAAP; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | the                reversal under U.S. GAAP of the technical revaluation of certain                property,                plant and equipment under Chilean GAAP, along with the associated                accumulated depreciation, depreciation expense and any necessary                recalculation of gain/loss on disposal of such property, plant, and                equipment; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                reversal under U.S. GAAP of severance indemnities for prior service                costs                that arose when we began to record a severance indemnity liability,                which                were charged to income under Chilean GAAP and deferred and amortized                under                U.S. GAAP; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                tax effects for any deferred tax effects related to other differences                between Chilean GAAP and U.S. GAAP described                herein; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                reversal of the amortization of complementary accounts created upon                adoption of Technical Bulletin No. 60 under Chilean GAAP. See Note                25 to                the financial statements; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | differences                in purchase accounting for business combinations. Chilean GAAP, through                December 31, 2003, carried over the historic cost of assets acquired                and                liabilities assumed. Under U.S. GAAP, purchase accounting for business                combinations, the fair value of assets acquired and liabilities assumed                are recorded and the excess of the purchase price over such fair                value is                recorded as goodwill. These divergences cause subsequent year differences                in net income and shareholders’ equity for depreciation expense and                accumulated depreciation, respectively, as well as the associated                monetary                correction; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                reclassification of revenues obtained from suppliers to cost of goods                sold                under U.S. GAAP; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                timing difference related to the accrual of mandatory dividends under                Chilean law; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | U.S.                GAAP reflects notes and accounts receivable with stated maturity                dates at                their present value if there is no associated contractual interest                rate in                the instrument and accretes interest through maturity so that the                face                value of the amounts is reflected in the balance sheet at the maturity                date. Chilean GAAP presents the amount at its face value from recording                date (contract date) through maturity                date; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | volume                rebates associated with unsold inventory are capitalized under U.S.                GAAP; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | marketable                securities are designated as trading, available-for-sale, and                held-to-maturity under U.S. GAAP. The company holds certain                available-for-sale securities whose unrecognized gains, under Statement                of                Financial Accounting Standards No. 115, require treatment as adjustments                to other comprehensive income. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | deficit                during development stage on the U.S. GAAP adjustments. Under Circular                No.                981 of the Chilean Superintendency of Securities and Insurance (“SVS”),                investments in majority-owned subsidiaries in the development stage                are                recorded by the equity method and the investor’s proportional share of the                subsidiary’s results of operations are taken to a reserve which forms part                of shareholders’ equity. For U.S. GAAP purposes, the deficit in                subsidiaries in the development stage is consolidated and the results                of                their operations charged directly to                income. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | capitalization                of restructured loan expenses. In September 2006, the Company restructured                its loans with banks signing a long-term syndicated loan agreement                with                banks Santander-Santiago, Estado, BBVA and Citibank N.A., concentrating                by                this means all the short-term and long-term standing loans into only                one                loan of 8 year term. The expenses related to the restructure of these                loans, such as bank commissions, tax and legal expenses, have been                capitalized by the Company and are being amortized over the term                of the                loans, in accordance to Chilean GAAP. Under U.S. GAAP, each bank                in the                syndicated group was analyzed separately under EITF 96-19 to determine                whether a modification or extinguishment of debt had occurred. The                restructured loans with Banco Santander-Santiago, BBVA and Citibank                N.A.                are considered substantially different from the corresponding loans                before                the syndicated loan, therefore the unamortized balance of the                corresponding proportion of capitalized expenses at the date of the                restructure of the debt, was charged against income of the period.                Under                U.S. GAAP, the restructured debt with Banco Estado is considered                a                modification and therefore the proportional previously unamortized                costs                continue to be amortized and proportional third party costs associated                with the new debt were expensed;                and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | sale                of portfolio. Under Chilean GAAP, a portion of the Presto portfolio                (installment payments on credit cards) was defined as sold in 2006                and the                loss was deferred over the period of time that interest continued                to                accrue on the installment payments. Under U.S. GAAP, under FAS 140,                the loss on the sale or transfer of the receivable would be recognized                immediately on the transaction date under SFAS                140. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Recent      U.S. GAAP Pronouncements***

**Research      and Development**

**Trend      Information**

----

**Off-Balance      Sheet Arrangements**

**Item      6.**
**DIRECTORS,      SENIOR MANAGEMENT AND EMPLOYEES**

**Directors**

| **Name**                                               |   | **Position** |                           | **Age** |   |
|--------------------------------------------------------|--------|--------------|--------------------------------|---------|--------|
|                                                   |   |         |                           |    |   |
| Felipe                Ibáñez Scott           |   |         | Chairman                       |    |   | 53 |   |
| Hans                Eben Oyanedel                      |   |         | Deputy                Chairman |    |   | 65 |   |
| Nicolás                Ibáñez Scott (1) |   |         | Director                       |    |   | 51 |   |
| Jonny                Kulka Fraenkel                    |   |         | Director                       |    |   | 62 |   |
| Gerardo                Jofré Miranda (2)          |   |         | Director                       |    |   | 67 |   |
| Fernando                Larraín Cruzat(3)         |   |         | Director                       |    |   | 48 |   |
| Verónica                Edwards Guzmán       |   |         | Director                       |    |   | 49 |   |
| Felipe                Larraín Bascuñan       |   |         | Director                       |    |   | 49 |   |
| Francisco                Gana Eguiguren(4)             |   |         | Director                       |    |   | 51 |   |

----

| (1) | Between                1994 and 2002, Mr. Nicolás Ibáñez Scott served as our company’s CEO. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (2) | Mr.                Gerardo                Jofré Miranda, Mr. Felipe                Larraín Bascuñan and Mr. Francisco Gana Eguiguren were elected to our                board of directors for the first time at the annual shareholders’ meeting                held on April 24, 2007 . |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Mr.                Fernando                Larraín Cruzat                is                the managing director of Larraín Vial, Corredora de Bolsa S.A., a stock                broker, investment bank, underwriter and financial services company                with                which we have regularly worked in the past and that presently renders                services to our company. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Mr.                Francisco Gana Eguiguren complies with the criteria for independence                according to Chilean law, having been elected without the votes of                controlling shareholders or related parties at the annual shareholders’                meeting held on April 24, 2007. Mr. Francisco Gana Eguiguren, however,                does not qualify as an “independent director” as defined in Section                303A.02 of the NYSE’s Listed Company Manual, as he served as chief                executive officer of Soprole S.A., one of our suppliers, until                2006. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Audit      Committee **

| **Name**                                   |   | **Position** |     | **Age** |   |
|--------------------------------------------|--------|--------------|----------|---------|--------|
|                                       |   |         |     |    |   |
| Francisco                Gana Eguiguren(2) |   |         | Director |    |   | 51 |   |

----

| (1) | As                required under Chilean law, we also have a Directors’ Committee                (C*omité                de Directores*)                comprised of one independent director and two non-independent directors                to                perform the supervisory functions detailed under Chilean law. The                current                members of the Directors’ Committee are Mr. Fermando Larraín Cruzat, Mr.                Gerardo                Jofré Miranda                Mr. Francisco Gana Eguiguren. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Mr.                Francisco Gana Eguiguren complies with the criteria for independence                according to Chilean law, having been elected without the votes of                controlling shareholders or related parties at the annual shareholders’                meeting held on April 24, 2007. Mr. Francisco Gana Eguiguren, however,                does not qualify as an “independent director” as defined in Section                303A.02 of the NYSE’s Listed Company Manual, as he served as chief                executive officer of Soprole S.A., one of our suppliers, until                2006. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Examine                the reports of external auditors, our company’s annual report and other                financial statements presented by the management of our company to                its                shareholders, and issue an opinion in connection with the same prior                to                such presentation; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Propose                to our board of directors the external auditors and risk rating agencies                which names shall be taken up to the shareholders’ meeting for appointment                as external auditors and risk rating agencies of our                company; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Examine                all related-party transactions and issue a report to our board of                directors on each of such                transactions; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Examine                the compensation packages and plans of managers and key executives; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | The                audit committee is required to suggest to the board the names of                the                auditors and risk rating agencies of the company that will be suggested                to                the shareholders at the annual shareholder’s meeting for approval;                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | All                other responsibilities assigned to it by the by-laws of our company                or an                agreement passed by the shareholders at a shareholders’ meeting or our                board of directors. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Executive      Officers**

| **Name**                                       |   | **Position** |                                     | **Age** |   | **Years                with our company** |   |
|------------------------------------------------|--------|--------------|------------------------------------------|---------|--------|-------------------------------------------|--------|
|                                           |   |         |                                     |    |   |                                      |   |
| Enrique                Ostalé Cambiaso    |   |         | Chief                Executive Officer   |    |   | 46                                        |   |   | 12 |   |
| Alejandro                Droste(1)             |   |         | Chief                Financial Officer   |    |   | 41                                        |   |   | - |   |
| Silvio                Rostagno Hayes           |   |         | Chief                Operating Officer   |    |   | 48                                        |   |   | 2 |   |
| Gonzalo                Smith Ferrer            |   |         | General                Counsel           |    |   | 36                                        |   |   | 3 |   |
| Tina                Rosenfeld                  |   |         | Corporate                Comptroller     |    |   | 37                                        |   |   | - |   |
| Marcelo                Gálvez Sadías |   |         | Development                Manager       |    |   | 43                                        |   |   | 19 |   |
| Claudio                Hohmann Barrientos      |   |         | Corporate                Affairs Manager |    |   | 53                                        |   |   | 1 |   |

----

| (1) | Mr.                Alejandro Droste took office in May 2007. |
|-----|--------------------------------------------------------------|

| (2) | Mrs.                Tina Rosenfeld took office in April 2007. |
|-----|---------------------------------------------------------------|

----

**Division      Managers**

| **Name**                                         |   | **Position** |                                                                                    | **Age** |   | **Years                with our company** |   |
|--------------------------------------------------|--------|--------------|-----------------------------------------------------------------------------------------|---------|--------|-------------------------------------------|--------|
|                                             |   |         |                                                                                    |    |   |                                      |   |
| Elias                Ayub Uauy                   |   |         | General                Manager of Financial Services Division                (*Presto)* |    |   | 54                                        |   |   | 3 |   |
| Juan                Pablo Vega Walker            |   |         | Development                Manager                                                      |    |   | 39                                        |   |   | 4 |   |
| Sebastián                Rozas Heusser      |   |         | General                Manager of the Real Estate Development Division (Saitec S.A.)    |    |   | 36                                        |   |   | 6 |   |
| Manuel                López Barranco        |   |         | General                Manager of Hypernarkets                                          |    |   | 37                                        |   |   | 12 |   |
| Andrés                Fernández Donoso |   |         | General                Manager of Superrnarkets                                         |    |   | 32                                        |   |   | 9 |   |

**Biographical      Information **

*Directors*

*Felipe      Ibáñez Scott*
*Almac*
*Ekono*
*Ekono*
*Almac,      Ekono *
*summa*
*cum      laude *

*Hans      Eben Oyanedel*

*Nicolás      Ibáñez Scott*

*Jonny      Kulka Fraenkel*
*El Mercurio*
*El Mercurio*

*Fernando      Larraín Cruzat*
*Casa      de Acogida La Esperanza*

----

*Verónica      Edwards Guzmán*
*Woman      Community *

*Gerardo      Jofré Miranda*
*To      Know More*
*** ***

*Felipe      Larraín Bascuñan*

*Francisco      Gana Eguiguren*

*Corporate      Executives *

*Enrique      Ostalé Cambiaso*
*Líder*
*El      Mercurio Online *

*Alejandro      Droste *
*.*

*Silvio      Rostagno Hayes, *

----

*Gonzalo      Smith Ferrer*

*Tina      Rosenfeld*
*.*

*Marcelo      Gálvez Saldías*
*Líder*
*Almac-Ekono      *

*Claudio      Hohmann Barrientos*

*Divisional      Executive Officers*

*Elías      Ayub Uauy*
*Presto      *
*Banco Hipotecario de      Chile Holding *

*Juan      Pablo Vega Walker*
*Ekono*

*Sebastián      Rozas Heusser*

----

*Manuel      López Barranco *
*Almac*
*Ekono*
*Líder*

*Andrés      Fernández Donoso *

**Director      and Executive Officer Compensation **

|                                               |   | **Board                of Directors**                       |        |
|----------------------------------------------------|--------|-------------------------------------------------------------|-------------|
|                                               |   | **Attendance                Fees (D&S Board Meetings)** |        | **Attendance                Fees****(Subsidiaries                Board Meetings and Other Committees)** |   | **Remuneration** |   |
|                                               |   | **Ch$****(1)**                                              |        |
|                                               |   |                                                        |        |   |   |   |   |
| Felipe                Ibáñez Scott       |   |                                                        | 96,000,000  |   |   | 8,500,000 |   |   | 28,480,000 |   |
| Hans                Eben Oyanedel                  |   |                                                        | 72,000,000  |   |   | 132,000,000 |   |   | — |   |
| Jonny                Kulka Fraenkel                |   |                                                        | 24,000,000  |   |   | — |   |   | — |   |
| Enrique                Ostalé Cambiaso        |   |                                                        | 14,000,000  |   |   | 77,000,000 |   |   | — |   |
| Gonzalo                Eguiguren Correa            |   |                                                        | 24,000,000  |   |   | 24,000,000 |   |   | — |   |
| Fernando                Larraín Cruzat        |   |                                                        | 24,000,000  |   |   | 36,000,000 |   |   | — |   |
| Nicolás                Ibáñez Scott |   |                                                        | 59,000,000  |   |   | 52,400,000 |   |   | — |   |
| René                Cortázar Sanz        |   |                                                        | 24,000,000  |   |   | 18,000,000 |   |   | — |   |
| Verónica                Edwards Guzmán   |   |                                                        | 24,000,000  |   |   | 7,000,000 |   |   | — |   |
| Total                                              |   |                                                        | 361,000,000 |   |   | 354,900,000 |   |   | 28,480,000 |   |

----

| (1) | The                    amounts paid to each director for serving as member of the board                    of                    directors varies in accordance with the position held and the                    time period                    during which such position was                    held. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                        |   | **Audit                Committee****Attendance                Fees** |                              |
|---------------------------------------------|--------|----------------------------------------------------------------------|-----------------------------------|
|                                        |   |
|                                        |   | **Ch$**                                                              |                              |
| René                Cortázar Sanz |   | Ch$                                                                  |     6,000,000 |   |
| Total                                       |   | Ch$                                                                  | 6,000,000                         |   |

*** ***

----

**Employees**

*Líder      *
*FarmaLíder      *
*Farmalider*

**Share      Ownership **

|                                                                                                                                                               |   | **At                December 31, 2006**            |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|-----------|
| **Directors**                                                                                                                                                      |   | **Number                of Shares Owned (1)** |      | **Ownership                %** |   |
|                                                                                                                                                               |   |                                               |      |   |   |
| Felipe                Ibáñez Scott                                                                                                                       |   |                                               | —   |   |   | — |   |
| Hans                Eben Oyanedel                                                                                                                                  |   |                                               | —   |   |   | — |   |
| Nicolás                Ibáñez Scott                                                                                                                 |   |                                               | 2,010,476 |   |   | 0.031 |   |
| Jonny                Kulka Fraenkel                                                                                                                                |   |                                               | 343,736   |   |   | 0.005 |   |
| Fernando                Larraín Cruzat                                                                                                                        |   |                                               | —   |   |   | — |   |
| Verónica                Edwards Guzmán                                                                                                                   |   |                                               | —   |   |   | — |   |
| René                Cortázar Sanz                                                                                                                        |   |                                               | —   |   |   | — |   |
| Felipe                Larraín Bascuñan                                                                                                                   |   |                                               | —   |   |   | — |   |
| Gerardo                Jofré Miranda                                                                                                                          |   |                                               | —   |   |   | — |   |
| Francisco                Gana Eguiguren                                                                                                                            |   |                                               | —   |   |   | — |   |
|                                                                                                                                                               |   |                                               |      |   |   |   |   |
| **Executive                Officers**                                                                                                                              |   |                                               |      |   |   |   |   |
| Enrique                Ostalé Cambiaso                                                                                                                        |   |                                               | —   |   |   | — |   |
| Silvio                Rostagno Hayes                                                                                                                               |   |                                               | —   |   |   | — |   |
| Gonzalo                Smith Ferrer                                                                                                                                |   |                                               | —   |   |   | — |   |
| Tina                Rosenfeld                                                                                                                                      |   |                                               | —   |   |   | — |   |
| Alejandro                Droste Bertolo                                                                                                                            |   |                                               | —   |   |   | — |   |
| Marcelo                Gálvez Saldías                                                                                                                    |   |                                               | —   |   |   | — |   |
| Claudio                Hohmann Barrientos                                                                                                                          |   |                                               | —   |   |   | — |   |
|                                                                                                                                                               |   |                                               |      |   |   |   |   |
| **Division                Managers**                                                                                                                               |   |                                               |      |   |   |   |   |
| Elias                Ayub Uauy                                                                                                                                     |   |                                               | —   |   |   | — |   |
| Juan                Pablo Vega Walker                                                                                                                              |   |                                               | —   |   |   | — |   |
| Sebastián                Rozas Heusser                                                                                                                        |   |                                               | —   |   |   | — |   |
| Manuel                López Barranco                                                                                                                          |   |                                               | 30,124    |   |   | 0.0005 |   |
| Andrés                Fernández Donoso                                                                                                                   |   |                                               | —   |   |   | — |   |
|                                                                                                                                                                    |   |                                               |      |   |   |   |   |
| Directors                and executive officers as a group                                                                                                         |   |                                               | 2,384,336 |   |   | 0.037 |   |
|                                                                                                                                                               |   |                                               |      |   |   |   |   |
| Directors                and executive officers as a group, excluding controlling shareholders                (Nicolás Ibáñez Scott’s shares) |   |                                               | 373,860   |   |   | 0.006 |   |

----

| (1) | Amount                refers to directly held shares                only. |
|-----|---------------------------------------------------------------------------|

----

**Item      7.**
**MAJOR      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS **

**Principal      Shareholders**

|                                                                                                             |   | **At                December 31, 2006**   |          |
|------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------------|
| **Shareholders**                                                                                                 |   | **Number                of Shares Owned** |          | **Ownership%** |   |
|                                                                                                             |   |                                      |          |   |   |
| Servicios                Profesionales y de Comercialización S.A.(1)                                        |   |                                      | 2,305,831,496 |   |   | 35.37 |   |
| Empresas                Almac S.A.(1)                                                                            |   |                                      | 599,758,172   |   |   | 9.20 |   |
| Future                Investments S.A.(2)                                                                        |   |                                      | 525,414,236   |   |   | 8.06 |   |
| Servicios                e Inversiones Trucha S.A.(3)                                                            |   |                                      | 480,195,104   |   |   | 7.36 |   |
| International                Supermarket Holdings S.A. (1)(4)                                               |   |                                      | 213,363,228   |   |   | 3.27 |   |
| Inversiones                Triplevis Limitada(1)                                                                 |   |                                      | 11,404,604    |   |   | 0.17 |   |
| Inversiones                Triplesis Limitada(1)                                                                 |   |                                      | 7,603,072     |   |   | 0.12 |   |
|                                                                                                             |   |                                      |          |   |   |   |   |
| Controlling                group(5)                                                                              |   |                                      | 4,143,569,912 |   |   | 63.55 | % |
|                                                                                                             |   |                                      |          |   |   |   |   |
| TOTAL                                                                                                            |   |                                      | 6,520,000,000 |   |   | 100.00 | % |
|                                                                                                             |   |                                      |          |   |   |   |   |
| Related                parties(6)                                                                                |   |                                      | 28,790,888    |   |   | 0.442 | % |
| Directors                and executive officers as a group, excluding controlling                shareholders(7) |   |                                      | 373,860       |   |   | 0.006 | % |

----

| (1) | Servicios                Profesionales y de Comercialización S.A., Empresas Almac S.A.,                International Supermarket Holdings S.A., Inversiones Triplevis Limitada                and Inversiones Triplesis Limitada are companies beneficially owned                or                controlled by Messrs. Nicolás Ibáñez Scott and Felipe Ibáñez                Scott. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2) | Future                Investments S.A. is a company beneficially owned or controlled by                Mr.                Nicolás Ibáñez Scott. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Servicios                e Inversiones Trucha S.A. is a company beneficially owned or controlled                by                Mr. Felipe Ibáñez Scott. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | This                number includes 24,706,518 shares held through accounts with Larraín Vial,                Corredora de Bolsa S.A.. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | This                number includes shares held by the companies described above, which                are                beneficially owned or controlled by Messrs. Nicolás Ibáñez Scott and/or                Felipe Ibáñez Scott. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Ibáñez                family members related to controlling group. Includes shares held                directly                by Mr. Nicolás Ibáñez Scott and his father Mr. Manuel Ibáñez Ojeda (former                director of the board). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Sets                forth the number of shares owned by directors and officers as a group,                excluding the controlling                shareholders. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Purchase      of Shares by Controlling Shareholders*

**Related      Party Transactions **

----

*Loans      from Servicios Profesionales y de Comercialización S.A. *

*Relationship      with Larraín Vial, Corredora de Bolsa S.A.*

*Loans      to Related Parties*

**Item      8.**
**FINANCIAL      INFORMATION**

**Item      9.**
**THE      OFFER AND LISTING**

*Bolsa      de Comercio de Santiago *
*Bolsa      Electrónica de Chile *
*Bolsa      de Valores de*
*Valparaíso*
** **

----

|                       |   | **Closing                Prices on the Santiago Stock Exchange** |      | **Closing                Prices on the NYSE** |   |
|----------------------------|--------|------------------------------------------------------------------|-----------|-----------------------------------------------|--------|
|                       |   | **Share                Volume (2)**                         |      | **Ch$                per Share (1)(2)**  |   | **ADS                Volume** |   | **US$                per ADS** |   |
|                       |   | **(In                thousands)**                                |      | **High**                                      |   | **Low** |   | **(In                thousands)** |   | **(High)** |   | **Low** |   |
| 2002                  |   |                                                             | 941,116   |                                          |   | 140.25 |   |   | 96.25 |   |   | 16,747 |   |   | 15.40 |   |   | 7.50 |   |
| 2003                  |   |                                                             | 963,016   |                                          |   | 222.00 |   |   | 99.50 |   |   | 21,458 |   |   | 20.75 |   |   | 8.28 |   |
| 2004                  |   |                                                             | 3,071,010 |                                          |   | 160.23 |   |   | 156.47 |   |   | 22,044 |   |   | 18.74 |   |   | 15.27 |   |
| 2005                  |   |                                                             | 3,259,896 |                                          |   | 201.90 |   |   | 157.00 |   |   | 11,809 |   |   | 22.58 |   |   | 16.35 |   |
| 1st                Quarter |   |                                                             | 991,633   |                                          |   | 185.4 |   |   | 157.00 |   |   | 3,124 |   |   | 19.03 |   |   | 16.35 |   |
| 2nd                Quarter |   |                                                             | 895,715   |                                          |   | 195.5 |   |   | 176.00 |   |   | 3,120 |   |   | 20.30 |   |   | 18.30 |   |
| 3rd                Quarter |   |                                                             | 736,433   |                                          |   | 201.9 |   |   | 189.00 |   |   | 2,322 |   |   | 22.35 |   |   | 19.51 |   |
| 4th                Quarter |   |                                                             | 636,115   |                                          |   | 197.5 |   |   | 162.97 |   |   | 3,243 |   |   | 22.58 |   |   | 19.06 |   |
|                       |   |                                                             |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   |                                                             |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2006                  |   |                                                             | 4,163,939 |                                          |   | 184.56 |   |   | 138.05 |   |   | 7,445 |   |   | 21.22 |   |   | 14.96 |   |
|                       |   |                                                             |      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1st                Quarter |   |                                                             | 1,069,809 |                                          |   | 180.51 |   |   | 160.75 |   |   | 2,832 |   |   | 20.68 |   |   | 18.33 |   |
| 2nd                Quarter |   |                                                             | 982,917   |                                          |   | 168.50 |   |   | 138.05 |   |   | 2,326 |   |   | 19.36 |   |   | 14.96 |   |
| 3rd                Quarter |   |                                                             | 769,925   |                                          |   | 155.18 |   |   | 140.10 |   |   | 1,410 |   |   | 17.00 |   |   | 15.46 |   |
| 4th                Quarter |   |                                                             | 1,341,288 |                                          |   | 184.56 |   |   | 154.75 |   |   | 877 |   |   | 21.22 |   |   | 17.31 |   |

----

| (1) | Chilean                pesos per share reflect nominal price at trade date per share of                common                stock; the price has not been restated in constant Chilean                pesos. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Stock                split |
|-----|----------------------------|

----

|                         |   | **Closing                Prices on the Santiago Stock Exchange** |   | **Closing                Prices on the NYSE** |   |
|------------------------------|--------|------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                         |   | **Ch$                per Share (1)**                        |   | **US$                per ADS**                |   |
|                         |   | **High**                                                         |   | **Low**                                       |   | **(High)** |   | **Low** |   |
| November                2006 |   |                                                             | 179.81 |                                          |   | 158.50 |   |   | 19.91 |   |   | 18.34 |   |
| December                2006 |   |                                                             | 184.56 |                                          |   | 179.01 |   |   | 21.22 |   |   | 20.42 |   |
| January                2007  |   |                                                             | 191.26 |                                          |   | 178.00 |   |   | 21.25 |   |   | 19.65 |   |
| February                2007 |   |                                                             | 207.70 |                                          |   | 166.00 |   |   | 23.21 |   |   | 18.65 |   |
| March                2007    |   |                                                             | 186.63 |                                          |   | 167.49 |   |   | 20.90 |   |   | 18.44 |   |
| April                2007    |   |                                                             | 208.00 |                                          |   | 189.00 |   |   | 23.51 |   |   | 20.82 |   |
| May                2007      |   |                                                             | 284.21 |                                          |   | 208.00 |   |   | 33.22 |   |   | 23.61 |   |
| June                2007     |   |                                                             | 286.00 |                                          |   | 269.92 |   |   | 32.88 |   |   | 31.05 |   |

----

| (1) | Chilean                pesos per share reflect nominal price at trade date per share of                common                stock; the price has not been restated in constant Chilean                pesos. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item      10.**
**ADDITIONAL      INFORMATION**

**Register      and Entry Number**

*Registro      de Comercio del Conservador de Bienes Raíces*

**Bylaws**

*General*

| ·   | maintain                and improve our leadership position in our core business area, as                well as                to be the best, most efficient and most profitable retailer in the                region; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | capture                and develop new business opportunities that will allow for sustained                growth in the future; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | run                a profitable business that will create value for our shareholders                and                contribute to economic development in our country;                and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | implement                clear corporate governance rules and accountability to maintain                shareholders’ confidence and attract new investors for the continued                growth and long-term endurance of our                company. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Shareholders’      Meetings*

----

| ·   | changing                the corporate form, splitting or spinning-off our company or merging                it                with another legal entity; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changing                the duration term of our company, if any; |
|--------------------|-------------------------------------------------------------------|

| ·   | the                early dissolution of our company; |
|--------------------|------------------------------------------------------|

| ·   | changing                the corporate domicile; |
|--------------------|-------------------------------------------------|

| ·   | reducing                the capital of our company; |
|--------------------|-----------------------------------------------------|

| ·   | approving                and appraising of non-monetary equity contributions to the capital                of our                company; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | amending                the matters that are the competence of shareholders’ meetings and the                limitations of the competence of our board of                directors; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | decreasing                the number of members of the board of directors; |
|--------------------|----------------------------------------------------------------------------|

| ·   | transferring                50% or more of our company’s assets, whether or not together with its                liabilities, as well as any business plan or amendment to a business                plan                that imply the transfer of 50% or more of our company’s                assets; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changing                the manner in which profits are paid-out; |
|--------------------|-------------------------------------------------------------------|

| ·   | granting                of collateral or sureties relating third-party obligations, with                the                exception of subsidiaries for which the approval of the board of                directors                shall suffice; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | acquiring                shares issued by our company; and |
|--------------------|------------------------------------------------------------|

| ·   | curing                of formal problems affecting the incorporation or amendment to the                bylaws                of our company that would otherwise cause it to be null and                void. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Share      Capital**

*Common      Shares*

----

*Voting*

*American      Depositary Shares*

**Material      Contracts**

**The      Deposit Agreement**

----

**Merger      Agreement with S.A.C.I Falabella **

*Banco      Falabella*
*Saitec*
*Sociedad      de*
*Rentas      Falabella*

----

*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Fiscalía      Nacional Económica*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*
*Tribunal      de Defensa de la Libre Competencia*

**Exchange      Controls**

*Mercado      Cambiario Formal *

----

| ·   | cash                dividends; |
|--------------------|--------------------------------|

| ·   | proceeds                from the sale in Chile of Withdrawn Shares, or from shares distributed                because of our liquidation, merger or consolidation, subject to receipt                by                the Central Bank of Chile of a certificate from the holder of the                Withdrawn Shares (or from an institution authorized by the Central                Bank of                Chile) that such holder’s residence and domicile are outside Chile and a                certificate from a Chilean stock exchange (or from a brokerage or                securities firm established in Chile) that such Withdrawn Shares                were sold                on a Chilean exchange; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | proceeds                from the sale in Chile of preemptive rights to subscribe for additional                shares; |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | proceeds                from our liquidation, merger or consolidation; and |
|--------------------|----------------------------------------------------------------------------|

| ·   | other                distributions, that result from holding shares represented by ADSs                or                Withdrawn Shares, including without limitation, those resulting from                any                recapitalization. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | receipt                by the Central Bank of Chile of a certificate from the Depositary                that                such deposit has been effected and that the related ADSs have been                issued;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | receipt                by the Custodian of a declaration from the person making such deposit                waiving the benefits of the Foreign Investment Contract with respect                to                the deposited Shares. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Other      Limitations**

***Dividends      Policy***

***Exchange      Rates***

***Share      Capital***

*Superintendencia      de Valores y Seguros *

| ·   | any                direct or indirect acquisition or sale of shares or options to buy                or sell                shares, in any amount, if made by a holder of 10% or more of the                publicly-held corporation’s                capital; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any                direct or indirect acquisition or sale of shares or options to buy                or sell                shares, in any amount, if made by a director, receiver, senior officer,                C.E.O. or manager of such corporation;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any                direct or indirect acquisition of shares resulting in a person acquiring,                directly or indirectly, 10% or more of a publicly held corporation’s share                capital. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | send                a written communication to the target corporation, the entities controlled                by such corporation or the entities that control such corporation,                as well                as to the SVS and the Chilean stock exchanges,                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | inform                the general public, in advance, through notice published in two Chilean                newspapers of national                distribution. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Dissenting      Shareholders***

| ·   | the                transformation of the issuer into an entity which is not a stock                corporation governed by the Chilean Companies                Act; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                merger of the issuer with and/or into another company; |
|--------------------|---------------------------------------------------------------------------|

| ·   | the                sale of 50% or more the assets of the issuer, whether or not its                liabilities are included, or the formulation of a business plan                contemplating a sale on those                terms; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | creation                of personal securities or asset-backed securities for the purpose                of                guaranteeing third-party obligations in excess of 50% of the company’s                assets; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | the                creation of preferential rights for a class of shares or an amendment                to                those already existing, in which case the right to withdraw only                accrues                to the dissenting shareholders of the class or classes of shares                adversely                affected; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                creation of preferential rights for a class of shares or an amendment                to                preferential rights already existing, in which case the right to                withdraw                only accrues to the dissenting shareholders of the class or classes                of                shares adversely affected; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | such                other resolutions as may be established by an issuer’s bylaws (no such                additional resolutions currently are specified in the bylaws of our                company). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Voting      Shares of Common Stock***

***Disclosure***

----

**Chilean      Tax Considerations**

***Cash      Dividends and Other Distributions***

| D&S                taxable income                                                                                                 |   |   | 100.0 |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| First                Category Tax (17.0% of Ch$100)                                                                                   |   |   | -17.0 |   |
| Net                distributable income                                                                                               |   |   | 83.0  |   |
| Dividend                distributed (30% of net distributable income)                                                                 |   |   | 24.9  |   |
| Withholding                Tax (35% of the sum of Ch$25.2 dividend plus Ch$4.8 First Category                Tax                paid) |   |   | -10.5 |   |
| Credit                for 17.0% of First Category Tax paid                                                                            |   |   | 5.1   |   |
| Net                additional tax withheld                                                                                            |   |   | 5.4   |   |
| Net                dividend received                                                                                                  |   |   | 19.5  |   |
| Effective                dividend withholding rate                                                                                    |   |   | 22.7  | %      |

----

| **Effective                dividend Withholding Tax Rate**                = | (Withholding                Tax Rate) - (First Category Tax Rate) |
|-----------------------------------------------------------------------------|-------------------------------------------------------------------|
| 1                -                (First Category Tax Rate)                 |

***Capital      Gains***

| ·   | the                foreign holder has held the shares for less than one year since exchanging                the ADSs for the common shares; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                foreign holder acquired and disposed of the shares in the ordinary                course                of its business or as a habitual trader of shares;                or |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                foreign holder and the purchaser of the shares are “related parties.” |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | a                partner; |
|--------------------|---------------------------|

| ·   | a                shareholder if the entity is a closed stock corporation; or |
|--------------------|------------------------------------------------------------------------------|

| ·   | a                shareholder with more than 10% of the shares if the entity is an                open                stock corporation. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

***Other      Chilean Taxes***

***Withholding      Tax Certificates***

**United      States Tax Considerations**

| ·   | an                individual citizen or resident of the United States, |
|--------------------|------------------------------------------------------------------------|

| ·   | a                corporation (or other entity treated as a corporation for United                States                federal income tax purposes) created or organized in or under the                laws of                the United States, any state thereof or the District of                Columbia, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an                estate the income of which is subject to United States federal income                taxation regardless of its source,                or |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                trust: |
|--------------------|-------------------------|

----

| ·    | that                is subject to the primary supervision of a court within the United                States                and the control of one or more United States persons as described                in                section 7701(a)(30) of the Code, or |
|--------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·    | that                has a valid election in effect under applicable U.S. Treasury regulations                to be treated as a United States                person. |
|--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***ADSs***

***Taxation      of Dividends***

----

| ·   | has                held ADSs or shares for less than a specified minimum period during                which                such U.S. Holder was not protected from risk of loss,                or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | is                obligated to make payments related to the dividends, the U.S. Holder                will                not be allowed a foreign tax credit for foreign taxes imposed on                dividends                paid on ADSs or shares. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Passive      Foreign Investment Companies***

----

***Capital      Gains***

***Estate      and Gift Taxation***

***Information      Reporting and Backup Withholding***

**Dividend      Policy and Dividends**

----

| **Year                Declared** |   | **Dividend                Paid Ratio** |   | **Dividend                per Share (Ch$/share) (1)** |   | **Dividend                per ADS (Ch $/ADS) (1)** |   |
|----------------------------------|--------|----------------------------------------|--------|------------------------------------------------------------|--------|---------------------------------------------------------|--------|
| 2002                             |   |                                   | 58.0   |                                                       |   | 2.5                                                     |   |   | 150 |   |
| 2003                             |   |                                   | 66.3   |                                                       |   | 2.5                                                     |   |   | 150 |   |
| 2004                             |   |                                   | 194.9  |                                                       |   | 3.125                                                   |   |   | 187.5 |   |
| 2005                             |   |                                   | 34.3   |                                                       |   | 2.0                                                     |   |   | 120 |   |
| 2006                             |   |                                   | 65.6   |                                                       |   | 4.0                                                     |   |   | 240 |   |

----

| (1) | Adjusted                to the to the one-to-four stock split of December 6, 2004 on local                shares.                In order to maintain the same economic and corporate rights for the                ADSs                as the underlying common shares, the number of shares representing                each                ADS was increased from 15 common shares per ADS to 60 common shares                per                ADS. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Exchange      Rates**

**New      York Stock Exchange and Chilean Corporate Governance      Requirements**

----

| **ITEM**                                            |   | **NYSE                REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **CHILEAN                LAW****REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Composition                of Board of Directors    |   | The                board of directors must consist of a majority of independent                directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | No                similar obligation exists under Chilean law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Director’s                Independence        |   | A                director qualifies as independent only if the board of directors                affirmatively determines that the director has no material relationship                with the company, either directly of indirectly. The NYSE listing                standards enumerate a number of relationships that preclude                independence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | A                director qualifies as independent only if he or she has been elected                with                the votes of other than the controlling shareholders’, that is, with the                votes of the minority shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Code                of Business Conduct and Ethics  |   | A                company must adopt, and post on its website, a code of business conduct                and ethics for its directors, officers and employees and promptly                disclose                any waiver of its code of conduct that is granted to an officer or                director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | There                is no legal obligation to adopt a code of business conduct. Chilean                law                requires that a company have a set of internal regulations which                regulates                employee conduct. Such regulations may contain, among other things,                regulations related to ethics and good behavior. Notwithstanding                the                above, a company may create internal codes of conduct, provided that                they                do not require or prohibit behavior or impose sanctions that contravene                Chilean law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Internal                Audit Function              |   | A                company must have in place an internal audit function to provide                management and its audit committee with ongoing assessments of such                company’s risk management processes and system of internal control. A                company may choose to outsource this function to a firm other than                its                independent auditors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | There                is no similar obligation under Chilean law. However, Chilean law                requires                that companies must have both external auditors and an audit                department.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Meetings                of Non-Management Directors |   | Non-management                directors must meet regularly without management of the                company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | No                similar legal obligation exists under Chilean law. Under Chilean                law, the                position of director of a corporation is incompatible with the position                of                manager, auditor, accountant or president of the company. Directors                must                meet in a properly convened meeting in order to agree on the matters                under                their competence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Committees                                          |   | A                company must have a nominating/corporate governance committee and                an audit                committee. Each of these committees must have a written charter that                addresses certain matters specified in the NYSE listing standards.                All the                members of each of these committees must be independent directors.                A                company must have an audit committee with a minimum of three members.                At                least one member of the audit committee must have accounting or related                financial management expertise as a company’s board interprets such                qualification in its business judgment. While the NYSE does not require                that a listed company’s audit committee have an “audit committee financial                expert” as defined by the U.S. securities laws, a company’s board may                presume that such a person has accounting or related financial management                expertise sufficient to satisfy the NYSE requirement. |   | In                accordance with the Chilean Companies Law 18,046, listed companies                that                have a net worth of more than 1.5 million UFs (approximately US$52,600,000                as of December 31, 2005) must have a committee of directors, formed                by                three board members. All directors deemed to be independent from                the                controller have the right to be members of the director’s committee. Under                Chilean law a director is deemed to be independent from the controller                if                after subtracting the votes of the controllers, such director would                still                be elected as director of the company. The committee’s compensation is set                by the annual shareholders meeting, and it performs the following                functions: (1) examine the reports of external auditors, our company’s                annual report and other financial statements presented by the management                of our company to its shareholders, and issue an opinion in connection                with the same prior to such presentation, (2) propose to our board                of                directors the external auditors and risk rating agencies which names                shall                be taken up to the shareholder’s meeting for appointment as external                auditors and risk rating agencies of our company, (3) examine all                related-party transactions and issue a report to our board of directors                on                each of such transactions, (4) examine the compensation package and                plans                of managers and key executives and (5) any other matters that the                bylaws,                the shareholders meeting or the board of directors                decide. |

----

| **ITEM**                                                                                                                |   | **NYSE                REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **CHILEAN                LAW****REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| CEO                Certifications                                                                                       |   | A                company’s CEO must certify annually that he or she is not aware of any                violations by such company of the NYSE’s corporate governance standards                (this certification is in addition to the certification required                by                Section 302 of the U.S. Sarbanes-Oxley Act of 2002).                                                                                                                                                                                                                            |   | No                similar obligation exists under Chilean law. However, in accordance                with                Chilean law, the directors of a company must annually submit for                approval                the company’s annual report and financial statements to its shareholders                at the company’s annual shareholders’ meeting. Similarly, public companies                must, from time to time, provide all relevant company information                by means                of the publications and notifications established by law, both to                the                public and to the SVS.                                                                                                                                                                                                                                                 |
|                                                                                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Notification                by the CEO to the NYSE of Non-Compliance with Corporate Governance                Standards |   | A                company’s CEO must promptly notify the NYSE in writing after any executive                officer of the company becomes aware of any material non-compliance                with                any applicable NYSE corporate governance standard.                                                                                                                                                                                                                                                                                                                  |   | No                similar obligation exists under Chilean law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Disclosure                of Significant Differences with Respect to Corporate Governance                Practices      |   | A                company must provide a summary description of significant differences                between its home country corporate governance practices and the corporate                governance requirements established by the NYSE and applicable to                U.S.                domestic listed companies.                                                                                                                                                                                                                                                              |   | No                similar obligation exists under Chilean law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Shareholder                Approval of Equity Compensation Plans                                                        |   | Shareholders                must be given the opportunity to vote on all equity compensation                plans and                material revisions to the terms of such plans with certain limited                exceptions. An “equity-compensation plan” is a plan or other arrangement                that provides for the delivery of equity securities (either newly                issued                or treasury shares) of the listed company to any employee, director                or                other service provider as compensation for services. |   | Under                Chilean law, 10% of any capital increase may be set aside by shareholders                for use in equity compensation plans. Additionally, shareholders                may also                set aside the company’s other unsubscribed shares with respect to which                preemptive rights were waived or not exercised for use in equity                compensation plans. Chilean corporations may also approve share repurchase                programs for purposes of implementing stock options compensation                plans for                their employees and those of its subsidiaries. If the company offers                shares in connection with shareholder approved equity compensation                plans,                such offerings are not subject to Chilean preemptive rights requirements                applicable to other offerings. |

----

| **ITEM**                                                                  |   | **NYSE                REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **CHILEAN                LAW****REQUIREMENTS**                                |
|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|
| Adoption                and Disclosure of Corporate Governance Guidelines |   | Listed                companies must adopt and disclose corporate governance guidelines,                encompassing such areas as director qualification standards, director                responsibilities, director access to management, director compensation,                director orientation and continuing education, management succession,                and                annual performance evaluations of the company’s board. Each listed                company’s website must include its corporate governance guidelines and the                charters of its most important committees. |   | No                similar obligation exists under Chilean                law. |

**Documents      on Display**

----

**Item      11.**
**QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

***Policies      and Procedures***

***Foreign      Currency Exchange Rate Risk***

***Interest      Rate Risk***

*tasa      bancaria *

----

|  **Debt                in UF**                   |   |
|-------------------------------------------------------|--------|
|                                                  |   |   |   |   |   | **As                of** |   | **Effect                in** |   |
|                                                  |   | **Capital** |   |   |   | **December                31, 2006** |   | **income                statement** |   |
|                                                  |   |   |   | **Amount** |   | **CPI                1%** |   | **CPI                4%** |   | **CPI                1%** |   | **CPI                4%** |   |
|                                                  |   |   |   | **Ch$** |   | **Ch$** |   | **Ch$** |   | **Ch$** |   | **Ch$** |   |
|                                                  |   | **UF** |   | **(millions)** |   | **(millions)** |   | **(millions)** |   | **(millions)** |   | **(millions)** |   |
|                                                  |   |   |   |   |   |   |   |   |   | Positive |   | Negative |   |
| Bonds                D&S                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Series                B                               |   |   | 1,200,000 |   |   | 22,356 |   |   | 22,579 |   |   | 23,250 |   |   | 224 |   |   | 894 |   |
| Series                C                               |   |   | 1,496,333 |   |   | 27,530 |   |   | 27,805 |   |   | 28,631 |   |   | 275 |   |   | 1,101 |   |
| Series                D                               |   |   | 1,000,000 |   |   | 18,418 |   |   | 18,603 |   |   | 19,155 |   |   | 184 |   |   | 737 |   |
| Total                bonds D&S                    |   |   | 3,696,333 |   |   | 68,304 |   |   | 68,987 |   |   | 71,036 |   |   | 683 |   |   | 2,732 |   |
| Bonds                Saitec                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Series                A                               |   |   | 94,737 |   |   | 1,724 |   |   | 1,783 |   |   | 1,836 |   |   | 18 |   |   | 71 |   |
| Series                B                               |   |   | 4,500,000 |   |   | 83,412 |   |   | 84,205 |   |   | 86,706 |   |   | 834 |   |   | 3,335 |   |
| Total                bonds Saitec                     |   |   | 4,594,737 |   |   | 85,136 |   |   | 85,987 |   |   | 88,542 |   |   | 851 |   |   | 3,405 |   |
| Total                bonds                            |   |   | 8,291,070 |   |   | 153,440 |   |   | 154,974 |   |   | 159,577 |   |   | 1,534 |   |   | 6,138 |   |
| Lease                obligations and accounts payable |   |   | 396,826 |   |   | 7,276 |   |   | 7,349 |   |   | 7,567 |   |   | 73 |   |   | 291 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                debt UF                          |   |   | 8,687,896 |   |   | 160,716 |   |   | 162,323 |   |   | 167,145 |   |   | 1,607 |   |   | 6,429 |   |

**Item      12.**
**DESCRIPTION      OF SECURITIES OTHER THAN EQUITY SECURITIES**

**PART      II**

**Item      13.**
**DEFAULTS,      DIVIDEND ARREARAGES AND DELINQUENCIES**

**Item      14.**
**MATERIAL      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF      PROCEEDS**

----

**Item      15.T**
**CONTROLS      AND PROCEDURES**

**Disclosure      Controls and Procedures **

**Management’s      Report on Internal Control over Financial Reporting**

----

**Changes      in Internal Control over Financial Reporting **

| ·   | We                reorganized our internal audit functions and increased the size and                quality of our internal accounting                personnel; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                introduced a new audit approach focused on financial controls along                with                operational controls; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                began reviewing controls over the stock integrity at our distribution                center and continued our review of documentation and processes at                our                distribution center; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                will integrate U.S. GAAP reconciliation into accounting system, which                we                believe will make our accounting process more                robust; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| ·   | We                will hire additional personnel with U.S. GAAP expertise as well as                improve                such expertise among our existing accounting personnel;                and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                began and will continue to develop an internal control group within                our                accounting department charged with supporting management in establishing                and maintaining an internal control structure, along with corresponding                internal procedures, designed to control the risks inherent in our                businesses and our strategy. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item      16.**
**[Reserved]**

**Item      16A.**
**AUDIT      COMMITTEE FINANCIAL EXPERT**
** **

**Item      16B.**
**CODE      OF ETHICS**
** **

**Item      16C.**
**PRINCIPAL      ACCOUNTANT FEES AND SERVICES**
** **

----

**Audit      Fees**

**Audit-Related      Fees**

**Tax      Fees**

**All      Other Fees**

**Item      16D.**
**EXEMPTIONS      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**
** **

**Item      16E.**
**PURCHASES      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED      PURCHASERS**

| **Period**                                             |   | **(a)                Total****Number                of****Common****Shares****Purchased(1)** |           | **(b)                Average****Price                Paid****per****Common****Share(1)** |         | **(c)                Total****Number                of****Common                Shares****Purchased                as****Part                of Publicly****Announced****Plans                or****Programs(1)** |   | **(d)                Maximum****Number                of****Common                Shares****that                May Yet Be****Purchased                Under****the                Plans or****Programs(1)(2)** |           |
|--------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|----------------|------------------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                                   |   |                                                                                         |           |                                                                                     |         |                                                                                                                                                                                                              |   |                                                                                                                                                                                                            |           |
| As                of December 31, 2006                 |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| January                1, 2006 to January 31, 2006     |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| February                1, 2006 to February 28, 2006   |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| March                1, 2006 to March 31, 2006         |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| April                1, 2006 to April 30, 2006         |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| May                1, 2006 to May 31, 2006             |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| June                1, 2006 to June 30, 2006           |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 65,200,000 |   |
| July                1, 2006 to July 31, 2006           |   |                                                                                         | 32,837,278     |                                                                                     |    | Ch$147.00(US$0.28                                                                                                                                                                                                 | )      |                                                                                                                                                                                                            | 32,837,278     |   |   | 65,200,000 |   |
| August                1, 2006 to August 31, 2006       |   |                                                                                         | 3,162,722      |                                                                                     |    | Ch$141.99(US$0.27                                                                                                                                                                                                 | )      |                                                                                                                                                                                                            | 3,162,722      |   |   | 32,362,722 |   |
| September                1, 2006 to September 30, 2006 |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 29,200,000 |   |
| October                1, 2006 to October 31, 2006     |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 29,200,000 |   |
| November                1, 2006 to November 30, 2006   |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 29,200,000 |   |
| December                1, 2006 to December 31, 2006   |   |                                                                                         | —        |                                                                                     |         | —                                                                                                                                                                                                           |   |                                                                                                                                                                                                            | —        |   |   | 29,200,000 |   |
| **Total                2006**                          |   |                                                                                         | **36,000,000** |                                                                                     | **Ch$**      | **146.56****(US$0.28**                                                                                                                                                                                            | **)**  |                                                                                                                                                                                                            | **36,000,000** |   |   | 65,200,000 |   |

----

| (1) | All                these treasury transactions were under our share repurchase program                announced on October 26, 2004 of up to 5% of our common shares                (326,000,000 common shares). These purchases were approved by our                shareholders on October 26, 2004, specifically for use in our stock                option                compensation plan. These common shares were purchased in the market                at an                average price of Ch$146.56 (US$0,28) per share. This share repurchase                program expires October 26, 2007. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2) | Pursuant                to the share repurchase program, single day purchases may not exceed                25%                of the average daily trading volume of our common shares for the                90-day                period preceding the purchase of the shares. In addition, purchases                may                not exceed 1% of our common shares (65,200,000) during any 12-month                period, subject to certain exceptions. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PART      III**

**Item      17.**
**FINANCIAL      STATEMENTS**

**Item      18.**
**FINANCIAL      STATEMENTS**

| Index                to Audited Consolidated Financial Statements                                                                                |   | F-1    |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                             |   |   |
| Report                of Independent Registered Public Accounting Firm                                                                           |   | F-2    |
|                                                                                                                                             |   |   |
| Consolidated                Balance Sheets as of December 31, 2005 and 2006                                                                      |   | F-3    |
|                                                                                                                                             |   |   |
| Consolidated                Statements of Income for the years ended December 31, 2004, 2005                and                2006              |   | F-4    |
|                                                                                                                                             |   |   |
| Consolidated                Statements of Cash Flows for the years ended December 31, 2004, 2005                and                2006          |   | F-5    |
|                                                                                                                                             |   |   |
| Notes                to the Consolidated Financial Statements for the years ended December                31,                2004, 2005 and 2006 |   | F-6    |

**Item      19.**
**EXHIBITS**

----

**INDEX      TO EXHIBITS**

| **Exhibit                Number** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1                               |   | English                translation of our Amended Bylaws (filed                with the U.S. Securities and Exchange Commission in our annual report                on                Form 20-F on July 15, 2005 and incorporated herein by                reference)                                                                                                                                           |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 2.1                               |   | English                translation of Settlement Agreement between us and the *Fiscalía                Nacional Económica*dated                December 15, 2006, including Addendum, dated December 29, 2006, and                Final                Resolution from the Antitrust Court approving the Settlement Agreement,                dated January 17, 2007 (filed                herewith). |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 2.2                               |   | English                translation of Merger Agreement between our controlling shareholders                and the controlling shareholders of S.A.C.I Falabella (filed                herewith).                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 8.1                               |   | List                of our subsidiaries (filed herewith).                                                                                                                                                                                                                                                                                                                                                       |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 11.1                              |   | Code                of Ethics of the company, dated June 29, 2004 (filed with the U.S.                Securities and Exchange Commission in our annual report on Form 20-F                on                June 30, 2004 and incorporated herein by reference).                                                                                                                                                |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 12.1                              |   | Certification                of Mr. Enrique                Ostalé Cambiaso pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith).                                                                                                                                                                                                                       |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 12.2                              |   | Certification                of Mr. Alejandro Droste pursuant to Section 302 of the Sarbanes-Oxley                Act                of 2002 (filed herewith).                                                                                                                                                                                                                                                  |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.1                              |   | Certification                of Mr. Enrique                Ostalé Cambiaso pursuant                to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes                -                Oxley Act of 2002 (filed herewith).                                                                                                                                                               |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.2                              |   | Certification                of Mr. Alejandro Droste pursuant to 18 U.S.C. 1350, as adopted pursuant                to                Section 906 of the Sarbanes - Oxley Act of 2002 (filed                herewith).                                                                                                                                                                                          |

----

***SIGNATURE***

|         |                                              |                 |
|--------------|---------------------------------------------------|----------------------|
|         | DISTRIBUCION              Y SERVICIO D&S S.A. |
|    |                                         |            |
|         |                                                   | /s/ Alejandro Droste |
|         | Alejandro DrosteChief Financial Officer           |

----

**DISTRIBUCION      Y SERVICIO D&S S.A.**

**INDEX      TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

| **Audited                Consolidated Financial Statements**                                                                                     | **Page** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                             |     |
| Report                of Independent Registered Public Accounting Firm                                                                           | F-2      |
|                                                                                                                                             |     |
| Consolidated                Balance Sheets as of December 31, 2005 and 2006                                                                      | F-3      |
|                                                                                                                                             |     |
| Consolidated                Statements of Income for the years ended December 31, 2004, 2005                and                2006              | F-4      |
|                                                                                                                                             |     |
| Consolidated                Statements of Cash Flows for the years ended December 31, 2004, 2005                and                2006          | F-5      |
|                                                                                                                                             |     |
| Notes                to the Consolidated Financial Statements for the years ended December                31,                2004, 2005 and 2006 | F-6      |

----

|  | Deloitte                & ToucheSociedad                de Auditores y Consultores Ltda.RUT:                80.276.200-3Av.                Providencia 1760Pisos                6, 7, 8 y 9Providencia,                SantiagoChileFono:                (56-2) 270 3000Fax:                (56-2) 374 9177e-mail:                deloittechile@deloitte.comwww.deloitte.cl |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

| **DISTRIBUCION                  Y SERVICIO D&S S.A. AND SUBSIDIARIES**                                                                                                                     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                           |
| CONSOLIDATED                  BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2006                                                                                                                  |
| (Restated                  for general price-level changes and expressed in thousands of constant                  Chilean pesos (ThCh$) and thousands of US dollars                  (ThUS$)) |

|                                                                                                                                                                                                                                                     |   |      |   | **At                    December 31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                     |   | **Notes** |   | **2005**                               |   | **2006** |   | **2006** |   |
|                                                                                                                                                                                                                                                          |   |      |   | ThCh$                                  |   | ThCh$ |   | ThUS$ |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   | **(note                    2u)** |   |
| **ASSETS**                                                                                                                                                                                                                                               |   |      |   |                                   |   |   |   |   |   |
| CURRENT                    ASSETS:                                                                                                                                                                                                                       |   |      |   |                                   |   |   |   |   |   |
| Cash                                                                                                                                                                                                                                                     |   |      |   |                                   |   | 21,208,712 |   |   | 30,933,622 |   |   | 58,103 |   |
| Marketable                    securities                                                                                                                                                                                                                 |   |      | 4      |                                   |   | 40,805,897 |   |   | 2,759,902 |   |   | 5,184 |   |
| Notes                    and accounts receivable (net of allowance for doubtful accounts                    of                    ThCh$22,941,369                    and ThCh$22,934,530 at December 31, 2005 and 2006,                    respectively) |   |      | 5      |                                   |   | 172,976,491 |   |   | 123,794,021 |   |   | 232,525 |   |
| Due                    from related companies                                                                                                                                                                                                            |   |      | 19     |                                   |   | 1,570,093 |   |   | 1,562,703 |   |   | 2,935 |   |
| Inventories                                                                                                                                                                                                                                              |   |      | 6      |                                   |   | 135,202,645 |   |   | 147,265,657 |   |   | 276,612 |   |
| Refundable                    taxes                                                                                                                                                                                                                      |   |      | 14     |                                   |   | 9,010,946 |   |   | 8,341,647 |   |   | 15,668 |   |
| Prepaid                    expenses                                                                                                                                                                                                                      |   |      |   |                                   |   | 3,248,056 |   |   | 797,462 |   |   | 1,498 |   |
| Other                    current assets                                                                                                                                                                                                                  |   |      | 7      |                                   |   | 8,518,711 |   |   | 26,518,048 |   |   | 49,809 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| TOTAL                    CURRENT ASSETS                                                                                                                                                                                                                  |   |      |   |                                   |   | 392,541,551 |   |   | 341,973,062 |   |   | 642,334 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| PROPERTY,                    PLANT AND EQUIPMENT - NET                                                                                                                                                                                                   |   |      | 8      |                                   |   | 618,916,557 |   |   | 646,843,617 |   |   | 1,214,981 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| OTHER                    ASSETS - NET                                                                                                                                                                                                                    |   |      | 9      |                                   |   | 115,992,870 |   |   | 216,588,454 |   |   | 406,823 |   |
| TOTAL                    ASSETS                                                                                                                                                                                                                          |   |      |   |                                   |   | 1,127,450,978 |   |   | 1,205,405,133 |   |   | 2,264,138 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                    AND SHAREHOLDERS' EQUITY**                                                                                                                                                                                              |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| CURRENT                    LIABILITIES:                                                                                                                                                                                                                  |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| Banks                    and financial institutions                                                                                                                                                                                                      |   |      | 12     |                                   |   | 57,833,268 |   |   | 59,270,542 |   |   | 111,329 |   |
| Current                    portion of long-term liabilities                                                                                                                                                                                              |   |      | 12     |                                   |   | 100,736,994 |   |   | 14,588,545 |   |   | 27,402 |   |
| Commercial                    paper                                                                                                                                                                                                                      |   |      | 12     |                                   |   | 59,797,623 |   |   | 63,459,450 |   |   | 119,197 |   |
| Dividend                    payable                                                                                                                                                                                                                      |   |      | 13     |                                   |   | 13,313,840 |   |   | - |   |   | - |   |
| Accounts                    payable                                                                                                                                                                                                                      |   |      | 10     |                                   |   | 226,196,838 |   |   | 241,168,153 |   |   | 452,991 |   |
| Sundry                    creditors                                                                                                                                                                                                                      |   |      | 12     |                                   |   | 9,708,201 |   |   | 5,478,722 |   |   | 10,291 |   |
| Due                    to related companies                                                                                                                                                                                                              |   |      | 19     |                                   |   | 6,331,536 |   |   | - |   |   | - |   |
| Accruals                    and withholdings                                                                                                                                                                                                             |   |      | 11     |                                   |   | 23,662,802 |   |   | 25,781,713 |   |   | 48,426 |   |
| Other                    current liabilities                                                                                                                                                                                                             |   |      |   |                                   |   | 77,916 |   |   | 1,458,288 |   |   | 2,739 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| Total                    current liabilities                                                                                                                                                                                                             |   |      |   |                                   |   | 497,659,018 |   |   | 411,205,413 |   |   | 772,375 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| LONG-TERM                    LIABILITIES:                                                                                                                                                                                                                |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| Banks                    and financial institutions                                                                                                                                                                                                      |   |      | 12     |                                   |   | 52,601,687 |   |   | 119,788,475 |   |   | 225,001 |   |
| Bonds                                                                                                                                                                                                                                                    |   |      | 12     |                                   |   | 69,566,529 |   |   | 144,299,146 |   |   | 271,040 |   |
| Lease                    obligations                                                                                                                                                                                                                     |   |      | 12     |                                   |   | 1,473,746 |   |   | 3,867,768 |   |   | 7,266 |   |
| Sundry                    creditors                                                                                                                                                                                                                      |   |      | 12     |                                   |   | - |   |   | 659,008 |   |   | 1,238 |   |
| Accruals                                                                                                                                                                                                                                                 |   |      | 20     |                                   |   | 5,756,634 |   |   | 7,226,627 |   |   | 13,574 |   |
| Other                    long-term liabilities                                                                                                                                                                                                           |   |      |   |                                   |   | 1,809,300 |   |   | 447,080 |   |   | 840 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| Total                    long-term liabilities                                                                                                                                                                                                           |   |      |   |                                   |   | 131,207,896 |   |   | 276,288,104 |   |   | 518,959 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| MINORITY                    INTEREST                                                                                                                                                                                                                     |   |      |   |                                   |   | 24,288 |   |   | 761 |   |   | 1 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| SHAREHOLDERS'                    EQUITY:                                                                                                                                                                                                                 |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| Paid-in                    capital (Common stock, no par value; authorized, issued                    and outstanding 6,520,000,000 at                    December 31, 2005 and 2006, respectively)                                                      |   |      |   |                                   |   | 400,693,999 |   |   | 400,693,999 |   |   | 752,632 |   |
| Technical                    revaluation reserve and other reserves                                                                                                                                                                                      |   |      |   |                                   |   | (1,268,044 | ) |   | (8,627,490 | ) |   | (16,205 | ) |
| Retained                    earnings                                                                                                                                                                                                                     |   |      |   |                                   |   | 99,133,821 |   |   | 125,844,346 |   |   | 236,376 |   |
|                                                                                                                                                                                                                                                     |   |      |   |                                   |   |   |   |   |   |   |   |   |   |
| Total                    shareholders' equity                                                                                                                                                                                                            |   |      | 13     |                                   |   | 498,559,776 |   |   | 517,910,855 |   |   | 972,803 |   |
| TOTAL                    LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                            |   |      |   |                                   |   | 1,127,450,978 |   |   | 1,205,405,133 |   |   | 2,264,138 |   |

----

|                                                                                                                                      |
|-------------------------------------------------------------------------------------------------------------------------------------------|
| **DISTRIBUCION                  Y SERVICIO D&S S.A. AND SUBSIDIARIES**                                                                |
|                                                                                                                                      |
| CONSOLIDATED                  STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004, 2005                  AND                  2006 |
| (Restated                  for general price-level changes and expressed in thousands of constant                  Chilean pesos (ThCh$)  |
| and                  thousands of US dollars (ThUS$))                                                                                     |

|                                                   |   |      |   | **For                    the year ended December 31,** |   |
|--------------------------------------------------------|--------|-----------|--------|--------------------------------------------------------|--------|
|                                                   |   | **Notes** |   | **2004**                                               |   | **2005** |   | **2006** |   | **2006** |   |
|                                                   |   |      |   | ThCh$                                                  |   | ThCh$ |   | ThCh$ |   | ThUS$ |   |
|                                                   |   |      |   |                                                   |   |   |   |   |   | **(note                    2u)** |   |
| **OPERATING                    RESULTS**               |   |      |   |                                                   |   |   |   |   |   |   |   |
| Net                    revenue                         |   |      |   |                                                   |   | 1,523,656,944 |   |   | 1,632,340,849 |   |   | 1,696,664,847 |   |   | 3,186,883 |   |
| Cost                    of sales                       |   |      |   |                                                   |   | (1,171,905,325 | ) |   | (1,175,299,449 | ) |   | (1,229,418,368 | ) |   | (2,309,244 | ) |
|                                                   |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross                    profit                        |   |      |   |                                                   |   | 351,751,619 |   |   | 457,041,400 |   |   | 467,246,479 |   |   | 877,639 |   |
| Selling                    and administrative expenses |   |      |   |                                                   |   | (320,527,133 | ) |   | (387,542,975 | ) |   | (402,958,207 | ) |   | (756,885 | ) |
|                                                   |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                    income                    |   |      |   |                                                   |   | 31,224,486 |   |   | 69,498,425 |   |   | 64,288,272 |   |   | 120,754 |   |
|                                                   |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NON-OPERATING                    RESULTS**           |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating                    income                |   |      | 18     |                                                   |   | 3,055,537 |   |   | 4,191,293 |   |   | 5,020,912 |   |   | 9,431 |   |
| Non-operating                    expenses              |   |      | 18     |                                                   |   | (23,309,177 | ) |   | (23,808,712 | ) |   | (26,102,914 | ) |   | (49,030 | ) |
| Foreign                    exchange gain (loss)        |   |      | 16     |                                                   |   | 189,868 |   |   | (1,232,327 | ) |   | 356,127 |   |   | 669 |   |
| Price-level                    restatement             |   |      | 16     |                                                   |   | 2,045,331 |   |   | (461,725 | ) |   | 910,748 |   |   | 1,711 |   |
|                                                   |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating                    loss                  |   |      |   |                                                   |   | (18,018,441 | ) |   | (21,311,471 | ) |   | (19,815,127 | ) |   | (37,219 | ) |
|                                                   |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME                    BEFORE INCOME TAXES          |   |      |   |                                                   |   | 13,206,045 |   |   | 48,186,954 |   |   | 44,473,145 |   |   | 83,535 |   |
| INCOME                    TAXES                        |   |      | 14     |                                                   |   | (2,250,659 | ) |   | (4,930,124 | ) |   | (4,820,558 | ) |   | (9,055 | ) |
| NET                    INCOME                          |   |      |   |                                                   |   | 10,955,386 |   |   | 43,256,830 |   |   | 39,652,587 |   |   | 74,480 |   |

----

| **DISTRIBUCION                  Y SERVICIO D&S S.A. AND SUBSIDIARIES**                                                                                                                     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                           |
| CONSOLIDATED                  STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004,                  2005 AND                  2006                                                  |
| (Restated                  for general price-level changes and expressed in thousands of constant                  Chilean pesos (ThCh$) and thousands of US dollars                  (ThUS$)) |

|                                                                                                                                                |   |      |   | **For                    the year ended December 31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------------------------|--------|
|                                                                                                                                                |   | **Notes** |   | **2004**                                               |   | **2005** |   | **2006** |   | **2006** |   |
|                                                                                                                                                |   |      |   | ThCh$                                                  |   | ThCh$ |   | ThCh$ |   | ThUS$ |   |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   | **(note                    2u)** |   |
| **CASH                    FLOWS FROM OPERATING ACTIVITIES**                                                                                         |   |      |   |                                                   |   |   |   |   |   |   |   |
| Net                    income                                                                                                                       |   |      |   |                                                   |   | 10,955,386 |   |   | 43,256,830 |   |   | 39,652,587 |   |   | 74,480 |   |
| Adjustments                    to reconcile net income to net cash provided by                    operating activities:                             |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                    and amortization expense                                                                                            |   |      |   |                                                   |   | 52,119,196 |   |   | 56,304,941 |   |   | 54,511,998 |   |   | 102,391 |   |
| Write                    offs and accruals                                                                                                          |   |      |   |                                                   |   | 19,698,060 |   |   | 18,288,785 |   |   | 42,037,989 |   |   | 78,961 |   |
| Equity                    in earnings of equity - method investees (gain - net)                                                                     |   |      | 9      |                                                   |   | (645,715 | ) |   | (719,813 | ) |   | (1,520,855 | ) |   | (2,857 | ) |
| Loss                    (gain) on sales of property, plant and equipment, net                                                                       |   |      |   |                                                   |   | 145,032 |   |   | 43,153 |   |   | (117,635 | ) |   | (221 | ) |
| Minority                    interest                                                                                                                |   |      | 18     |                                                   |   | (130,866 | ) |   | (1,704 | ) |   | (30,917 | ) |   | (58 | ) |
| Price-level                    restatement                                                                                                          |   |      | 16     |                                                   |   | (2,045,331 | ) |   | 461,725 |   |   | (910,748 | ) |   | (1,711 | ) |
| Foreign                    exchange                                                                                                                 |   |      | 16     |                                                   |   | (189,868 | ) |   | 1,232,327 |   |   | (356,127 | ) |   | (669 | ) |
| Others                    charges                                                                                                                   |   |      | 23     |                                                   |   | 1,952,008 |   |   | 1,096,667 |   |   | 1,230,639 |   |   | 2,312 |   |
| Others                    credits                                                                                                                   |   |      |   |                                                   |   | (423,860 | ) |   | (29,851 | ) |   | - |   |   | - |   |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Changes                    in assets and liabilities:                                                                                               |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                    in accounts receivable                                                                                                  |   |      |   |                                                   |   | (62,732,154 | ) |   | (62,873,387 | ) |   | (87,530,210 | ) |   | (164,410 | ) |
| Increase                    in inventory                                                                                                            |   |      |   |                                                   |   | (20,944,345 | ) |   | (9,707,312 | ) |   | (12,063,012 | ) |   | (22,658 | ) |
| Decrease                    (increase) in other assets                                                                                              |   |      |   |                                                   |   | 468,367 |   |   | (3,078,572 | ) |   | 10,379,858 |   |   | 19,497 |   |
| (Decrease)                    increase in accounts payable                                                                                          |   |      |   |                                                   |   | (9,656,011 | ) |   | 12,848,164 |   |   | 12,917,878 |   |   | 24,264 |   |
| (Decrease)                    increase in income tax payable                                                                                        |   |      |   |                                                   |   | (10,940,115 | ) |   | (2,538,752 | ) |   | 1,677,562 |   |   | 3,151 |   |
| Increase                    (decrease) in other accounts payable                                                                                    |   |      |   |                                                   |   | 2,016,529 |   |   | 8,376,466 |   |   | (1,280,174 | ) |   | (2,405 | ) |
| Increase                    (decrease) in interest payable                                                                                          |   |      |   |                                                   |   | 393,216 |   |   | 720,973 |   |   | (722,642 | ) |   | (1,357 | ) |
| Increase                    (decrease) in accruals and withholdings                                                                                 |   |      |   |                                                   |   | 5,697,904 |   |   | 1,368,667 |   |   | (3,439,903 | ) |   | (6,461 | ) |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    cash (used in) provided by operating activities                                                                              |   |      |   |                                                   |   | (14,262,567 | ) |   | 65,049,307 |   |   | 54,436,288 |   |   | 102,249 |   |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| **CASH                    FLOWS FROM INVESTING ACTIVITIES**                                                                                         |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchases                    of property, plant and equipment                                                                                       |   |      |   |                                                   |   | (78,694,918 | ) |   | (51,400,988 | ) |   | (79,685,805 | ) |   | (149,676 | ) |
| Proceeds                    from sale of property, plant and equipment                                                                              |   |      |   |                                                   |   | 772,244 |   |   | 642,868 |   |   | 1,221,750 |   |   | 2,295 |   |
| Purchase                    of permanent investments                                                                                                |   |      |   |                                                   |   | (81,096,291 | ) |   | (12,032,471 | ) |   | - |   |   | - |   |
| Collection                    of loans to related companies                                                                                         |   |      |   |                                                   |   | - |   |   | 8,151 |   |   | 7,390 |   |   | 14 |   |
| Payment                    of capitalized interest                                                                                                  |   |      |   |                                                   |   | (1,259,411 | ) |   | (165,708 | ) |   | (500,775 | ) |   | (941 | ) |
| Standby                    deposit for letter of credit related to purchase of Carrefour                    and                    others           |   |      |   |                                                   |   | 55,294,195 |   |   | - |   |   | - |   |   | - |   |
| Other                    investment income                                                                                                          |   |      |   |                                                   |   | 4,697,048 |   |   | - |   |   | 852,283 |   |   | 1,601 |   |
| Other                    investment disbursements                                                                                                   |   |      | 23     |                                                   |   | (1,104,032 | ) |   | (1,017,557 | ) |   | (17,471,557 | ) |   | (32,817 | ) |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    cash used in investing activities                                                                                            |   |      |   |                                                   |   | (101,391,165 | ) |   | (63,965,705 | ) |   | (95,576,714 | ) |   | (179,524 | ) |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| **CASH                    FLOWS FROM FINANCING ACTIVITIES**                                                                                         |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares                    issuance                                                                                                                  |   |      |   |                                                   |   | 165,495,850 |   |   | - |   |   | - |   |   | - |   |
| Bank                    loans                                                                                                                       |   |      |   |                                                   |   | 160,908,763 |   |   | 73,785,083 |   |   | 132,452,074 |   |   | 248,788 |   |
| Paid                    miscellaneous loans to related companies                                                                                    |   |      |   |                                                   |   | - |   |   | (7,803,735 | ) |   | (6,331,536 | ) |   | (11,893 | ) |
| Repayment                    of bank loans                                                                                                          |   |      |   |                                                   |   | (135,762,107 | ) |   | (69,249,494 | ) |   | (85,969,151 | ) |   | (161,478 | ) |
| Bonds                    and commercial paper repayments                                                                                            |   |      |   |                                                   |   | (60,687,508 | ) |   | (62,479,662 | ) |   | (139,105,770 | ) |   | (261,285 | ) |
| Dividends                    paid                                                                                                                   |   |      | 13     |                                                   |   | (26,201,674 | ) |   | (13,606,744 | ) |   | (26,255,904 | ) |   | (49,317 | ) |
| Proceeds                    from issuance of bonds                                                                                                  |   |      |   |                                                   |   | 60,652,332 |   |   | 58,082,291 |   |   | 156,480,251 |   |   | 293,920 |   |
| Proceeds                    from loans from related companies                                                                                       |   |      |   |                                                   |   | 5,676,759 |   |   | - |   |   | - |   |   | - |   |
| Payment                    of charges for issuance of shares                                                                                        |   |      |   |                                                   |   | (2,671,386 | ) |   | - |   |   | - |   |   | - |   |
| Payment                    of charges for issuance of bonds and commercial paper                                                                    |   |      |   |                                                   |   | (60,670 | ) |   | (58,245 | ) |   | (1,554,250 | ) |   | (2,919 | ) |
| Other                    financing disbursements                                                                                                    |   |      |   |                                                   |   | - |   |   | - |   |   | (5,295,486 | ) |   |   |   |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    cash provided by (used in) financing activities                                                                              |   |      |   |                                                   |   | 167,350,359 |   |   | (21,330,506 | ) |   | 24,420,228 |   |   | 55,816 |   |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                             |   |      |   |                                                   |   | 51,696,627 |   |   | (20,246,904 | ) |   | (16,720,198 | ) |   | (21,459 | ) |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| EFFECT                    OF CHANGES IN THE PURCHASING POWER OF THE CHILEAN PESO ON CASH                    AND CASH                    EQUIVALENTS |   |      |   |                                                   |   | (1,675,679 | ) |   | (3,588,839 | ) |   | (2,041,107 | ) |   | (3,834 | ) |
|                                                                                                                                                |   |      |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| CASH                    AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR                                                                               |   |      |   |                                                   |   | 36,207,778 |   |   | 86,228,726 |   |   | 62,392,983 |   |   | 117,194 |   |
| CASH                    AND CASH EQUIVALENTS AT END OF THE YEAR                                                                                     |   |      |   |                                                   |   | 86,228,726 |   |   | 62,392,983 |   |   | 43,631,678 |   |   | 91,901 |   |

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**1.**
**THE        COMPANY**

**2.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES**

**a.        Basis of Presentation**

**b.        Reporting Entity**

**c.        Basis of Consolidation**

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                                                         |   | **Total                  ownership percentage** |     |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|----------|
|                                                                                                         |   | **2004**                                        |     | **2005** |   | **2006** |   |
|                                                                                                              |   | %                                               |     | % |   | % |   |
|                                                                                                         |   |                                            |     |   |   |   |   |
| Sociedad                  Anónima Inmobiliaria Terrenos y Establecimientos                  Comerciales |   |                                            | 99.9600  |   |   | 99.9944 |   |   | 99.9944 |   |
| Administradora                  de Concesiones Comerciales de Supermercados S.A.                             |   |                                            | 99.1693  |   |   | 99.1693 |   |   | 99.1693 |   |
| Administradora                  de Concesiones Comerciales de Hipermercados S.A.                             |   |                                            | 99.5000  |   |   | 99.5000 |   |   | 99.5000 |   |
| Comercial                  D&S S.A. (formerly Magallanes S.A.) (1)                                       |   |                                            | 100.0000 |   |   | 100.0000 |   |   | 100.0000 |   |
| Comercializadora                  de Vestuario S.A. (2)                                                      |   |                                            | 100.0000 |   |   | 100.0000 |   |   | - |   |
| Servicios                  y Administración de Créditos Comerciales Presto S.A.                    |   |                                            | 100.0000 |   |   | - |   |   | - |   |
| Maquinsa                  Equipamiento S.A.(3)                                                               |   |                                            | -        |   |   | 100.0000 |   |   | 100.0000 |   |
| Distribudora                  y Comercializadora Farmalider S.A. (4)                                         |   |                                            | -        |   |   | 100.0000 |   |   | 100.0000 |   |
| Grupo                  Restaurante de Chile S.A.(5)                                                          |   |                                            | -        |   |   | 100.0000 |   |   | 100.0000 |   |
| Servicios                  Financieros D&S S.A. (6)                                                      |   |                                            | -        |   |   | 100.0000 |   |   | 100.0000 |   |
| Desarrollos                  de la Patagonia S.A.(7)                                                         |   |                                            | -        |   |   | 100.0000 |   |   | 100.0000 |   |
| Inversiones                  D&S Chile Ltda.(8)                                                          |   |                                            | -        |   |   | - |   |   | 99.9999 |   |
| Ekono                  S.A.(9)                                                                               |   |                                            | -        |   |   | - |   |   | 100.0000 |   |

|   | (1) | On                  January 7, 2004 the purchase agreement entered into on December                  19, 2003                  was consummated by virtue of which Carrefour Nederland B.V. sold                  to                  D&S 1,701,403 shares of Carrefour Chile S.A. corresponding to 99.9999%                  of the shares of the latter company, at a price of ThCh$74,732,116                  (EUR                  99,999,940). On the same date, and based on the same document,                  Intercross                  Roads B.V. (a company related to Carrefour Nederland B.V.) sold                  to                  Administradora de Concesiones Comerciales de Hipermercados S.A.                  (a                  subsidiary of D&S) one share of Carrefour Chile S.A. corresponding to                  0.0001% of the shares of the latter for a price of ThCh$45 (EUR                  60). With                  these purchases, the Company acquired the entirety of the issued                  shares of                  Carrefour Chile S.A. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | This                  Company was incorporated on September 15, 2004 by issuance of l,000,000                  no-par value common stock shares of the same series, of which D&S                  subscribed to and paid for 999,999 shares. Certain other consolidated                  entities of the Company hold indirect                  interests. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (3) | The                  Extraordinary Shareholders’ Meeting of Maquinsa S.A. held on January 25,                  2005, agreed to increase the Company’s capital by ThCh$221,981,506                  (historic) through the issuance of 36,099,895 no par value registered                  shares. Distribución y Servicio D&S S.A. underwrote and paid for its                  share of the above capital increase in full by transferring property,                  plant and equipment, which had a book value of ThCh$221,981,506                  (historic)                  on the date of said capital                  increase. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | On                  January 26, 2005, Distribución y Servicio D&S S.A. became the Parent                  of “Distribuidora y Comercializadora Farmalider Ltda.”, by subscribing to                  100% of the capital increase of ThCh$3,900,000. Other majority                  owned                  subsidiaries of the Company, Administradora de Concesiones Comerciales                  de                  Hipermercados S.A. and Administradora de Concesiones Comerciales                  de                  Supermercados S.A. had previously held certain ownership interests                  in                  Distribuidora y Comercializadora Farmalíder Ltda. The capital increase was                  paid for by contributing the accounts receivable maintained between                  Distribuidora y Comercializadora Farmalider Ltda. and Distribución y                  Servicio D&S S.A. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

|   | (5) | On                  January 26, 2005, Distribución y Servicio D&S S.A. became the Parent                  of Grupo de Restaurantes Chile Ltda. by acquiring the ownership                  rights to                  the Company from its subsidiary Administradora de Concesiones Comerciales                  de Hipermercados S.A. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | This                  Company was incorporated on January 5, 2005 by issuing 10,000 no                  par value                  shares of the same series, of which 9,999 shares were underwritten                  and                  paid by Distribución y Servicio D&S S.A. The underwritten shares were                  paid for by contributing the shares held on that date by Distribución y                  Servicio D&S S.A. in Servicios y Administración de Créditos                  Comerciales Presto S.A. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (7) | In                  2005, Desarrollos de la Patagonia S.A. completed all arrangements                  for its                  incorporation, issuing 10,000 shares of which 9,990 shares were                  underwritten and paid for by Distribución y Servicio D&S                  S.A. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | On                  November 3, 2006, the Company Inversiones D&S Chile Ltda. was created,                  with paid-in capital of ThCh$431,300,000, of which ThCh$431,299,569                  was                  subscribed to by Distribución y Servicio D&S S.A. through surrender,                  transfer and contribution of shares for an amount of ThCh$485,017,871.                  The                  details of said shares are the following: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Maquinsa                    Equipamiento S.A.                            |   | 11,999,887                    shares |
|--------------------------------------------------------------------------|--------|--------------------------------------|
| Comercial                    D&S S.A.                                |   | 1,701,403                    shares  |
| S.A.                    Inmob. Terres y Establec. Comerciales            |   | 233,176                    shares    |
| Rentas                    e Inversiones La Dehesa S.A.                   |   | 1                    share           |
| Servicios                    Financieros D&S S.A.                    |   | 9,999                    shares      |
| Rentas                    e Inversiones Puente Alto Ltda.                |   | 1%                    of the shares  |
| Rentas                    e Inversiones Gran Avenida Ltda.               |   | 1%                    of the shares  |
| Rentas                    e Inversiones Viñal del Mar Ltda.         |   | 1%                    of the shares  |
| Rentas                    e Inversiones Antofagasta Ltda.                |   | 1%                    of the shares  |
| Rentas                    e Inversiones Linares Ltda.                    |   | 1%                    of the shares  |
| Rentas                    e Inversiones Quillota Ltda.                   |   | 1%                    of the shares  |
| Comercializadora                    de Vestuario S.A.                    |   | 999,900                    shares    |
| Adm.                    de Concesiones Comerciales de Hipermercados S.A. |   | 199                    shares        |
| Adm.                    de Concesiones Comerciales de Supermercados S.A. |   | 1,552                    shares      |
| Grupo                    de Restaurantes de Chile S.A.                   |   | 89.900                    shares     |
| EKONO                    S.A.                                            |   | 99                    shares         |
| Desarrollo                    de la Patagonia S.A.                       |   | 9,999                    shares      |
| Distribuidora                    y Comerc.Farmalider S.A.                |   | 4,316,000                    shares  |

| Maquinsa                    Equipamiento S.A.                       |   | 11,999,887                    shares |
|---------------------------------------------------------------------|--------|--------------------------------------|
| Comercializadora                    de Vestuario S.A.               |   | 999,900                    shares    |
| Adm.                    de Concesiones Comer. de Hipermercados S.A. |   | 199                    shares        |
| Adm.                    de Concesiones Comer. de Supermercados S.A. |   | 1,552                    shares      |
| Grupo                    de Restaurantes de Chile S.A.              |   | 89,900                    shares     |
| EKONO                    S.A.                                       |   | 99                    shares         |
| Desarrollo                    de la Patagonia S.A.                  |   | 9,999                    shares      |
| Distribuidora                    y Comerc Farmalider S.A.           |   | 4,316,000                    shares  |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (9) | Comercial                  Huelén S.A. was created on November 17, 2005, with paid-in capital of                  ThCh$1,000. During 2006, the Company completed its incorporation                  through                  completion of its bylaws. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**d.        Price-Level Restatement **

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                          |   | **Index** |   | **Change                  over ****previous****December                  31,** |   |
|-----------------------------------------------|--------|-----------|--------|-------------------------------------------------------------------------------------|--------|
|                                          |   |      |   |                                                                                |   |
| Year                  ended December 31, 2004 |   |      | 116.84 |                                                                                |   | 2.4 | % |
| Year                  ended December 31, 2005 |   |      | 121.12 |                                                                                |   | 3.7 | % |
| Year                  ended December 31, 2006 |   |      | 124.23 |                                                                                |   | 2.6 | % |

|                               |   | **Index** |   | **Change                  over****previous****November                  30,** |   |
|------------------------------------|--------|-----------|--------|-------------------------------------------------------------------------------|--------|
|                               |   |      |   |                                                                          |   |
| November                  30, 2004 |   |      | 117.28 |                                                                          |   | 2.5 | % |
| November                  30, 2005 |   |      | 121.53 |                                                                          |   | 3.6 | % |
| November                  30, 2006 |   |      | 124.11 |                                                                          |   | 2.1 | % |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**e.          Assets and Liabilities Denominated in Index-Linked Units of Account and          in          Foreign Currencies**

|                         |   | **At                  December 31,** |      |
|------------------------------|--------|--------------------------------------|-----------|
|                         |   | **2004**                             |      | **2005** |   | **2006** |   |
|                         |   | Ch$                                  |      | Ch$ |   | Ch$ |   |
|                         |   |                                 |      |   |   |   |   |
| U.S.                  dollar |   |                                 | 557.40    |   |   | 512.50 |   |   | 532.39 |   |
| UF                           |   |                                 | 17,317.05 |   |   | 17,974.81 |   |   | 18,336.38 |   |

**f.        Cash and Cash equivalents**

**g.        Marketable Securities**

|  | · | **Shares**are                  stated at the lower of price-level restated purchase cost or year-end                  market value. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Mutual                  Funds**are                  stated at the year-end market                  value. |
|--|--------|-------------------------------------------------------------------------------------------------------------|

|  | · | **Fixed                  income securities**are                  stated at the year-end value of the units, which is considered                  market                  value. These investments accrue interest at a fixed designated                  rate on the                  amount invested. The amount invested plus accrued interest, if                  applicable,                  is the year-end unit value. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**h.        Inventories - **

**i.        Allowance for doubtful accounts**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**j.        Property, plant and equipment, and depreciation**
**-**

**k.        Investment in Affiliated Companies**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**l.        Goodwill and Negative Goodwill**

**m.        Bonds payable - **

**n.        Commercial paper**

**o.        Income taxes and deferred taxes**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**p.        Vacation Expense**

**q.        Research and Development Expenses**

**r.        Severance Indemnities**

**s.        Revenue Recognition**

**t.        Use of Estimates**

**u.        Translation to U.S. Dollars**
** **

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**v.        Derivative contracts **

**w.        Long-lived assets - **

**x.        Cost of sales and Administrative and selling expenses**

**y.        Sales - lease back transactions -**

**z.        Instruments purchased under agreement to resell **

**aa.        Intangible**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**ab.        Software**

**ac.        Time deposits**

**ad.        Promotions**

**ae.        Sale of portfolio -**

**af.        Development stage of subsidiary -**

**ag.        Investments in other companies -**

**3.**
**CHANGES        IN ACCOUNTING PRINCIPLES**

**4.**
**MARKETABLE        SECURITIES**

|                                                          |   | **At                    December 31,** |       |
|---------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                          |   | **2005**                               |       | **2006** |   |
|                                                          |   | ThCh$                                  |       | ThCh$ |   |
|                                                          |   |                                   |       |   |   |
| Shares                                                        |   |                                   | 748,696    |   |   | - |   |
| Mutual                    funds (fixed income securities) (1) |   |                                   | 38,630,308 |   |   | 1,230,589 |   |
| Mutual                    funds (2)                           |   |                                   | 1,426,893  |   |   | 1,529,313 |   |
|                                                          |   |                                   |       |   |   |   |   |
| Total                                                         |   |                                   | 40,805,897 |   |   | 2,759,902 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

| **Institutions**                               |   | **Principal                    amount** |       | **Interest                    rate (monthly)** |   | **Interest                    income** |   | **Total                    book value** |   |
|------------------------------------------------|--------|-----------------------------------------|------------|------------------------------------------------|--------|----------------------------------------|--------|-----------------------------------------|--------|
|                                           |   | **2005**                                |       | **2006**                                       |   | **2005**                               |   | **2006**                                |   | **2005** |   | **2006** |   | **2005** |   | **2006** |   |
|                                           |   | ThCh$                                   |       | ThCh$                                          |   | %                                      |   | %                                       |   | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   |
|                                           |   |                                    |       |                                           |   |                                   |   |                                    |   |   |   |   |   |   |   |   |   |
| Fondos                    Mutuos Security      |   |                                    | 7,657,500  |                                           |   | -                                      |   |                                    | 0.437  |   |   |   |   |   | 3,265 |   |   | - |   |   | 7,660,765 |   |   | - |   |
| Fondos                    Mutuos Scotiabank    |   |                                    | 13,089,220 |                                           |   | 1,110,000                              |   |                                    | 0.440  |   |   | 0.530 |   |   | 5,480 |   |   | 589 |   |   | 13,094,700 |   |   | 1,110,589 |   |
| Fondos                    Mutuos Santander     |   |                                    | -          |                                           |   | 100,000                                |   |                                    | -      |   |   | 0.440 |   |   | - |   |   | - |   |   | - |   |   | 100,000 |   |
| Bandesarrollo                    Fondos Mutuos |   |                                    | 8,984,800  |                                           |   | -                                      |   |                                    | 0.439  |   |   |   |   |   | 3,710 |   |   | - |   |   | 8,988,510 |   |   | - |   |
| Fondos                    Mutuos BBVA          |   |                                    | -          |                                           |   | 20,000                                 |   |                                    | -      |   |   | 0.390 |   |   | - |   |   | - |   |   | - |   |   | 20,000 |   |
| Fondos                    Mutuos Corp Banca    |   |                                    | 8,882,700  |                                           |   | -                                      |   |                                    | 0.438  |   |   |   |   |   | 3,633 |   |   | - |   |   | 8,886,333 |   |   | - |   |
|                                           |   |                                    |       |                                           |   |                                   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Total                                          |   |                                    | 38,614,220 |                                           |   | 1,230,000                              |   |                                    |   |   |   |   |   |   | 16,088 |   |   | 589 |   |   | 38,630,308 |   |   | 1,230,589 |   |

**5.**
**NOTES        AND ACCOUNTS RECEIVABLE**

|                                               |   | **At                    December 31,** |        |
|----------------------------------------------------|--------|----------------------------------------|-------------|
|                                               |   | **2005**                               |        | **2006** |   |
|                                               |   | ThCh$                                  |        | ThCh$ |   |
|                                               |   |                                   |        |   |   |
| Trade                    accounts receivable (a)   |   |                                   | 160,111,127 |   |   | 123,499,762 |   |
| Notes                    receivable                |   |                                   | 2,430,019   |   |   | 3,799,192 |   |
| Sundry                    debtors (b)              |   |                                   | 33,376,714  |   |   | 19,429,597 |   |
| Allowance                    for doubtful accounts |   |                                   | (22,941,369 | ) |   | (22,934,530 | ) |
| Total                                              |   |                                   | 172,976,491 |   |   | 123,794,021 |   |

|  | (a) | In                  2006, this amount includes ThCh$98,031,634 (ThCh$140,646,274 in                  2005) of                  trade accounts receivable of Servicios y Administración de Créditos                  Comerciales Presto S.A., the finance subsidiary of the                  Company. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | At                  December 31, 2006, Sundry debtors include ThCh$12,112,625 of accounts                  receivable from BCI Factoring S.A., for the factoring of certain                  accounts                  receivable of the indirect subsidiary Servicios y Administración de                  Créditos Comerciales Presto S.A. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**6.**
**INVENTORIES**

|                                                  |   | **At                    December 31,** |        |
|-------------------------------------------------------|--------|----------------------------------------|-------------|
|                                                  |   | **2005**                               |        | **2006** |   |
|                                                  |   | ThCh$                                  |        | ThCh$ |   |
|                                                  |   |                                   |        |   |   |
| Merchandise                    for sale               |   |                                   | 132,764,986 |   |   | 144,036,257 |   |
| Imports                    in transit                 |   |                                   | 1,762,550   |   |   | 2,106,974 |   |
| Supplies                                              |   |                                   | 805,132     |   |   | 1,251,373 |   |
|                                                  |   |                                   |        |   |   |   |   |
| Sub-total                                             |   |                                   | 135,332,668 |   |   | 147,394,604 |   |
|                                                  |   |                                   |        |   |   |   |   |
| Provision                    for merchandise for sale |   |                                   | (130,023    | ) |   | (128,947 | ) |
|                                                  |   |                                   |        |   |   |   |   |
| Total                                                 |   |                                   | 135,202,645 |   |   | 147,265,657 |   |

**7.**
**OTHER        CURRENT ASSETS**

|                                                                    |   | **At                    December 31,** |      |
|-------------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                                    |   | **2005**                               |      | **2006** |   |
|                                                                    |   | ThCh$                                  |      | ThCh$ |   |
|                                                                    |   |                                   |      |   |   |
| Deferred                    taxes (Note 14.b)                           |   |                                   | 3,827,248 |   |   | 3,954,234 |   |
| Repurchase                    agreements (Note 25.b.4.ii)               |   |                                   | 2,553,963 |   |   | 11,467,467 |   |
| Time                    deposits on warranties (a)                      |   |                                   | -         |   |   | 5,038,573 |   |
| Derivative                    contracts - Cross currency swap (Note 21) |   |                                   | -         |   |   | 1,162,137 |   |
| Deferred                    charges                                     |   |                                   | 1,090,622 |   |   | 1,903,771 |   |
| Other                                                                   |   |                                   | 1,046,878 |   |   | 2,991,866 |   |
| Total                                                                   |   |                                   | 8,518,711 |   |   | 26,518,048 |   |

|   | (a) | Corresponds                  to a time deposit for ThCh$1,929,602 made by SAITEC to guarantee                  its entry                  in “good faith” into negotiations with a counterparty for a potential land                  purchase and a time deposit for ThCh$3,108,971 to guarantee the                  sale of                  portfolio, carried out by the indirect subsidiary, Servicios de                  Administración de Créditos Comerciales Presto                  S.A. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**8.**
**PROPERTY,        PLANT AND EQUIPMENT - NET**

|                                                         |   | **At                    December 31,** |         |
|--------------------------------------------------------------|--------|----------------------------------------|--------------|
|                                                         |   | **2005**                               |         | **2006** |   |
|                                                         |   | ThCh$                                  |         | ThCh$ |   |
|                                                         |   |                                   |         |   |   |
| Land                                                         |   |                                   | 177,724,156  |   |   | 190,465,130 |   |
| Buildings                    and infrastructure:             |   |                                   |         |   |   |   |   |
| Buildings                                                    |   |                                   | 479,964,711  |   |   | 493,852,939 |   |
| Construction                    in progress                  |   |                                   | 5,823,866    |   |   | 8,949,532 |   |
| Machinery                    and equipment                   |   |                                   | 180,352,864  |   |   | 192,605,998 |   |
| Other:                                                       |   |                                   |         |   |   |   |   |
| Leased                    assets (1)                         |   |                                   | 46,228,449   |   |   | 44,162,678 |   |
| Fixtures                                                     |   |                                   | 39,776,394   |   |   | 68,014,551 |   |
|                                                         |   |                                   |         |   |   |   |   |
| Subtotal                                                     |   |                                   | 929,870,440  |   |   | 998,050,828 |   |
|                                                         |   |                                   |         |   |   |   |   |
| Technical                    revaluation (2):                |   |                                   |         |   |   |   |   |
| Land                                                         |   |                                   | 3,817,223    |   |   | 3,817,223 |   |
| Buildings                                                    |   |                                   | 512,212      |   |   | 512,212 |   |
|                                                         |   |                                   |         |   |   |   |   |
| Subtotal                                                     |   |                                   | 4,329,435    |   |   | 4,329,435 |   |
|                                                         |   |                                   |         |   |   |   |   |
| Total                    gross property, plant and equipment |   |                                   | 934,199,875  |   |   | 1,002,380,263 |   |
|                                                         |   |                                   |         |   |   |   |   |
| Accumulated                    depreciation                  |   |                                   | (315,283,317 | ) |   | (355,536,646 | ) |
|                                                         |   |                                   |         |   |   |   |   |
| Total                    net property, plant and equipment   |   |                                   | 618,916,557  |   |   | 646,843,617 |   |

|  | (1) | Corresponds                  to land, buildings and equipment leased under capital leases for                  store                  premises. The Company is a lessee in these                  transactions. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2) | The                  technical revaluation was determined based on a study by independent                  consultants, in accordance with Circular No1529 of the                  SVS. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**Useful        lives assigned to property, plant and equipment:**

| · Buildings                  and infrastructure | 20                  to 60 |   | Years |
|-----------------------------------------------------------|---------------------------|--------|-------|
| · Machinery                  and equipment      | 4                  to 7   |   | Years |
| · Leased                  assets                | 5                  to 7   |   | Years |
| · Fixtures                                      | 10                        |   | Years |
| · Other                  fixed assets           | 4                         |   | Years |

**9.**
**OTHER        ASSETS - NET**

|                                                |   | **At                    December 31,** |        |
|-----------------------------------------------------|--------|----------------------------------------|-------------|
|                                                |   | **2005**                               |        | **2006** |   |
|                                                |   | ThCh$                                  |        | ThCh$ |   |
|                                                |   |                                   |        |   |   |
| Goodwill                    (net) (Note 9a)         |   |                                   | 38,564,209  |   |   | 37,251,951 |   |
| Other                    long-term assets (Note 9b) |   |                                   | 77,428,661  |   |   | 179,336,503 |   |
|                                                |   |                                   |        |   |   |   |   |
| Total                                               |   |                                   | 115,992,870 |   |   | 216,588,454 |   |

|   | **a.** | **Goodwill                  and negative goodwill** |
|--------|--------|-----------------------------------------------------|

|                                                               |   | **At                  December 31,** |       |
|--------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                               |   | **2005**                             |       | **2006** |   |
|                                                               |   | ThCh$                                |       | ThCh$ |   |
|                                                               |   |                                 |       |   |   |
| Maquinsa                  S.A.                                     |   |                                 | 8,821,992  |   |   | 8,007,654 |   |
| Comercial                  D&S S.A. (formerly Magallanes S.A.) |   |                                 | 22,311,714 |   |   | 22,112,977 |   |
| Alvi                  Supermercados Mayoristas S.A.                |   |                                 | 7,068,890  |   |   | 6,710,972 |   |
| Supermercados                  La Frontera S.A.                    |   |                                 | 195,740    |   |   | 179,869 |   |
| Alimentos                  y Servicios Ltda.                       |   |                                 | 165,873    |   |   | 139,334 |   |
| Astro                  S.A.                                        |   |                                 | -          |   |   | 101,145 |   |
|                                                               |   |                                 |       |   |   |   |   |
| Total                                                              |   |                                 | 38,564,209 |   |   | 37,251,951 |   |

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**Incorporation        of Saitec S.A., El Rodeo S.A. and Almac Internacional S.A.**

** **

**Acquisition        of Maquinsa S.A. (formerly Fullmarket S.A.)**

**Acquisition        of Comercial D&S S.A. (formerly Magallanes S.A.)**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                             |   | ThCh$  |             |
|--------------------------------------------------|--------|--------|------------------|
|                                             |   |   |             |
| CURRENT                    ASSETS                |   |   | 6,210,742        |   |
|                                             |   |   |             |   |
| PROPERTY,                    PLANT AND EQUIPMENT |   |   | 55,286,098       |   |
|                                             |   |   |             |   |
| OTHER                    ASSETS                  |   |   | 7,058,539        |   |
|                                             |   |   |             |   |
| TOTAL                    ASSETS ACQUIRED         |   |   | 68,555,379       |   |
|                                             |   |   |             |   |
| CURRENT                    LIABILITIES           |   |   | 17,384,781       |   |
|                                             |   |   |             |   |
| LONG-TERM                    DEBT                |   |   | 218,733          |   |
|                                             |   |   |             |   |
| TOTAL                    LIABILITIES ASSUMED     |   |   | 17,603,514       |   |
|                                             |   |   |             |   |
| NET                    ASSETS ACQUIRED           |   |   | 50,951,865  |   |

**Acquisition        of Alvi Supermercados Mayorista S.A.**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.        **
**Other        long-term assets**

|                                                                      |   | **At                    December 31,** |       |
|---------------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                                      |   | **2005**                               |       | **2006** |   |
|                                                                      |   | ThCh$                                  |       | ThCh$ |   |
|                                                                      |   |                                   |       |   |   |
| Electric                    utility refundable advances                   |   |                                   | 229,021    |   |   | 338,599 |   |
| Deferred                    discount on bond issuance (Note 12.e)         |   |                                   | 2,362,548  |   |   | 3,818,889 |   |
| Deferred                    expenses of bond placement and issuance costs |   |                                   | 938,655    |   |   | 2,577,508 |   |
| Investment                    in related companies (3)                    |   |                                   | 7,255,410  |   |   | 7,902,520 |   |
| Long                    term trade accounts receivable (1)                |   |                                   | 50,453,085 |   |   | 105,809,939 |   |
| Long                    term sundry debtors (2)                           |   |                                   | -          |   |   | 25,571,103 |   |
| Deferred                    tax (Note 14.b)                               |   |                                   | 10,147,266 |   |   | 13,067,422 |   |
| Deferred                    charges                                       |   |                                   | 2,619,040  |   |   | 5,410,475 |   |
| Other                                                                     |   |                                   | 3,423,636  |   |   | 14,840,048 |   |
|                                                                      |   |                                   |       |   |   |   |   |
| Total                                                                     |   |                                   | 77,428,661 |   |   | 179,336,503 |   |

|   | (1) | Long-term                  trade debtors correspond to receivables with maturities over a                  year (See                  25b.8). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | At                  December 31, 2006, long-term sundry debtors include ThCh$25,408,148                  (short-term sundry debtors ThCh$24,972,541 at December 31, 2005,                  (see note                  5)) equivalent to US$47,724,690.03, which corresponds to the portion                  unpaid by Disco S.A., from the original receivable of US$90,000,000                  which                  said company maintained with Distribution and Service D&S S.A. after                  the sale of the shares of Supermercados Ekono S.A. (Argentina)                  in 1999,                  and which was due on May 2, 2003. Said amount was not fully paid                  by Disco                  S.A., under the argument that the “pesification” law in Argentina                  stipulates that liabilities expressed and payable in American Dollars                  should have been converted into Argentinean Pesos. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (3) | Investment                  in related companies detail (all Chilean) is as                  follows: |
|--------|-----|-------------------------------------------------------------------------------------------------------|

|                                                  |   | **Ownership**                       |   |                                 |   |                                        |   |     |      |     |   |     |   |
|-------------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|---------------------------------------------|--------|----------|-----------|----------|--------|----------|--------|
|                                                  |   | **percentage**                      |   | **Book                    value of** |   | **Equity                    in income**     |   |
|                                                  |   | (as                    of all year- |   | **investment**                       |   | **(losses)                    of investee** |   |
|                                                  |   | ends                    presented)  |   | **2005**                             |   | **2006**                                    |   | **2004** |      | **2005** |   | **2006** |   |
|                                                       |   | %                                   |   | ThCh$                                |   | ThCh$                                       |   | ThCh$    |      | ThCh$    |   | ThCh$    |   |
|                                                  |   |                                |   |                                 |   |                                        |   |     |      |     |   |     |   |
| Alimentos                    y Servicios Ltda.        |   |                                | 50.00  |                                 |   | 1,042,155                                   |   |     | 1,261,520 |     |   | 315,900  |   |   | 154,033 |   |   | 271,176 |   |
| Inversiones                    Solpacific S.A.        |   |                                | 50.00  |                                 |   | (7,056                                      | )      |     | (20,753   | )        |   | (15,693  | )      |   | (52,585 | ) |   | (2,637 | ) |
| Alvi                    Supermercados Mayoristas S.A. |   |                                | 35.00  |                                 |   | 5,083,814                                   |   |     | 5,316,926 |     |   | -        |   |   | 201,892 |   |   | 677,160 |   |
| Inmobiliaria                    Mall Calama S.A.      |   |                                | 25.00  |                                 |   | 1,136,497                                   |   |     | 1,344,827 |     |   | 345,508  |   |   | 416,473 |   |   | 575,156 |   |
|                                                  |   |                                |   |                                 |   |                                        |   |     |      |     |   |     |   |   |   |   |   |   |   |
| Total                                                 |   |                                |   |                                 |   | 7,255,410                                   |   |     | 7,902,520 |     |   | 645,715  |   |   | 719,813 |   |   | 1,520,855 |   |

**10.**
**ACCOUNTS        PAYABLE**

|                                  |   | **At                    December 31,** |        |
|---------------------------------------|--------|----------------------------------------|-------------|
|                                  |   | **2005**                               |        | **2006** |   |
|                                  |   | ThCh$                                  |        | ThCh$ |   |
|                                  |   |                                   |        |   |   |
| Domestic                    suppliers |   |                                   | 225,378,260 |   |   | 240,505,485 |   |
| Foreign                    suppliers  |   |                                   | 818,578     |   |   | 662,668 |   |
|                                  |   |                                   |        |   |   |   |   |
| Total                                 |   |                                   | 226,196,838 |   |   | 241,168,153 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**11.**
**ACCRUALS        AND WITHHOLDINGS**

|                                            |   | **At                    December 31,** |       |
|-------------------------------------------------|--------|----------------------------------------|------------|
|                                            |   | **2005**                               |       | **2006** |   |
|                                            |   | ThCh$                                  |       | ThCh$ |   |
| Accruals:                                       |   |                                   |       |   |   |
| Vacations                                       |   |                                   | 5,606,161  |   |   | 5,291,661 |   |
| Bonuses                    payable              |   |                                   | 2,732,240  |   |   | 2,183,801 |   |
| Accrued                    expenses (1)         |   |                                   | 10,802,320 |   |   | 13,168,669 |   |
|                                            |   |                                   |       |   |   |   |   |
| Subtotal                                        |   |                                   | 19,140,721 |   |   | 20,644,131 |   |
|                                            |   |                                   |       |   |   |   |   |
| Employee                    withholdings/taxes: |   |                                   |       |   |   |   |   |
| Other                                           |   |                                   | 4,522,081  |   |   | 5,137,582 |   |
|                                            |   |                                   |       |   |   |   |   |
| Total                                           |   |                                   | 23,662,802 |   |   | 25,781,713 |   |

|   | (1) | In                  2006, this amount includes ThCh$1,037,336 (ThCh$395,609 in 2005)                  of                  severance indemnities (See Note                  20). |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**12.**
**BANK        DEBT, SUNDRY CREDITORS AND OTHER LIABILITIES**

**a.**
**Short-term        bank debt**

|                                                               |   | **At                    December 31,** |       |
|--------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                               |   | **2005**                               |       | **2006** |   |
|                                                               |   | ThCh$                                  |       | ThCh$ |   |
| Payable                    in:                                     |   |                                   |       |   |   |
| United                    States dollars                           |   |                                   | 19,431,901 |   |   | 30,080,639 |   |
| Chilean                    pesos (not indexed)                     |   |                                   | 38,173,927 |   |   | 28,929,065 |   |
| Inflation-linked                    units (UFs)                    |   |                                   | 227,440    |   |   | 260,838 |   |
|                                                               |   |                                   |       |   |   |   |   |
| Total                                                              |   |                                   | 57,833,268 |   |   | 59,270,542 |   |
|                                                               |   |                                   |       |   |   |   |   |
| Weighted                    average interest rates are as follows: |   |                                   |       |   |   |   |   |
|                                                               |   |                                   |       |   |   |   |   |
| Loans                    in U.S. Dollars                           |   |                                   | 3.22       | % |   | 5.50 | % |
| Loans                    in Chilean pesos (not indexed)            |   |                                   | 6.00       | % |   | 5.70 | % |
| Loans                    in inflation-linked units (UFs)           |   |                                   | 0.40       | % |   | 0.40 | % |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                   |   | **Balance**                         |       |         |   | **Balance**                         |   |                                 |       |
|--------------------------------------------------------|--------|-------------------------------------|------------|--------------|--------|-------------------------------------|--------|--------------------------------------|------------|
|                                                        |   | **December                    31,** |       |         |   | **December                    31,** |   | **Stated**                           |       |
| **Bank/Financial                      Institution**    |   | **2005**                            |       | **Currency** |   | **2006**                            |   | **Interest                    Rate** |       |
|                                                   |   | ThCh$                               |       |         |   | ThCh$                               |   |                                 |       |
|                                                   |   |                                |       |         |   |                                |   |                                 |       |
| Santander                    - Santiago                |   |                                | 11,549,064 |         |        | US$                                 |   |                                 | 6,387,522  |   |   | Libor                    + 0.10 |   |
|                                                   |   |                                | 227,440    |         |   | UF                                  |   |                                 | 260,838    |   |   | 0.40 | % |
|                                                        |   |                                | -          |         |        | Ch$                                 |   |                                 | 389,488    |   |   | 1.00 | % |
|                                                        |   |                                |       |         |   | Ch$                                 |   |                                 | 648,856    |   |   | 0.25 | % |
|                                                   |   |                                | 4,118,714  |         |        | Ch$                                 |   |                                 | -          |   |   | 6.00 | % |
|                                                   |   |                                | 32,361,471 |         |        | Ch$                                 |   |                                 | -          |   |   | TAB+0.85 | % |
| Chile                                                  |   |                                | 3,293,580  |         |        | US$                                 |   |                                 | 3,655,055  |   |   | Libor                    + 0.10 |   |
|                                                        |   |                                | -          |         |        | Ch$                                 |   |                                 | 10,095,536 |   |   | 0.48 | % |
| Scotiabank                                             |   |                                | 2,382,314  |         |        | US$                                 |   |                                 | 1,604,987  |   |   | Libor                    + 0.10 |   |
| Citibank                                               |   |                                | -          |         |        | Ch$                                 |   |                                 | 1,379,000  |   |   | 0.52 | % |
|                                                        |   |                                | -          |         |        | US$                                 |   |                                 | 3,671,033  |   |   | Libor                    + 0.07 |   |
| Estado                                                 |   |                                | 10,978     |         |        | US$                                 |   |                                 | 3,163,523  |   |   | Libor                    + 0.05 |   |
| Banco                    de Crédito e Inversiones |   |                                | 1,543,942  |         |        | US$                                 |   |                                 | 5,882,032  |   |   | Libor                    + 0.08 |   |
|                                                   |   |                                | 1,428,412  |         |   | Ch$                                 |   |                                 | 10,346,454 |   |   | 0.46 | % |
| BankBoston                                             |   |                                | 652,023    |         |   | US$                                 |   |                                 | 169,656    |   |   | Libor                    + 0.14 |   |
|                                                   |   |                                | 265,330    |         |        | Ch$                                 |   |                                 | -          |   |   | 7.30 | % |
| Desarrollo                                             |   |                                | -          |         |        | Ch$                                 |   |                                 | 5,008,188  |   |   | 0.48 | % |
| Security                                               |   |                                | -          |         |        | Ch$                                 |   |                                 | 1,061,543  |   |   | 0.48 | % |
| Banco                    Bilbao Viscaya Argentaria     |   |                                | -          |         |        | US$                                 |   |                                 | 5,546,831  |   |   | Libor                    + 0.10 |   |
| Total                                                  |   |                                | 57,833,268 |         |   |                                |   |                                 | 59,270,542 |   |   |   |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.**
**Long-term        bank debt**

|                                                     |   | **At                    December 31,** |       |
|----------------------------------------------------------|--------|----------------------------------------|------------|
|                                                     |   | **2005**                               |       | **2006** |   |
|                                                     |   | ThCh$                                  |       | ThCh$ |   |
| Payable                    in:                           |   |                                   |       |   |   |
| Inflation-linked                    units (UFs)          |   |                                   | 22,352,344 |   |   | - |   |
| Chilean                    pesos                         |   |                                   | 54,633,256 |   |   | 121,827,807 |   |
|                                                     |   |                                   |       |   |   |   |   |
| Total                                                    |   |                                   | 76,985,600 |   |   | 121,827,807 |   |
| Less:                    Current portion (see Note 12.g) |   |                                   | 24,383,913 |   |   | 2,039,332 |   |
| Long-term                    portion                     |   |                                   | 52,601,687 |   |   | 119,788,475 |   |

|                                                |   |         |   | **Balance**                         |   |         |   | **Balance**                         |   |                                 |   |         |   |
|-----------------------------------------------------|--------|--------------|--------|-------------------------------------|--------|--------------|--------|-------------------------------------|--------|--------------------------------------|--------|--------------|--------|
|                                                     |   |         |   | **December                    31,** |   |         |   | **December                    31,** |   | **Stated**                           |   | **Maturity** |   |
| **Bank/Financial                      Institution** |   | **Currency** |   | **2005**                            |   | **Currency** |   | **2006**                            |   | **Interest                    rate** |   | **date**     |   |
|                                                |   |         |   |                                |   |         |   |                                |   |                                 |   |         |   |
| Estado                                              |   |         | UF     |                                |   | 22,022,737   |   |                                | UF     |                                 |   | -            |   |   | 4.49 | % |   | 02-09-2007 |   |
| Estado                                              |   |              | Ch$    |                                |   | -            |   |                                     | Ch$    |                                 |   | 119,788,475  |   |   | TAB+0.40 | % |   | 28-03-2014 |   |
| Citibank                                            |   |              | Ch$    |                                |   | 11,435,200   |   |                                     | Ch$    |                                 |   | -            |   |   | TAB+0.80 | % |   | 20-09-2007 |   |
| Banco                    Bilbao Vizcaya Argentaria  |   |              | Ch$    |                                |   | 19,143,750   |   |                                     | Ch$    |                                 |   | -            |   |   | TAB+0.80 | % |   | 22-12-2009 |   |
|                                                |   |         |   |                                |   | 52,601,687   |   |                                |   |                                 |   | 119,788,475  |   |   |   |   |   |   |   |

| **Bank/Financial                    Institution** |   | **Currency** |   | **2008** |   | **2009**  |   | **2010** |       | **Total** |   |
|---------------------------------------------------|--------|--------------|--------|----------|--------|-----------|--------|----------|------------|-----------|--------|
|                                              |   |         |   | ThCh$    |   | ThCh$     |   | ThCh$    |       | ThCh$     |   |
| Estado                                            |   |         | UF     |     |   | 6,588,366 |   |     | 14,374,617 |      |   | 98,825,492 |   |   | 119,788,475 |   |

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

| **Principal                  Loan Covenants** |
|-----------------------------------------------|
|                                          |   |   |
| Banco                  Estado (agent)         | 1. | Coverage                  of financial expenses, understood as the ratio of EBITDA                  (Operating income plus depreciation) to financial expenses which                  must be                  greater than 3.5 |
|                                          |   |   |
|                                          | 2. | Leverage                  understood as the ratio between current liabilities (which generate                  interest) and net shareholders’ equity which must be less than                  1.2 |

**c.**
**Capital        lease and leaseback obligations**

|                                                               |   | **At                    December 31,** |      |
|--------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                               |   | **2005**                               |      | **2006** |   |
|                                                               |   | ThCh$                                  |      | ThCh$ |   |
|                                                               |   |                                   |      |   |   |
| Lease                    obligations                               |   |                                   | 5,341,254 |   |   | 7,062,817 |   |
| Less:                    Current portion                           |   |                                   | 3,867,508 |   |   | 3,195,049 |   |
|                                                               |   |                                   |      |   |   |   |   |
| Long-term                    portion                               |   |                                   | 1,473,746 |   |   | 3,867,768 |   |
|                                                               |   |                                   |      |   |   |   |   |
| Leaseback                    obligations                           |   |                                   | 1,027,222 |   |   | 213,538 |   |
| Less:                    Current portion                           |   |                                   | 1,027,222 |   |   | 213,538 |   |
|                                                               |   |                                   |      |   |   |   |   |
| Long-term                    portion                               |   |                                   | -         |   |   | - |   |
| Total                    long-term lease and leaseback obligations |   |                                   | 1,473,746 |   |   | 3,867,768 |   |

| **Future                    minimum lease payments** |   | **2007** |      | **2008** |   | **2009**  |   | **2010** |      | **Total** |   |
|------------------------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|----------|-----------|-----------|--------|
|                                                 |   | ThCh$    |      | ThCh$    |   | ThCh$     |   | ThCh$    |      | ThCh$     |   |
|                                                 |   |     |      |     |   |      |   |     |      |      |   |
| Total                                                |   |     | 3,408,586 |     |   | 1,464,098 |   |     | 1,425,383 |      |   | 978,288 |   |   | 7,276,355  |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                                                    |   | **Currency** |   | **2005** |   | **2006**  |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------|--------|----------|--------|-----------|--------|
|                                                                                                    |   |              |   | ThCh$    |   | ThCh$     |   |
| **Short                    - term lease and leaseback obligations**                                     |   |              | US$    |     |   | 2,465,256 |   |   | 2,704,984 |   |
|                                                                                                         |   |         | UF     |     |   | 2,429,474 |   |   | 703,603 |   |
|                                                                                                    |   |         |   |     |   |      |   |   |   |   |
| Total                    short - term lease and leaseback obligations (see Note                    12g) |   |         |   |     |   | 4,894,730 |   |   | 3,408,587 |   |
|                                                                                                    |   |         |   |     |   |      |   |   |   |   |
| **Long                    - term lease and leaseback obligations**                                      |   |              | US$    |     |   | 1,172,670 |   |   | 3,419,357 |   |
|                                                                                                         |   |         | UF     |     |   | 301,076   |   |   | 448,411 |   |
|                                                                                                    |   |         |   |     |   |      |   |   |   |   |
| Total                    long - term lease and leaseback obligations (see Note 12g)                     |   |         |   |     |   | 1,473,746 |   |   | 3,867,768 |   |
|                                                                                                    |   |         |   |     |   |      |   |   |   |   |
| Total                    lease and leaseback obligations                                                |   |         |   |     |   | 6,368,476 |   |   | 7,276,355  |   |

**Leaseback        agreements**

|                                  |   |      |                                         | **Sales                  price to** |   | **Contractual** |   |                            |    |         |   |                                  |   | **Income**                       |   |
|---------------------------------------|--------|-----------|----------------------------------------------|-------------------------------------|--------|-----------------|--------|---------------------------------|---------|--------------|--------|---------------------------------------|--------|----------------------------------|--------|
|                                  |   |      |                                         | ** buyer**                     |   | **installment** |   | **N°                  of** |    | **Interest** |   |                                  |   | **(loss)                  from** |   |
| **Creditor**                          |   | **Asset** |                                         | **lessor**                          |   | **payments**    |   | **installments**                |    | **rate**     |   | **Term                  of contract** |   | **transactions**                 |   |
|                                  |   |      |                                         | UF                                  |   | UF              |   | %                               |    |         |   |                                  |   | ThCh$                            |   |
| Bansa                  Santander S.A. |   |      | Terreno                  y edificios Alameda |                                |   | 380,518         |   |                            | 570,504 |         |   | 121                                   |   |                             | 8.57   |   |   | 18.12.1996                  to 20.01.2007 |   |   | - |   |
| Bansa                  Santander S.A. |   |      | Terreno                  San Bernardo        |                                |   | 109,893         |   |                            | 111,711 |         |   | 121                                   |   |                             | 8.20   |   |   | 14.03.1997                  to 14.03.2007 |   |   | (54,862 | ) |
| Bansa                  Santander S.A. |   |      | Terreno                  San Bernardo        |                                |   | 21,026          |   |                            | 30,904  |         |   | 123                                   |   |                             | 8.65   |   |   | 04.12.1997                  to 14.03.2007 |   |   | - |   |

**d.**
**Short-term        sundry creditors**

|                                                               |   | **At                    December 31,** |      |
|--------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                               |   | **2005**                               |      | **2006** |   |
|                                                               |   | ThCh$                                  |      | ThCh$ |   |
|                                                               |   |                                   |      |   |   |
| Provision                    for merchandise rebate obligation (1) |   |                                   | 2,908,480 |   |   | 2,787,749 |   |
| Accrued                    insurance expense                       |   |                                   | 2,339,328 |   |   | 237,368 |   |
| Other                    (in Chilean pesos) (2)                    |   |                                   | 4,460,393 |   |   | 2,453,605 |   |
| Total                                                              |   |                                   | 9,708,201 |   |   | 5,478,722 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (1) | The                  provision relates to deferred revenue the Company has relating                  to gift                  certificates that it sells to customers at face value. The Company                  debits                  cash and credits deferred revenue when the vouchers are sold at                  the                  equivalent to 100% of their retail value, recognizing revenue (with                  a                  corresponding decrease to deferred revenue) as the vouchers are                  redeemed                  by the customers. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Consist                  of obligations with less than one year in maturity classified as                  non-operational. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------|

**e.**
**Commercial        paper**

|                              |   | **At                    December 31,** |       |
|-----------------------------------|--------|----------------------------------------|------------|
| **Short                    term** |   | **2005**                               |       | **2006** |   |
|                              |   | ThCh$                                  |       | ThCh$ |   |
| Payable                    in:    |   |                                   |       |   |   |
| Chilean                    pesos  |   |                                   | 59,797,623 |   |   | 63,459,450 |   |

|            |   |                                           |   | **Principal                  amount** |   |            |   |
|------------|--------|-------------------------------------------|--------|---------------------------------------|--------|------------|--------|
| **Series** |   | **Stated                  interest rate** |   | **2005**                              |   | **2006**   |   | **Maturity                  Date** |   |
|       |   |                                      |   | ThCh$                                 |   | ThCh$      |   |   |   |
|       |   |                                      |   |                                  |   |       |   |   |   |
| 003-9      |   |                                      | 4.20   | %                                     |   | 12,025,000 |   |   | - |   |   | 01-17-2006 |   |
| 003-10     |   |                                      | 5.64   | %                                     |   | 12,000,000 |   |   | - |   |   | 09-14-2006 |   |
| 003-11     |   |                                      | 5.64   | %                                     |   | 12,000,000 |   |   | - |   |   | 10-17-2006 |   |
| 011-5      |   |                                      | 4.32   | %                                     |   | 10,580,000 |   |   | - |   |   | 03-16-2006 |   |
| 011-6      |   |                                      | 4.80   | %                                     |   | 10,570,000 |   |   | - |   |   | 04-19-2006 |   |
| 003-13     |   |                                      | 6.00   | %                                     |   | -          |   |   | 14,000,000 |   |   | 09-06-2007 |   |
| 003-14     |   |                                      | 6.00   | %                                     |   | -          |   |   | 13,200,000 |   |   | 10-10-2007 |   |
| 003-15     |   |                                      | 6.00   | %                                     |   | -          |   |   | 12,300,000 |   |   | 12-12-2007 |   |
| 011-7      |   |                                      | 6.00   | %                                     |   | -          |   |   | 10,559,000 |   |   | 03-06-2007 |   |
| 011-8      |   |                                      | 6.12   | %                                     |   | -          |   |   | 11,800,000 |   |   | 04-10-2007 |   |

|   | a) | Accrued                  interest on the promissory notes at year end is shown with the                  current                  portion of long-term liabilities together with the current portion                  of the                  liability. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | b) | Long-term                  principal is shown under bonds on the consolidated balance                  sheets. |
|--------|----|----------------------------------------------------------------------------------------------------------------|

|   | c) | The                  promissory notes are not secured. |
|--------|----|--------------------------------------------------------|

|   | d) | At                  December 31, 2006, the premium from the placement of the promissory                  notes                  amounted to ThCh$42,251 (ThCh$95,906 in 2005). At December 31,                  2006, these                  amounts are shown in other current                  liabilities. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e) | The                  expenses incurred in the issue and placement of these promissory                  notes                  were capitalized and are being amortized over the issue term of                  the                  securities. At December 31, 2006, ThCh$64,420 have been amortized                  and                  included in the financial expenses for 2006 (ThCh$63,198 in 2005                  and                  ThCh$487,731 in 2004). ThCh$35,185 is included in other current                  assets.                  (ThCh$26,070 in 2005). |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f) | The                  duration term for these issuances is ten years and the commercial                  paper is                  repaid and renewed every year. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Bonds:**

|                                                      |   | **At                    December 31,** |        |
|-----------------------------------------------------------|--------|----------------------------------------|-------------|
|                                                      |   | **2005**                               |        | **2006** |   |
|                                                      |   | ThCh$                                  |        | ThCh$ |   |
| Payable                    in:                            |   |                                   |        |   |   |
| Inflation-linked                    units (UFs)           |   |                                   | 141,024,880 |   |   | 153,439,772 |   |
| Less:                    current portion (See Note 12.g.) |   |                                   | 71,458,351  |   |   | 9,140,626 |   |
|                                                      |   |                                   |        |   |   |   |   |
| Total                                                     |   |                                   | 69,566,529  |   |   | 144,299,146 |   |

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|        |   | **Bond**                  |   | **Date                  of** |   |           |   | **Amount** |   |                                                |   |                               |   | **Maturity**                       |   | **Nominal**                                    |   | **Amortization**                                                                                                                          |   | **Interest**                                                                                                                                                          |
|-------------|--------|---------------------------|--------|------------------------------|--------|----------------|--------|------------|--------|-----------------------------------------------------|--------|------------------------------------|--------|------------------------------------|--------|------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Issuing** |   | **Issued**                |   | **Issuance**                 |   | **Indexation** |   | **issued** |   | **Series**                                          |   | **date**                           |   | **interest                  rate** |   | **Terms**                                      |   | **Payment**                                                                                                                               |
|        |   |                      |   |                         |   |           |   |       |   |                                                |   |                               |   |                               |   |                                           |   |                                                                                                                                      |   |                                                                                                                                                                  |
| D&S     |   | SERIES                  B |   | 15.11.2001                   |   | U.F.           |   | 1,200,000  |   | B1                  U.F. B2                    U.F. |   | 200,000                  1,000,000 |   | 2022                  2022         |   | 6.5%                  compounded semiannually  |   | 32                  semiannual equal                  Installments                  as from                  April,                  2007 |   | Semiannually,                  due on April                  1, and                  October 1, each year,                  as                  from April 1, 2001    |
|        |   |                      |   |                         |   |           |   |       |   |                                                |   |                               |   |                               |   |                                           |   |                                                                                                                                      |   |                                                                                                                                                                  |
| D&S     |   | SERIES                  C |   | 25.11.2003                   |   | U.F.           |   | 2,000,000  |   | C1                  U.F.                            |   | 2,000,000                          |   | 2009                               |   | 4.5%                  compounded semiannually  |   | 10                  semiannual Installments                  as from                  June,                  2005                    |   | Semiannually,                  due on April                  1, and                  December 1, each year                  As                  from December 1, 2003 |
|        |   |                      |   |                         |   |           |   |       |   |                                                |   |                               |   |                               |   |                                           |   |                                                                                                                                      |   |                                                                                                                                                                  |
| D&S     |   | SERIES                  D |   | 27.11.2003                   |   | U.F.           |   | 1,000,000  |   | D1                  U.F.                            |   | 1,000,000                          |   | 2025                               |   | 5.5%                  compounded semiannually  |   | 38                  semiannual Installments                  as from June,                  2007                                          |   | Semiannually,                  due on April 1, and                  December 1, each year As                  from December 1, 2003                                   |
|        |   |                      |   |                         |   |           |   |       |   |                                                |   |                               |   |                               |   |                                           |   |                                                                                                                                      |   |                                                                                                                                                                  |
| SAITEC      |   | SERIES                  A |   | 04.01.1992                   |   | U.F.           |   | 350,000    |   | A1                  UF                              |   | 350,000                            |   | 2014                               |   | 6.5%                  compounded semiannually  |   | 36                  semiannual Installments                  as from October                  1995                                        |   | Semiannually,                  due on April 1, and                  October 1, each year As                  from April 1, 1992                                       |
|        |   |                      |   |                         |   |           |   |       |   |                                                |   |                               |   |                               |   |                                           |   |                                                                                                                                      |   |                                                                                                                                                                  |
| SAITEC      |   | SERIES                  B |   | 13.09.2006                   |   | U.F.           |   | 4,500,000  |   | B1                  UF                              |   | 4,500,000                          |   | 2028                               |   | 4.2%                  compounded semmiannually |   | 42                  semiannual Installments                  as from April                  1, 2008                                       |   | Semiannually,                  due on April 1, and                  October 1, each year As                  from October 1, 2006                                     |

** **
** **
** **

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**Bonds        and Commercial Paper Covenants**

| Bonds                  Series                  A, B, C, D | 1.     | Maintain                  an indebtedness relationship lower than 1.2 times, defined as the                  ratio                  between current liabilities that accrue interest and                  equity.                                                                                                                                                   |
|-----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      |   |                                                                                                                                                                                                                                                                                                                                                                |
|                                                      | 2.     | Minimum                  coverage of interest expense of 3.5 times (operating results plus                  depreciation plus amortization of intangibles divided by interest                  expenses).                                                                                                                                                           |
|                                                      |   |                                                                                                                                                                                                                                                                                                                                                                |
|                                                      | 3.     | Keeping                  assets free from liens in a total amount equal to at least 1.3                  times the                  outstanding balance of the total bonds issued for the Issuer, which                  are in                  force, calculated and measured each quarter over the consolidated                  balance                  sheet. |
|                                                      |   |                                                                                                                                                                                                                                                                                                                                                                |
|                                                      | 4.     | Keeping                  consolidated total equity of an amount equal at least to UF13,000,000,                  calculated and measured each quarter.                                                                                                                                                                                                              |
|                                                      |   |                                                                                                                                                                                                                                                                                                                                                                |
| Commercial                  paper                         | 1.     | Minimum                  Coverage of financial expenses of 3.5 (operating income plus depreciation                  divided by interest expenses) for March, June, September and                  December.                                                                                                                                                         |
|                                                      |   |                                                                                                                                                                                                                                                                                                                                                                |
|                                                      | 2.     | Leverage                  less than 1.2 (current liabilities divided by equity) for March,                  June,                  September and December.                                                                                                                                                                                                          |

|   | **f.** | **Long-term                  sundry creditors** |
|--------|--------|-------------------------------------------------|

|                                            |   | **At                    December 31,** |   |
|-------------------------------------------------|--------|----------------------------------------|--------|
|                                            |   | **2005**                               |   | **2006** |   |
|                                            |   | ThCh$                                  |   | ThCh$ |   |
| Due                    to Cesar Lahsen Rabi (1) |   |                                   | -      |   |   | 659,008 |   |

|   | (1) | This                  amount corresponds to an obligation for the purchase of land, which                  is                  expressed in Chilean pesos at an annual interest rate of 6.68%.                  The                  obligation payments start in 2007 and its final maturity is in                  2021. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | **g.** | **Analysis                  of current debt and other obligations included in the current portion                  of                  long-term liabilities for each period                  presented** |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **As                    of December 31, 2005** |   |
|------------------------------------------------|--------|
|                                           |   |
|                                           |   |   |   |   |   |   |   | **Amount                    of principal** |   |   |   |
|                                           |   |   |   |   |   |   |   | **payable                    within** |   | **Amount                    of** |   |
|                                           |   |   |   |   |   |   |   | **one                    year and** |   | **principal                    payable** |   |
| **Bank                    or Other**           |   |   |   | **Interest** |   | **Date** |   | **accrued                    interest as of** |   | **in                    more than** |   |
| **Institution                    Name**        |   | **Principal** |   | **rate** |   | **of                    maturity** |   | **December                    31, 2005** |   | **one                    year** |   |
|                                           |   |   |   |   |   |   |   | ThCh$ |   | ThCh$ |   |
| Estado                                         |   |   | ThCh$21,569,772 |   |   | 4.49 | % |   | 2007 |   |   | 329,607 |   |   | 22,022,737 |   |
| Citibank                                       |   |   | ThCh$28,000,000 |   |   | TAB                    +0.80 | % |   | 2007 |   |   | 17,625,835 |   |   | 11,435,200 |   |
| BBVA                                           |   |   | ThCh$25,000,000 |   |   | TAB                    +0.80 | % |   | 2009 |   |   | 6,428,471 |   |   | 19,143,750 |   |
| **Subtotal-Banks**                             |   |   |   |   |   |   |   |   |   |   |   | **24,383,913** |   |   | **52,601,687** |   |
| **Bonds**                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SERIE                    A                     |   |   | UF3.500.000 |   |   | UF                    +7 | % |   | 2006 |   |   | 65,338,048 |   |   | - |   |
| SERIE                    B                     |   |   | UF1.200.000 |   |   | UF                    + 6,5 | % |   | 2022 |   |   | 352,232 |   |   | 22,022,737 |   |
| SERIE                    C                     |   |   | UF1.784.826 |   |   | UF                    + 4,5 | % |   | 2009 |   |   | 5,422,910 |   |   | 27,452,873 |   |
| SERIE                    D                     |   |   | UF1.000.000 |   |   | UF                    + 5,5 | % |   | 2025 |   |   | 82,078 |   |   | 18,352,281 |   |
| SERIEA-162                                     |   |   | UF107.368 |   |   | UF                    + 6,5 | % |   | 2014 |   |   | 263,083 |   |   | 1,738,638 |   |
| **Subtotal                    Bonds**          |   |   |   |   |   |   |   |   |   |   |   | **71,458,351** |   |   | **69,566,529** |   |
| **Lease                    Obligations**       |   |   | ThCh$6.237.490 |   |   | 7%                    to 13,56 | % |   | 2007 |   |   | **4,894,730** |   |   | **1,473,746** |   |
| **Total**                                      |   |   |   |   |   |   |   |   |   |   |   | **100,736,994** |   |   | **123,641,962** |   |

| **As                    of December 31, 2006** |   |
|------------------------------------------------|--------|
|                                           |   |
|                                           |   |   |   |   |   |   |   | **Amount                    of principal** |   |   |   |
|                                           |   |   |   |   |   |   |   | **payable                    within** |   |   |   |
|                                           |   |   |   |   |   |   |   | **one                    year and** |   | **Amount                    of** |   |
| **Bank                    or Other**           |   |   |   | **Interest** |   | **Date** |   | **accrued                    interest as of** |   | **Principal                    payable** |   |
| **Institution                    Name**        |   | **Principal** |   | **rate** |   | **of                    maturity** |   | **December                    31, 2006** |   | **in                    more than one year** |   |
|                                           |   |   |   |   |   |   |   | ThCh$ |   | ThCh$ |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |
| Estado                                         |   |   | ThCh$119,788,478 |   |   | TAB                    +0,40 | % |   | 2014 |   |   | 2,039,332 |   |   | 119,788,475 |   |
| **Subtotal-Banks**                             |   |   |   |   |   |   |   |   |   |   |   | **2,039,332** |   |   | **119,788,475** |   |
| **Bonds**                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SERIE                    B                     |   |   | UF1,200,000 |   |   | UF                    + 6,5 | % |   | 2022 |   |   | 759,570 |   |   | 21,596,013 |   |
| SERIE                    C                     |   |   | UF1,496,333 |   |   | UF                    + 4,5 | % |   | 2009 |   |   | 7,059,082 |   |   | 20,470,614 |   |
| SERIE                    D                     |   |   | UF1,000,000 |   |   | UF                    + 5,5 | % |   | 2025 |   |   | 205,090 |   |   | 18,213,295 |   |
| SERIE                    A-162                 |   |   | UF94,737 |   |   | UF                    + 6,5 | % |   | 2014 |   |   | 218,884 |   |   | 1,505,514 |   |
| SERIE                    B-463                 |   |   | UF4,500,000 |   |   | UF                    + 4,2 | % |   | 2028 |   |   | 898,000 |   |   | 82,513,710 |   |
| **Subtotal                    Bonds**          |   |   |   |   |   |   |   |   |   |   |   | **9,140,626** |   |   | **144,299,146** |   |
| **Lease                    Obligations**       |   |   | ThCh$6,237,490 |   |   | 7%                    to 13.56 | % |   | 2007 |   |   | **3,408,587** |   |   | **3,867,768** |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                          |   |   |   |   |   |   |   |   |   |   |   | **14,588,545** |   |   | **267,955,389** |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**13.**
**SHAREHOLDERS’        EQUITY**

|                                                      |   |        |        | **Technical**   |   |         |   |            |       | **Retained                    earnin****gs** |   |                                |   |
|-----------------------------------------------------------|--------|-------------|-------------|-----------------|--------|--------------|--------|-----------------|------------|----------------------------------------------|--------|-------------------------------------|--------|
|                                                      |   | **Paid-in** |        | **revaluation** |   | **Other**    |   | **Development** |       | **Retained**                                 |   | **Net                    income**   |   | **Interim** |   |   |   |
|                                                      |   | **capital** |        | **reserve**     |   | **reserves** |   | **stage**       |       | **earnings**                                 |   | **for                    the year** |   | **dividends** |   | **Total** |   |
|                                                      |   | ThCh$       |        | ThCh$           |   | ThCh$        |   | ThCh$           |       | ThCh$                                        |   | ThCh$                               |   | ThCh$ |   | ThCh$ |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |
| Balances,                    January 1, 2004              |   |        | 216,932,458 |            |   | 1,280,051    |   |            | 33,751     |                                         |   | -                                   |   |   | 78,642,483 |   |   | 11,766,514 |   |   | (6,879,300 | ) |   | 301,775,957 |   |
| Transfers                                                 |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | 11,766,514 |   |   | (11,766,514 | ) |   | - |   |   | - |   |
| Capital                    increase with increase         |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    new shares                          |   |        | 155,048,729 |            |   | -            |   |            | (2,510,459 | )                                            |   | -                                   |   |   | - |   |   | - |   |   | - |   |   | 152,538,270 |   |
| Dividends                    paid                         |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | (13,779,300 | ) |   | - |   |   | 6,879,300 |   |   | (6,900,000 | ) |
| Price                    level restatement                |   |        | 6,833,964   |            |   | 32,001       |   |            | (14,219    | )                                            |   | -                                   |   |   | 1,908,841 |   |   | - |   |   | (269,100 | ) |   | 8,491,487 |   |
| Net                    income for the year                |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | - |   |   | 10,357,195 |   |   | (10,350,000 | ) |   | 7,195 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                    December 31, 2004            |   |        | 378,815,151 |            |   | 1,312,052    |   |            | (2,490,927 | )                                            |   | -                                   |   |   | 78,538,538 |   |   | 10,357,195 |   |   | (10,619,100 | ) |   | 455,912,909 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances                    as of December 31, 2004 (1)   |   |        | 400,693,999 |            |   | 1,387,831    |   |            | (2,634,793 | )                                            |   | -                                   |   |   | 83,074,609 |   |   | 10,955,386 |   |   | (11,232,417 | ) |   | 482,244,615 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                    January 1, 2005              |   |        | 378,815,151 |            |   | 1,312,052    |   |            | (2,490,927 | )                                            |   | -                                   |   |   | 78,538,538 |   |   | 10,357,195 |   |   | (10,619,100 | ) |   | 455,912,909 |   |
| Transfers                                                 |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | 10,357,195 |   |   | (10,357,195 | ) |   | - |   |   | - |   |
| Dividends                    paid                         |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | (10,619,100 | ) |   | - |   |   | 10,619,100 |   |   | - |   |
| Price                    level restatement                |   |        | 13,637,345  |            |   | 47,234       |   |            | (90,468    | )                                            |   | -                                   |   |   | 2,817,958 |   |   | - |   |   | (286,880 | ) |   | 16,125,189 |   |
| Recognition                    of equity value adjustment |   |        | -           |            |   | -            |   |            | (19,854    | )                                            |   | -                                   |   |   | - |   |   | - |   |   | - |   |   | (19,854 | ) |
| Net                    income for the year                |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | - |   |   | 42,367,120 |   |   | (26,080,000 | ) |   | 16,287,120 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                    December 31, 2005            |   |        | 392,452,496 |            |   | 1,359,286    |   |            | (2,601,249 | )                                            |   | -                                   |   |   | 81,094,591 |   |   | 42,367,120 |   |   | (26,366,880 | ) |   | 488,305,364 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances                    as of December 31, 2005 (1)   |   |        | 400,693,999 |            |   | 1,387,831    |   |            | (2,655,875 | )                                            |   | -                                   |   |   | 82,797,576 |   |   | 43,256,830 |   |   | (26,920,585 | ) |   | 498,559,776 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                    January 1, 2006              |   |        | 392,452,496 |            |   | 1,359,286    |   |            | (2,601,249 | )                                            |   | -                                   |   |   | 81,094,591 |   |   | 42,367,120 |   |   | (26,366,880 | ) |   | 488,305,364 |   |
| Transfers                                                 |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | 42,367,120 |   |   | (42,367,120 | ) |   | - |   |   | - |   |
| Dividends                    paid                         |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | (26,366,880 | ) |   | - |   |   | 26,366,880 |   |   | - |   |
| Development                    stage                      |   |        | -           |            |   | -            |   |            | -          |                                         |   | (2,053,438                          | )      |   | - |   |   | - |   |   | - |   |   | (2,053,438 | ) |
| Shares                    in treasury                     |   |        | -           |            |   | -            |   |            | (5,276,173 | )                                            |   | -                                   |   |   | - |   |   | - |   |   | - |   |   | (5,276,173 | ) |
| Recognition                    of equity value adjustment |   |        | -           |            |   | -            |   |            | (10,537    | )                                            |   | -                                   |   |   | - |   |   | - |   |   | - |   |   | (10,537 | ) |
| Price                    level restatement                |   |        | 8,241,503   |            |   | 28,545       |   |            | (73,924    | )                                            |   | -                                   |   |   | 2,038,992 |   |   | - |   |   | 25,936 |   |   | 10,261,052 |   |
| Net                    income for the year                |   |        | -           |            |   | -            |   |            | -          |                                         |   | -                                   |   |   | - |   |   | 39,652,587 |   |   | (12,968,000 | ) |   | 26,684,587 |   |
|                                                      |   |        |        |            |   |         |   |            |       |                                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances,                    December 31, 2006            |   |        | 400,693,999 |            |   | 1,387,831    |   |            | (7,961,883 | )                                            |   | (2,053,438                          | )      |   | 99,133,823 |   |   | 39,652,587 |   |   | (12,942,064 | ) |   | 517,910,855 |   |

**a.**
**Paid-in        capital**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.**
**Capital        increases**

**c.**
**Income        distribution policy**

**d.**
**Reserve        for technical revaluation of property, plant and equipment**

**e.**
**Dividends        paid**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**f.**
**Deficit        during development stage of subsidiaries**

|                                                          |   | **2005** |       | **2006** |   |
|---------------------------------------------------------------|--------|----------|------------|----------|--------|
|                                                          |   | ThCh$    |       | ThCh$    |   |
|                                                          |   |     |       |     |   |
| Capital                    Increase Expenses Reserve (1)      |   |     | (2,671,386 | )        |   | (2,671,386 | ) |
| Recognition                    of equity value adjustment (2) |   |     | (21,082    | )        |   | (31,608 | ) |
| Other                    Reserves                             |   |     | 36,593     |     |   | 36,593 |   |
| Shares                    in treasury reserve (3)             |   |     | -          |     |   | (5,295,482 | ) |
| Totals                                                        |   |     | (2,655,875 | )        |   | (7,961,883  | )  |

|  | (1) | Corresponds                  to expenses incurred in the placement of shares issued in accordance                  with                  the capital increase approved by the Fourteenth Extraordinary Shareholders                  Meeting, which are recorded in accordance with Circular No.1736                  of the                  Superintendency of Securities and Insurance                  (“SVS”). |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2) | During                  2005 and 2006, the Parent purchased shares, acquired ownership                  interests                  and subscribed and paid capital increases in various companies                  of the                  Consolidated Group. The net gain (loss) obtained from the above                  transactions has been charged to Other reserves. The expenses related                  to                  this process was recognized in income statement of the                  period. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (3) | During                  July and August 2006, the Company repurchased 36,000,000 shares,                  at an                  average price of Ch$146.56 per share. The mentioned purchase of                  treasury                  stock was made in anticipation of the formalization of compensation                  plan                  for managers and executives of the Company and its subsidiaries,                  agreed to                  by the Extraordinary Meeting of Shareholders held on October 26,                  2004, and                  which plan was approved by the Board of Directors in Ordinary Meeting                  held                  on June 27, 2006. At December 31, 2006 the Company has not signed                  any                  related compensation plan agreement with its                  employees. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**g.****Other        reserves**

|                        |       |                                         |       |       | **Deficit                  during**          |       |
|-----------------------------|------------|----------------------------------------------|------------|------------|----------------------------------------------|------------|
|                        | ** ** | ** **                                   | ** ** | ** ** | ** development                  stage** | ** ** |
| **Company**                 | ** ** | **Relationship                  to Company** | ** ** | ** ** | **of                the period**             | ** ** | ** ** | **Accumulated** |   |
|                        |       |                                         |       |       | ThCh$                                        |       |   | ThCh$ |   |
|                        |       |                                         |       |       |                                         |       |   |   |   |
| Ekono                  S.A. |       | Indirect                  Subsidiary         |       |       | 1,514,644                                    |       |   | 1,514,644 |   |
| Others                      |       | Indirect                  Subsidiary         |       |       | 538,794                                      |       |   | 538,794 |   |
|                        |       |                                              |       |       |                                              |       |   |  |   |
| Total                       |       |                                              |       |       | 2,053,438                                    |       |   | 2,053,438 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**14.**
**INCOME        TAXES**

|   | **a.** | The                  detail of accrued income taxes is as                  follows: |
|--------|--------|-------------------------------------------------------------------------------------|

|                                                               |   | **2005** |       | **2006** |   |
|--------------------------------------------------------------------|--------|----------|------------|----------|--------|
|                                                               |   | ThCh$    |       | ThCh$    |   |
|                                                               |   |     |       |     |   |
| First                    category income taxes                     |   |     | (9,598,093 | )        |   | (9,015,374 | ) |
| Less:                                                              |   |     |       |     |   |   |   |
| Monthly                    payments                                |   |     | 9,750,308  |     |   | 8,653,220 |   |
| Personnel                    training credit and                   |   |     |       |     |   |   |   |
| real                    estate tax credit                          |   |     | 4,988,373  |     |   | 4,952,161 |   |
| Recovery                    of first category income tax           |   |     |       |     |   |   |   |
| by                    applying tax losses:                         |   |     |       |     |   |   |   |
| To                    the year                                     |   |     | 743,619    |     |   | 2,322,654 |   |
| Benefit                    from carryback of tax losses            |   |     | 2,979      |     |   | 202,298 |   |
| Arica                    Law tax credit                            |   |     | 7,337      |     |   | 7,337 |   |
| Austral                    Law tax credit                          |   |     | 574,940    |     |   | - |   |
| Prior                    year first category income tax to recover |   |     | -          |     |   | 1,054,591 |   |
|                                                               |   |     |       |     |   |   |   |
| Net                    income taxes refundable                     |   |     | 6,469,463  |     |   | 8,176,887 |   |

|   |   | At                  December 31, 2005 and 2006, “Refundable taxes” on the balance sheet is                  shown together with other Value Added Taxes (VAT) receivable of                  ThCh$2,541,483 and ThCh$164,760 respectively, within current                  assets. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   |   | At                  December 31, 2006, D&S and its subsidiaries have unremitted taxable                  earnings of approximately ThCh$148,594,100 (ThCh$159,581,752 in                  2005). The                  latter are entitled to a credit for first category tax when dividends are                  distributed to the shareholders. Certain subsidiaries have tax                  losses for                  tax purposes totaling ThCh$140,638,559 as of December 31, 2006                  (ThCh$96,515,411 in 2005). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | **b.** | **Deferred                  taxes**                  -                  The detail of accumulated consolidated balances of deferred taxes                  is as                  follows: |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                             |   |  **Balance,                    December 31, 2005** |      | **Balance,                    December 31, 2006** |   |
|------------------------------------------------------------------|--------|---------------------------------------------------------|-----------|---------------------------------------------------|--------|
|                                                             |   | **Deferred                    assets**                  |      | **Deferred                    Liabilities**       |   | **Deferred                    assets** |   | **Deferred                    Liabilities** |   |
|                                                             |   | **Short                    -**                          |      | **Long-**                                         |   | **Short                    -** |   | **Long-** |   | **Short                    -** |   | **Long-** |   | **Short                    -** |   | **Long-** |   |
| **Temporary                      difference**                    |   | **term**                                                |      | **term**                                          |   | **term** |   | **term** |   | **term** |   | **term** |   | **term** |   | **term** |   |
|                                                                  |   | ThCh$                                                   |      | ThCh$                                             |   | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   |
| Allowance                    for uncollectible accounts          |   |                                                    | 1,712,351 |                                              |   | - |   |   | - |   |   | - |   |   | 648,276 |   |   | - |   |   | - |   |   | - |   |
| Vacation                    accrual                              |   |                                                    | 953,047   |                                              |   | - |   |   | - |   |   | - |   |   | 899,582 |   |   | - |   |   | - |   |   | - |   |
| Leased                    assets                                 |   |                                                    | -         |                                              |   | - |   |   | - |   |   | 1,106,159 |   |   | - |   |   | - |   |   | - |   |   | 1,144,311 |   |
| Depreciation                    of property, plant and equipment |   |                                                    | -         |                                              |   | 1,254,027 |   |   | - |   |   | 5,366,577 |   |   | - |   |   | - |   |   | - |   |   | 4,913,184 |   |
| Severance                    indemnity                           |   |                                                    | 67,254    |                                              |   | 978,628 |   |   | - |   |   | - |   |   | 176,347 |   |   | 1,228,526 |   |   | - |   |   | - |   |
| Other                    events                                  |   |                                                    | -         |                                              |   | 248,145 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Sundry                    provisions                             |   |                                                    | 159,359   |                                              |   | - |   |   | - |   |   | - |   |   | 101,570 |   |   | - |   |   | - |   |   | - |   |
| Realization                    allowance on inventory            |   |                                                    | 22,104    |                                              |   | - |   |   | - |   |   | - |   |   | 21,921 |   |   | - |   |   | - |   |   | - |   |
| Interest                    income                               |   |                                                    | 93,653    |                                              |   | - |   |   | - |   |   | - |   |   | 165,926 |   |   | - |   |   | - |   |   | - |   |
| Allowance                    for uncollectible sundry debtors    |   |                                                    | 191,351   |                                              |   | - |   |   | - |   |   | - |   |   | 187,811 |   |   | - |   |   | - |   |   | - |   |
| Capitalized                    financial cost                    |   |                                                    | -         |                                              |   | - |   |   | - |   |   | 453,218 |   |   | - |   |   | - |   |   | 11,669 |   |   | 654,963 |   |
| Deferred                    charges                              |   |                                                    | -         |                                              |   | - |   |   | 675,870 |   |   | 686,472 |   |   | - |   |   | - |   |   | 840,326 |   |   | 1,455,780 |   |
| Tax                    loss                                      |   |                                                    | 1,303,999 |                                              |   | 14,360,002 |   |   | - |   |   | - |   |   | 2,604,796 |   |   | 18,981,105 |   |   | - |   |   | - |   |
|                                                                  |   |                                                    |      |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   | - |   |
| Total                    deferred taxes                          |   |                                                    | 4,503,118 |                                              |   | 16,840,802 |   |   | 675,870 |   |   | 7,612,426 |   |   | 4,806,229 |   |   | 20,209,631 |   |   | 851,995 |   |   | 8,168,238 |   |
|                                                             |   |                                                    |      |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Complementary                    accounts balance                |   |                                                    | -         |                                              |   | (490,563 | ) |   | - |   |   | (1,409,453 | ) |   | - |   |   | (324,500 | ) |   |   |   |   | (1,350,529 | ) |
|                                                             |   |                                                    |      |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    balances per balance sheet                |   |                                                    | 4,503,118 |                                              |   | 16,350,239 |   |   | 675,870 |   |   | 6,202,973 |   |   | 4,806,229 |   |   | 19,885,131 |   |   | 851,995 |   |   | 6,817,709 |   |

**c.**

|                                                                   |   | **2004** |       | **2005** |   | **2006**   |   |
|------------------------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|
|                                                                   |   | ThCh$    |       | ThCh$    |   | ThCh$      |   |
|                                                                   |   |     |       |     |   |       |   |
| **Current                    tax expense**                             |   |     |       |     |   |       |   |
| For                    the year                                        |   |     | (7,786,575 | )        |   | (9,598,093 | )      |   | (9,015,374 | ) |
| Prior                    year adjustment                               |   |     | (19,592    | )        |   | 1,189,272  |   |   | (1,174,980 | ) |
| Benefit                    from tax loss carry back                    |   |     | 1,189,579  |     |   | 743,619    |   |   | 2,322,654 |   |
| **Deferred                    taxes**                                  |   |     |       |     |   |       |   |   |   |   |
| Change                    in deferred taxes                            |   |     | 4,355,777  |     |   | 3,011,725  |   |   | 2,940,003 |   |
| Effect                    of amortization of complementary accounts of |   |     |       |     |   |       |   |   |   |   |
| deferred                    tax assets and liabilities                 |   |     | (142,613   | )        |   | (276,647   | )      |   | 107,139 |   |
| Effect                    on assets and liabilities of deferred tax    |   |     |       |     |   |       |   |   |   |   |
| from                    changes in valuation allowance                 |   |     | 152,765    |     |   | -          |   |   | - |   |
|                                                                   |   |     |       |     |   |       |   |   |   |   |
| Total                    charge to income                              |   |     | (2,250,659 | )        |   | (4,930,124 | )      |   | (4,820,558  | ) |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**15.**
**FOREIGN        CURRENCIES**

|                                              |   | **At                    December 31,** |       |
|---------------------------------------------------|--------|----------------------------------------|------------|
|                                              |   | **2005**                               |       | **2006** |   |
|                                                   |   | ThCh$                                  |       | ThCh$ |   |
| **ASSETS**                                        |   |                                   |       |   |   |
|                                              |   |                                   |       |   |   |
| Current                    assets                 |   |                                   | 27,009,690 |   |   | 27,535,818 |   |
|                                              |   |                                   |       |   |   |   |   |
| **LIABILITIES**                                   |   |                                   |       |   |   |   |   |
| Current                    liabilities            |   |                                   | 22,715,734 |   |   | 33,768,437 |   |
| Long-term                    liabilities          |   |                                   | 1,172,670  |   |   | 152,846 |   |
|                                              |   |                                   |       |   |   |   |   |
| Total                    liabilities              |   |                                   | 23,888,404 |   |   | 33,921,283 |   |
|                                              |   |                                   |       |   |   |   |   |
| Net                    asset (liability) position |   |                                   | 3,121,286  |   |   | (6,385,465 | ) |

**16.**
**PRICE-LEVEL        RESTATEMENT AND FOREIGN EXCHANGE**

|                                                                 |   | **For                    the year ended December 31,** |       |
|----------------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                                 |   | **2004**                                               |       | **2005** |   | **2006** |   |
|                                                                 |   | ThCh$                                                  |       | ThCh$ |   | ThCh$ |   |
|                                                                 |   |                                                   |       |   |   |   |   |
| Property,                    plant and equipment - net               |   |                                                   | 15,298,335 |   |   | 22,760,403 |   |   | 13,491,125 |   |
| Non-monetary                    liabilities - net of other long-term |   |                                                   |       |   |   |   |   |   |   |   |
| non-monetary                    assets                               |   |                                                   | 2,756,830  |   |   | 4,189,748 |   |   | 2,189,495 |   |
| Shareholders'                    equity                              |   |                                                   | (8,981,921 | ) |   | (16,463,818 | ) |   | (10,261,052 | ) |
| Liabilities                    (UF's)                                |   |                                                   | (5,572,097 | ) |   | (7,605,618 | ) |   | (3,294,873 | ) |
| Income                    statement amounts                          |   |                                                   | (1,455,816 | ) |   | (3,342,440 | ) |   | (1,213,947 | ) |
|                                                                 |   |                                                   |       |   |   |   |   |   |   |   |
| Price-level                    restatements - net                    |   |                                                   | 2,045,331  |   |   | (461,725 | ) |   | 910,748 |   |
| Foreign                    exchange gain (loss) (1)                  |   |                                                   | 189,868    |   |   | (1,232,327 | ) |   | 356,127 |   |
|                                                                 |   |                                                   |       |   |   |   |   |   |   |   |
| Gain                    (loss) from changes in the purchasing        |   |                                                   |       |   |   |   |   |   |   |   |
| power                    of the Chilean peso                         |   |                                                   | 2,235,199  |   |   | (1,694,052 | ) |   | 1,266,875 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (1) | The                  detail of foreign exchange gain (loss) is as                  follows: |
|--------|-----|---------------------------------------------------------------------------------------------|

|                                                           |   |         |   |  **At                    December 31,** |   |
|----------------------------------------------------------------|--------|--------------|--------|----------------------------------------------|--------|
|                                                           |   | **Currency** |   | **2004**                                     |   | **2005** |   | **2006** |   |
|                                                           |   |         |   | ThCh$                                        |   | ThCh$ |   | ThCh$ |   |
| **Assets**                                                     |   |         |   |                                         |   |   |   |   |   |
| Marketable                    securities                       |   |              | US$    |                                         |   | (481,723 | ) |   | (123,342 | ) |   | 54,238 |   |
| Sundry                    debtors                              |   |              | US$    |                                         |   | (1,838,086 | ) |   | (2,187,839 | ) |   | 949,244 |   |
|                                                           |   |         |   |                                         |   |   |   |   |   |   |   |   |   |
| Total                    gain (loss)                           |   |         |   |                                         |   | (2,319,809 | ) |   | (2,311,181 | ) |   | 1,003,482 |   |
|                                                           |   |         |   |                                         |   |   |   |   |   |   |   |   |   |
| **Liabilities**                                                |   |         |   |                                         |   |   |   |   |   |   |   |   |   |
| Debt                    due to banks and financial institution |   |              | US$    |                                         |   | 2,260,771 |   |   | 1,338,408 |   |   | (1,111,127 | ) |
| Current                    portion of long-term liabilities    |   |              | US$    |                                         |   | - |   |   | 39,870 |   |   | (62,667 | ) |
| Accruals                                                       |   |              | US$    |                                         |   | 248,906 |   |   | (299,424 | ) |   | 526,439 |   |
|                                                           |   |         |   |                                         |   |   |   |   |   |   |   |   |   |
| Total                    gain (loss)                           |   |         |   |                                         |   | 2,509,677 |   |   | 1,078,854 |   |   | (647,355 | ) |
|                                                           |   |         |   |                                         |   |   |   |   |   |   |   |   |   |
| Foreign                    exchange gain (loss)                |   |         |   |                                         |   | 189,868 |   |   | (1,232,327 | ) |   | 356,127 |   |

**17.**
**DIRECTORS’        REMUNERATION**

|                               |   | **For                    the****year                    ended December 31,** |    |
|------------------------------------|--------|------------------------------------------------------------------------------|---------|
|                               |   | **2004**                                                                     |    | **2005** |   | **2006** |   |
|                               |   | ThCh$                                                                        |    | ThCh$ |   | ThCh$ |   |
|                               |   |                                                                         |    |   |   |   |   |
| Attendance                    fees |   |                                                                         | 385,023 |   |   | 607,449 |   |   | 542,400 |   |

|                          |   | **For                    the****year                    ended December 31,** |   |
|-------------------------------|--------|------------------------------------------------------------------------------|--------|
|                          |   | **2004**                                                                     |   | **2005** |   | **2006** |   |
|                          |   | ThCh$                                                                        |   | ThCh$ |   | ThCh$ |   |
|                          |   |                                                                         |   |   |   |   |   |
| Per                    - diem |   |                                                                         | 53,946 |   |   | 175,612 |   |   | 173,500 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**18.**
**NON-OPERATING        INCOME AND EXPENSES**

|                                                 |   | **For                    the year ended December 31,** |      |
|------------------------------------------------------|--------|--------------------------------------------------------|-----------|
|                                                 |   | **2004**                                               |      | **2005** |   | **2006** |   |
|                                                 |   | ThCh$                                                  |      | ThCh$ |   | ThCh$ |   |
|                                                 |   |                                                   |      |   |   |   |   |
| Interest                    income                   |   |                                                   | 1,378,772 |   |   | 2,880,869 |   |   | 2,692,577 |   |
| Amortization                    of negative goodwill |   |                                                   | 375,097   |   |   | 375,097 |   |   | - |   |
| Equity                    in income of investee      |   |                                                   | 661,408   |   |   | 772,398 |   |   | 1,523,492 |   |
| Gain                    from sale of fixed assets    |   |                                                   | 187,651   |   |   | 38,705 |   |   | 117,635 |   |
| Minority                    interest                 |   |                                                   | 130,866   |   |   | 1,704 |   |   | 30,917 |   |
| Other                                                |   |                                                   | 321,743   |   |   | 122,520 |   |   | 656,291 |   |
|                                                 |   |                                                   |      |   |   |   |   |   |   |   |
| Total                                                |   |                                                   | 3,055,537 |   |   | 4,191,293 |   |   | 5,020,912 |   |

|                                              |   | **For                    the year ended December 31,** |       |
|---------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                              |   | **2004**                                               |       | **2005** |   | **2006** |   |
|                                              |   | ThCh$                                                  |       | ThCh$ |   | ThCh$ |   |
|                                              |   |                                                   |       |   |   |   |   |
| Interest                    expense               |   |                                                   | 19,774,517 |   |   | 20,513,535 |   |   | 22,527,820 |   |
| Amortization                    of goodwill       |   |                                                   | 2,092,299  |   |   | 2,190,811 |   |   | 2,454,206 |   |
| Equity                    in losses of investee   |   |                                                   | 15,693     |   |   | 52,585 |   |   | 2,637 |   |
| Donations                                         |   |                                                   | 323,154    |   |   | 692,071 |   |   | 585,402 |   |
| Loss                    from sale of fixed assets |   |                                                   | 332,683    |   |   | 81,857 |   |   | - |   |
| Other                                             |   |                                                   | 770,831    |   |   | 277,853 |   |   | 532,849 |   |
|                                              |   |                                                   |       |   |   |   |   |   |   |   |
| Total                                             |   |                                                   | 23,309,177 |   |   | 23,808,712 |   |   | 26,102,914 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**19.**
**TRANSACTIONS        WITH RELATED PARTIES**

|  | **a.** | **Related                  companies**                  -                  The Company has transactions with its equity - method investees                  and other                  related parties. Balances due from and due to these companies are                  shown on                  the consolidated balance sheets. The detail of accounts receivable                  and                  payable is the following: |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                              |   | **Receivable**                               |      | **Payable** |   |
|---------------------------------------------------|--------|----------------------------------------------|-----------|-------------|--------|
|                                              |   |  **At                    December 31,** |      |
|                                              |   | **2005**                                     |      | **2006**    |   | **2005** |   | **2006** |   |
|                                              |   | ThCh$                                        |      | ThCh$       |   | ThCh$ |   | ThCh$ |   |
| **Short-term:**                                   |   |                                         |      |        |   |   |   |   |   |
| Servicios                    Profesionales y de   |   |                                         |      |        |   |   |   |   |   |
| Comercialización                    S.A. (1) |   |                                         | -         |        |   | - |   |   | 6,331,536 |   |   | - |   |
| Aquapuro                    S.A.                  |   |                                         | 213,233   |        |   | 208,847 |   |   | - |   |   | - |   |
| Inversiones                    Solpacific S.A.    |   |                                         | 109,273   |        |   | 107,025 |   |   | - |   |   | - |   |
| Inmobiliaria                    Mall Calama S.A.  |   |                                         | 1,247,587 |        |   | 1,246,831 |   |   | - |   |   | - |   |
|                                              |   |                                         |      |        |   |   |   |   |   |   |   |   |   |
| Totals                                            |   |                                         | 1,570,093 |        |   | 1,562,703 |   |   | 6,331,536 |   |   | - |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.**
**Transactions        with related companies **

|                                                                                              |   |                                   |                                          |                                                          |   | **Cash                    value of the transaction**                         |   | **(Charged)                    to income**                                   |      |
|---------------------------------------------------------------------------------------------------|--------|----------------------------------------|-----------------------------------------------|----------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|-----------|
|                                                                                              |   | **Relationship                    to** |                                          | **Description                      of**services or goods |   | **for                    the year ended****December                    31,** |   | **for                    the year ended****December                    31,** |      |
| **Company**                                                                                       |   | **Company**                            |                                          | **received/disbursed**                                   |   | **2004**                                                                     |   | **2005**                                                                     |      | **2006** |   | **2004** |   | **2005** |   | **2006** |   |
|                                                                                              |   |                                   |                                          |                                                     |   | ThCh$                                                                        |   | ThCh$                                                                        |      | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   |
|                                                                                                   |   |                                   |                                          |                                                     |   |                                                                         |   |                                                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Servicios                      Profesionales y de                      Comercialización S.A. |   |                                   | Parent                    company             |                                                     |   | Interest                    on checking account                              |   |                                                                         | 669,111   |   |   | 339,546 |   |   | - |   |   | (669,111 | ) |   | (339,546 | ) |   | - |   |
|                                                                                                   |   |                                   |                                          |                                                     |   | Readjustment                    on current account                           |   |                                                                         | 492,855   |   |   | 282,051 |   |   | - |   |   | (492,855 | ) |   | (282,051 | ) |   | - |   |
| Aquapuro                    S.A.                                                                  |   |                                   | Member                    of controling group |                                                     |   | Purchase                    of merchandise                                   |   |                                                                         | 6,810,601 |   |   | 5,871,577 |   |   | 6,278,493 |   |   | - |   |   | - |   |   | - |   |
| Alimentos                    y Servicios Ltda.                                                    |   |                                   | Member                    of controling group |                                                     |   | Purchase                    of merchandise                                   |   |                                                                         | 3,874,741 |   |   | 3,879,796 |   |   | 3,824,782 |   |   | - |   |   | - |   |   | - |   |
| Larrain                    Vial S.A. Corredora de Bolsa                                           |   |                                   | Member                    of controling group |                                                     |   | Professional                    services                                     |   |                                                                         | 2,078,080 |   |   | 69,311 |   |   | 88,144 |   |   | (2,078,080 | ) |   | (69,311 | ) |   | (88,144 | ) |
| Kimberly                    Clarke Chile S.A.                                                     |   |                                   | Common                    management          |                                                     |   | Purchase                    of merchandise                                   |   |                                                                         | 7,643,836 |   |   | 8,387,796 |   |   | 7,985,836 |   |   | - |   |   | - |   |   | - |   |
| BST                    Consulting Group S.A.                                                      |   |                                   | Common                    management          |                                                     |   | Services                                                                     |   |                                                                         | 139,068   |   |   | 2,607,177 |   |   | 3,739,247 |   |   | (139,068 | ) |   | (2,607,177 | ) |   | (3,739,247 | ) |
| BST                    Bancheque                                                                  |   |                                   | Common                    management          |                                                     |   | Control                    of checks                                         |   |                                                                         | 513,081   |   |   | 471,267 |   |   | 410,183 |   |   | (431,160 | ) |   | (396,022 | ) |   | (344,692 | ) |
| BST                    Procesadora Automatic                                                      |   |                                   | Common                    management          |                                                     |   | Search                    and recruitment                                    |   |                                                                         | 2,948     |   |   | 106,950 |   |   | 3,228 |   |   | (2,948 | ) |   | (106,950 | ) |   | (3,228 | ) |
| BST                    Retail Services                                                            |   |                                   | Common                    management          |                                                     |   | Collection                    services                                       |   |                                                                         | 1,334,969 |   |   | - |   |   | - |   |   | (1,334,969 | ) |   | - |   |   | - |   |
| BST                    Seguros Ltda.                                                              |   |                                   | Common                    management          |                                                     |   | Insurance                    brokers                                         |   |                                                                         | 48,728    |   |   | 5,958 |   |   | - |   |   | (40,949 | ) |   | (5,006 | ) |   | - |   |
| Promociones                    Financieras Ltda.                                                  |   |                                   | Common                    management          |                                                     |   | Commissions                    paid                                          |   |                                                                         | 1,389,760 |   |   | 1,895,999 |   |   | 3,434,995 |   |   | (1,167,865 | ) |   | (1,593,277 | ) |   | (2,886,550 | ) |
| Shop'n                    Check (Chile) Ltda.                                                     |   |                                   | Common                    management          |                                                     |   | Consultant's                    offices in marketting                        |   |                                                                         | 30,540    |   |   | 87,908 |   |   | 83,887 |   |   | (30,540 | ) |   | (87,908 | ) |   | (83,887 | ) |
| Soc                    Agrícola Panquehue Ltda.                                              |   |                                   | Member                    of controling group |                                                     |   | Purchase                    of merchandise                                   |   |                                                                         | 4,107,060 |   |   | 1,507,286 |   |   | 949,669 |   |   | - |   |   | - |   |   | - |   |
| Agrícola                    y Forestal Arcoiris S.A.                                         |   |                                   | Member                    of controling group |                                                     |   | Purchase                    of merchandise                                   |   |                                                                         | 945,359   |   |   | 1,073,737 |   |   | 1,104,245 |   |   | - |   |   | - |   |   | - |   |
| Empresas                    El Mercurio S.A.P.                                                    |   |                                   | Common                    directors           |                                                     |   | Publicity                                                                    |   |                                                                         | 624,558   |   |   | 836,752 |   |   | 1,024,431 |   |   | (524,839 | ) |   | (703,152 | ) |   | (1,024,431 | ) |
| El                    Mercurio Valparaíso                                                    |   |                                   | Common                    directors           |                                                     |   | Publicity                                                                    |   |                                                                         | 95,880    |   |   | 90,248 |   |   | 74,868 |   |   | (80,571 | ) |   | (75,839 | ) |   | (74,868 | ) |
| BBDO                    Publicidad S.A.                                                           |   |                                   | Common                    directors           |                                                     |   | Publicity                                                                    |   |                                                                         | -         |   |   | 230,848 |   |   | - |   |   | - |   |   | (230,848 | ) |   | - |   |
| Entel                    PCS Telecomunicaciones .S.A.                                             |   |                                   | Common                    directors           |                                                     |   | Communications                                                               |   |                                                                         | 18,032    |   |   | 399,525 |   |   | 106 |   |   | (15,153 | ) |   | (335,735 | ) |   | - |   |
| Entel                    Telefonía Local S.A.                                                |   |                                   | Common                    directors           |                                                     |   | Communications                                                               |   |                                                                         | 7,399     |   |   | 11,204 |   |   | - |   |   | (6,218 | ) |   | (9,416 | ) |   | - |   |
| Entel                    Call Center S.A.                                                         |   |                                   | Common                    directors           |                                                     |   | Communications                                                               |   |                                                                         | 207,265   |   |   | 388,957 |   |   | 10,462 |   |   | (174,172 | ) |   | (326,855 | ) |   | - |   |
| Entel                    S.A.                                                                     |   |                                   | Common                    directors           |                                                     |   | Communications                                                               |   |                                                                         | 16,561    |   |   | 20,416 |   |   | 12,095 |   |   | (16,561 | ) |   | (20,416 | ) |   | (12,095 | ) |
| Universidad                    Adolfo Ibañez                                                 |   |                                   | Common                    directors           |                                                     |   | Donations                                                                    |   |                                                                         | 265,073   |   |   | - |   |   | - |   |   | (265,073 | ) |   | - |   |   | - |   |
| Inmobiliaria                    Mall Calama S.A.                                                  |   |                                   | Member                    of controling group |                                                     |   | Lease                    of real estate                                      |   |                                                                         | -         |   |   | 47,236 |   |   | 25,024 |   |   | - |   |   | (47,236 | ) |   | (25,024 | ) |

**20.**
**SEVERANCE        INDEMNITIES**

|                                                |   | **As                    of December 31,** |       |
|-----------------------------------------------------|--------|-------------------------------------------|------------|
|                                                |   | **2005**                                  |       | **2006** |   |
|                                                |   | ThCh$                                     |       | ThCh$ |   |
|                                                |   |                                      |       |   |   |
| Opening                    balance as of January 1, |   |                                      | 5,243,913  |   |   | 6,152,243 |   |
| Increase                    in accruals             |   |                                      | 3,962,349  |   |   | 9,223,019 |   |
| Payments                    during the period       |   |                                      | (3,054,019 | ) |   | (7,111,299 | ) |
|                                                |   |                                      |       |   |   |   |   |
| Total                                               |   |                                      | 6,152,243  |   |   | 8,263,963 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**21.**
**FINANCIAL        DERIVATIVES**

|                                           |   |               |   |                                           |   | **Description                    of contracts** |   |                                        |   | **Accounts                    affected**              |
|------------------------------------------------|--------|--------------------|--------|------------------------------------------------|--------|-------------------------------------------------|--------|----------------------------------------|--------|-------------------------------------------------------|
|                                                |   | **Contract**       |   |                                                |   |                                                 |   | **Position**                           |   | **Item                    or transaction****covered** |   | **Value                      of** |   | **Asset                    / Liability** |   | **Effect                    in income****statement** |
| **Type                      of****derivative** |   | **value****ThCh$** |   | **Expiration****date**                         |   | **Specific****item**                            |   | **Purchase                    / Sell** |   | **Name**                                              |   | **ThCh$** |   | **item****covered** |   | **Name** |   | **ThCh$** |   | **Realized** |   | **Not                    realizaed** |
| Cross                    currency swap         |   | 119,788,476        |   | 1                    -                    2014 |   | Interest                    rate /              |   | P                                      |   | Syndicated                                            |   | 119,788,476 |   | 121,827,809 |   | Other                    current |   | 169,036 |   | - |   | (169,036) |
|                                           |   |               |   |                                           |   | currency                                        |   |                                   |   | loan                                                  |   |   |   |   |   | liabilities |   |   |   |   |   |   |

**22.**
**CONTINGENCIES        AND COMMITMENTS**

**Parent        Company**

|   | **a.** | **Direct                  commitments:** |
|--------|--------|------------------------------------------|

|   | **b.** | **Indirect                  commitments:** |
|--------|--------|--------------------------------------------|

|   | **c.** | **Management                  restrictions and financial                  covenants:** |
|--------|--------|----------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | **d.** | **Legal                  actions:** |
|--------|--------|-------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**Direct        guaranties:**

| **Guaranty                    Creditor** |   | **Indebted**                  |   | **Type                    of** |   | **Assets                    Committed** |   | **Outstanding                    payment****balance                    in Ch$** |
|------------------------------------------|--------|-------------------------------|--------|--------------------------------|--------|-----------------------------------------|--------|---------------------------------------------------------------------------------|
|                                     |   | **Entity**                    |   | **Relation**                   |   | **Guaranty**                            |   | **Type**                                                                        |   | **Book                    Value Ch$** |   | **31-12-2006** |   | **31-12-2005** |
| Banco                    Santander       |   | Distribución             |   | Parent                         |   | Mortgage                                |   | Inmob.                    Puente                                                |   | 24,816,272 |   | 34,285,419 |   | 30,714,088 |
| Santiago                                 |   | y                    Servicio |   |                           |   |                                    |   | Nuevo                                                                           |   |   |   |   |   |   |

|  **Guaranties                    release** |
|-------------------------------------------------|
| **31-12-2007**                                  |   | **Assets** |   | **31-12-2008** |   | **Assets** |   | **31-12-2009** |   | **Assets** |   |
| -                                               |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**23.**
**SUPPLEMENTARY        CASH FLOW INFORMATION**

|                                                               |   | **For                    the year ended December 31,** |       |
|--------------------------------------------------------------------|--------|--------------------------------------------------------|------------|
|                                                               |   | **2004**                                               |       | **2005** |   | **2006** |   |
|                                                               |   | ThCh$                                                  |       | ThCh$ |   | ThCh$ |   |
|                                                               |   |                                                   |       |   |   |   |   |
| Interest                    collected                              |   |                                                   | 984,956    |   |   | 2,491,052 |   |   | 2,400,191 |   |
|                                                               |   |                                                   |       |   |   |   |   |   |   |   |
| Interest                    paid                                   |   |                                                   | 16,536,125 |   |   | 17,297,116 |   |   | 21,301,863 |   |
|                                                               |   |                                                   |       |   |   |   |   |   |   |   |
| Income                    taxes paid                               |   |                                                   | 241,736    |   |   | 233,336 |   |   | 1,574,596 |   |
|                                                               |   |                                                   |       |   |   |   |   |   |   |   |
| Property,                    plant and equipment acquired by       |   |                                                   |       |   |   |   |   |   |   |   |
| assuming                    directly related debt (net of payment) |   |                                                   | 4,813,983  |   |   | 960,759 |   |   | 7,800,497 |   |

| **Description**                                                                   |   | **2004** |      | **2005** |   | **2006**  |   |
|-----------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|
|                                                                                   |   | ThCh$    |      | ThCh$    |   | ThCh$     |   |
| Amortization                    of debt issuance costs                            |   |     | 798,626   |     |   | 373,921   |   |   | 341,205 |   |
| Amortization                    of premium/discount associated with bond issuance |   |     | 402,831   |     |   | 416,253   |   |   | 462,525 |   |
| Miscellaneous                    adjustments to other investments                 |   |     | 59,482    |     |   | 26,010    |   |   | 23,730 |   |
| Other                    accruals                                                 |   |     | 691,069   |     |   | -         |   |   | - |   |
| Others                                                                            |   |     | -         |     |   | 280,483   |   |   | 403,179 |   |
|                                                                              |   |     |      |     |   |      |   |   |   |   |
| Total                                                                             |   |     | 1,952,008 |     |   | 1,096,667 |   |   | 1,230,639  |   |

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|  **Description**                                          |   | **2004** |       | **2005** |   | **2006**   |   |
|----------------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|
|                                                                |   | ThCh$    |       | ThCh$    |   | ThCh$      |   |
| Lease                    prepayment                            |   |     | -          |     |   | (849,728   | )      |   | (11,528,786 | ) |
| Others                    costs - investment in Astro S.A.     |   |     | -          |     |   | -          |   |   | (101,145 | ) |
| Others                    costs - investment in Carrefour S.A. |   |     | (1,095,956 | )        |   | -          |   |   | - |   |
| Time                    deposits on warranty                   |   |     | -          |     |   | -          |   |   | (5,038,573 | ) |
| Other                                                          |   |     | (8,076     | )        |   | (167,829   | )      |   | (803,053 | ) |
|                                                           |   |     |       |     |   |       |   |   |   |   |
| Total                                                          |   |     | (1,104,032 | )        |   | (1,017,557 | )      |   | (17,471,557 | ) |

**24.**
**SUBSEQUENT        EVENTS**

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

| **25.** | **DIFFERENCES                  BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING                  PRINCIPLES** |
|---------|------------------------------------------------------------------------------------------------------------------------------|

**a.1.        Deferred income taxes**

|  | i. | A                  deferred tax liability or asset is recognized for the estimated                  future tax                  effects attributable to temporary differences and tax loss                  carryforwards. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ii. | The                  measurement of deferred tax liabilities and assets is based on                  the                  provisions of the enacted tax law. The effects of future changes                  in tax                  laws or rates are not anticipated. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | iii. | The                  measurement of deferred tax assets are reduced by a valuation allowance,                  if, based on the weight of available evidence, it is more likely                  than not                  that some portion of the deferred tax assets will not be                  realized. |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**a.2.        Mandatory dividends**

**a.3.        Marketable debt and equity securities**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                                                                   |   | **Years                    ended December 31,** |          |
|------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------------|
|                                                                                                                   |   | **2004**                                        |          | **2005** |   | **2006** |   |
|                                                                                                                   |   | ThCh$                                           |          | ThCh$ |   | ThCh$ |   |
|                                                                                                                   |   |                                            |          |   |   |   |   |
| Proceeds                    from sales of "available-for-sale" securities generating realized                    gains |   |                                            | 1,780,532,808 |   |   | 3,760,976,574 |   |   | 3,927,641,772 |   |
| Realized                    gains                                                                                      |   |                                            | 990,823       |   |   | 2,418,512 |   |   | 2,918,282 |   |

|                                                                       |   |     |       | **Gross**      |   |      |   |
|-----------------------------------------------------------------------|--------|----------|------------|----------------|--------|-----------|--------|
|                                                                  |   |     |       | **unrealized** |   | **Fair**  |   |
| **Available-for-sale                    investments**                 |   | **Cost** |       | **gains**      |   | **value** |   |
|                                                                  |   | ThCh$    |       | ThCh$          |   | ThCh$     |   |
|                                                                  |   |     |       |           |   |      |   |
| Securities                    available for sale at December 31, 2004 |   |     | 37,669,095 |           |   | 269,558   |   |   | 37,938,653 |   |
| Securities                    available for sale at December 31, 2005 |   |     | 40,805,897 |           |   | 520,622   |   |   | 41,326,519 |   |
| Securities                    available for sale at December 31, 2006 |   |     | 2,759,902  |           |   | -         |   |   | 2,759,902 |   |

**a.4.        Property, plant and equipment**

**a.5.        Purchase accounting and impairment of goodwill**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (a) | Under                  Chilean GAAP, at the acquisition date of the shares of Saitec S.A.,                  El                  Rodeo S.A. and Almac Internacional S.A., the Company recorded negative                  goodwill due to the excess of the carrying value of the investment                  over                  the stated increase in the Company’s capital. Under U.S. GAAP, such                  negative goodwill has been reversed against shareholders’ equity and the                  subsequent amortization recorded under Chilean GAAP has been                  eliminated. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Under                  Chilean GAAP, the acquisition of Maquinsa, an unrelated company,                  in 1997,                  was recorded at cost with the assets acquired and liabilities assumed                  stated at their book basis, with any excess up to the purchase                  price being                  recorded as goodwill. Under U.S. GAAP, the assets acquired and                  liabilities                  assumed would be recorded at their respective fair value with any                  excess                  up to the purchase price being recorded as goodwill. In 1999, the                  Company                  settled an amount of ThCh$1,107,833 with the former owner of Maquinsa                  S.A.                  in arbitration. Under Chilean GAAP, this amount was recorded as                  goodwill.                  Under U.S. GAAP, this amount would have been expensed. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (c) | On                  January 7, 2004, a purchase agreement entered into on December                  19, 2003                  was consummated whereby Carrefour Nederland B.V. sold to the Company                  1,701,403 shares of Carrefour Chile S.A., corresponding to 99.9999%                  of the                  shares of the latter, for a price of ThCh$74,732,116. At that same                  date,                  and based on the same agreement, Intercross Roads B.V. (a company                  related                  to Carrefour Nederland B.V.) sold to Administradora de Concesiones                  Comerciales de Hipermercados S.A. (a subsidiary of the Company)                  one share                  of Carrefour Chile S.A., corresponding to 0.0001% of the shares                  of the                  latter, for a price of ThCh$45. With these purchases, the Company                  acquired                  the entirety of the issued shares of Carrefour Chile                  S.A. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | On                  October 13, 2005, Distribución y Servicio D&S S.A. purchased 35% of                  the shares issued by Alvi Supermercados Mayorista S.A., through                  a capital                  stock purchase agreement at the purchase price of ThCh$11,606,564.                  Under                  Chilean GAAP at December 31, 2005 the excess of the purchase price                  paid                  for the shares acquired from ALVI over the net book value of the                  assets                  acquired and liabilities assumed was designated as goodwill and                  amortized                  since the acquisition date. Under US GAAP said value would have                  been                  modified based on the fair value of the assets acquired and liabilities                  assumed, which determination process was concluded in May 2006.                  Due to the                  insignificant amount of the modification, no effect has been included                  in                  the 2005 reconciliations to net income or shareholders equity other                  than                  to reverse the amortization of goodwill recorded under Chile                  GAAP. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | (e) | In                  1996 the Company purchased a 100% interest in Supermercados Ekono                  S.A.                  (Argentina). The Company previously held a 49.99% non-controlling                  interest, accounted for under the equity method for the period                  from                  December 27, 1991 to December 31, 1995, when it sold this interest                  to the                  Company's shareholders and subsequently repurchased the 100% interest                  from                  such shareholders. Under Chilean GAAP, these transactions were                  accounted                  for separately. Under U.S. GAAP, the sale and repurchase from shareholders                  were treated as capital transactions. In December 1999, the Company                  sold                  its 100.0% interest in Supermercados Ekono S.A. (Argentina). The                  effects                  of such differences and their reversals upon the December, 1999                  sale are                  recorded in the reconciliation. In 2005, management determined                  that,                  unintentionally, certain basis differences originating in both                  shareholders’ equity and net income related to the sale in 1999 had not                  been appropriately reversed in the reconciliation to U.S. GAAP                  shareholders’ and net income in 1999, as a result of which shareholders’                  equity under U.S. GAAP for comparative periods was understated                  by                  ThCh$2,839,011. Since this misstatement was deemed to have an immaterial                  impact on the presentation of the financial statements for prior                  periods,                  corrections have been recorded in 2005 reconciliations to U.S.                  GAAP,                  resulting in an increase of shareholders’ equity by ThCh$2,839,011 and an                  increase in net income for 2005 by ThCh$1,464,461, under U.S.                  GAAP. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**a.6.        Severance indemnities **

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**a.7.        Derivative instruments -**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                     |   |    |        |                                 |   |                            |   |
|--------------------------------------------------------------------------|--------|---------|-------------|--------------------------------------|--------|---------------------------------|--------|
|                                                                          |   |    |        |                                 |   | **Total                    of** |   |
| **Forward                    exchange contract**                         |   |    |        | **Exchange                    rate** |   | **payment**                     |   |
| ("Assignment                    Agreement" signed on December 19, 2003") |   | € |        | Peso                    / Euro       |   | ThCh$                    (1)    |   |
|                                                                     |   |    |        |                                 |   |                            |   |
| Euro                    adopted on the agreement                         |   |    | 100,000,000 |                                 |   | 745.80                          |   |   | 78,887,442 |   |
| Euro                    day of payment on January 7, 2004                |   |    | 100,000,000 |                                 |   | 721.35                          |   |   | 76,301,535 |   |
|                                                                     |   |    |        |                                 |   |                            |   |   |   |   |
| The                  Company realized a loss of                          |   |    |        |                                 |   |                            |   |   | 2,585,907 |   |

| (1) | Restated                  in thousands of constant Chilean pesos as of December 31,                  2006. |
|-----|------------------------------------------------------------------------------------------------------------|

**a.8.        Effects of minority interest on the U.S. GAAP adjustments**

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**a.9.        Effects of Capitalization of rebate associated with unsold inventory on the        U.S.        GAAP adjustments**

**a.10.        Deficit during development stage on the U.S. GAAP        adjustments**

**a.11.        Leaseback transactions - **

**a.12.        Capitalization of restructured loan expenses - **

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**a.13.        Sale of portfolio - **

**a.14.        Effect of Conforming to U.S. GAAP**

|                                                                                                                                                            |   |          |                      |  **Year                    ended December 31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|---------------------------|------------------------------------------------------|--------|
|                                                                                                                                                            |   |          |                      | **2004**                                             |   | **2005** |   | **2006** |   | **2006** |   |
|                                                                                                                                                            |   | **Paragraph** |                      | ThCh$                                                |   | ThCh$ |   | ThCh$ |   | ThUS$ |   |
| Net                    income, in accordance with Chilean GAAP                                                                                                  |   |          |                      |                                                 |   | 10,955,386 |   |   | 43,256,830 |   |   | 39,652,587 |   |   | 74,480 |   |
| Reversal                      of depreciation of the technical revaluation of  property,                      revaluation of property, plant and equipment |   |          | a.4                       |                                                 |   | 31,396 |   |   | 31,396 |   |   | 31,396 |   |   | 59 |   |
| Adjustment                    for deferred taxes                                                                                                                |   |          | a.1                       |                                                 |   | 142,613 |   |   | 276,647 |   |   | (107,139 | ) |   | (201 | ) |
| Amortization                    of severance indemnity prior service cost                                                                                       |   |          | a.6                       |                                                 |   | (24,737 | ) |   | (24,737 | ) |   | (470,018 | ) |   | (883 | ) |
| Reversal                    of amortization of negative goodwill                                                                                                |   |          | a.5                    (a | )                                                    |   | (375,097 | ) |   | (339,861 | ) |   | - |   |   | - |   |
| Reversal                    amortization goodwill Maquinsa S.A.                                                                                                 |   |          | a.5                    (b | )                                                    |   | 814,338 |   |   | 814,338 |   |   | 814,338 |   |   | 1,530 |   |
| Reversal                    amortization goodwill Carrefour S.A.                                                                                                |   |          | a.5                    (c | )                                                    |   | 1,230,633 |   |   | 1,239,539 |   |   | 1,239,540 |   |   | 2,328 |   |
| Reversal                    amortization goodwill Alvi S.A.                                                                                                     |   |          | a.5                    (d | )                                                    |   | - |   |   | 89,479 |   |   | 357,918 |   |   | 672 |   |
| Reversal                    amortization others goodwill                                                                                                        |   |          | a.5                       |                                                 |   | 47,328 |   |   | 47,455 |   |   | 42,410 |   |   | 80 |   |
| Loss                    on forward exchange contract associated with purchase of Carrefour                    S.A.                                              |   |          | a.7                       |                                                 |   | (2,585,907 | ) |   | - |   |   | - |   |   | - |   |
| Deferred                    tax from adjustments to U.S.GAAP                                                                                                    |   |          | a.1                       |                                                 |   | 25,393 |   |   | 740,020 |   |   | 392,814 |   |   | 738 |   |
| Capitalization                    of volume rebate on unsold inventory                                                                                          |   |          | a.9                       |                                                 |   | (126,842 | ) |   | (216,804 | ) |   | (310,069 | ) |   | (582 | ) |
| Minority                    interest                                                                                                                            |   |          | a.8                       |                                                 |   | (3,336 | ) |   | (1,930 | ) |   | (1,068 | ) |   | (2 | ) |
| Adjustment                    to net loss on sale of Supermercados Ekono Argentina S.A.                                                                         |   |          | a.5                    (e | )                                                    |   | - |   |   | 1,464,461 |   |   | - |   |   | - |   |
| Reversal                    of capitalized expenses on restructured loans                                                                                       |   |          | a.12                      |                                                 |   | - |   |   | - |   |   | (78,749 | ) |   | (148 | ) |
| Reversal                    of capitalized interests on sale of portfolio                                                                                       |   |          | a.13                      |                                                 |   | - |   |   | - |   |   | (694,784 | ) |   | (1,305 | ) |
| Indemnity                    adjustment for workforce rotation, etc.                                                                                            |   |          | a.6                       |                                                 |   | - |   |   | - |   |   | (307,454 | ) |   | (577 | ) |
| Deficit                    during development stage                                                                                                             |   |          | a.10                      |                                                 |   | - |   |   | - |   |   | (2,053,438 | ) |   | (3,857 | ) |
| Unrealized                    loss on financial derivative                                                                                                      |   |          | a.7                       |                                                 |   | - |   |   | - |   |   | (169,036 | ) |   | (318 | ) |
| Net                    income in accordance with US GAAP                                                                                                        |   |          |                      |                                                 |   | 10,131,168 |   |   | 47,376,833 |   |   | 38,339,248 |   |   | 72,013 |   |
| Other                    comprehensive income                                                                                                                   |   |          |                      |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                    gain on marketable securities (net of tax)                                                                                        |   |          | a.3                       |                                                 |   | 156,455 |   |   | 208,384 |   |   | (427,187 | ) |   | (802 | ) |
| Comprehensive                    income in accordance with U.S.GAAP                                                                                             |   |          |                      |                                                 |   | 10,287,623 |   |   | 47,585,217 |   |   | 37,912,061 |   |   | 71,211 |   |

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                    |   |   **December                  31,** |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|
|                                                                    |   |                                          |   | **2005** |   | **2006** |   | **2006** |   |
|                                                                    |   | **Paragraph**                                 |   | ThCh$ |   | ThCh$ |   | ThUS$ |   |
| Shareholders'                  equity, in accordance with Chilean GAAP  |   |                                          |   |   |   | 498,559,776 |   |   | 517,910,855 |   |   | 972,803 |   |
|                                                                    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Reversal                  of the technical revaluation                  |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| of                  property, plant and equipment                       |   |                                          | a.4 |   |   | (2,031,157 | ) |   | (2,031,157 | ) |   | (3,815 | ) |
| Reversal                  of the accumulated depreciation               |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| of                  the technical revaluation of property,              |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| plant                  and equipment                                    |   |                                          | a.4 |   |   | 796,834 |   |   | 828,230 |   |   | 1,556 |   |
| Deferred                  tax on adjustments to U.S. GAAP               |   |                                          | a.1 |   |   | 208,217 |   |   | 601,031 |   |   | 1,129 |   |
| Adjustments                  for deferred tax                           |   |                                          | a.1 |   |   | (918,890 | ) |   | (1,026,029 | ) |   | (1,927 | ) |
| Reversal                  of severance indemnity prior service cost     |   |                                          | a.6 |   |   | 742,129 |   |   | 742,129 |   |   | 1,394 |   |
| Amortization                  of severance                              |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| indemnity                  prior service cost                           |   |                                          | a.6 |   |   | (272,111 | ) |   | (742,129 | ) |   | (1,394 | ) |
| Indemnity                  adjustment for workforce rotation, etc.      |   |                                          | a.6 |   |   | - |   |   | (307,454 | ) |   | (577 | ) |
| Reversal                  of negative goodwill                          |   |                                          | a.5                  (a | ) |   | 3,750,974 |   |   | - |   |   | - |   |
| Reversal                  of amortization of negative goodwill          |   |                                          | a.5                  (a | ) |   | (3,750,974 | ) |   | - |   |   | - |   |
| Reversal                  of goodwill Maquinsa S.A.                     |   |                                          | a.5                  (b | ) |   | (1,796,788 | ) |   | (1,796,788 | ) |   | (3,375 | ) |
| Reversal                  of amortization of goodwill Maquinsa S.A.     |   |                                          | a.5                  (b | ) |   | 6,912,889 |   |   | 7,727,227 |   |   | 14,514 |   |
| Reversal                  of amortization of goodwill Carrefour S.A.    |   |                                          | a.5                  (c | ) |   | 2,470,172 |   |   | 3,709,712 |   |   | 6,968 |   |
| Reversal                  amortization goodwill Alvi S.A.               |   |                                          | a.5                  (d | ) |   | 89,479 |   |   | 447,397 |   |   | 840 |   |
| Reversal                  amortization others goodwill                  |   |                                          |   |   |   | 255,687 |   |   | 298,097 |   |   | 560 |   |
| Loss                  on forward exchange contract                      |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| associated                  with purchase of Carrefour Chile S.A.       |   |                                          | a.7 |   |   | (2,585,907 | ) |   | (2,585,907 | ) |   | (4,857 | ) |
| Adjustment                  for difference for arbitration settlement   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| for                  Maquinsa S.A.                                      |   |                                          | a.5                  (b | ) |   | (1,131,098 | ) |   | (1,131,098 | ) |   | (2,125 | ) |
| Capitalization                  of volume rebate on unsold inventory    |   |                                          | a.9 |   |   | (772,446 | ) |   | (1,082,515 | ) |   | (2,033 | ) |
| Reversal                  of capitalized expenses on restructured loans |   |                                          | a.12 |   |   | - |   |   | (78,749 | ) |   | (148 | ) |
| Recognition                  of loss on sale of portfolio               |   |                                          | a.13 |   |   | - |   |   | (694,784 | ) |   | (1,305 | ) |
| Unrealized                  gain on marketable securities               |   |                                          | a.3 |   |   | 520,622 |   |   | - |   |   | - |   |
| Unrealized                  loss on financial derivative                |   |                                          | a.7 |   |   | - |   |   | (169,036 | ) |   | (318 | ) |
| One                  time cumulative adjustment under SAB 108           |   |                                          | a.6 |   |   | - |   |   | (449,383 | ) |   | (844 | ) |
| Minority                  interest                                      |   |                                          | a.8 |   |   | (3,344 | ) |   | (4,412 | ) |   | (8 | ) |
| Shareholders'                  equity, in accordance with U.S. GAAP     |   |                                          |   |   |   | 501,044,064 |   |   | 520,165,237 |   |   | 977,038 |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                                                         |   | ThCh$  |        |
|--------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
|                                                                                                         |   |   |        |
| Balance                    at January 1, 2004                                                                |   |   | 316,016,716 |   |
| Dividends                    declared                                                                        |   |   | (10,155,698 | ) |
| Capital                    increase                                                                          |   |   | 164,003,723 |   |
| Expenses                    for share issuance                                                               |   |   | (2,655,453  | ) |
| Price-level                    restatement related to capital increase                                       |   |   | 1,476,165   |   |
| Comprehensive                    income for the year                                                         |   |   | 10,287,623  |   |
|                                                                                                         |   |   |        |   |
| Balance                    at December 31, 2004                                                              |   |   | 478,973,076 |   |
| Dividends                    declared                                                                        |   |   | (26,898,989 | ) |
| Comprehensive                    income for the year                                                         |   |   | 47,585,217  |   |
| Adjustment                    to net loss on sale of Supermercados Ekono Argenitna S.A.                    * |   |   | 1,384,760   |   |
|                                                                                                         |   |   |        |   |
| Balance                    at December 31, 2005                                                              |   |   | 501,044,064 |   |
| Dividends                    declared                                                                        |   |   | (13,046,023 | ) |
| Shares                    in treasury (1)                                                                    |   |   | (5,295,482  | ) |
| Comprehensive                    income for the year                                                         |   |   | 37,912,061  |   |
| One                    time cumulative adjustment under SAB 108 (net of tax)**                               |   |   | (449,383    | ) |
| Balance                    at December 31, 2006                                                              |   |   | 520,165,237 |   |

| (1) | Shares                  in treasury corresponds to the repurchased of 36,000,000 shares,                  at an                  average price of Ch$146.56 per share, made by the Company in anticipation                  of the formalization of compensation plan for managers and executives                  of                  the Company and its subsidiaries, agreed to by the Extraordinary                  Meeting                  of Shareholders held on October 26, 2004, and which plan was approved                  by                  the Board of Directors in Ordinary Meeting held on June 27, 2006.                  At                  December 31, 2006 the Company has not signed any compensation plan                  agreement with its employees. Under US GAAP the repurchased stock                  is                  classified as Treasury Stock in Shareholders ́ Equity. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | **b.** | **Additional                  Disclosure Requirements** |
|--------|--------|---------------------------------------------------------|

**b.1.        Basic and diluted earnings per share:**

|                                                 |   | **For                    the****year                    ended December 31,** |          |
|------------------------------------------------------|--------|------------------------------------------------------------------------------|---------------|
|                                                 |   | **2004**                                                                     |          | **2005** |   | **2006** |   |
|                                                 |   | Ch$                                                                          |          | Ch$ |   | Ch$ |   |
| Chilean                    GAAP earnings per share   |   |                                                                         | 1.68          |   |   | 6.63 |   |   | 6.10 |   |
| U.S.GAAP                    earnings per share       |   |                                                                         | 1.55          |   |   | 7.27 |   |   | 5.90 |   |
| Weighted                    average number of common |   |                                                                         |          |   |   |   |   |   |   |   |
| shares                    outstanding (a)            |   |                                                                         | 6,520,000,000 |   |   | 6,520,000,000 |   |   | 6,503,505,839 |   |

| (a) | For                  comparative purposes number of common shares outstanding in 2004,                  have                  been adjusted for stock split (see Note 13.a.). In July and August                  2006,                  the Company repurchased 36,000,000 of shares maintained in Treasury                  (see                  Note 13.f). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.2.        Reporting Comprehensive Income**

|                                             |   **December                    31, 2004** |                                          |
|--------------------------------------------------|------------------------------------------------------|-----------------------------------------------|
|                                             |                                                 | **Unrealized                    gain (loss)** |   |   |   | **Accumulated                    Other** |   |
|                                             |                                                 | **on                    marketable**          |   |   |   | **comprehensive** |   |
|                                             |                                                 | **securities**                                |   | **Effect                    of Tax** |   | **Income                    (loss)** |   |
|                                             |                                                 | ThCh$                                         |   | ThCh$ |   | ThCh$ |   |
|                                             |                                                 |                                          |   |   |   |   |   |
| Beginning                    Balance             |                                                 |                                          | 81,059 |   |   | (18,711 | ) |   | 62,348 |   |
| Credit                    (Charge) of the period |                                                 |                                          | 188,499 |   |   | (32,044 | ) |   | 156,455 |   |
| Ending                    balance                |                                                 |                                          | 269,558 |   |   | (50,755 | ) |   | 218,803 |   |

|                                             |   |  **December                    31, 2005**      |    |
|--------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                             |   |  **Unrealized                    gain (loss)** |    |    |   |  **Accumulated                    Other** |   |
|                                             |   |  **on                    marketable**          |    |    |   |  **comprehensive** |   |
|                                             |   |  **securities**                                |    |  **Effect                    of Tax** |   |  **Income                    (loss**)**** |   |
|                                             |   |  ThCh$                                         |    |  ThCh$ |   |  ThCh$ |   |
|                                             |   |                                           |    |    |   |    |   |
| Beginning                    Balance             |   |                                                | 269,558 |   |   | (50,755 | ) |   | 218,803 |   |
| Credit                    (Charge) of the period |   |                                                | 251,064 |   |   | (42,680 | ) |   | 208,384 |   |
| Ending                    balance                |   |                                                | 520,622 |   |   | (93,436 | ) |   | 427,187 |   |

|                                             |   |  **December                    31, 2006**   |     |
|--------------------------------------------------|--------|------------------------------------------------------------|----------|
|                                             |   |  **Unrealized                    gain (loss)**        |     |    |   |                      **Accumulated                      Other** |   |
|                                             |   |  **on                    marketable**                 |     |   |   |  **comprehensive** |   |
|                                             |   |  **securities**                                       |     |  **Effect                    of Tax** |   |  **Income                    (loss**)**** |   |
|                                             |   |  ThCh$                                                |     |  ThCh$ |   |  ThCh$ |   |
| Beginning                    Balance             |   |                                                       | 520,622  |   |   | (93,436 | ) |   | 427,187 |   |
| Credit                    (Charge) of the period |   |                                                       | (520,622 | ) |   | 93,436 |   |   | (427,187 | ) |
| Ending                    balance                |   |                                                       | -        |   |   | - |   |   | - |   |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.3.        Income Taxes**

|                                                                   |   | **2004** |       | **2005** |   | **2006**   |   |
|------------------------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|
|                                                                   |   | ThCh$    |       | ThCh$    |   | ThCh$      |   |
|                                                                   |   |     |       |     |   |       |   |
| Income                    tax provision under Chilean GAAP:            |   |     |       |     |   |       |   |
| **Current                    tax expense**                             |   |     |       |     |   |       |   |
| For                    the year                                        |   |     | (7,786,575 | )        |   | (9,598,093 | )      |   | (9,015,374 | ) |
| Prior                    year adjustment                               |   |     | (19,592    | )        |   | 1,189,272  |   |   | (1,174,980 | ) |
| Benefit                    from tax loss carry back                    |   |     | 1,189,579  |     |   | 743,619    |   |   | 2,322,654 |   |
| **Deferred                    taxes**                                  |   |     |       |     |   |       |   |   |   |   |
| Change                    in deferred taxes                            |   |     | 4,355,777  |     |   | 3,011,725  |   |   | 2,940,003 |   |
| Effect                    of amortization of complementary accounts of |   |     |       |     |   |       |   |   |   |   |
| deferred                    tax assets and liabilities                 |   |     | (142,613   | )        |   | (276,647   | )      |   | 107,139 |   |
| Effect                    on assets and liabilities of deferred tax    |   |     |       |     |   |       |   |   |   |   |
| from                    changes in valuation allowance                 |   |     | 152,765    |     |   | -          |   |   | - |   |
| Total                    income provision under Chilean GAAP           |   |     | (2,250,659 | )        |   | (4,930,124 | )      |   | (4,820,558 | ) |
| U.S.GAAP                    Adjustments:                               |   |     |       |     |   |       |   |   |   |   |
| Deferred                    tax effect of applying SFAS No.109         |   |     | 142,613    |     |   | 276,647    |   |   | (107,139 | ) |
| Deferred                    tax effect of adjustments to U.S.GAAP      |   |     | 25,393     |     |   | 740,020    |   |   | 392,814 |   |
| Total                    US GAAP adjustments                           |   |     | 168,006    |     |   | 1,016,667  |   |   | 285,675 |   |
| Total                    income tax provision under US GAAP            |   |     | (2,082,653 | )        |   | (3,913,457 | )      |   | (4,534,883 | ) |

----

**DISTRIBUCION          Y SERVICIO D&S S.A.**

**NOTES          TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                   |   |  **2005**                         |      |
|------------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                                   |   |  **Short-term**                   |      |  **Long-term** |   |
|                                                                   |   | **SFAS                    N°109** |      |   |   |   |   | **SFAS                    N°109** |   |   |   |   |   |
|                                                                   |   | **Applied                    to**      |      | **SFAS                    N°109** |   | **Total** |   | **Applied                    to** |   | **SFAS                    N°109** |   | **Total** |   |
|                                                                   |   | **Chilean**                            |      | **applied                    to** |   | **Deferred** |   | **Chilean** |   | **applied                    to** |   | **Deferred** |   |
|                                                                   |   | **GAAP**                               |      | **U.S.                    GAAP** |   | **Taxes                    under** |   | **GAAP** |   | **U.S.                    GAAP** |   | **Taxes                    under** |   |
|                                                                   |   | **Balances**                           |      | **Adjustments** |   | **SFAS                    N°109** |   | **Balances** |   | **Adjustments** |   | **SFAS                    N°109** |   |
|                                                                   |   | ThCh$                                  |      | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   |
| **Deferred                    income tax assets:**                     |   |                                   |      |   |   |   |   |   |   |   |   |   |   |
| Property,                    plant and equipment                       |   |                                   |      |   |   | - |   |   | - |   |   | 1,254,027 |   |   | - |   |   | 1,254,027 |   |
| Severance                    indemnity                                 |   |                                   | 67,254    |   |   |   |   |   | 67,254 |   |   | 978,628 |   |   | 149,420 |   |   | 1,128,048 |   |
| Allowance                    for doubtful accounts                     |   |                                   | 1,712,351 |   |   | - |   |   | 1,712,351 |   |   | - |   |   | - |   |   | - |   |
| Allowance                    for uncollectible sundry debtors          |   |                                   | 350,710   |   |   | - |   |   | 350,710 |   |   | - |   |   | - |   |   | - |   |
| Vacation                    accrual                                    |   |                                   | 953,047   |   |   | - |   |   | 953,047 |   |   |   |   |   | - |   |   | - |   |
| Other                    events                                        |   |                                   | -         |   |   | - |   |   | - |   |   | 248,145 |   |   | - |   |   | 248,145 |   |
| Allowance                    on inventory                              |   |                                   | 22,104    |   |   | - |   |   | 22,104 |   |   | - |   |   | - |   |   | - |   |
| Interest                    yield                                      |   |                                   | 93,653    |   |   | - |   |   | 93,653 |   |   |   |   |   | - |   |   | - |   |
| Tax                    loss carryforwards (1)                          |   |                                   | 1,303,999 |   |   | - |   |   | 1,303,999 |   |   | 14,360,002 |   |   | - |   |   | 14,360,002 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    deferred income tax assets                    |   |                                   | 4,503,118 |   |   | - |   |   | 4,503,118 |   |   | 16,840,802 |   |   | 149,420 |   |   | 16,990,222 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Deferred                    income tax liabilities:**                |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,                    plant and equipment                       |   |                                   | -         |   |   | - |   |   | - |   |   | 5,366,577 |   |   | (209,835 | ) |   | 5,156,742 |   |
| Deferred                    charges                                    |   |                                   | 675,870   |   |   | - |   |   | 675,870 |   |   | 686,472 |   |   | - |   |   | 686,472 |   |
| Leased                    assets                                       |   |                                   | -         |   |   | - |   |   | - |   |   | 1,106,159 |   |   | - |   |   | 1,106,159 |   |
| Marketable                    securities                               |   |                                   | -         |   |   | 93,436 |   |   | 93,436 |   |   | - |   |   | - |   |   | - |   |
| Capitalization                    of volume rebate on unsold inventory |   |                                   | -         |   |   | 57,602 |   |   | 57,602 |   |   | - |   |   | - |   |   | - |   |
| Capitalized                    interest                                |   |                                   | -         |   |   | - |   |   | - |   |   | 453,218 |   |   | - |   |   | 453,218 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    deferred income tax liabilities               |   |                                   | 675,870   |   |   | 151,038 |   |   | 826,908 |   |   | 7,612,426 |   |   | (209,835 | ) |   | 7,402,591 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    deferred assets (liabilities)                   |   |                                   | 3,827,248 |   |   | (151,038 | ) |   | 3,676,210 |   |   | 9,228,376 |   |   | 359,255 |   |   | 9,587,631 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Complementary                    Account                               |   |                                   | -         |   |   | - |   |   | - |   |   | 918,890 |   |   | (918,890 | ) |   | - |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    deferred assets (liabilities)                   |   |                                   | 3,827,248 |   |   | (151,038 | ) |   | 3,676,210 |   |   | 10,147,266 |   |   | (559,635 | ) |   | 9,587,631 |   |

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                                   |   |  **2006**                         |      |
|------------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                                   |   |  **Short-term**                   |      |  **Long-term** |   |
|                                                                   |   | **SFAS                    N°109** |      |   |   |   |   | **SFAS                    N°109** |   |   |   |   |   |
|                                                                   |   | **Applied                    to**      |      | **SFAS                    N°109** |   | **Total** |   | **Applied                    to** |   | **SFAS                    N°109** |   | **Total** |   |
|                                                                   |   | **Chilean**                            |      | **applied                    to** |   | **Deferred** |   | **Chilean** |   | **applied                    to** |   | **Deferred** |   |
|                                                                   |   | **GAAP**                               |      | **U.S.                    GAAP** |   | **Taxes                    under** |   | **GAAP** |   | **U.S.                    GAAP** |   | **Taxes                    under** |   |
|                                                                   |   | **Balances**                           |      | **Adjustments** |   | **SFAS                    N°109** |   | **Balances** |   | **Adjustments** |   | **SFAS                    N°109** |   |
|                                                                   |   | ThCh$                                  |      | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   | ThCh$ |   |
| **Deferred                    income tax assets:**                     |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Severance                    indemnity                                 |   |                                   | 176,347   |   |   | - |   |   | 176,347 |   |   | 1,228,526 |   |   | 144,309 |   |   | 1,372,835 |   |
| Allowance                    for doubtful accounts                     |   |                                   | 648,276   |   |   | - |   |   | 648,276 |   |   | - |   |   | - |   |   | - |   |
| Allowance                    for uncollectible sundry debtors          |   |                                   | 289,381   |   |   | - |   |   | 289,381 |   |   | - |   |   | - |   |   | - |   |
| Vacation                    accrual                                    |   |                                   | 899,582   |   |   | - |   |   | 899,582 |   |   | - |   |   | - |   |   | - |   |
| Unrealized                    loss on financial derivative             |   |                                   | -         |   |   | 28,736 |   |   | 28,736 |   |   | - |   |   | - |   |   | - |   |
| Allowance                    on inventory                              |   |                                   | 21,921    |   |   | - |   |   | 21,921 |   |   | - |   |   | - |   |   | - |   |
| Capitalization                    of volume rebate on unsold inventory |   |                                   | -         |   |   | 184,028 |   |   | 184,028 |   |   | - |   |   | - |   |   | - |   |
| Interest                    yield                                      |   |                                   | 165,926   |   |   | - |   |   | 165,926 |   |   | - |   |   | - |   |   | - |   |
| Tax                    loss carryforwards (1)                          |   |                                   | 2,604,796 |   |   | - |   |   | 2,604,796 |   |   | 18,981,105 |   |   | - |   |   | 18,981,105 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    deferred income tax assets                    |   |                                   | 4,806,229 |   |   | 212,764 |   |   | 5,018,993 |   |   | 20,209,631 |   |   | 144,309 |   |   | 20,353,940 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Deferred                    income tax liabilities:**                |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,                    plant and equipment                       |   |                                   | -         |   |   | - |   |   | - |   |   | 4,913,184 |   |   | (204,498 | ) |   | 4,708,686 |   |
| Deferred                    charges                                    |   |                                   | 840,326   |   |   | - |   |   | 840,326 |   |   | 1,455,780 |   |   | (131,500 | ) |   | 1,324,280 |   |
| Leased                    assets                                       |   |                                   | -         |   |   | - |   |   | - |   |   | 1,144,311 |   |   | - |   |   | 1,144,311 |   |
| Capitalized                    interest                                |   |                                   | 11,669    |   |   | - |   |   | 11,669 |   |   | 654,963 |   |   | - |   |   | 654,963 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    deferred income tax liabilities               |   |                                   | 851,995   |   |   | - |   |   | 851,995 |   |   | 8,168,238 |   |   | (335,998 | ) |   | 7,832,240 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    deferred assets (liabilities)                   |   |                                   | 3,954,234 |   |   | 212,764 |   |   | 4,166,998 |   |   | 12,041,393 |   |   | 480,307 |   |   | 12,521,700 |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Complementary                    Account                               |   |                                   | -         |   |   | - |   |   | - |   |   | 1,026,029 |   |   | (1,026,029 | ) |   | - |   |
|                                                                   |   |                                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    deferred assets (liabilities)                   |   |                                   | 3,954,234 |   |   | 212,764 |   |   | 4,166,998 |   |   | 13,067,422 |   |   | (545,722 | ) |   | 12,521,700 |   |

| (1) | In                      Chile tax loss carryforwards may be utilized                      indefinitely. |
|-----|---------------------------------------------------------------------------------------------------------|

|                                                                   |   |  **Year                    ended December 31,** |       |
|------------------------------------------------------------------------|--------|------------------------------------------------------|------------|
|                                                                   |   | **2004**                                             |       | **2005** |   | **2006** |   |
|                                                                   |   | ThCh$                                                |       | ThCh$ |   | ThCh$ |   |
|                                                                   |   |                                                 |       |   |   |   |   |
| Statutory                    tax rate                                  |   |                                                 | 17.00      | % |   | 17.00 | % |   | 17.00 | % |
| Pretax                    U.S.GAAP income                              |   |                                                 | 12,213,821 |   |   | 51,290,290 |   |   | 42,874,131 |   |
| Pretax                    income multiplied by the applicable tax rate |   |                                                 | (2,076,350 | ) |   | (8,719,349 | ) |   | (7,288,602 | ) |
| Differences                    in price-level restatement              |   |                                                 | (623,783   | ) |   | (394,099 | ) |   | 1,757,485 |   |
| Non-deductible                    items                                |   |                                                 | (3,181,361 | ) |   | (165,905 | ) |   | (825,144 | ) |
| Other                    deductible items                              |   |                                                 | 3,917,752  |   |   | 2,642,893 |   |   | 1,579,074 |   |
| Tax                    credits                                         |   |                                                 | -          |   |   | 2,323,342 |   |   | - |   |
| Other                                                                  |   |                                                 | (118,912   | ) |   | 399,661 |   |   | 242,304 |   |
| Tax                    expense                                         |   |                                                 | (2,082,653 | ) |   | (3,913,457 | ) |   | (4,534,883 | ) |

----

**DISTRIBUCION        Y SERVICIO D&S S.A.**

**NOTES        TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**(Restated        for general price-level changes)**

**b.4.          Cash flow information**

|   | i. | Management                    has determined its cash and cash equivalents under Chilean GAAP                    are equal                    to those as defined under SFAS No.95, for the years ended December                    31,                    2004, 2005 and 2006. Additionally, as noted below, the Company's                    cash flow                    used in or provided by in Chilean GAAP for operating activities,                    investing                    activities, and financing activities is the                    same. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                     |   | **Year                    ended December 31,** |         |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------------|
|                                                                                                                                     |   | **2004**                                       |         | **2005** |   | **2006** |   |
|                                                                                                                                     |   | ThCh$                                          |         | ThCh$ |   | ThCh$ |   |
|                                                                                                                                     |   |                                           |         |   |   |   |   |
| Cash                    provided by (used in) operating activities under Chilean                    GAAP                                 |   |                                           | (14,262,567  | ) |   | 65,049,307 |   |   | 54,436,288 |   |
| Reclassification                    (a)                                                                                                  |   |                                           | -            |   |   | (849,728 | ) |   | (11,528,786 | ) |
| Cash                    provided by (used in) operating activities under U.S.GAAP                                                        |   |                                           | (14,262,567  | ) |   | 64,199,579 |   |   | 42,907,502 |   |
|                                                                                                                                     |   |                                           |         |   |   |   |   |   |   |   |
| Cash                    provided by (used in) financing activities under Chilean GAAP                    and                    U.S.GAAP |   |                                           | 167,350,359  |   |   | (21,330,506 | ) |   | 24,420,228 |   |
|                                                                                                                                     |   |                                           |         |   |   |   |   |   |   |   |
| Cash                    used in investing activities under Chilean GAAP                                                                  |   |                                           | (101,391,165 | ) |   | (63,965,705 | ) |   | (95,576,714 | ) |
| Reclassification                    (a)                                                                                                  |   |                                           | -            |   |   | 849,728 |   |   | 11,528,786 |   |
| Cash                    used in investing activities under U.S.GAAP                                                                      |   |                                           | (101,391,165 | ) |   | (63,115,977 | ) |   | (84,047,928 | ) |

|   | (a) | The                    Company prepaid a long-term operating lease which payment was                    presented as                    an investment activity in Chile GAAP while in U.S. GAAP, it would                    be                    classified as operational. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|   | ii. | Cash                      equivalents includes all highly liquid debt instruments purchased                      with an                      original maturity of three months or                      less: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | **Year                        ended December 31,** |       |
|---------------------------------------------------------------|--------|----------------------------------------------------|------------|
|                                                          |   | **2004**                                           |       | **2005** |   | **2006** |   |
|                                                          |   | ThCh$                                              |       | ThCh$ |   | ThCh$ |   |
|                                                          |   |                                               |       |   |   |   |   |
| Cash                                                          |   |                                               | 24,099,491 |   |   | 21,208,712 |   |   | 30,933,622 |   |
| Mutual                        funds (fixed income securities) |   |                                               | 35,666,170 |   |   | 38,630,308 |   |   | 1,230,589 |   |
| Other                        current assets (1)               |   |                                               | 26,463,065 |   |   | 2,553,963 |   |   | 11,467,467 |   |
|                                                          |   |                                               |       |   |   |   |   |   |   |   |
| Total                        cash and cash equivalents under  |   |                                               |       |   |   |   |   |   |   |   |
| Chilean                        GAAP and U.S.GAAP              |   |                                               | 86,228,726 |   |   | 62,392,983 |   |   | 43,631,678 |   |

|   | (1) | Correspond                      to repurchase agreements (see Note 7). The detail is as                      follows: |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------|

| **Institutions**                                     |   |   | **Principal                        amount** |   |   | **Interest                        rate****(month)** |   |   | **Interest** |   |   | **Total** |   |
|------------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|-----------------------------------------------------|--------|--------|--------------|--------|--------|-----------|--------|
|                                                 |   |   | **2005**                                    |   |   | **2006**                                            |   |   | **2005**     |   |   | **2006**  |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |   | **2006** |   |
|                                                 |   |   | ThCh$                                       |   |   | ThCh$                                               |   |   | %            |   |   | %         |   |   | ThCh$ |   |   | ThCh$ |   |   | ThCh$ |   |   | ThCh$ |   |
|                                                 |   |   |                                        |   |   |                                                |   |   |         |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Banchile                        S.A.                 |   |   | -                                           |   |   | 3,200,000                                           |   |   | -            |   |   | 0.480     |   |   | - |   |   | 2,048 |   |   | - |   |   | 3,202,048 |   |
| Corp                        Corredores de Bolsa S.A. |   |   | -                                           |   |   | 5,000,000                                           |   |   | -            |   |   | 0.500     |   |   | - |   |   | 3,333 |   |   | - |   |   | 5,003,333 |   |
| BCI                        Corredores de Bolsa S.A.  |   |   | 2,552,500                                   |   |   | 3,260,000                                           |   |   | 0.430        |   |   | 0.480     |   |   | 1,463 |   |   | 2,086 |   |   | 2,553,963 |   |   | 3,262,086 |   |
| Total                                                |   |   | 2,552,500                                   |   |   | 11,460,000                                          |   |   |         |   |   |      |   |   | 1,463 |   |   | 7,467 |   |   | 2,553,963 |   |   | 11,467,467 |   |

**b.5.            Estimated Fair Value of Financial Instruments**

|  | · | **Cash**-** **The                      fair value of the Company’s cash is equal to its carrying                      value. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Marketable                      securities and cash equivalents**                      -                      The fair value of the investments was determined based on market                      value. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Notes                      and accounts receivable and payable, sundry debtors and                      creditors**                      -                      Short-term - The carrying amount of trade notes and accounts                      receivable                      and payable, and short-term debtors and creditors approximate                      fair value                      because of the short-term maturity of these                      instruments. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Notes                    and accounts receivable**-                    Long-term - These correspond mainly to the long-term portion                    of the credit                    card receivables recorded by the indirect subsidiary Presto.                    The carrying                    amounts of trade notes and accounts receivable approximate fair                    value                    because of these instruments are valued at market interest                    rates. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|  | · | **Due                          from and due to related companies**-                          The carrying amounts of these accounts receivable and payable                          approximate                          fair value due to the fact that they yield interest at                          market interest                          rates. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Sundry                    debtors, long-term**                    -                    The fair value of the account receivable from Disco is impracticable                    to                    determine as it has no maturity date and it is currently in litigation.                    For further details see note 9.b.1. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Derivative                    contracts**                    -                    The fair value of the investments was determined based on market                    value. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Long-term                    debt and bonds**                    -                    The fair value of the Company’s long-term debt is estimated based on the                    current interest rates offered to the Company for loans of the                    same                    remaining maturities. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Commercial                    paper**                    -                    The fair value of commercial paper is estimated based on the                    current                    interest rates offered to the Company for loans of the same remaining                    maturities. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | **Short-term                    debt**                    -                    Short-term debt has interest rates that vary with market conditions                    and                    accordingly, the carrying amount approximates fair value of our                    short-term                    debt, the portion with fixed interest rates is                    insignificant. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                 |   |   | **As                        of December 31,** |   |
|----------------------------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                                                                 |   |   | **2005**                                      |   |   | **2006** |   |
|                                                                 |   |   | **Carrying**                                  |   |   | **Fair** |   |   | **Carrying** |   |   | **Fair** |   |
|                                                                 |   |   | **amount**                                    |   |   | **value** |   |   | **amount** |   |   | **value** |   |
|                                                                 |   |   | ThCh$                                         |   |   | ThCh$ |   |   | ThCh$ |   |   | ThCh$ |   |
|                                                                 |   |   |                                          |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                 |   |   | 21,208,712                                    |   |   | 21,208,712 |   |   | 30,933,622 |   |   | 30,933,622 |   |
| Marketable                        securities and cash equivalents    |   |   | 40,805,897                                    |   |   | 41,326,520 |   |   | 2,759,902 |   |   | 2,759,902 |   |
| Short-term                        notes and accounts receivable, net |   |   | 172,976,491                                   |   |   | 172,976,491 |   |   | 123,794,021 |   |   | 123,794,021 |   |
| Long-term                        notes and accounts receivable       |   |   | 50,453,085                                    |   |   | 50,453,085 |   |   | 105,809,939 |   |   | 105,809,939 |   |
| Short-term                        sundry debtors                     |   |   | 33,376,714                                    |   |   | 33,376,714 |   |   | 19,429,597 |   |   | 19,429,597 |   |
| Long-term                        sundry debtors                      |   |   | -                                             |   |   | - |   |   | 25,571,103 |   |   | 25,571,103 |   |
| Derivative                        contracts - Cross currency swap    |   |   | -                                             |   |   | - |   |   | 1,162,137 |   |   | 1,162,137 |   |
| Due                        from related companies                    |   |   | 1,570,093                                     |   |   | 1,570,093 |   |   | 1,562,703 |   |   | 1,562,703 |   |
| Accounts                        payable                              |   |   | 226,196,838                                   |   |   | 226,196,838 |   |   | 241,168,153 |   |   | 241,168,153 |   |
| Bonds                                                                |   |   | 141,024,880                                   |   |   | 141,095,391 |   |   | 153,439,772 |   |   | 165,251,422 |   |
| Commercial                        paper                              |   |   | 59,797,623                                    |   |   | 59,797,623 |   |   | 63,459,450 |   |   | 63,459,450 |   |
| Due                        to related companies                      |   |   | 6,331,536                                     |   |   | 6,331,536 |   |   | - |   |   | - |   |
| Long-term                        debt                                |   |   | 110,434,955                                   |   |   | 110,545,803 |   |   | 179,059,017 |   |   | 179,059,017 |   |
| Sundry                        creditors                              |   |   | 9,708,201                                     |   |   | 9,708,201 |   |   | 5,478,722 |   |   | 5,478,722 |   |

**b.6.          U.S. GAAP Condensed Balance Sheet**

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                                            |   | **2005**                              |          |
|-----------------------------------------------------------------|--------|---------------------------------------|---------------|
|                                                            |   | **Chilean                      GAAP** |          | **Adjustment****U.S.                          GAAP** |   | **Reclassification** |   | **U.S.                      GAAP** |   |
|                                                            |   | ThCh$                                 |          | ThCh$ |   | ThCh$ |   | ThCh$ |   |
|                                                            |   |                                  |          |   |   |   |   |   |   |
| Current                      assets                             |   |                                  | 392,541,551   |   |   | (251,824 | ) |   | 13,789,782 |   |   | 406,079,509 |   |
| Property,                      plant and equipment, net         |   |                                  | 618,916,557   |   |   | (1,234,323 | ) |   | - |   |   | 617,682,234 |   |
| Other                      assets                               |   |                                  | 115,992,870   |   |   | 5,601,392 |   |   | (8,200,531 | ) |   | 113,393,731 |   |
| Total                      assets                               |   |                                  | 1,127,450,978 |   |   | 4,115,245 |   |   | 5,589,251 |   |   | 1,137,155,474 |   |
|                                                            |   |                                  |          |   |   |   |   |   |   |   |   |   |   |
| Current                      liabilities                        |   |                                  | 497,659,018   |   |   | (318,979 | ) |   | 8,890,453 |   |   | 506,230,492 |   |
| Long-term                      liabilities                      |   |                                  | 131,207,896   |   |   | 1,946,593 |   |   | (3,301,202 | ) |   | 129,853,287 |   |
| Minority                      interest                          |   |                                  | 24,288        |   |   | 3,344 |   |   | - |   |   | 27,631 |   |
| Shareholders'                      equity                       |   |                                  | 498,559,776   |   |   | 2,484,288 |   |   | - |   |   | 501,044,064 |   |
| Total                      liabilities and shareholders' equity |   |                                  | 1,127,450,978 |   |   | 4,115,245 |   |   | 5,589,251 |   |   | 1,137,155,474 |   |

|                                                            |   | **2006**                              |          |
|-----------------------------------------------------------------|--------|---------------------------------------|---------------|
|                                                            |   | **Chilean                      GAAP** |          | **Adjustment****U.S.                          GAAP** |   | ** Reclassification** |   | **U.S.                      GAAP** |   |
|                                                            |   | ThCh$                                 |          | ThCh$ |   | ThCh$ |   | ThCh$ |   |
|                                                            |   |                                  |          |   |   |   |   |   |   |
| Current                      assets                             |   |                                  | 341,973,062   |   |   | (1,777,298 | ) |   | 18,764,874 |   |   | 358,960,638 |   |
| Property,                      plant and equipment, net         |   |                                  | 646,843,617   |   |   | (1,202,927 | ) |   | - |   |   | 645,640,690 |   |
| Other                      assets                               |   |                                  | 216,588,454   |   |   | 7,271,464 |   |   | (4,409,755 | ) |   | 219,450,163 |   |
| Total                      assets                               |   |                                  | 1,205,405,133 |   |   | 4,291,239 |   |   | 14,355,119 |   |   | 1,224,051,491 |   |
|                                                            |   |                                  |          |   |   |   |   |   |   |   |   |   |   |
| Current                      liabilities                        |   |                                  | 411,205,413   |   |   | 37,536 |   |   | 8,766,935 |   |   | 420,009,884 |   |
| Long-term                      liabilities                      |   |                                  | 276,288,104   |   |   | 1,994,909 |   |   | 5,588,184 |   |   | 283,871,197 |   |
| Minority                      interest                          |   |                                  | 761           |   |   | 4,412 |   |   | - |   |   | 5,173 |   |
| Shareholders'                      equity                       |   |                                  | 517,910,855   |   |   | 2,254,382 |   |   | - |   |   | 520,165,237 |   |
| Total                      liabilities and shareholders' equity |   |                                  | 1,205,405,133 |   |   | 4,291,239 |   |   | 14,355,119 |   |   | 1,224,051,491 |   |

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|  | **ii.** | **Income                    statement (certain line items                    presentation)** |
|--|---------|----------------------------------------------------------------------------------------------|

|                                            |   | **2004**    |        |
|-------------------------------------------------|--------|-------------|-------------|
|                                            |   | **Chilean** |        | **Adjustments** |   |   |   |   |   |
|                                            |   | **GAAP**    |        | **U.S.GAAP** |   | **Reclassification** |   | **U.S.                      GAAP** |   |
|                                            |   | ThCh$       |        | ThCh$ |   | ThCh$ |   | ThCh$ |   |
| Operating                      income           |   |        | 31,224,486  |   |   | (120,183 | ) |   | (3,141,355 | ) |   | 27,962,948 |   |
| Non-operating                      expense, net |   |        | (18,018,441 | ) |   | (872,041 | ) |   | 3,141,355 |   |   | (15,749,127 | ) |
| Income                      taxes               |   |        | (2,250,659  | ) |   | 168,006 |   |   | - |   |   | (2,082,653 | ) |
| Net                      income                 |   |        | 10,955,386  |   |   | (824,218 | ) |   | - |   |   | 10,131,168 |   |

|                                            |   | **2005**    |        |
|-------------------------------------------------|--------|-------------|-------------|
|                                            |   | **Chilean** |        | **Adjustments** |   |   |   |   |   |
|                                            |   | **GAAP**    |        | **U.S.GAAP** |   | **Reclassification** |   | **U.S.                      GAAP** |   |
|                                            |   | ThCh$       |        | ThCh$ |   | ThCh$ |   | ThCh$ |   |
| Operating                      income           |   |        | 69,498,425  |   |   | (210,145 | ) |   | (3,398,916 | ) |   | 65,889,364 |   |
| Non-operating                      expense, net |   |        | (21,311,471 | ) |   | 3,313,481 |   |   | 3,398,916 |   |   | (14,599,074 | ) |
| Income                      taxes               |   |        | (4,930,124  | ) |   | 1,016,667 |   |   | - |   |   | (3,913,457 | ) |
| Net                      income                 |   |        | 43,256,830  |   |   | 4,120,003 |   |   | - |   |   | 47,376,833 |   |

|                                            |   | **2006**    |        |
|-------------------------------------------------|--------|-------------|-------------|
|                                            |   | **Chilean** |        | **Adjustments** |   |   |   |   |   |
|                                            |   | **GAAP**    |        | **U.S.GAAP** |   | **Reclassification** |   | **U.S.                      GAAP** |   |
|                                            |   | ThCh$       |        | ThCh$ |   | ThCh$ |   | ThCh$ |   |
|                                            |   |        |        |   |   |   |   |   |   |
| Operating                      income           |   |        | 64,288,272  |   |   | (3,804,367 | ) |   | (7,676,078 | ) |   | 52,807,827 |   |
| Non-operating                      expense, net |   |        | (19,815,127 | ) |   | 2,205,353 |   |   | 7,676,078 |   |   | (9,933,696 | ) |
| Income                      taxes               |   |        | (4,820,558  | ) |   | 285,675 |   |   | - |   |   | (4,534,883 | ) |
| Net                      income                 |   |        | 39,652,587  |   |   | (1,313,339 | ) |   | - |   |   | 38,339,248 |   |

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.7.          Lease Commitments**

|                                                          |   | ThCh$  |             |
|---------------------------------------------------------------|--------|--------|------------------|
|                                                          |   |   |             |
| 2007                                                          |   |   | 11,188,670       |   |
| 2008                                                          |   |   | 8,647,650        |   |
| 2009                                                          |   |   | 8,239,185        |   |
| 2010                                                          |   |   | 6,963,928        |   |
| 2011                                                          |   |   | 5,592,227        |   |
| Thereafter                                                    |   |   | 37,725,515       |   |
| Present                      value net minimum lease payments |   |   |             |   |
|                                                          |   |   | 78,357,175  |   |

**b.8.          Segment Information**

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                               |   |   | **Hypermarket**                          |   |   |        |   |   |        |   |   |          |   |
|----------------------------------------------------|--------|--------|------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|--------|---------------|--------|
|                                               |   |   | **and                      Supermarket** |   |   | **Credit**  |   |   |        |   |   |          |   |
|                                               |   |   | **format**                               |   |   | **card**    |   |   | **Other**   |   |   | **Total**     |   |
|                                               |   |   | ThCh$                                    |   |   | ThCh$  |   |   | ThCh$       |   |   | ThCh$         |   |
| **2004**(2)                                        |   |   |                                     |   |   |        |   |   |        |   |   |          |   |
| Revenues                                           |   |   | 1,423,198,827                            |   |   | 27,036,310  |   |   | 73,421,807  |   |   | 1,523,656,944 |   |
| Segment                      gross profit          |   |   | 277,942,549                              |   |   | 27,036,310  |   |   | 46,772,760  |   |   | 351,751,619   |   |
| Identifiable                      assets           |   |   | 707,026,938                              |   |   | 139,248,166 |   |   | 232,716,433 |   |   | 1,078,991,537 |   |
| Goodwill                      (1)                  |   |   | 33,220,371                               |   |   | -           |   |   | -           |   |   | 33,220,371    |   |
| Operating                      income              |   |   | 17,732,608                               |   |   | 2,621,432   |   |   | 10,870,446  |   |   | 31,224,486    |   |
| Depreciation                      and amortization |   |   | 45,986,617                               |   |   | -           |   |   | 6,132,579   |   |   | 52,119,196    |   |
| Capital                      expenditures          |   |   | 69,251,529                               |   |   | -           |   |   | 9,443,389   |   |   | 78,694,918    |   |
|                                               |   |   |                                     |   |   |        |   |   |        |   |   |          |   |
| **2005**(2)                                        |   |   |                                     |   |   |        |   |   |        |   |   |          |   |
| Revenues                                           |   |   | 1,493,877,467                            |   |   | 59,252,655  |   |   | 79,210,727  |   |   | 1,632,340,849 |   |
| Segment                      gross profit          |   |   | 348,456,416                              |   |   | 59,252,655  |   |   | 49,332,329  |   |   | 457,041,400   |   |
| Identifiable                      assets           |   |   | 792,108,556                              |   |   | 187,370,203 |   |   | 132,722,497 |   |   | 1,112,201,256 |   |
| Goodwill                      (1)                  |   |   | 38,564,209                               |   |   | -           |   |   | -           |   |   | 38,564,209    |   |
| Operating                          income          |   |   | 53,054,122                               |   |   | 9,547,546   |   |   | 6,897,757   |   |   | 69,498,425    |   |
| Depreciation                      and amortization |   |   | 46,010,215                               |   |   | 241,531     |   |   | 10,053,195  |   |   | 56,304,941    |   |
| Capital                      expenditures          |   |   | 30,244,182                               |   |   | 3,648,864   |   |   | 17,507,942  |   |   | 51,400,988    |   |
|                                               |   |   |                                     |   |   |        |   |   |        |   |   |          |   |
| **Old Basis****2006**                              |   |   |                                     |   |   |        |   |   |        |   |   |          |   |
| Revenues                                           |   |   | 1,528,442,328                            |   |   | 82,066,915  |   |   | 86,155,604  |   |   | 1,696,664,847 |   |
| Segment                      gross profit          |   |   | 328,454,451                              |   |   | 82,066,915  |   |   | 56,725,113  |   |   | 467,246,479   |   |
| Identifiable                      assets           |   |   | 751,285,015                              |   |   | 232,693,205 |   |   | 206,097,490 |   |   | 1,190,075,710 |   |
| Goodwill                      (1)                  |   |   | 37,251,951                               |   |   | -           |   |   | -           |   |   | 37,251,951    |   |
| Operating                      income              |   |   | 27,880,983                               |   |   | 22,282,657  |   |   | 14,124,632  |   |   | 64,288,272    |   |
| Depreciation                      and amortization |   |   | 42,737,241                               |   |   | 351,664     |   |   | 11,423,093  |   |   | 54,511,998    |   |
| Capital                      expenditures          |   |   | 47,455,835                               |   |   | 6,040,890   |   |   | 26,189,080  |   |   | 79,685,805    |   |

|                                               |   | **Hypermarket**                          |          |       |   |                                 |   |           |        |      |   |       |   |
|----------------------------------------------------|--------|------------------------------------------|---------------|------------|--------|--------------------------------------|--------|----------------|-------------|-----------|--------|------------|--------|
|                                               |   | **and                      Supermarket** |          | **Credit** |   |                                 |   |           |        |      |   |       |   |
|                                               |   | **format**                               |          | **card**   |   | **Real                      estate** |   | **Pharmacies** |        | **Other** |   | **Total**  |   |
| **New                    Basis**                   |   | ThCh$                                    |          | ThCh$      |   | ThCh$                                |   | ThCh$          |        | ThCh$     |   | ThCh$      |   |
| **2006**                                           |   |                                     |          |       |   |                                 |   |           |        |      |   |       |   |
| Revenues                                           |   |                                     | 1,528,442,328 |       |   | 82,066,915                           |   |           | 18,526,848  |      |   | 38,709,392 |   |   | 28,919,364 |   |   | 1,696,664,847 |   |
| Segment                      gross profit          |   |                                     | 328,454,451   |       |   | 82,066,915                           |   |           | 18,526,848  |      |   | 9,632,459  |   |   | 28,565,806 |   |   | 467,246,479 |   |
| Identifiable                      assets           |   |                                     | 751,285,015   |       |   | 232,693,205                          |   |           | 127,340,045 |      |   | 1,768,327  |   |   | 76,989,118 |   |   | 1,190,075,710 |   |
| Goodwill                      (1)                  |   |                                     | 37,251,951    |       |   | -                                    |   |           | -           |      |   | -          |   |   | - |   |   | 37,251,951 |   |
| Operating                      income              |   |                                     | 27,880,983    |       |   | 22,282,657                           |   |           | 4,186,563   |      |   | (1,042,391 | )      |   | 10,980,460 |   |   | 64,288,272 |   |
| Depreciation                      and amortization |   |                                     | 42,737,241    |       |   | 351,664                              |   |           | 3,658,134   |      |   | 47,716     |   |   | 7,717,243 |   |   | 54,511,998 |   |
| Capital                      expenditures          |   |                                     | 47,455,835    |       |   | 6,040,890                            |   |           | 22,476,608  |      |   | 523,756    |   |   | 3,188,716 |   |   | 79,685,805 |   |

|   | (1) | The                    only change in goodwill from year to year is related to the amortization                    under Chilean GAAP. Information in this footnote is presented                    under                    Chilean GAAP as it represents the basis upon which the operational                    personnel evaluate the business. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Management                    of the Company has determined that it is impracticable to disclose                    its                    segment information on the same basis as defined in 2006                    retroactively. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                                        |   | **2005** |          | **2006** |   |
|---------------------------------------------|--------|----------|---------------|----------|--------|
|                                        |   | ThCh$    |          | ThCh$    |   |
|                                        |   |     |          |     |   |
| Identifiable                      assets    |   |     | 1,112,201,256 |     |   | 1,190,075,710 |   |
| Corporate                      headquarters |   |     | 15,249,722    |     |   | 15,329,423 |   |
| Total                      assets           |   |     | 1,127,450,978 |     |   | 1,205,405,133 |   |

***Supermarkets/Hypermarkets***

***Credit          card operations***

**Allowance          for credit risk associated to accounts receivable **

**Interest          **

----

**DISTRIBUCION              Y SERVICIO D&S S.A.**

**NOTES              TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

|                              |   | **2004** |        | **2005** |   | **2006**    |   |
|-----------------------------------|--------|----------|-------------|----------|--------|-------------|--------|
|                              |   | ThCh$    |        | ThCh$    |   | ThCh$       |   |
|                              |   |     |        |     |   |        |   |
| Short                      - term |   |     | 114,519,062 |     |   | 122,089,262 |   |   | 78,770,725 |   |
| Long                      - term  |   |     | 15,511,539  |     |   | 50,453,085  |   |   | 105,809,939 |   |
| Total                             |   |     | 130,030,601 |     |   | 172,542,347 |   |   | 184,580,664 |   |

|   |   | ThCh$  |       |
|--------|--------|--------|------------|
|   |   |   |       |
| 2004   |   |   | 19,676,377 |   |
| 2005   |   |   | 10,552,035 |   |
| 2006   |   |   | 18,924,000 |   |

|                                       |   | **2004** |        | **2005** |   | **2006**    |   |
|--------------------------------------------|--------|----------|-------------|----------|--------|-------------|--------|
|                                       |   | ThCh$    |        | ThCh$    |   | ThCh$       |   |
|                                       |   |     |        |     |   |        |   |
| January                      1, balance    |   |     | 15,146,699  |     |   | 19,325,266  |   |   | 18,557,012 |   |
| Additional                      provisions |   |     | 19,629,458  |     |   | 39,305,007  |   |   | 41,625,157 |   |
| Write-offs,                      net       |   |     | (15,450,891 | )        |   | (40,073,261 | )      |   | (40,921,260 | ) |
| December                      31, balance  |   |     | 19,325,266  |     |   | 18,557,012  |   |   | 19,260,909 |   |

----

**DISTRIBUCION              Y SERVICIO D&S S.A.**

**NOTES              TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

| **Description**                                        |   | **2004** |                         | **2005** |   | **2006**                     |   |
|--------------------------------------------------------|--------|----------|------------------------------|----------|--------|------------------------------|--------|
|                                                   |   |     |                         |     |   |                         |   |
| Average                    interest rate annual (%)    |   |     | 37.20                        |     |   | 41.23                        |   |   | 44.90 |   |
| Interest                    income (ThCh$)             |   |     | 27,036,310                   |     |   | 44,916,991                   |   |   | 63,097,239 |   |
| Range                    of interest rates monthly (%) |   |     | 3.1                    - 3.3 |     |   | 3.2                    - 3.6 |   |   | 3.6                    - 3.8 |   |

**b.9.          Concentration of risk**

**b.10.          Schedule of long-term debt and bond maturity:**

|                                              |   | ThCh$  |              |
|---------------------------------------------------|--------|--------|-------------------|
|                                              |   |   |              |
| 2007                                              |   |   | 134,285,220       |   |
| 2008                                              |   |   | 19,445,504        |   |
| 2009                                              |   |   | 29,832,945        |   |
| 2010                                              |   |   | 20,466,566        |   |
| 2011                                              |   |   | 21,459,192        |   |
| Thereafter                                        |   |   | 176,751,182       |   |
|                                                   |   |   |              |   |
| Balance                      at December 31, 2006 |   |   | 402,240,609  |   |

----

**DISTRIBUCION              Y SERVICIO D&S S.A.**

**NOTES              TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.11.          Disclosure regarding interest capitalization:**

|                                                         |   | **Year                      ended December 31,** |       |
|--------------------------------------------------------------|--------|--------------------------------------------------|------------|
|                                                         |   | **2004**                                         |       | **2005** |   | **2006** |   |
|                                                         |   | ThCh$                                            |       | ThCh$ |   | ThCh$ |   |
|                                                         |   |                                             |       |   |   |   |   |
| Interest                      expense incurred               |   |                                             | 19,774,517 |   |   | 20,513,535 |   |   | 22,527,820 |   |
| Interest                      capitalized under Chilean GAAP |   |                                             | 1,259,411  |   |   | 165,708 |   |   | 500,775 |   |
| Interest                      capitalized under U.S. GAAP    |   |                                             | 1,259,411  |   |   | 165,708 |   |   | 500,775 |   |

**b.12.          Advertising Costs**

**b.13.          Vendor allowances**

|                                   |   | **2004**                     |         | **2005**                     |   | **2006**                     |   |
|----------------------------------------|--------|------------------------------|--------------|------------------------------|--------|------------------------------|--------|
|                                   |   | ThCh$                        |         | ThCh$                        |   | ThCh$                        |   |
|                                   |   | Dr                      (Cr) |         | Dr                      (Cr) |   | Dr                      (Cr) |   |
| OPERATING                      RESULTS |   |                         |         |                         |   |                         |   |
| Net                      revenue       |   |                         | 135,157,554  |                         |   | 152,013,375                  |   |   | 162,660,982 |   |
| Cost                      of sales     |   |                         | (135,157,554 | )                            |   | (152,013,375                 | )      |   | (162,660,982 | ) |

| **Description**                                                     |   | **2004** |        | **2005** |   | **2006**    |   |
|---------------------------------------------------------------------|--------|----------|-------------|----------|--------|-------------|--------|
|                                                                     |   | ThCh$    |        | ThCh$    |   | ThCh$       |   |
| Volume                      rebates                                 |   |     | 103,401,316 |     |   | 107,717,419 |   |   | 107,806,765 |   |
| Slotting                      fees                                  |   |     | 8,104,475   |     |   | 16,630,656  |   |   | 21,636,730 |   |
| Allowances                      for store opening and remodeling    |   |     | 3,823,687   |     |   | 1,342,097   |   |   | 2,197,587 |   |
| Reinbursements                      for use of distribution network |   |     | 19,828,076  |     |   | 26,323,203  |   |   | 31,019,900 |   |
| Total                                                               |   |     | 135,157,554 |     |   | 152,013,375 |   |   | 162,660,982 |   |

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

**b.14.          Valuation and Qualifying Accounts**

|                                                       |   |                                  |       | **Additions**                         |   |           |   |      |        |                                 |   |
|------------------------------------------------------------|--------|---------------------------------------|------------|---------------------------------------|--------|----------------|--------|-----------|-------------|--------------------------------------|--------|
|                                                       |   | **Balance                        at** |       | **charged                        to** |   |           |   |      |        | **Balance**                          |   |
|                                                       |   | **beginning**                         |       | **costs                        and**  |   |           |   |      |        | **at                        end of** |   |
|                                                       |   | **of                        period**  |       | **expenses**                          |   | **Deductions** |   | **Other** |        | **period**                           |   |
|                                                       |   | ThCh$                                 |       | ThCh$                                 |   | ThCh$          |   | ThCh$     |        | ThCh$                                |   |
|                                                       |   |                                  |       |                                  |   |           |   |      |        |                                 |   |
| **December                        31, 2004**               |   |                                  |       |                                  |   |           |   |      |        |                                 |   |
| Allowance                        for doubtful accounts     |   |                                  | 19,802,441 |                                  |   | 19,698,060     |   |      | (16,437,992 | )(a)                                 |   | - |   |   | 23,062,509 |   |
| Allowance                        for inventory realization |   |                                  | -          |                                  |   | -              |   |      | -           |                                 |   | - |   |   | - |   |
|                                                       |   |                                  |       |                                  |   |           |   |      |        |                                 |   |   |   |   |   |   |
| **December                        31, 2005**               |   |                                  |       |                                  |   |           |   |      |        |                                 |   | - |   |   | - |   |
| Allowance                        for doubtful accounts     |   |                                  | 23,062,509 |                                  |   | 18,288,788     |   |      | (18,409,928 | )(a)                                 |   | - |   |   | 22,941,369 |   |
| Allowance                        for inventory realization |   |                                  | -          |                                  |   | 130,023        |   |      | -           | (b)                                  |   | - |   |   | 130,023 |   |
|                                                       |   |                                  |       |                                  |   |           |   |      |        |                                 |   |   |   |   |   |   |
| **December                        31, 2006**               |   |                                  |       |                                  |   |           |   |      |        |                                 |   |   |   |   |   |   |
| Allowance                        for doubtful accounts     |   |                                  | 22,941,369 |                                  |   | 42,037,989     |   |      | (42,044,828 | )(a)                                 |   | - |   |   | 22,934,530 |   |
| Allowance                        for inventory realization |   |                                  | 130,023    |                                  |   | 128,947        |   |      | (130,023    | )(b)                                 |   | - |   |   | 128,947 |   |

|   | (a) | Relates                    to write-offs of accounts receivable. |
|--------|-----|------------------------------------------------------------------|
|   |   |   |
|--------|--------|--------|

|   | (b) | Relates                    to lower of cost or market adjustment taken on                    inventory. |
|--------|-----|---------------------------------------------------------------------------------------------------------|

**b.15.          Recent Accounting Pronouncements**

----

**DISTRIBUCION            Y SERVICIO D&S S.A.**

**NOTES            TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)**

----

| **Exhibit                  Number** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                               |
|-------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1                                 |   | English                  translation of our Amended Bylaws (filed                  with the U.S. Securities and Exchange Commission in our annual                  report on                  Form 20-F on July 15, 2005 and incorporated herein by                  reference)                                                                                                                                               |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 2.1                                 |   | English                  translation of Settlement Agreement between us and the *Fiscalía                  Nacional Económica*dated                  December 15, 2006, including Addendum, dated December 29, 2006,                  and Final                  Resolution from the Antitrust Court approving the Settlement Agreement,                  dated January 17, 2007 (filed                  herewith). |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 2.2                                 |   | English                  translation of Merger Agreement between our controlling shareholders                  and the controlling shareholders of S.A.C.I Falabella (filed                  herewith).                                                                                                                                                                                                                  |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 8.1                                 |   | List                  of our subsidiaries (filed herewith).                                                                                                                                                                                                                                                                                                                                                                   |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 11.1                                |   | Code                  of Ethics of the company, dated June 29, 2004 (filed with the U.S.                  Securities and Exchange Commission in our annual report on Form                  20-F on                  June 30, 2004 and incorporated herein by reference).                                                                                                                                                      |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 12.1                                |   | Certification                  of Mr. Enrique                  Ostalé Cambiaso pursuant                  to Section 302 of the Sarbanes-Oxley Act of 2002 (filed                  herewith).                                                                                                                                                                                                                             |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 12.2                                |   | Certification                  of Mr. Alejandro Droste pursuant to Section 302 of the Sarbanes-Oxley                  Act                  of 2002 (filed herewith).                                                                                                                                                                                                                                                          |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 13.1                                |   | Certification                  of Mr. Enrique                  Ostalé Cambiaso pursuant                  to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes                  -                  Oxley Act of 2002 (filed herewith).                                                                                                                                                                   |
|                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 13.2                                |   | Certification                  of Mr. Alejandro Droste pursuant to 18 U.S.C. 1350, as adopted                  pursuant to                  Section 906 of the Sarbanes - Oxley Act of 2002 (filed                  herewith).                                                                                                                                                                                                |