As filed with the Securities and Exchange Commission on June 30, 2006

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

|(Mark One)                                                                                   
|---------------------------------------------------------------------------------------------
|o                                                                                            
|                                                                                             
|OR                                                                                           
|                                                                                             
|x                                                                                            
|                                                                                             
|For the fiscal year ended December 31, 2005                                                  
|                                                                                             
|OR                                                                                           
|                                                                                             
|o                                                                                            
|                                                                                             
|Commission file number 333-7616                                                              
|                                                                                             
|                                                                                             
|                                                                                             
|Distribución   y Servicio D&S S.A.                                                           
|(Exact name of Registrant as specified in   its charter)                                     
|                                                                                             
|                                                                                             
|                                                                                             
|Distribution and Service D&S   Inc.                                                          
|(Translation of the Registrants name in   English)                                          
|                                                                                             
|                                                                                             
|                                                                                             
|The Republic of Chile                                                                        
|(State or other jurisdiction   of incorporation or organization)                             
|                                                                                             
|                                                                                             
|                                                                                             
|Avenida Presidente Eduardo Frei Montalva 8301   Quilicura   Santiago, Chile   (56-2) 200-5000
|(Address and telephone number of principal   executive offices)                              
|                                                                                             
|                                                                                             

Securities registered or to be registered pursuant to Section 12(b) of the Act :

|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                  

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.

Common Stock, with no par value: 6,520,000,000

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

|Yes
x | No
o
|----- | ----

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

|Yes
o | No
x
|----- | ----

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes
x | No
o
|----- | ----

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17
o
Item 18
x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|Yes
o | No
x
|----- | ----

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TABLE OF CONTENTS

|                                                        |                   |                                                                                | Page
|------------------------------------------------------- | ----------------- | ------------------------------------------------------------------------------ | ----
|                                                        |                   |                                                                                |     
|INTRODUCTION                                            |                   | 3                                                                             
|PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION | 4                
|PART I                                                  |                   | 5                                                                             
|                                                        | Item 1.           | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                          | 5   
|                                                        | Item 2.           | OFFER STATISTICS AND EXPECTED TIMETABLE                                        | 5   
|                                                        | Item 3.           | KEY INFORMATION                                                                | 5   
|                                                        | Item 4A.          | UNRESOLVED STAFF COMMENTS                                                      | 16  
|                                                        | Item 4.           | INFORMATION ON THE COMPANY                                                     | 16  
|                                                        | Item 5.           | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                   | 35  
|                                                        | Item 6.           | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                     | 57  
|                                                        | Item 7.           | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                              | 64  
|                                                        | Item 8.           | FINANCIAL INFORMATION                                                          | 66  
|                                                        | Item 9.           | THE OFFER AND LISTING                                                          | 66  
|                                                        | Item 10.          | ADDITIONAL INFORMATION                                                         | 68  
|                                                        | Item 11.          | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                     | 84  
|                                                        | Item 12.          | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                         | 85  
|PART II                                                 |                   | 85                                                                            
|                                                        | Item 13.          | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                | 85  
|                                                        | Item 14.          | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF   PROCEEDS | 85  
|                                                        | Item 15.          | CONTROLS AND PROCEDURES                                                        | 86  
|                                                        | Item 16.          | [Reserved]                                                                     | 86  
|                                                        | Item 16A.         | AUDIT COMMITTEE FINANCIAL EXPERT                                               | 86  
|                                                        | Item 16B.         | CODE OF ETHICS                                                                 | 86  
|                                                        | Item 16C.         | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                         | 86  
|                                                        | Item 16D.         | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                     | 87  
|                                                        | Item 16E.         | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED   PURCHASERS       | 87  
|PART III                                                |                   | 87                                                                            
|                                                        | Item 17.          | FINANCIAL STATEMENTS                                                           | 87  
|                                                        | Item 18.          | FINANCIAL STATEMENTS                                                           | 87  
|                                                        | Item 19.          | EXHIBITS                                                                       | 88  
|                                                        | INDEX TO EXHIBITS | 89                                                                            
|                                                        | SIGNATURE         | 90                                                                            

2

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INTRODUCTION

Distribución y Servicio D&S S.A. is a corporation organized under the laws of Chile. We completed our initial public offering of common shares in Chile in December 1996. We listed our common shares on the New York Stock Exchange under the symbol DYS and completed an initial public offering of ADSs in the United States in October 1997. We conducted a preemptive rights offering to the holders of our ADSs in the United States in August 2004. We also listed our common shares on the Madrid Stock Exchange in December 2002. In addition, our common shares currently trade on the Santiago Stock Exchange (Bolsa de Comercio de Santiago), the Electronic Stock Exchange of Chile (Bolsa Electrónica de Chile) and the Valparaíso Stock Exchange (Bolsa de Valores de Valparaíso). Our principal executive offices are located at Avenida Presidente Eduardo Frei Montalva
8301, Quilicura, Santiago, Chile. Our telephone number is 011-562-200-5000, and our website is www.dys.cl. Our authorized representative in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19715, United States. Puglisi & Associates phone number is (302) 738-6680.

Special Note Regarding Forward-Looking Statements

This annual report contains forward-looking statements that involve risks and uncertainties. These forward-looking statements appear throughout this annual report, including, without limitation, under Item 3Key InformationRisk Factors, Item 4Information on the Company and Item 5Operating and Financial Review and Prospects. These forward-looking statements relate to, among other things:

| | our   strategy;                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                              
| | general   economic, political and business conditions in Chile;                                                                                              
|  |                                                                                                                                                              
| | any new   store openings;                                                                                                                                    
|  |                                                                                                                                                              
| | our   expectations regarding ongoing litigation, and particularly the likelihood of   full recovery on the purchase price owed on our sale of EkonoArgentina;
|  |                                                                                                                                                              
| | our capital   expenditure plans;                                                                                                                             
|  |                                                                                                                                                              
| | industry   trends; and                                                                                                                                       
|  |                                                                                                                                                              
| | other   expectations, intentions and plans contained in this annual report that are   not historical fact.                                                   

When used in this annual report, the words expects, anticipates, intends, plans, may, believes, seeks, estimates and similar expressions generally identify forward-looking statements. These statements reflect our current expectations. They are subject to a number of risks and uncertainties, including, but not limited to, unforeseen competitive pressures, Chilean economic conditions and changes in the marketplace. In light of the many risks and uncertainties surrounding our marketplace, you should understand that we cannot assure you that the forward-looking statements contained in this annual report will be realized.

3

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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION

Unless otherwise specified, in this annual report:

| | 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.                                                                                                                                

In the presentation of results by format, the contributions to net revenues are included in the store format to which they were attributable. When we refer in this report to the supermarket industry or supermarkets in general, reference is made to operations of hypermarkets, supermarkets and any other commercial formats through which food and supermarket-complementary items are marketed. The term sales, as used in this annual report, is distinct from net revenues, and is limited to product sales (net of value added tax) attributed to our retail operations.

From north to south, Chile is divided into 13 political subdivisions, each called a Region. All of the Regions are denominated by Roman numerals (i.e., I-XIII). The thirteenth Region, which is not denominated by a Roman numeral, corresponds to the Metropolitan Region which includes the City of the Santiago.

We have computed the information contained in this annual report regarding annual volume, per capita growth rates and levels, market share, product segment, and population data in the supermarket industry based upon market statistics. Sales figures for the supermarket industry in Chile are based upon industry surveys and information reported by the Instituto Nacional de Estadísticas, or INE. Additional data was obtained from third parties and from our own research and estimates.

Our audited consolidated financial statements and, unless otherwise indicated, the other financial information presented in this annual report, are presented in Chilean pesos in conformity with generally accepted accounting principles in Chile, or Chilean GAAP, and the rules of the Superintendencia de Valores y Seguros, the Chilean Superintendency of Securities and Insurance, or SVS. Chilean GAAP differs in certain important respects from generally accepted accounting principles in the United States, or U.S. GAAP. See Note 25 to our audited consolidated financial statements for the years ended December 31, 2003, 2004 and 2005 contained in Item 18 herein for a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to us. Note 25 to our audited consolidated financial statements for the years ended December 31, 2003, 2004 and 2005 also contains a
reconciliation to U.S. GAAP of our net income for the years ended December 31, 2003, 2004 and 2005 and our total shareholders equity at December 31, 2004 and 2005.

4

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PART I

|Item 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not applicable.

|Item 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not applicable.

|Item 3. | KEY INFORMATION
|------- | ---------------

General

The following table presents our summary consolidated financial data and other financial and operating information at the dates and for the periods indicated. The summary consolidated financial data as of December 31, 2004 and 2005 and for the years ended December 31, 2003, 2004 and 2005, was derived from our consolidated financial statements, including the notes thereto, which were audited by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda., independent registered public accounting firm. The summary consolidated Chilean GAAP financial information as of and for the years ended December 31, 2001 and 2002 was derived from our consolidated financial statements, including the notes thereto, which were audited by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. and are not included herein. The consolidated financial data should be read in conjunction with our consolidated financial
statements, including the notes thereto, and with Managements Discussion and Analysis of Results of Operations and Financial Condition. Our consolidated financial statements are prepared in accordance with Chilean GAAP, which differs in certain significant respects from U.S. GAAP. Note 25 to our consolidated financial statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP of net income and shareholders equity for the periods and as of the dates covered by the financial statements.

As required by Chilean GAAP, our financial statements are adjusted to reflect changes in purchasing power of the Chilean peso due to inflation. These changes are based on the consumer price index, or CPI, measured from December 1 to November 30 of each year. All non-monetary assets and liabilities and income statement accounts have been restated to reflect the changes in the Chilean consumer price index from the date such assets and liabilities were acquired or incurred to the end of the period.

For the convenience of the reader, this annual report contains translations of certain Chilean peso amounts into U.S. dollars at specified rates. Unless otherwise indicated, U.S. dollar equivalent information for amounts in Chilean pesos is based on the observed exchange rate reported by the Chilean Central Bank for December 31, 2005, which was Ch$512.50 = US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate in New York City for Chilean pesos. No representation is made that the Chilean peso or U.S. dollar amounts presented in this annual report could have been or could be converted into Chilean pesos or U.S. dollars, as the case may be, at any particular rate or at all.

Recent Developments

Capital Contribution in Alvi.On October 13, 2005, we made an investment in Alvi Supermercados Mayoristas S.A. (Alvi) by making a capital contribution in the amount of UF653,660 (Ch$11,607 million or US$21.7 million at the observed exchange rate of October 13, 2005), representing a 35% ownership of Alvi. Alvi is one of the main Chilean store-format wholesale distributors with sales oriented towards the supply of small grocery stores.

5

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Selected Financial and Operating Data

|                                                               |  | At and for   the year ended December 31,                                                                                                              |          
|-------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|                                                               |  |                                                                                                                                                       |          
|                                                               |  | 2001                                                                                                                                                  |          
|                                                               |  |                                                                                                                                                       |          
|                                                               |  | (amounts   in millions of constant Ch$ and millions of US$, and except per share and   per ADS information and percentages or as otherwise indicated) |          
|INCOME   STATEMENT DATA:                                       |  |                                                                                                                                                       |          
|Chilean   GAAP:                                                |  |                                                                                                                                                       |          
|Net revenue                                                    |  | Ch$                                                                                                                                                   | 1,008,500
|Cost of sales                                                  |  |                                                                                                                                                       | (781,471 
|Gross profit                                                   |  |                                                                                                                                                       | 227,029  
|Selling and administrative   expenses                          |  |                                                                                                                                                       | (166,908 
|                                                               |  |                                                                                                                                                       |          
|Operating income                                               |  |                                                                                                                                                       | 60,121   
|Non-operating income                                           |  |                                                                                                                                                       | 1,713    
|Non-operating expenses                                         |  |                                                                                                                                                       | (16,380  
|Net price-level restatement   and foreign exchange gain (loss) |  |                                                                                                                                                       | 6,117    
|                                                               |  |                                                                                                                                                       |          
|Non-operating loss                                             |  |                                                                                                                                                       | (8,551   
|Income before income taxes                                     |  |                                                                                                                                                       | 51,570   
|Income taxes                                                   |  |                                                                                                                                                       | (8,083   
|                                                               |  |                                                                                                                                                       |          
|Net income                                                     |  | Ch$                                                                                                                                                   | 43,487   
|                                                               |  |                                                                                                                                                       |          
|Basic and diluted earning   per share(2)                       |  | Ch$                                                                                                                                                   | 6.67     
|Basic and diluted earning   per ADS(3)                         |  |                                                                                                                                                       | 400.19   
|Dividends per share(4)                                         |  | Ch$                                                                                                                                                   | 2.5      
|Dividends per ADS(3)(4)                                        |  |                                                                                                                                                       | 150.0    
|Weighted average shares   outstanding (in millions)(5) (16)    |  |                                                                                                                                                       | 6,520    
|U.S. GAAP:                                                     |  |                                                                                                                                                       |          
|Net revenue                                                    |  | Ch$                                                                                                                                                   | 932,622  
|Operating income                                               |  |                                                                                                                                                       | 60,027   
|Net income                                                     |  |                                                                                                                                                       | 45,840   
|Basic and diluted earning   per share(2)                       |  | Ch$                                                                                                                                                   | 7.03     
|Basic and diluted earning   per ADS(3)                         |  |                                                                                                                                                       | 421.84   
|Weighted average shares   outstanding (in millions)(5) (16)    |  |                                                                                                                                                       | 6,520    
|BALANCE   SHEET DATA:                                          |  |                                                                                                                                                       |          
|Chilean   GAAP:                                                |  |                                                                                                                                                       |          
|Total current assets                                           |  | Ch$                                                                                                                                                   | 166,117  
|Property, plant and   equipment-net                            |  |                                                                                                                                                       | 487,172  
|Total assets                                                   |  |                                                                                                                                                       | 736,480  
|Short-term debt                                                |  |                                                                                                                                                       | 48,244   
|Long-term debt                                                 |  |                                                                                                                                                       | 173,805  
|Total shareholders equity                                     |  |                                                                                                                                                       | 312,047  
|Ratio of shareholders   equity to capitalization(6)           |  |                                                                                                                                                       | 59.6     
|U.S. GAAP:                                                     |  |                                                                                                                                                       |          
|Total assets                                                   |  | Ch$                                                                                                                                                   | 737,495  
|Long-term debt                                                 |  |                                                                                                                                                       | 173,805  
|Total shareholders equity                                     |  |                                                                                                                                                       | 294,317  
|OTHER   FINANCIAL INFORMATION                                  |  |                                                                                                                                                       |          
|Chilean GAAP:                                                  |  |                                                                                                                                                       |          
|Capital expenditures                                           |  | Ch$                                                                                                                                                   | 76,363   
|Depreciation and   amortization                                |  |                                                                                                                                                       | 33,723   
|Net cash provided (used in)   from operating activities        |  |                                                                                                                                                       | 70,927   
|Financial   Ratios(7)                                          |  |                                                                                                                                                       |          
|(Chilean   GAAP):                                              |  |                                                                                                                                                       |          
|Gross margin                                                   |  |                                                                                                                                                       | 22.5     
|Operating margin                                               |  |                                                                                                                                                       | 6.0      
|Net margin                                                     |  |                                                                                                                                                       | 4.3      
|Current ratio                                                  |  |                                                                                                                                                       | 68.3     
|Financial debt/total   shareholders equity                    |  |                                                                                                                                                       | 71.2     
|Operating   Information:                                       |  |                                                                                                                                                       |          
|Number of stores (at end of   period):                         |  |                                                                                                                                                       |          
|Almac                                                          |  |                                                                                                                                                       | 4        
|Ekono                                                          |  |                                                                                                                                                       | 28       
|Líder Express(8)                                               |  |                                                                                                                                                       |         
|Líder                                                          |  |                                                                                                                                                       | 16       
|Líder Vecino                                                   |  |                                                                                                                                                       | 5        
|Líder Mercado                                                  |  |                                                                                                                                                       | 1        
|                                                               |  |                                                                                                                                                       |          
|Total                                                          |  |                                                                                                                                                       | 54       
|Total selling space                                            |  |                                                                                                                                                       | 263,635  
|Average selling space per   store(9)                           |  |                                                                                                                                                       | 4,810    
|Average sales per store (in   millions)(10)(11)                |  | Ch$                                                                                                                                                   | 16,583   
|Increase (decrease) in same   store sales(11)(12)              |  |                                                                                                                                                       | 3.0      
|Sales per square meter (in   millions)(11)(13)                 |  | Ch$                                                                                                                                                   | 3.5      
|Total number of   employees(14)                                |  |                                                                                                                                                       | 15,988   
|Sales per employee(11)(15)                                     |  | Ch$                                                                                                                                                   | 68.2     
|                                                               |  |                                                                                                                                                       |          

6

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|    
|----
|(1) 
|(2) 
|(3) 
|(4) 
|(5) 
|(6) 
|(7) 
|(8) 
|(9) 
|(10)
|(11)
|(12)
|(13)
|(14)
|(15)
|(16)

Exchange Rates

Chile has a free exchange system. There is a regulated exchange market known as the Mercado Cambiario Formal, or the Formal Exchange Market. Transactions taking place outside the Formal Exchange Market, which are lawful unless specifically prohibited, are deemed to occur in what is known as the Mercado Cambiario Informal, or the Informal Exchange Market. The Chilean Central Bank is empowered to determine that certain purchases and sales of foreign currencies must be carried out in the Formal Exchange Market. Pursuant to Chilean Central Bank regulations which are currently in effect, all payments, remittances or transfers of foreign currency abroad which are required to be performed through the Formal Exchange Market may be effected with foreign currency procured outside the Formal Exchange Market. The Formal Exchange Market is comprised of the banks and other entities so authorized by the
Chilean Central Bank. Current regulations require that the Chilean Central Bank be informed of certain transactions and that they be effected through the Formal Exchange Market.

7

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The reference exchange rate for the Formal Exchange Market is reset daily by the
Chilean Central Bank, taking internal and external inflation into account, and
is adjusted daily to reflect variations in parities between the peso and each of
the U.S. dollar, the euro and the Japanese yen. The observed exchange rate for a
given date is the average exchange rate of the transactions conducted in the
Formal Exchange Market on the immediately preceding banking day, as certified by
the Chilean Central Bank.

Prior to September 2, 1999, authorized transactions by banks were generally transacted within a certain range above or below the reference exchange rate. In order to maintain the average exchange rate within such limits, the Chilean Central Bank intervened by selling and buying foreign currencies on the Formal Exchange Market. On September 2, 1999, the Chilean Central Bank eliminated the exchange rate band as an instrument of exchange rate policy, introducing more flexibility to the exchange market. The Chilean Central Bank also announced that it would intervene in the exchange market only in special and qualified cases.  During the first quarter of 2006, the price of copper averaged US$2.24 per pound. The average price for the three years ending on December 31, 2005 was US$1.26 per pound. Since copper production accounts for 13.9% of Chiles GDP (for the year 2005), the increase in price that
copper has undergone during the first quarter of 2006 and continues to undergo as of the date of this report has put substantial pressure on the exchange rate between the Chilean peso and the U.S. dollar, leading to an appreciation of the peso.  If the Chilean peso appreciation persists, the Chilean Central Bank may or may not deem such peso appreciation as a special and qualified case that justifies its intervention in the exchange market, whether through direct or indirect measures.

Purchases and sales of foreign currencies which may be effected outside the Formal Exchange Market can be carried out in the Informal Exchange Market. The Informal Exchange Market reflects transactions carried out at informal exchange rates by entities not expressly authorized to operate in the Formal Exchange Market, such as most foreign exchange houses and travel agencies. There are no limits imposed on the extent to which the rate of exchange in the Informal Exchange Market can fluctuate above or below the observed exchange rate. At December 31, 2005, the average exchange rate in the Informal Exchange Market was approximately the same as the published observed exchange rate for such date, of Ch$512.50 per US$1.00. On May 31, 2006, the Chilean peso/U.S. dollar exchange rate was Ch$531.87 per U.S. dollar.

The following table sets forth the high, low, average and year-end observed exchange rates for U.S. dollars for the periods indicated as expressed in pesos per US$1.00, as reported by the Chilean Central Bank. No indication is made that the Chilean peso or U.S. dollar amounts referred to in this annual report actually represent, could have been or could be converted into, U.S. dollars or Chilean pesos, as the case may be, at the rates indicated, at any particular rate or at all. The Federal Reserve Bank of New York does not report a daily 12:00 p.m. buying rate for Chilean pesos:

|                  |  | Observed Exchange Rate (4)
|----------------- |  | --------------------------
|                  |  |                           
|Period            |  | Low (1)                   
|                  |  |                           
|2001 (2)          |  | Ch$                       
|2002 (2)          |  |                           
|2003 (2)          |  |                           
|2004 (2)          |  |                           
|2005 (2)          |  |                           
|December 2005 (3) |  |                           
|January 2006 (3)  |  |                           
|February 2006 (3) |  |                           
|March 2006 (3)    |  |                           
|April 2006 (3)    |  |                           
|May 2006 (3)      |  |                           

|                                  
|----------------------------------
|(1)                               
|(2)                               
|(3)                               
|(4)                               
|Source: The   Chilean Central Bank

8

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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 erode our profitability.

Our strategy is to deliver service and quality at the lowest possible price by keeping a perceptual low price positioning. We couple this positioning with incentives for holders of our Presto credit card, the development of our Líderbrand name, and individual pricing of perishables so that a consistent gross margin is maintained. This strategy is based on savings achieved through operational efficiency that are transferable to the customer. The long-term success of our strategy is subject to significant risks, including the following:

| | we depend   upon high sales volume and we may generate less additional sales volume than   expected;                                                                                                 
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                      
| | we may fail   to achieve desired reductions in sales, general 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; and                                
|  |                                                                                                                                                                                                      
| | even if we   are successful in implementing our strategy, it may take longer than planned   to achieve the desired results.                                                                          

Any one of these factors could adversely affect our current strategy and, consequently, our business, financial condition, results of operations, cash flows and prospects.

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

The supermarket industry in Chile is characterized by growing competition and increasing pressure on profit margins. The number and type of competitors and the degree of competition experienced by individual stores vary by location. Competition occurs on the basis of price, location, quality of products and services, product variety and store conditions. Through our Líder store formats (hypermarkets, compact hypermarkets and supermarkets), we compete across the full spectrum of the supermarket industry in Chile with a number of national hypermarket and supermarket chains, smaller chains and unaffiliated independent food stores.

Additionally, there is a trend towards consolidation in the Chilean retail and supermarket industries. Our main Chilean competitor, Cencosud S.A., which owns Jumbo, Santa Isabel, Montecarlo and Las Brisas (the latter two are mostly operated under the Santa Isabel brand), acquired Almacenes Paris in 2005 through a tender offer. As a result of these acquisitions, Cencosud has recently become a stronger competitor in the Chilean market. Similarly, Falabella, the main department and home improvement store chain in Chile, acquired the supermarket chain San Francisco in 2004, thus expanding their operations into the supermarket industry. During 2005, Falabella started opening hypermarkets under the Tottus brand. We purchased in January 2004, Carrefour Chile S.A., also participating in the consolidation of the sector. Additionally, we have participated in such consolidation trend from time to time
also by taking operating stores in long-term leases from regional chains in certain cities. If these or other competitors are successful in capturing market share, our results of operations or sales volume may be adversely affected.

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The Chilean retail and supermarket industries may become saturated and prevent us from carrying out our plans for expansion or from achieving further growth.

Our sales growth results from increases in sales in existing stores and through the addition of new stores. From 2001 through December 31, 2005, our average annual growth in supermarket floor space has been 12.8% while our average annual growth in sales has been 9.6%. Construction of new stores may have an adverse effect on same store sales of existing stores. Our same store sales decreased by 2.3% in 2005 compared to 2004. If the Chilean retail and supermarket industries continue to expand and become saturated relative to the current purchasing power of the Chilean consumer, it may limit our ability to profitably exploit our existing stores or expand through new store openings.

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.

Our Prestocredit card business is a growing segment of our operations. Over the twelve months from December 31, 2004 to December 31, 2005, we increased our number of accounts in good standing by 28% from 1,180,456 to 1,510,532 account holders. From 2004 to 2005, our net revenues derived from credit card financial income increased 121.7% to Ch$64,680 million (unconsolidated figures) or 3.6% of our net revenue after consolidation. Our amounts past-due have decreased 46.4% from Ch$19,272 million at December 31, 2004 to Ch$10,335 million at December 31, 2005 and as a percentage of total accounts receivable have decreased from 13.2% to 5.5%. At December 31, 2005, we had 1,510,532 accounts in good standing with credit outstanding of Ch$187,344 million (US$365.5 million), and we intend to continue to increase the number of account holders in the near term. In June 2005, our Prestocredit card,
issued by our subsidiary Servicios y Administración de Créditos Comerciales Presto S.A., started operating as what is known in Chile as an open credit card, that is, a credit card that may be used for the purchase and financing of purchases from any establishment or business that has previously affiliated with the credit card system.

We assume sole responsibility for account approval and credit risk. As a result, we are exposed to increased credit and financial risk, which may adversely affect our financial condition and results of operation. These risks include:

| | 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, our financial  services  division  voluntarily  requested and obtained the
authorization of the Chilean Central Bank and the Chilean Superintendencia de
Bancos e Instituciones  Financieras(Superintendency of Banks and Financial
Institutions) to operate our  Presto  credit card as an open credit
card.  Such  authorization  allowed  expanding  the  use of the  Prestocard to unaffiliated businesses throughout Chile. It also made the Prestocredit  card  subject  to the  rules  and  regulations  applicable  to  such
open  issuers.  These  rules and  regulations  lead to,  among other
things, higher levels of provisions for payment defaults than required under our
previous policy. In  March 2006, the Chilean Central Bank enacted new rules
regulating  non-banking  credit  issuers  and  operators,  which will be further
developed by the  Superintendency  of Banks and Financial  Institutions no later
than  September  2006.   These new rules,  however,  should not  materially
affect the issuance and operations of our  Presto  credit card since they
are  substantially  similar to the ones to which we voluntarily  submitted to in
2005. See  Information  on the  CompanyRegulation.

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

We may not be able to generate sufficient cash flows from our operations or obtain sufficient funds from external sources to fund our capital expenditure requirements. Our ability to access financial markets in sufficient amounts and at acceptable costs to finance our operations and fund our future capital expenditures will depend to some degree on prevailing capital and financial market conditions over which we have no control. Our failure to generate sufficient cash flows from operations or to obtain such financing could cause us to delay or abandon some or all of our planned capital expenditures, which, in turn, could adversely affect our competitive position, financial condition, results of operations, cash flows and prospects.

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.

Chile has antitrust laws that limit the abuse of market share by a company in any particular industry. On October 5, 2004, the Tribunal de Defensa de la Libre Competencia, the higher special-purpose court for antitrust matters, issued a ruling related to a fact finding investigation regarding procurement practices in the supermarket industry. This ruling ordered, among other things, that the supermarket chains operated by our company and Cencosud S.A. should consult in advance with the Tribunal de Defensa de la Libre Competenciaany and all negotiations or agreements that directly or indirectly imply an acquisition of or their integration or merger with, companies in the same business. Such ruling was challenged by our company and Cencosud and on May 26, 2005, the Supreme Court of Law ruled in favor of our interests by annulling the part of the decision of the Tribunal de Defensa
de la Libre Competenciain which it imposed the above-described consultation obligation.

Although we believe our procurement policies comply with applicable laws and regulations, Chilean regulatory scrutiny and policies requiring further objective, uniform and non-discriminatory procurement policies may constrain our ability to achieve optimal pricing based on our market leading market share, which may adversely affect the success of our business.

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

We sold our former Argentine subsidiary, Ekono-Argentina,to Disco S.A. in December of 1999 for US$150 million. However, only US$60 million of the purchase price was paid in May 2000, with the balance of US$90 million payable in May 2003 and guaranteed by the Netherlands Antilles company Disco-Ahold International Holdings N.V., which we refer to as Ahold and is a subsidiary of Royal Ahold N.V. We were informed in December 2002 that Disco S.A. would not pay us the entire US$150 million amount in dollars, but would instead convert the US$90 million balance owed to us into Argentine pesos under Argentine foreign currency convertibility regulations. On May 2, 2003, Disco S.A. made payment of A$126 million. After approval by the Central Bank of Argentina in August 2003, this amount plus accrued interest was remitted to us based on an effective exchange rate of A$3.00 to US$1.00 and totaled
US$42 million.

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We are involved in various legal challenges to recover the remaining amounts due. In April 2003, we sued Ahold in the Netherlands Antilles for not fulfilling its obligations as guarantor of the balance to be paid in installments. In September 2005, the court of first instance in the Netherlands Antilles rejected our claim against Ahold. We filed an appeal against the court decision, which is pending before the Courts of Appeal of the Netherlands Antilles. Oral pleadings on this appeal were heard on June 13, 2006. The Court of Appeal has anticipated that it intends to issue a judgment on the appeal by the end of August 2006. Additionally, in April 2005, our company started legal proceedings against Royal Ahold N.V., the parent company in the Netherlands, seeking damages because of what we believe constitutes tortious interference in the actions of Ahold and Disco S.A. After the commencement of litigation
against Royal Ahold N.V., Ahold requested and was allowed by the court to join the proceedings as a party that may be affected by them. We agreed to such joinder of parties. We have not yet sued Disco S.A. in Argentina, the main debtor of the account receivable on the Ekono transaction. However, we have not waived our rights to do so and such rights have not been barred by any statute of limitations. If we are unable to recover the remaining balance (currently US$47.5 million), plus interest and costs, owed to us, our financial condition may be adversely affected. Moreover, if we are unable to recover, or if we determine it is probable that we will be unable to recover, the remaining amounts owed, we may be required to write off the amount in dispute, which would have an adverse effect on our results of operations for that period. For more information, see Item 4  Information on the CompanyLegal Proceedings.

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

Control of our company is vested in a series of companies beneficially owned or controlled by our controlling shareholders, Messrs. Felipe Ibáñez Scott and Nicolás Ibáñez Scott. Together, these companies and our controlling shareholders controlled 63.47% of our outstanding capital stock at December 31, 2005. Therefore, our controlling shareholders are in a position to direct our management and to determine the result of substantially all matters to be decided by a shareholders vote, including:

| | 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.                                                              

In addition,
if the depositary does not receive voting instructions from a holder of ADSs on
or before the date set by the depositary, such holder will be deemed to have
instructed the depositary to give a discretionary proxy with full power of
substitution to the president of our board of directors, or to a person
designated by the president of our board of directors, to vote such shares on
any such matter described under Item 10  Additional Information
 Other Limitations. For more information on the Depositary
Agreement, see Item 10  Additional InformationThe Deposit
Agreement.

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.

The disposition by the companies controlled by our controlling shareholders of a significant number of the shares of our company they hold, or the perception that such a disposition might occur, could adversely affect the trading price of our shares and ADSs. If a significant disposition were to occur, our controlling shareholders may not continue to own a controlling percentage of our capital stock and an actual or potential reduction in their ownership percentage may have an adverse effect on our results of operations or financial condition.

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We are currently reviewing our internal controls for the first time pursuant to the Sarbanes-Oxley Act of 2002, and if we identify any material weaknesses or significant deficiencies in our internal controls, the price of our ADSs could be adversely affected.

We are in the process of assessing the effectiveness of our internal control over financial reporting in connection with the rules adopted by the U.S. Securities and Exchange Commission under Section 404 of the Sarbanes-Oxley Act of 2002. Unless extended, compliance with Section 404 of the Sarbanes-Oxley Act of 2002 will be required in connection with the filing of our Annual Report on Form 20-F for the fiscal year ending December 31, 2006.  We began a comprehensive review of our internal controls in 2005 and have identified areas of focus for strengthening our internal controls.  A number of processes and systems are currently being changed in order to bring our internal controls into compliance with best practices in the industry.  We expect to complete this process by the end of 2006, but we cannot provide assurance that we will be able to do so.  In addition, there can be no
assurance that our auditors will issue an unqualified opinion on managements assessment of the effectiveness of our internal control over financial reporting.

As part of our review, we may identify material weaknesses in our internal controls as defined in standards established by the Public Company Accounting Oversight Board (PCAOB). A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines significant deficiency as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

We cannot provide any assurance that our testing of our internal controls will not uncover deficiencies that, in the aggregate, could result in a material weakness in our internal control over financial reporting.  In the event that a material weakness is identified, we will adopt and implement policies and procedures to remediate any material weakness that is identified.  However, these measures may not remediate any material weaknesses that we may identify or the measures that we may implement may not maintain adequate controls over our financial process and reporting in the future.

Any failure to complete an assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements.  Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ADSs.

Risks Relating to Chile

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

At December 31, 2005, all of our assets and revenues were located or generated in Chile. Supermarket sales show a high degree of correlation with the economic situation prevailing in the relevant market. Accordingly, our financial condition and results of operations are dependent to a significant extent upon economic conditions prevailing in Chile. Chilean economic conditions can be adversely affected by a variety of factors, most of which are beyond our control, including:

| | 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.                                                                                                                        

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Our financial condition and results of operations to some extent also depend on the level of economic activity in both Latin American and other countries, especially the United States and certain nations in Asia. In addition, although economic conditions are different in each country, investors reactions to developments in one country may affect the securities of issuers in other countries, including Chile. For example, adverse developments in other developing or emerging market countries may lead to decreased investor interest in investing in Chile or in the securities of Chilean companies.

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

The Chilean governments economic policies and any future changes in the value of the Chilean peso against the U.S. dollar could affect the dollar value of our common stock and our ADSs. The peso has been subject to large devaluations in the past and, more recently, periods of significant appreciation, and could be subject to significant fluctuations in the future. In the period from December 31, 2004 to December 31, 2005, the value of the Chilean peso relative to the U.S. dollar increased by 8.06%. The Observed Exchange Rate on May 31, 2006 was Ch$531.87 = US$1.00. Our results of operations may be affected by fluctuations in the exchange rates between the peso and the U.S. dollar.

In the event of a devaluation of the Chilean peso, our financial condition and results of operations, and our ability to meet obligations in foreign currencies, could be adversely affected. The Chilean governments economic policies and future fluctuations in the value of the Chilean peso against the U.S. dollar could adversely affect our operating results and the dollar value of an investors return on an investment in the ADSs.

Chilean trading in the shares of our common stock that underlie our ADSs is conducted in pesos. Cash distributions with respect to shares of our common stock will be received in Chilean pesos by the depositary and converted by the depositary into U.S. dollars at the then-prevailing exchange rate for the purpose of making payments in respect of our ADSs. If the value of the Chilean peso falls relative to the U.S. dollar, the value of our ADSs and any distributions to be received from the depositary would be adversely affected. In addition, the depositary will incur customary currency conversion costs (to be borne by the holders of our ADSs) in connection with the conversion and subsequent distribution of dividends or other payments.

During the first quarter of 2006, the price of copper averaged US$2.24 per pound. The average price for the three years ending on December 31, 2005 was US$1.26 per pound. Since copper production accounts for 13.9% of Chiles GDP (for the year 2005), the increase in price that copper has undergone during the first quarter of 2006 and continues to undergo as of the date of this report has put substantial pressure on the exchange rate between the Chilean peso and the U.S. dollar, leading to an appreciation of the peso. Such appreciation could have an impact on the value of our ADSs and any distributions to be received from the depositary. If the appreciation of the Chilean peso persists, the Chilean Central Bank may or may not deem such peso appreciation as a special and qualified case that justifies its intervention in the exchange market, whether through direct or indirect measures.

Inflation could adversely affect our financial condition, results of operations and the value of our shares and ADSs.

Although Chilean inflation has moderated in recent years, Chile has experienced high levels of inflation in the past. High levels of inflation in Chile could adversely affect the Chilean economy and have a material adverse effect on our financial condition and results of operations. The annual rates of inflation (as measured by changes in the CPI and as reported by the INE) in 2001, 2002, 2003, 2004 and 2005 were 2.6%, 2.8%, 1.1%, 2.4% and 3.7%, respectively. Chilean inflation may increase significantly in the future. We generally pass on our increased costs resulting from inflation to our customers through increases in the prices of the products we sell. There can be no assurance, however, whether or to what extent we will pass on increased costs in the future. Further, the performance of the Chilean economy, our operating results or the value of the ADSs may be adversely affected by continuing or
increased levels of inflation and Chilean inflation may increase significantly from the current level.

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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.

The Chilean securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States. The companies listed on the Santiago Stock Exchange, which is Chiles principal exchange, had an aggregate equity market capitalization of approximately Ch$68,891,419 million (US$136,374 million) at December 31, 2005 and an aggregate average monthly trading volume of approximately US$1,727 million for 2005. The ten largest companies in terms of market capitalization at December 31, 2005, represented approximately 45.6% of the Santiago Stock Exchanges aggregate market capitalization. Daily share trading volumes on the Santiago Stock Exchange are on average substantially lower than those on the principal national securities exchanges in the United States. For 2005, approximately 17.2% of the securities listed and traded on the Santiago Stock Exchange traded
on 90% or more of the trading days.

The lack of liquidity owing, in part, to the relatively small size of the Chilean securities markets may have a significant effect on the trading prices of our shares. Because the market for our ADSs depends, in part, on investors perception of the value of our underlying shares, this lack of liquidity for our shares in Chile may have a significant effect on the trading prices of our ADSs.

In addition, the Chilean securities markets may be affected by developments in other emerging markets, particularly other countries in Latin America. The depth and liquidity of the market for our shares and the potential impact of developments in other emerging markets may cause the trading prices of our ADSs to fluctuate significantly.

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

Equity investments in Chile by non-Chilean residents generally are subject to various exchange control regulations that restrict the repatriation of investments and earnings from investments. The ADS facility, however, is the subject of a Foreign Investment Contract among the depositary, us and the Chilean Central Bank, which grants the depositary and the holders of ADSs access to Chiles Mercado Cambiario Formal,or Formal Exchange Market. Pursuant to current Chilean law, the Foreign Investment Contract may not be amended unilaterally by the Central Bank. Additionally, there are judicial precedents (although not binding on future judicial decisions) indicating that the Foreign Investment Contract may not be abrogated by future legislative changes. However, additional Chilean restrictions applicable to the holders of ADSs, to the disposition of underlying shares of common stock or to the
repatriation of the proceeds from such disposition may be imposed in the future, and the duration or implications of any such restrictions that might be imposed are difficult to predict. If, for any reason, including changes in the Foreign Investment Contract or Chilean law, the depositary were unable to convert pesos to U.S. dollars, investors might receive dividends or other distributions in pesos. Transferees of shares withdrawn from the ADS facility will not be entitled to access the Formal Exchange Market unless the withdrawn shares are redeposited with the depositary. If transferees are unable to access the Formal Exchange Market, they may be unable to convert peso amounts to dollars in connection with the sale of these shares.

Cash and non-cash dividends paid by us with respect to ADSs held by a foreign (non-Chilean) holder will be subject to a 35.0% Chilean withholding tax, which is withheld by our company. Stock dividends are not subject to Chilean taxation.

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

The securities laws of Chile which govern publicly listed companies, such as our company, impose disclosure requirements that are more limited than those in the United States in certain important respects. As a foreign private issuer, we are required to comply with most of the disclosure requirements of the Sarbanes-Oxley Act of 2002, but we are also exempt from many of the corporate governance standards the New York Stock Exchange applies to issuers that are U.S. companies. For a description of the main differences between Chilean corporate governance practices and the corporate governance standards of the New York Stock Exchange, see Item 10  Additional InformationNew York Stock Exchange (NYSE) and Chilean Corporate Governance Requirements.

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In addition, although Chilean law imposes restrictions on insider trading and price manipulation, the Chilean securities markets are not as highly regulated and supervised as the U.S. securities markets. There are also important differences between Chilean and U.S. accounting and financial reporting standards. As a result, Chilean financial statements and reported earnings generally differ from those reported based on U.S. accounting and reporting standards. See Note 25 to our audited financial statements for a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP of net income for the years ended December 31, 2003, 2004 and 2005 and shareholders equity as of December 31, 2004 and 2005 reported under Chilean GAAP.

Pursuant to the Chilean Securities Market Law, direct or indirect acquisitions of shares resulting in the taking of control over a Chilean listed corporation must be conducted through a public tender offer in Chile. Unlike other jurisdictions, tender offers in Chile are not generally triggered by the acquisition of a fixed threshold of the target companys shares, but because of the acquisition of the target companys control and the payment of a premium for such control. A Chilean public tender offer will not be mandatory if an exemption is applicable. Such exemptions include acquisitions that are made: (i) through a capital increase of the target company; (ii) through a sale of stock by the controlling shareholder, provided the price paid is not substantially higher than market price (usually not more than 10% over the average market price during a period of time determined by the law); or
(iii) through a merger with the target company. In addition, if the control of the target company is gained by any means other than the acquisition of sharesfor example, a proxy campaign or a shareholders agreement that allows the parties thereof to control a stake larger than the shareholding of the existing controlling personthe operation needs not be accomplished through a public tender offer. Therefore, the controlling shareholders of a Chilean open stock corporation can sell their controlling shares through a public tender offer or pursuant to a legal exemption.

Pursuant to Law No. 19,705, which amended the Chilean Companies Law and was enacted in December 2000, the controlling shareholders of a Chilean open stock corporation can only sell their controlling shares through a tender offer issued to all shareholders in which the bidder would have to buy all the offered shares up to the percentage determined by it, when the price paid is substantially higher than the market price (that is, when the price paid was higher than the average market price of a period starting 90 days before the proposed transaction and ending 30 days before such proposed transaction, plus 10%).

Minority shareholders of our company may nevertheless still have fewer and less well-defined rights under Chilean law and our Bylaws than they might have as minority shareholders of a U.S. corporation.

|Item 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable

|Item 4. | INFORMATION ON THE COMPANY
|------- | --------------------------

Overview

Our legal name is Distribución y Servicio D&S S.A. and our commercial name for advertising and publicity purposes is D&S. Our principal executive offices are located at Avenida Presidente Eduardo Frei Montalva 8301, Quilicura, Santiago, Chile. Our telephone number is (562) 200-5000.  Our authorized representative in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19715, United States. Puglisi & Associates phone number is (302) 738-6680. Our website address is www.dys.cl. The information on our website is not part of this report. The website address is included as an indicative textual reference only.

We are Chiles leading supermarket company in terms of sales, with an estimated market share in the supermarket industry of 33.8% for 2005. With over a century of experience in the distribution and sales of food and food-complementary items in the Chilean market, at December 31, 2005, we operated 85 stores in three store formats under the Líderbrand name. During 2005, we opened six new Líderstores in Talagante (Metropolitan Region), Arica (I Region), Ovalle (IV Region), Temuco (IX Region), Puerto Varas (X Region) and Punta Arenas (XII Region) and reopened the General Velázquez store (formerly Carrefour) in Santiago. Over the last five years, we have increased our total number of stores from 54 to 85, of which 49 are located in the Metropolitan Region, which includes Santiago. As of May 2006, we have opened new stores in Copiapó (III Region), Linares (VII Region),
Temuco (IX Region) and Santiago (Metropolitan Region). Our expansion program currently projects the opening of 20 new stores in 2006. We had total net revenues in 2005 of Ch$1,598,767 million (US$3,119.5 million).

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We have positioned ourselves as Chiles low price leader in the supermarket industry. In late 2004 and throughout 2005, our every day low prices strategy or EDLP evolved to a next stage of focus on delivering to consumers exceptional value and good quality while preserving a perceptual low price advantage. We believe our strong market position and our Líderbrands reputation for value will enhance our ability to successfully pursue our current strategy, allowing us to cross-sell an expanded selection of quality non-food products and offer other complementary products and services, such as pharmacies and credit cards to a large and growing customer base attracted by our traditional supermarket offering and our low prices.

We operate three store formats under the Líderbrand umbrella (FarmaLídersales not included):

| | Our 32 Líder   hypermarkets have an average selling space of 9,036 square meters   (approximately 97,263 square feet), and offer one-stop shopping for   traditional food items and non-food items such as home appliances,   electronics, apparel and toys. In 2005, our hypermarkets generated 57.6% of   our net revenues.                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Our 26 Líder   Vecinocompact   hypermarkets have an average selling space of 3,890 square meters   (approximately 41,892 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 2005, our compact hypermarkets generated 24.0% of our net revenues.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Our 27 Líder   Express   supermarkets have an average selling space of 1,327 square meters   (approximately 15,963 square feet), and emphasize quality groceries and   perishables at low prices. In 2005, our supermarkets generated 9.9% of our   net revenues.                                                                                                                                                  

We also operate businesses complementary to our supermarket operations, including real estate development, financial services and pharmacies, which together with logistic revenues from our distribution center represented 6.3% of our net revenues in 2005.

Our Core Strengths

We believe our core competitive strengths provide us with a strong platform for successful deployment of Líders current strategy.

| | 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 December 31, 2005 our market share in the Chilean   hypermarket and supermarket industry was 33.8%, compared to an estimated   market share of 26.6% 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 Líderbrand   name in Chile and its reputation for value.                                                                                                                                                                                                                                                                                                                                      

Our Strategy

Our goal is to maximize value to our shareholders, while expanding our position as the leading supermarket company in Chile. We believe we can best achieve this goal by delivering a broader selection of goods and services to our customers at low prices. Key elements of our strategy include:

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| | Continuing to expand customer traffic.  We have approximately 15 million customer   visits to our stores each month, providing us with what we believe is the   greatest supermarket retail opportunity in Chile. To further expand our   customer base, we are:                                                                                                                                                                                                                                                                                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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| | Increasing our share of wallet.We estimate that for 2005, our share of food sales in Chile (share
of wallet) was 9.5%, while our share of sales of non-food products in the
areas in which we compete was 7.0%. We estimate that for 2005, our overall share
for food and non-food products in the retail sector was approximately 8.0%. We
intend to steadily increase our share of the Chilean wallet by cross-selling
both food and non-food products to our strong and growing base of customers, as
well as by expanding our financial services operations. To do so, we
are:
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Recruiting and developing talent.  To implement our strategy, we seek to   recruit and develop talented personnel at all levels of our business. We have   strengthened our management team with executives recruited from leading   Chilean companies. This team is invested in the success of our strategy. We   also seek to become a preferred place to work in Chile, including for our   employees, which, we believe, over time, will help ensure our continued   success. Motivated and happy employees will improve the quality of our stores   and customer service.      

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History

We are a publicly-held open stock corporation (sociedad anónima abierta) organized and operating under the laws of the Republic of Chile. We were incorporated on September 17, 1985. We completed an initial public offering of our common shares in Chile in December 1996. We listed our ADSs on the New York Stock Exchange under the symbol DYS and completed an initial public offering of ADSs in the United States in October 1997. We also listed our common shares on the Madrid Stock Exchange (Latibex) in December 2002. In addition, our common shares currently trade on the Santiago Stock Exchange (Bolsa de Comercio de Santiago), the Electronic Stock Exchange of Chile (Bolsa Electrónica de Chile) and the Valparaíso Stock Exchange (Bolsa de Valores de Valparaíso).

Our history began in 1893 as the trading firm of Gratenau y Cía., founded by German immigrants in Valparaíso, a Chilean port city. Mr. Adolfo Ibáñez Boggiano joined Gratenau y Cía. in 1899. In the 1930s, Ibáñez y Cía., the successor firm to Gratenau y Cía., opened Depósitos Tres Montes, small retail warehouses selling coffee, tea and mate in bulk. In 1944, Mr. José Manuel Ibáñez Ojeda, in keeping with the evolving retail environment, converted the warehouses into self-service establishments selling an expanded range of products. The firm entered the modern age of supermarkets in 1957 with the opening in Santiago of the first Supermercado Almac.

During the 1980s, we entered a new period of expansion. In 1984, we established our first Ekonosupermarket in Santiago. In 1985, our company was incorporated as a distribution and service center for our related Almacand Ekonosupermarkets. Over the next decade, we significantly increased our market presence by expanding our existing store formats. In 1995, we opened our first hypermarket store under the Lídertradename and began offering non-food products. Since 1995, we have focused our expansion on the Líderhypermarket format. We began offering our customers financial services with the launch of our Presto credit card in 1996. In 2003, we rebranded all of our stores under the Líder brand.

Our company has consolidated its presence both in the Santiago Metropolitan Region and most of Chiles other regions with stores within reach of most of Chilean homes. In January 2004, we purchased the Chilean operations of the French supermarket chain Carrefour,a transaction which added seven new Líder stores. In 2005, we opened six new stores, two Líderhypermarkets and four Líder Vecinogrocery stores, and reopened one store.

Our financial services division underwent significant growth both in terms of its organizational structure and in the number of customers and loans, closing the year with 1,510,532 million active accounts and US$365 million in extended credit.

FarmaLíderoperations continued growing in 2005, with the opening of 10 new stores to bring it to a total of 67. This division accounted for 2.5% of D&Ss total sales and 5.1% of Chiles overall pharmaceutical market sales for the full year 2005.

At year-end 2005, our company, through its subsidiaries, operated 85 stores among its hypermarkets, compact hypermarkets, and supermarkets, 67 FarmaLíder pharmacies and six shopping centers. At year-end 2005, our company was operating in the Metropolitan Region and the I, II, IV, V, VI, VII, VIII, IX, X, and XII Regions.

Our principal subsidiaries are Administradora de Concesiones Comerciales de Hipermercados S.A., Administradora de Concesiones Comerciales de Supermercados S.A., Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales S.A. (SAITEC S.A.), Comercializadora de Vestuario S.A (COMVESA), Magallanes S.A, Presto S.A and Maquinsa S.A. For a complete list of our direct and indirect subsidiaries and our percentage of ownership in our subsidiaries,  see Exhibit 8.1 List of Subsidiaries.

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Market Overview

Supermarket Industry in Chile

Although the Chilean supermarket industry has historically been highly fragmented, it has been undergoing a period of consolidation as market players expand and the larger of these acquire smaller competitors. In addition to supermarkets and larger format stores, Chile continues to support smaller grocery stores, convenience stores and open-air markets. The level of competition and the identity of competitors vary from region to region. Supermarket chains in Chile generally compete on the basis of price, location, quality of products and services, product variety and store conditions.

We estimate that in 2005 the two largest supermarket chains in Chile accounted for approximately 60.4% of total supermarket net sales. In 2005, we accounted for approximately 33.8% of total net sales of the supermarket industry in Chile, which represents the highest total market share in Chile. In the Santiago Metropolitan Region, Chiles most densely populated area (with approximately 40.1% of Chiles population, according to the 2002 census), with the highest levels of per capita disposable income, and highest level of supermarket penetration, Líder  stores have the largest market share in terms of sales, with approximately 43.4% of the total market.

Increasing acceptance of supermarkets as principal outlets of foodstuffs and other household items in Chile has resulted in steady increases in supermarket sales. The total net sales by supermarkets in Chile grew at an average annual rate of 8.4% during the last five years, exceeding the 4.3% average annual growth rate of GDP in Chile over the same period. The growth of larger stores (including increased numbers of hypermarkets), both on a free-standing basis and within shopping centers and other commercial developments such as anchor tenants, and a consolidation of ownership in fewer, larger supermarket chains, has been a developing trend in the Chilean supermarket industry during the last several years. Current trends in the industry include increased differentiation among competitors, with some supermarket chains emphasizing a low-price and low-service strategy, while others pursue a strategy of
moderate or higher prices accompanied by higher levels of service. Other important trends in the Chilean supermarket industry include increased funding of marketing costs by suppliers, expansion by leading chains into the regions outside the Santiago Metropolitan Region, the growth of private label products and increased demand for prepared foods.

Growth in total net sales by supermarkets and other food stores in Chile is positively correlated to growth in consumer disposable income and the growth in GDP and inversely correlated to significant increases in real prices and sales or value added taxes. In Chile, all products sold by supermarkets are subject to a value added tax of 19%. Soft drinks and alcoholic beverages are subject to additional taxes.

Our Business

Our Store Formats

At December 31, 2005, we operated 85 stores which together comprised 426,126 square meters of total selling space (approximately 4,586,782 square feet). Of the 85 stores we operated, 32 were Líderhypermarkets, 26 were Líder Vecino compact hypermarkets and 27 were Líder Expresssupermarkets.

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The following table sets forth data by store classification at and for the year ended December 31, 2005:

|                                     |  | 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                  |  |                    | 32 |                           |  | 289,166                               |  |                                            | 9,036 |                          |  | 2.8                     | 
|Compact Hypermarket - Líder   Vecino |  |                    | 26 |                           |  | 101,127                               |  |                                            | 3,890 |                          |  | 3.4                     | 
|Supermarket  Líder   Express        |  |                    | 27 |                           |  | 35,833                                |  |                                            | 1,327 |                          |  | 4.0                     | 
|                                     |  |                    |    |                           |  |                                       |  |                                            |       |                          |  |                         | 
|Total                                |  |                    | 85 |                           |  | 426,126                               |  |                                            | 5,013 |                          |  | 3.1                     | 
|FarmaLíder                           |  |                    | 67 |                           |  | 6,548                                 |  |                                            | 98    |                          |  | 5.2                     | 

|   
|---
|(1)
|(2)
|(3)
|(4)

The following table sets forth, for the periods indicated, the net revenues from our supermarket operations by store format and the respective percentage of our total net revenues each format represents:

|                 |  | Year ended   December 31,       |          
|---------------- |  | ------------------------------- | ---------
|                 |  |                                 |          
|                 |  | 2003                            |          
|                 |  |                                 |          
|                 |  | Net Revenues                    |          
|                 |  |                                 |          
|                 |  | (in millions of constant   Ch$) |          
|Líder(1)         |  | Ch$                             | 746,806  
|Líder Vecino(2)  |  |                                 | 261,092  
|Líder Express(2) |  |                                 | 156,558  
|FarmaLíder       |  |                                 |         
|Other(3)         |  |                                 | 70,533   
|                 |  |                                 |          
|Total            |  | Ch$                             | 1,234,989
|                 |  |                                 |          

|   
|---
|(1)
|(2)
|(3)

Hypermarkets - Líder

At December 31, 2005, we operated 32 Líderhypermarkets of which 20 are located in the Santiago Metropolitan Region. All of our hypermarkets operate under the Líderbrand name. The Líderhypermarket, which was modeled after European hypermarkets and was introduced to Chile in 1995, is characterized by floor space of between 6,000 and 13,243 square meters (respectively and approximately 64,584 and 142,548 square feet), offering, in addition to traditional foodstuffs, non-food items such as home appliances, electronics, hardware, sports, toys, apparel and articles for the home. Líderhypermarkets typically occupy strategic sites at the intersection of major thoroughfares connecting communities, allowing us to service various communities with one store. The Lídersites have ample parking space and are generally developed in conjunction with an
assortment of complementary stores, such as video stores, fast food franchises, hardware superstores, cinemas, food courts and pharmacies, including our 67 FarmaLíder pharmacies. Líderstores have an average of 551 employees (425 full-time equivalent employees), 43 to 79 checkouts, an average store size of 9,036 square meters (approximately 97,263 square feet), and are generally open from 9:00 a.m. to 10:00 p.m., seven days a week. Our Líderstores offer one-stop shopping in an easily accessible store layout. In some of our Líderstores we also have moderately priced cafes and restaurants.

Net revenues of our Líderhypermarkets totaled Ch$920,434 million (US$1,796.0 million) in 2005, accounting for 57.6% of our total net revenues in 2005.

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Compact Hypermarkets - Líder Vecino

We currently operate 26 Líder Vecinohypermarkets, 14 of which are located in the Santiago Metropolitan Region. We developed our Líder Vecinoformat in 2000 to target smaller neighborhoods with a compact hypermarket format by converting our larger, existing Ekonosupermarket facilities, which ranged between 2,400 and 4,720 square meters (respectively and approximately 25,834 and 50,806 square feet), into Líder Vecinocompact hypermarkets. Our Líder Vecinoformat combines the convenience and pleasant atmosphere that characterizes neighborhood supermarkets with some of the advantages of Líder hypermarkets. These advantages include a broad assortment of non-food items to facilitate one-stop shopping and low prices. We believe these factors provide us an advantage over our primary competitors in these communities, which are generally
comprised of traditional supermarkets. Líder Vecinostores have an average of 327 employees (262 full-time equivalent employees), 22 to 44 checkout centers, an average store size of 3,890 square meters (approximately 41,892 square feet), and are generally open from 8:30 a.m. to 10:00 p.m., seven days a week

Net revenues of our Líder Vecinocompact hypermarkets totaled Ch$383,595 million (US$748.5 million) in 2005, accounting for 24.0% of our total net revenues in 2005.

Supermarkets - Líder Express

We currently operate 27 supermarkets under the Líder Expressbrand name, 15 of which are located in the Santiago Metropolitan Region. Líder Express stores are traditional neighborhood supermarkets providing a friendly atmosphere and personalized attention. These stores emphasize the food products offered, which include a broad assortment of quality perishables and groceries. Additionally, these supermarkets offer a variety of prepared dishes. Líder Expressstores have an average of 146 (123 full-time equivalent) employees, seven to 23 checkouts, an average selling area of 1,327 square meters (approximately 14,284 square feet) and are generally open from 8:30 a.m. to 10:00 p.m., seven days a week.

Net revenues of our Líder Expresssupermarkets totaled Ch$159,122 million (US$310.5 million) in 2005, accounting for 9.9% of our total net revenues in 2005.

Complementary Businesses

As part of our strategy to offer consumers a broader range of products beyond our traditional grocery business and thereby increase our share of the Chilean wallet, we have expanded our product offerings to include pharmacy and restaurant food sales as well as non-food offerings. We believe that we will be able to leverage our brand, our established market presence in the Chilean supermarket industry and our land bank of properties to move efficiently into these areas, thereby increasing our share of total Chilean consumer spending. We continuously explore and evaluate opportunities to expand our operations through new commercial formats.

Pharmacy - FarmaLíder.  We have used our existing retail infrastructure and real estate to begin opening our own pharmacies located in small spaces in our hypermarkets. Our first pharmacy opened in July 2001, and at December 31, 2005 we had 67 pharmacies in operation, which in the aggregate accounted for 2.2% of our total 2005 net revenues. In Chile, pharmaceuticals are regulated and even non-prescription drugs must be dispensed from behind the counter. Our FarmaLíderoutlets are located in our stores but outside of the selling space beyond the check-out counters. The floor space dedicated to FarmaLíderaverages 98 square meters (approximately 1,055 square feet), with two check-out counters. Our pharmacies typically employ 9 workers. FarmaLídergenerated net revenues of Ch$35,323 million (US$68.9 million) in 2005.

Real Estate Development.  We rent small spaces to retailers in the foyers of our stores and adjacent to our stores. We select tenants that are complementary to our stores, such as photo shops and laundromats, in order to draw more traffic to our stores. See Real Estate Development.

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Our Pricing and Marketing Strategy

Pricing.  Our strategy is to be the supermarket chain with the best price position and the best quality-price ratio in Chile. We expect to achieve, over the long term, a lower price position with respect to the total price of a basket of goods purchased at our stores versus the same basket of goods purchased at a competitors store with the best quality-price ratio. Although our promotional offers are generally the same in all our stores, we otherwise manage our pricing strategy in clusters of stores with reference to the prices of specific local competing stores. A significant component of this strategy is our offering of private label products under the Líder brand name and other private brands (Acuentaand Buffet, among others) which permit us to offer lower prices at moderate gross margins as well as improved bargaining power with suppliers. See
Our Products-Non-Food Products-Private Label Products. Our strategy also comprises high-low pricing in perishables and special incentives for the holders of our Prestocredit card.

Marketing. Líder, Líder Vecino, and Líder Expresspursue a joint marketing strategy designed to reinforce Lídersimage of providing exceptional value. We continue, however, to make extensive use of in-store promotions and signage to offer sales and particularly low priced items.

We have also focused our marketing efforts on mass media, especially television and radio. All of our audiovisual and written advertisements make reference to the slogan En Líder Siempre Se Puede or At Líder Its Always Possible, which, we believe, reflects and appeals to the aspirational ideal for development and growth of the Chilean people. We have periodically distributed printed materials through the press and within our stores such as weekly leaflets or bi-weekly catalogs and have focused on catalogs for specific seasonal campaigns such as Summer, Outdoors, Back to School and Christmas. These campaigns are mainly oriented toward non-food products and special food campaigns for specific holidays such as Independence Day and New Years Eve. Consolidated advertising
expenses represented 1.9% of our net revenues in 2005. In past years, this percentage has been 1.4% for 2004 and 1.0% of our net revenues in 2003.

Our Products

Product Mix.Our product mix varies according to the store format, with our larger formats offering a greater variety and number of stock keeping units, or SKUs, and a higher proportion of non-food items. The following table sets forth our product mix by store category:

|                |  | Percentage   of Selling Space   by Product Category   Year ended December 31, 2005 |   
|--------------- |  | ---------------------------------------------------------------------------------- | --
|                |  |                                                                                    |   
|                |  | Groceries(1)                                                                       |   
|                |  |                                                                                    |   
|Líder           |  |                                                                                    | 32
|Líder   Vecino  |  |                                                                                    | 35
|Líder   Express |  |                                                                                    | 60
|FarmaLíder      |  |                                                                                    | 20

|   
|---
|(1)
|(2)

In addition to the foregoing, we have also installed family-style cafeterias referred to as Patios de Comida(foodcourts) and coffee shops at certain locations in order to increase the use of Líderstores as destinations apart from traditional grocery stores.

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The following table sets forth, for the periods indicated, each product categorys percentage contribution to our sales:

|                           |  | Percentage Contribution to Sales by Product   Category   Year ended December 31, |      
|-------------------------- |  | -------------------------------------------------------------------------------- | -----
|                           |  |                                                                                  |      
|                           |  | 2003                                                                             |      
|                           |  |                                                                                  |      
|Groceries                  |  |                                                                                  | 47.0 
|Perishables                |  |                                                                                  | 34.1 
|Apparel                    |  |                                                                                  | 6.0  
|Electronics and appliances |  |                                                                                  | 3.0  
|Housewares and furniture   |  |                                                                                  | 3.0  
|Other non-food products(1) |  |                                                                                  | 6.9  
|                           |  |                                                                                  |      
|Total                      |  |                                                                                  | 100.0
|                           |  |                                                                                  |      

|   
|---
|(1)

Groceries.  Grocery sales represented 46.7% of our sales in 2005. Along with our perishable offerings, grocery products have historically formed the core of our business. Our grocery product offerings comprise a wide variety of consumer packaged goods such as cereals, jellies, sauces, canned food items, paper towels and assorted paper products, hygiene and beauty aids. Our main long-term goal with respect to our grocery products is to have the best price positioning in the market with respect to the total price of a basket of goods purchased at our stores versus the same basket of goods purchased at a competitors store. We believe that by maintaining consistently better price positioning than our principal competitors with respect to our grocery products, we can generate a greater amount of customer traffic in our stores.

Perishables.  Sales of our perishable products represented 33.7% of our sales in 2005. Along with our grocery products mentioned above, sales of perishables have historically formed the core of our business. Our perishables include a wide variety of traditional food products, such as meats, fish, dairy products, fruits and vegetables, frozen foods, bakery goods and prepared foods and include a wide array of private label products. Our main strategy for our perishable products is to increase the quality of our products and expand the breadth of our product offerings. We believe that by increasing the product quality and customer service levels in relation with our perishables we will be able to improve customer loyalty and, thereby, increase customer traffic and improve net sales of these products.

Non-Food Products

Sales of non-food products (including pharmacy sales) represented 19.6% of our sales in 2005. In order to increase our share of the Chilean consumers wallet and to take advantage of our high customer traffic levels, we sell products such as apparel, housewares, electronics, sporting goods, toys and office supplies. Many of our purchases in these areas are made abroad through our worldwide network of suppliers.

Apparel.  Our apparel department seeks to provide customers of all ages with a reliable source of basic non-fashion clothing items, including underwear, jeans, skirts, pants, blouses, shirts, t-shirts, shoes and basic accessories of reasonable quality at affordable prices. In 2005, sales of our apparel products accounted for 5.9% of our sales. Our apparel department consists primarily of private label brands catering to women, men and infants. Our marketing strategies and the layout of our apparel department aim to create strong brand identification with our BLVDprivate label, as an affordable brand that is similar in quality to those offered at department stores.

Electronics and Appliances.  The electronics and appliances we offer in our stores include products manufactured by well-known manufacturers, as well as a growing number of our own products marketed under our Grövenand Hausprivate labels. In 2005, sales of electronics and appliances were 3.5% of our sales. Our main strategy regarding home electronics and appliances is to offer a diverse assortment of these products. During 2005, we expanded the amount of home computing products available in our stores through cross-selling with our Presto credit card in order to take advantage of the growth in this sector in Chile.

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Housewares and Furniture.  Our housewares department offers our customers an assortment of products in the areas of home decorating, including bath and kitchen supplies, and home improvement, including hardware and furniture. In 2005, sales of housewares generated 2.3% of our sales. In addition to the products we offer that are manufactured and marketed by other manufacturers, we also market a growing number of products under our Hausprivate label, including general kitchen products, decorating supplies and furniture. Our main strategy regarding our housewares involves further marketing of our Hausprivate label. To increase awareness of our Hausproducts, we offer seasonal promotions around holidays such as Christmas and Easter. As with our electronics and appliances, we seek to offer our housewares at a discernible price differential versus our department store
rivals.

Other Products.  We also offer a variety of other non-food products, including sporting goods, toys, office supplies, auto parts and pet supplies. In 2005, sales of other non-food products were equal to 5.4% of our sales. We offer the following private labels in these categories: Paragon(sporting goods), Toi(toys) and Alquimia(office supplies). Additionally, pharmaceutical products sold in our FarmaLíderstores account for 2.5% of total sales.

Private Label Products.

Sales of our private label products represented 13.8% or Ch$186,720 million (US$364.3 million) of our sales in 2005. In groceries (including beauty care), they accounted for 9.3% or Ch$58,822 million (US$114.8 million) of 2005 net groceries sales, while in perishables our private labels represented 4.2% or Ch$14,570 million (US$28.4 million) of 2005 net perishables sales. In beauty care products, private label sales represented 8.9% or Ch$21,000 million (US$41.0 million) of 2005 net beauty care sales. Private labels have become very prominent in the non-food area. In 2005, private label products accounted for 22.4% of our sales in general merchandise, 71.8% in home supplies, 11.8% in electronics and appliances, 89.6% in clothing and 44.8% for our non-food area (excluding pharmacy sales) as a whole.

We seek to achieve three primary goals through the use of our private labels:

| | 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.

Our
proprietary private labels include the following: Líder(groceries
and perishables) Buffet(perishables), Acuenta(groceries,
perishables and home supplies), BLVD(apparel), Haus(housewares),
Gröven(electronics), Paragon (sporting goods), Toi(toys), Body Plus (health and beauty products of premium quality) and
Alquimia (office supplies), among others. We also sell groceries under
the Presidents Choice brand, a private label owned by Loblaws
Canada that offers premium quality products sold in Chile exclusively in our
stores, among others.

Customer Service and Standardization

In order to ensure that we are providing our targeted levels of customer service, we use several metrics and indicators. Adimark, a Chilean market research company, assists us with annual market surveys and quarterly customer surveys, which allow us to monitor market and customer perceptions of the level of service provided in our stores. In addition, we have a customer service call center and each store has a suggestion/complaint box offering a means for customers to communicate with management.

We also operate laboratories located at our distribution center in order to conduct random testing of products and approve new products as part of ongoing efforts to ensure the quality of our products. In order to monitor the quality of our customer interaction and enhance quality control, we employ an incognito shopper program in all of our stores and we use a tool that measures customer service levels quantitatively and take actions required to improve service standards throughout our company stores. We call this monitoring tool ISC (Customer Satisfaction Index). The ISC is built based on interviews to customers right after they have shopped in our stores, once they are beyond the check-out line. This measurement is applied four times a year.

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Seasonality

Historically, we have experienced distinct seasonal sales patterns due to heightened consumer activity throughout the Christmas and New Year holiday season. During this period, we promote the sale of non-food items, particularly by discounting imported goods, such as toys, throughout the Christmas holiday season. As a result, the strongest quarter in terms of sales is the fourth quarter which represented 27.3% of total sales for the year 2005, while the first, second and third quarters, each represented 23.7, 24.2 and 24.8% of total annual sales, respectively.

Purchasing and Distribution

Purchasing and Supply

We carry out our purchasing activities mainly on a centralized basis for all of our stores. Through the use of our automatic store and warehouse replenishment systems, we have centralized the purchase of our products from suppliers. We attempt to take advantage of our resulting large purchasing volume to obtain an advantageous mix of price and payment terms. For 2005, the average payment term was 53.4 days. The average days of inventory for our company total (stores and distribution facilities) were 40.7 days for year 2005.

In order to increase our operating productivity and enhance the efficiency of our business, we use software and technological changes in our supply chain. These include computerized inventory replenishment programs, SLIM, or Store Level Inventory Management, and TRIM, or True Replenishment Inventory Management. The use of SLIM and TRIM have led to the creation of a centralized and automated computer network connecting all of our stores and our central distribution facility. Through the use of SLIM, our store replenishment system automatically allocates the required quantities to be delivered to our stores. In order to process and allocate the quantities to match our stores requirements, SLIM automatically calculates, with respect to each of our stores, information including the amount of a given product on hand, the amount on order, the required lead time needed to replenish such product, the
historic use of the product at the store, the maximum shelf capacity and projected future use of the product. Much like SLIM, TRIM uses a similar process to calculate the supply requirements of our central distribution center. The use of SLIM and TRIM are focused on enhancing efficiency in allocating proper quantities of our products to meet our stores demand.

We have sought to enhance the efficiency of our supply chain by reducing the number of suppliers we use and centralizing our negotiations with these suppliers. In 2005, no single supplier accounted for more than 6.5% of total goods purchased. Our ten largest suppliers collectively accounted for approximately 31.5% of our purchases in 2005, and the 50 largest accounted for 60.1%. Certain products such as fish are purchased from affiliated companies. We purchase nearly all food products on a spot or short-term basis, within the context of long-term relationships with the suppliers. We conduct our business with our suppliers on terms which we believe are at least as favorable as those generally available to the industry.

Distribution and Inventory Management

Distribution.  We have centralized distribution from our distribution center through the use of SLIM as described above. We operate two distribution centers in Santiago: our distribution center or LTS with 81,000 square meters and a leased distribution center named Puerto Santiago with 51,000 square meters of space.  In addition, we operate two warehouses in two regions: the leased Antofagasta warehouse (5,000 square meters) and the Temuco warehouse (1,500 square meters). All of these distribution centers and warehouses fully supply 65.7% of the products sold in our stores (respectively and approximately 871,876; 548,959; 53,819 and 16,146 square feet each). By the end of 2006, our goal is to increase this percentage to approximately 70% of all our products.

Centralized distribution consists of shipping, from a central warehouse to the stores, mixed pallets of products selected to satisfy the daily inventory requirements of the particular store. Our integrated information management system allows pallets to be prepared on the basis of real-time information on sales and inventory levels in each store. We also use direct deliveries to our stores from suppliers. Under the direct delivery system, a product can be ordered either directly by the store or through a central purchasing office. Because direct deliveries generally result in additional costs and introduce inefficiencies into our distribution process, we have decreased our reliance on such deliveries.

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We transport our products with our fleet of tractor-trailers. At December 31, 2005, our fleet consisted of 15 tractors and 173 trailers. Our trailers are equipped with global positioning systems permitting us to track their location. Expanding and improving the quality of our fleet of tractor-trailers complements our strategy of emphasizing centralized distribution by allowing us to avoid the costs associated with independent or third-party tractor-trailer operators chartered to deliver products to our stores by our suppliers.

Deliveries from the distribution centers and warehouses occur principally at night during hours of low traffic, thereby allowing a greater number of deliveries per truck and avoiding stock-outs (i.e., running out of stock) resulting from delays caused by traffic. Our policy is to charge suppliers for distribution and transportation services to cover effectively the cost of these activities.

Inventory Management.  A principal objective of our investments in distribution and information management technology is inventory control. In 2005, we continue to manage our inventory with the flow-through system of inventory management. In contrast, flow-through inventory management involves the receipt and immediate allocation and delivery of products to local stores. Under our flow-through system, lower product quantities are held in our distribution center, further increasing our centralization and reducing our average number of days of inventory. At December 31, 2005, we held approximately 85% of our inventory in traditional staple stock and used flow-through inventory management for the remaining 15%. We plan to increase the use of flow-through inventory management to cover approximately 20% of our total products by the end of 2006 and over the long-term achieve flow-through


management for up to approximately 30 to 35% of our total products.

In order to support this initiative, we are investing in new technology (Put to Light system) to further reduce inventory at store level, allowing for an increase in assortment.

In addition, we are seeking to reduce our shrinkage, which includes losses in inventory, losses and damage during transportation, and theft. We expect to reduce our shrinkage by centralizing our distribution system, improving the efficiency of our supply chain, and improving our operational processes. We have considerably improved our level of accuracy at the distribution center during the first quarter of 2006 to 95.0%, from 88.8% at year-end 2005 and 76% at year-end 2004. Shrinkage in all of our Líderstores was 2.0% of total sales at year-end 2005 as compared to 2.3% in 2004. Shrinkage reduction is another goal for our company. In addition, our stores have extensive security systems, including our own security service, to discourage theft and enhance shopper safety.

Financial Services

Our financial services division, which main business is the Presto credit card, is also dedicated to the development of other financial businesses that are complementary to our supermarket and credit operations.

Presto Credit Card.As we have expanded our business to include higher priced durable goods, including apparel, housewares and electronics, we have recognized the importance of making an in-store credit card available as a means of financing consumer purchases of these higher priced items. Through our Prestocard, we extend revolving credit and installment payment options to our customers with respect to all their purchases, including both food and non-food products. The Prestocard aims to become the most convenient payment option for Lídercustomers. In fact, it is one of the most widely used payment options in Líderstores, second only to cash purchases.

The Prestocard, launched in May 1996, is undergoing strong growth in its operations, the number of cardholders increasing rapidly over the last few years. The amount of credit issued and the volume of sales with the Presto card have increased, particularly for non-food purchases. Prestocard use during 2005 represented 21.2% of total Lídersales, and 35.1% of non-food purchases.

During 2005, our number of accounts in good standing increased by 28.0% to 1,510,532 accounts in good standing at December 31, 2005. We intend to continue to increase our number of accountholders. In 2005, our Prestocredit card operations averaged a monthly charge volume of Ch$29,963  million (US$58.5 million) and total credit issued under the Prestocard was up 28.1% over 2004, with Ch$187,344 million (US$365.5 million) in total outstanding credit at December 31, 2005.

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Revenues from our Prestocredit card operations and related financial services consist of interest revenues from our credit portfolio and fees from affiliate businesses (merchant discount) amounted to Ch$64,680 million (US$126.2 million) (unconsolidated figures) in 2005. These revenues are recorded under other revenues and represented 3.6% of our consolidated net revenues in 2005.

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 operate our Presto credit card as an open credit card. Such authorization allowed expanding the use of the Presto card to unaffiliated businesses throughout Chile. It also made the Prestocredit card subject to the rules and regulations applicable to such open issuers. These rules and regulations lead to, among other things, higher levels of provisions for payment defaults than required under our previous policy. In March 2006,  the Chilean Central Bank enacted new rules regulating non-banking credit issuers and operators, which will be further developed by
the Superintendency of Banks and Financial Institutions no later than September 2006. These new regulations, however, should not affect the issuance and operation of our Presto credit card since they are substantially similar to the ones to which we voluntarily submitted in 2005.

The following tables set forth, for the periods indicated, unconsolidated information concerning our credit card operations (unconsolidated figures):

|                                               |  | Year ended December 31,         |       
|---------------------------------------------- |  | ------------------------------- | ------
|                                               |  |                                 |       
|                                               |  | 2003                            |       
|                                               |  |                                 |       
|                                               |  | (in   millions of constant Ch$) |       
|Net revenues                                   |  |                                 | 22,357
|Provisions for doubtful   accounts             |  |                                 | 20,703
|Financial expenses                             |  |                                 | 2,393 
|Other expenses                                 |  |                                 | 5,409 
|Selling and administrative   expenses          |  |                                 | 28,506
|Operating income (loss)                        |  |                                 | (6,149
|                                               |  |                                 |       
|Total accounts receivable,   end of period     |  |                                 | 90,077
|Allowance for doubtful   accounts              |  |                                 | 14,836
|Net total accounts   receivable, end of period |  | Ch$                             | 75,242
|                                               |  |                                 |       

|                                                             |  | At   December 31,               |        
|------------------------------------------------------------ |  | ------------------------------- | -------
|                                                             |  |                                 |        
|                                                             |  | 2003                            |        
|                                                             |  |                                 |        
|                                                             |  | (in   millions of constant Ch$) |        
|Allowance   for Doubtful Accounts, Detail                    |  |                                 |        
|January 31, balance                                          |  |                                 | 1,041  
|Provisions for doubtful   accounts                           |  |                                 | 20,703 
|Write-off, net                                               |  |                                 | (6,908 
|                                                             |  |                                 |        
|December 31, balance                                         |  | Ch$                             | 14,836 
|                                                             |  |                                 |        
|Number of accounts in good   standing (1)                    |  |                                 | 652,541
|Delinquent   accounts (2)                                    |  |                                 | 102,720
|Average balance per account   (in thousands of constant Ch$) |  |                                 | 131    
|Allowance for doubtful   accounts/Total net receivables      |  |                                 | 19.7   
|Allowance for doubtful   accounts/Total gross receivables    |  |                                 | 16.5   

|   
|---
|(1)
|(2)

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Our strategy for developing our financial services combines significant growth and expansion of our credit card operations as well as other financial services that are expected to include insurance, utility payment services and cash advances as well as potentially other products and services. During 2005, our financial services division opened 44 branch offices in Líderstores for a total of 63 branch offices at year end to assist with card services and develop additional financial products. The division also signed an agreement with BancoEstado this year to allow Presto customers to use BancoEstado automatic teller machines and have access to other bank products at preferred rates.

Our losses (write-offs net of recovery) resulting from payment defaults totaled 11.0% of our outstanding credit net of provisions during 2005. Our goal is to reduce these losses to 10% by the end of 2006 and, over the longer term, to a range of 8.0% to 9.0% of our net receivables. However, we may not be successful in reducing our losses, particularly as we expand the number of account holders. Our credit analysis is based on each applicants current income and credit behavior as registered in credit history data bases. In Chile, detailed information relating to the individual account balances of an applicant with other commercial creditors is not made publicly available by entities handling credit history data bases and is, therefore, unavailable. However, since our Prestosubsidiary has registered with the Superintendencia de Bancos e Instituciones Financierasas a credit card
issuer and operator, it will be given access to credit history information handled by banks, financial institutions and the referred authority. Our loss recovery process involves gathering information relating to the type and amount of unpaid balances, as well as communicating with our customers to try to secure recovery of these balances. We evaluate the results of our process and then decide to write off certain debts based on our analysis of the reasons for non-payment and our estimation of the likelihood of eventual payment of these balances.

Presto Insurance Broker and Other Financial Services. As of the first quarter of 2005, our financial services division started marketing insurance through the Presto insurance broker entity (Corredora de Seguros Presto Limitada), which has obtained all governmental approvals to conduct such business. Although incipient, we are focusing our efforts toward the strengthening of our insurance brokerage business.

Real Estate Development

We have actively assembled a land bank of developed and undeveloped strategic properties for use as potential future store locations. We believe that owning these properties insulates us from the volatility of real estate leases and provides investors with an underlying asset of considerable value. Our real estate development division, to the extent appropriate and complementary to the strategic requirements of the core business, develops some properties as shopping malls where our store formats serve as the anchor tenant. Our real estate division also manages all rental spaces associated with our supermarkets and hypermarkets which are not located in shopping malls.

At December 31, 2005, we operated six shopping malls that house a total of 282 (including our 6 Líder stores) stores and have a total of 150,647 square meters of sales area (approximately 1,621,551 square feet), 51.9% of which is rented to third-party merchants, with the remainder rented to our stores (72,500 square meters, approximately 780,384 square feet). The real estate division also manages leases corresponding to approximately 594 retail locations (83,014 square meters in total, approximately 893,555 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, 2005, our real estate operations generated rental income from 735,360 square meters of rental space (approximately 7,915,349 square feet), corresponding to 931 retail locations in total, including stores in
shopping malls and supermarkets. In 2005, our real estate operations generated consolidated net revenues in the amount of Ch$18,347 million (US$35.8 million) in annual rental income from our properties representing approximately 1.1% of our net revenues, after deducting Ch$36,234 million (US$70.7 million) in rental income received from our supermarkets.

In 2005, we expanded our properties by opening six new Líderstores, of which two are Líder Vecinosand four are Líder Express supermarkets. In 2006, we plan to expand our properties by opening 20 new Líderstores (mainly with the Líder Vecinoand Líder Expressformat). We also plan to purchase or lease new properties in targeted cities where we are not yet present or where we want to expand our presence by increasing our number of stores.

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Description of Property

In the last five years we invested approximately US$810 million in real estate and opened 31 stores.

An important component of our development is the early acquisition of
strategically located properties, by which we accumulate a stock of valuable,
undeveloped properties that gives us control of our expansion plans. We
increasingly develop our projects as commercial centers in which one
of our stores is combined with other non-competing stores, such as hardware
stores, fast food franchises and video stores, to create a complete shopping
destination for consumers. This strategy has also allowed us to partially offset
our real estate costs by developing the commercial potential of the properties.
There are no environmental issues related to the properties we have purchased
for development that may affect our utilization of those assets.

At December 31, 2005, we owned 61 (of which five were subject to financial leases) of our 85 store locations in Chile with total retail space of 426,126 square meters; 652,346 square meters (approximately 7,021,793 square feet) fully developed (including shopping malls with its Lider stores) and 1,170,619 square meters (approximately 12,600,438 square feet) of land available for new projects. In addition, we own the La Dehesa, Maipú, Puente Alto and Gran Avenida shopping centers in Santiago, and the Viña del Mar and Antofagasta shopping centers in the cities of the same name. In addition, at December 31, 2005, we owned our headquarters and service school and the adjacent distribution center at Quilicura, in the outskirts of Santiago, and 14 additional sites for new projects (two of them currently undergoing development). A
significant portion of these sites are strategically located at major intersections or other desirable store locations.

The following table presents a breakdown of our real estate holdings in Chile as of December 31, 2005:

|                          |  | Undeveloped   Sites |    | Stores | 
|------------------------- |  | ------------------- | -- | ------ | 
|                          |  |                     |    |        | 
|Region                    |  |                     |    |        | 
|V, Metropolitan Region    |  |                     | 10 |        | 
|VI, VII, VIII, IX, X, XII |  |                     | 3  |        | 
|I, II, III, IV            |  |                     | 1  |        | 
|                          |  |                     |    |        | 
|Total                     |  |                     | 14 |        | 
|                          |  |                     |    |        | 

Although our general policy is to purchase our properties in order to secure strategic locations against competitors, this is not feasible in certain cases, particularly for store sites within shopping centers. In such instances, we lease the desired locations, if strategically justified. Our leased stores have initial terms ranging from one to five years. We generally pay a variable rent based upon the stores revenues.

We regularly remodel our stores and invest on an ongoing basis in new decorations and fixtures, updated signage and technology. To the extent that we centralize distribution of inventory, it is anticipated to result in a reduction of the required stocking area and permit an expansion of selling space in certain of our existing stores. Currently, some of our properties are held in wholly-owned subsidiaries while others are held directly by us.

Information Technology

We seek to implement state-of-the-art information technology in our industry in Chile. Over the last three years, we have invested an average of US$25 million per year (approximately 1.0% of our net sales and over 5.0% of our capital expenditures) in computers and information technology. As our back office, distribution and check-out operations were already automated, these investments were directed towards renewing and upgrading our information technology and enhancing the integration of our systems. These investments have contributed to reduced labor costs and increased efficiencies in customer check-outs, purchasing, distribution, inventory management and the provision of information in a timely manner. Additionally, during 2005, the focus had been on the development of back-up systems to cover for contingencies preventing the eventual impact
on operations of any type of system disruption.

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Store Systems.  All of our stores are equipped with point-of-sale scanners. Transactions recorded by laser scanners located at the check-out aisle permit the reporting of real time information regarding product sales. Each laser scanner reads bar codes imprinted on the labels of all of our products, enabling us to accurately record all transactions. The computers in our stores nationwide are connected to the central mainframe at our headquarters, permitting both senior managers and store managers to receive near real time information by store, SKU or product category, including both sales volume and margins, thus enhancing inventory management, cost controls and sales tracking. We also use radio frequency inventory devices for our stores, which allows inventories to be taken in a faster and more accurate manner. Furthermore, our
stores are interconnected with the Transbank credit approval system in connection with both our Prestocredit card and other bank credit cards, as well as with entities such as RedBank which allow us to offer in-store ATM machines for our customers. The store systems are supplemented by point of sale technology at our distribution center and at the receiving points for supplies at store locations, thereby permitting strict control over incoming as well as outgoing merchandise.

Management Information Systems.  We have consistently invested in modern computer hardware and software in order to improve the efficiency of our accounting, control systems and financial management operations and employ 50 computer professionals. Although some of our software was developed in-house, we principally rely on outside vendors to purchase software platforms which we then modify to respond to our unique specifications. These platforms include:

| |  | in   connection with distribution, TRIM and SLIM (both as described above) and   Worldwide Chain Store System (a warehouse management system);                                                                                                                                   
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                  
| |  | in our   stores, the IBM Supermarket Application platform (POS software); and                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                  
| |  | 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.
| |   |                                                                                                                                                                                                                                                                                  
| |  | for CRM and   Business Inteligence platforms, we implemented Teradata (NCR Datawarehouse   Division) that is connected to our promotional solutions in our POS platform.                                                                                                         

We use the electronic data interchange (EDI) system to integrate our suppliers within our systems, thereby reducing the paperwork and delays in communications with our suppliers. We are currently implementing greater integration with our suppliers, including electronic invoicing, and developing a business continuity plan and enhanced system redundancy. During 2005, the emphasis had been on the integration of in-house systems, the connectivity with external systems and the quality and efficiency of system development by adopting a rational methodology.

Employees and Human Resources

At December
31, 2005, we had a total of 30,124 full-time equivalent employees. Of those
employees, 25,826 were employed in stores (including the 624 full-time
equivalent employees employed in our FarmaLíderpharmacies), 1,015
were employed in our distribution facilities and 3,283 were employed in our
headquarters other support units and other business units. Of our 30,124
full-time equivalent employees working in the various divisions throughout
Chile, 16,719 are unskilled workers (55.5%), 13,074 are technicians and
administrative workers (43.4%) and 331 hold executive positions
(1.1%).

At December 31, 2005, approximately 6.7% of our employees were represented by 16 independent unions. Other store employees negotiate collective contracts at each store, which generally have a term of three years. Employees receive benefits established by the collective bargaining agreements, benefits provided for by law (including disability insurance) and certain additional benefits provided for by us, including scholarships for children of employees and assistance in financing the purchase of homes. We also operate a merit-based, quarterly bonus program for our employees. The bonus is determined in accordance with clearly-defined criteria, including our overall performance, the performance of the employees store, his or her performance relative to specific targets established at the beginning of the year and other more subjective
standards.

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We recognize that any service industry depends fundamentally on the training and motivation of its employees. As a result, we attempt to develop a distinctive corporate culture that explicitly affirms the value of the individual employee and encourages the development of the individuals skills. Employees are regularly briefed on the performance of their store and our company as a whole and are expected to attend ongoing training programs. In 2005, 68,958 associates were trained in 40,358 courses, totaling 645,729 hours of training, with an average of 17.5 hours of training per employee.

Competition

Our competitors include hypermarkets, supermarkets, self-service stores, department stores, home supply stores and pharmacies. In recent years, each of these store categories has expanded its product offerings to compete for an increasing share of consumer spending in overlapping markets. Although competition is already intense in many locations, we expect it to increase as existing competitors expand the number of their stores and improve the quality of their operations and as new competitors enter the market. Our principal competitive strategy is to be the low-price leader in Chile.

We operate the largest chain of hypermarkets and supermarkets in Chile in terms of net sales. Our largest competitors are Cencosud (which owns Jumbo, Santa Isabel, Montecarlo and Las Brisas (the latter two mostly operated under the Santa Isabel brand)), Falabella, which owns San Francisco and during 2005 started opening hypermarkets under the Tottus brand, Unimarc, Rendic and Montserrat. Cencosuds Jumbo, a hypermarket operator, focuses on the middle and high-income sectors of the population emphasizing a broad range of high quality goods and services. Santa Isabel, a supermarket operator, is especially strong in the regions outside the capital city. The estimated market share of Cencosud in 2005 was approximately 26.6%.  Falabella, a multi-retail operator (department stores, home improvement, credit, bank and a stake in
pharmacy) with a presence in Chile, Perú, Argentina and Colombia has an estimated market share of approximately 3.5%. These figures are based upon industry surveys and information reported by the INE. Additional data was obtained from third parties and from our own research and estimates.

The following table sets forth estimates of the percentage of annual supermarket net sales attributable to each of the three largest supermarket companies in Chile in terms of 2005 net sales and the number of stores owned by such companies at December 31, 2005.

|             |  | Percentage   of   Sales |       | Number of   Stores   at Year End | 
|------------ |  | ----------------------- | ----- | -------------------------------- | 
|             |  |                         |       |                                  | 
|D&S(1)       |  |                         | 33.8  | %                                | 
|Cencosud(2)  |  |                         | 26.6  |                                  | 
|Falabella(3) |  |                         | 3.6   |                                  | 
|Others       |  |                         | 36.0  |                                  | 
|             |  |                         |       |                                  | 
|Total        |  |                         | 100.0 | %                                | 
|             |  |                         |       |                                  | 

|                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------
|(1)                                                                                                                                    
|(2)                                                                                                                                    
|(3)                                                                                                                                    
|Source: Industry surveys, information reported by the INE and data obtained from third parties and from our own research and estimates.

As a result of our efforts to increase our share of Chilean family spending by emphasizing the areas of our business which are considered non-traditional for the supermarket industry (housewares and furniture, electronics and appliances, apparel, pharmaceuticals and cafeterias), we compete in a market that is larger than the supermarket industry. With respect to our non-food product offerings, our principal competitors at December 31, 2005 among the traditional supermarkets are department stores that operate in Chile. This market provides numerous opportunities to expand the scope of our business but also exposes us to new competitors with greater expertise and experience in the non-food areas.

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Trademarks, Tradenames and Service Marks

We own certain trademarks, tradenames and service marks used in our business, including Líder, Líder Vecinoand Líder Expressand their respective logos, covering the Chilean market. We also own trademarks of our superseded store formats, including Almacand Ekono. We also own, or hold licenses to use, our private label brands including Líder, Buffet, Acuentaand BLVD. We believe that our trademarks, tradenames and service marks are valuable assets, which differentiate us from our competitors. Our brands are duly registered under applicable law. We are not dependent on patents and licenses or industrial, commercial or financial contracts as material factors to our business and profitability.

Insurance

We maintain insurance policies covering, among other things, fires, earthquakes, floods and general business and third party liability. Our management believes that our insurance coverage is adequate for our business.

Regulation

We are subject to a full range of governmental regulation and supervision, including labor laws, social security laws, public health laws, consumer protection laws, environmental laws, securities laws and antitrust laws in Chile. These include regulations to ensure sanitary and safe conditions in sale and distribution facilities of foodstuffs and requirements to obtain construction permits for our new facilities. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations.

Except for government licenses required for the sale of alcoholic beverages, baked goods, pharmaceuticals, seafood and vegetables, special authorizations for the issuance and operation of credit cards and for the brokerage of insurance and customary local taxes required by local governmental authorities to conduct business within their jurisdiction, we require no special governmental licenses or permits for conducting our businesses as currently conducted. Our supermarkets are subject to inspection by the Servicio Nacional de Salud(National Health Service), which inspects supermarkets on a regular basis and takes samples for analysis. We periodically retain a private inspection company to undertake private inspections of our facilities to ensure that they meet or surpass all Chilean health standards. Our supermarkets are also
subject to inspection by the Servicio Agrícola y Ganadero(Agricultural and Livestock Service) and the Servicio Nacional del Consumidor(National Consumer Service). Concessionaires that operate pharmacies within some of our supermarkets are also subject to licensing and inspection by the Servicio Nacional de la Salud.

In addition, the Fiscal Nacional Económico(National Economic Prosecutor) has broad investigating powers and the Tribunal de Defensa de la Libre Competencia(Antitrust Court) has broad regulatory powers for the protection of free competition, including the power to intervene and prevent or unwind acquisitions tending to decrease the levels of competition in the marketplace or anticompetitive behavior in general.  On October 5, 2004, the Tribunal de Defensa de la Libre Competencia, the higher special-purpose court for antitrust matters, issued a ruling related to a fact finding investigation regarding procurement practices in the supermarket industry. This ruling ordered, among other things, that the supermarket chains operated by our company and Cencosud S.A. should consult in advance with the Tribunal de
Defensa de la Libre Competencia any and all negotiations or agreements that directly or indirectly imply an acquisition of or their integration or merger with, companies in the same business. Such ruling was challenged by our company and Cencosud and on May 26, 2005, the Supreme Court of Law ruled in favor of our interests by annulling the part of the decision of the Tribunal de Defensa de la Libre Competencia in which it imposed the above-described consultation obligation.

Until
March 2006, there were no regulations in Chile affecting in-store credit cards
other than provisions of law generally applicable to any type of business and
provisions of the Chilean Consumer Rights Law that require retail companies
granting direct credit to customers to inform them about certain terms and
conditions of the credit, including interest rates, costs and extrajudicial
collection fees.  However, in March 2006, the Chilean Central Bank enacted
new rules regulating non-banking credit card issuers and operators, which should
be further developed by the Superintendency of Banks and Financial Institutions
no later than September 2006. In 2005 and prior to the issuance of such
regulations, Servicios y Administración de Créditos Comerciales Presto
S.A. voluntarily requested and obtained the authorization of the Chilean Central
Bank and the Chilean Superintendencia de Bancos e Instituciones Financieras
(Superintendency of Banks and Financial Institutions) to operate our
     Presto credit card as an open credit card. Such
     authorization allowed expanding the use of the Presto card to
     unaffiliated businesses throughout Chile. It also made the card subject to
     the rules and regulations applicable to such open issuers.
     These rules and regulations lead to, among other things, higher levels of
     provisions for payment defaults than required under our previous policy.
     These new regulations, however, should not affect the issuance and
     operation of our Presto credit card since they are substantially
     similar to the ones to which we voluntary submitted in 2005.

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Capital Expenditures

The supermarket business is capital intensive. Over the past five years, we have invested approximately US$810 million in capital expenditures, primarily to develop and expand our store formats. In 2006 and 2007, we expect to invest a total of Ch$205,000 million or US$400 million in capital expenditures primarily to open 40 new stores in Chile. We expect that the majority of these stores will be built on properties owned by us. We have opened 4 stores in the first 5 months of 2006 and we expect to open 16 additional stores before the end of 2006.

The following table sets forth our actual capital expenditures for 2003, 2004 and 2005 and projected capital expenditures for 2006 and 2007. Our actual capital expenditures may vary substantially from the projected numbers set forth below as a result of competition and the cost and availability of the necessary funds.  We expect to finance our capital expenditures as described below through a combination of existing cash resources and cash flow to be generated from our operations; additional short term and long term debt that we will incur as necessary; and proceeds remaining from our US$250 million equity offerings in 2005.

|                                                  |  | Actual for   year ended December 31, |        | Projected |       | Total   Projected | 
|------------------------------------------------- |  | ------------------------------------ | ------ | --------- | ----- | ----------------- | 
|                                                  |  |                                      |        |           |       |                   | 
|                                                  |  | 2003                                 |        | 2004      |       | 2005              | 
|                                                  |  |                                      |        |           |       |                   | 
|Number of stores at beginning   of period         |  |                                      | 62     |           |       | 68                | 
|New stores opened or   acquired or reopened       |  |                                      | 6      |           |       | 13                | 
|Stores sold or closed                             |  |                                      |       |           |       | 3                 | 
|Existing stores remodeled or   expanded           |  |                                      |       |           |       | 1                 | 
|Existing stores transformed   into another format |  |                                      | 3      |           |       | 1                 | 
|                                                  |  |                                      |        |           |       |                   | 
|Number of supermarkets at   end of period         |  |                                      | 68     |           |       | 78                | 
|Format of stores at end of   year:                |  |                                      |        |           |       |                   | 
|Almac/Líder Express                               |  |                                      | 4      |           |       | 0                 | 
|Ekono/Líder Express                               |  |                                      | 22     |           |       | 23                | 
|Líder-Líder Mercado                               |  |                                      | 23     |           |       | 31                | 
|Líder Vecino                                      |  |                                      | 19     |           |       | 24                | 
|Capital expenditures(1) (in   Ch$MN)              |  | Ch$                                  | 46,892 |           | Ch$   | 156,505           | 
|Capital expenditures(1) (in   US$MN)              |  | (US$)                                | 91.5   |           | (US$) | 305.4             | 

|   
|---
|(1)

Legal Proceedings

We are party to legal proceedings arising from the normal course of our business which we believe are routine in nature and incidental to our operations. We do not believe that the outcome of the proceedings to which we currently are a party, other than as noted below, are likely to have a material adverse effect on our operations, financial condition, results of operations, cash flows or prospects.

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Disco-Ahold Litigation

We are currently litigating a series of disputes stemming from the sale of our former Argentine subsidiary, Ekono-Argentina,to Disco S.A. in December 1999. Under the terms of the sale, in May 2000 Disco S.A. paid us US$60 million of the US$150 million purchase price, with the balance of US$90 million coming due in May 2003. Of this US$90 million, US$80 million was evidenced by ten promissory notes of US$8 million each, and US$10 million was held by Disco S.A. as collateral for certain liabilities of Ekono-Argentinato be borne by our company. The deferred payment amount was guaranteed by Disco S.A.s parent company, Disco-Ahold International Holdings N.V., a Netherlands Antilles company and a subsidiary of Royal Ahold N.V., a Netherlands company. We were informed in December 2002 that Disco S.A. did not intend to pay us the
entire US$90 million amount in dollars, but would instead convert the US$90 million balance owed to us into Argentine pesos under then-prevailing Argentine dollar convertibility regulations. On May 2, 2003, Disco S.A. made payment of A$126 million. After approval by the Central Bank of Argentina in August of 2003, this amount plus accrued interest was remitted to us based on an effective exchange rate of A$3.0 to 1 U.S. dollar which was equivalent to US$42 million.

We have steadfastly rejected the applicability of the Argentine currency convertibility regime to Disco S.A. and to Disco-Ahold International Holdings N.V., the guarantor, a non-Argentine entity, as to this obligation (which was explicitly undertaken to be a U.S. dollar obligation). We have retained counsel in Chile, Argentina and the Netherlands and are pursuing legal actions in order to collect the amounts due to us. Based on advice from counsel as to the likely results in these proceedings, we have not provisioned for a potential loss regarding these matters.

In April 2003, we initiated an action against the guarantor, Disco-Ahold International Holdings N.V., in the Court of Curaçao in the Netherlands Antilles. Our claim is for US$47.5 million plus interest and expenses. In September 2005, the court rejected our claim.  We have filed an appeal against the court decision, which is pending before the Courts of Appeal of the Netherlands Antilles. Oral pleadings on this appeal were heard on June 13, 2006. The Court of Appeal has anticipated that it intends to issue a judgment on the appeal by the end of August, 2006.

In January 2004, we initiated arbitration proceedings with Disco S.A. before the
Chairman of the Buenos Aires Bar in Argentina. Our claim is for US$1.5 million,
the amount we believe was wrongfully withheld by Disco S.A. (The account
receivable of the unpaid portion of the receivable from Disco S.A., amounting to
US$ 47.7 million is net of the provision of said amount being claimed). However,
after initiating the proceedings Disco S.A. and our company decided to negotiate
and settle this issue directly.  As of the date of this report, there is
still one remaining legal proceeding in Argentina related to our former
operation in Argentina for which we may be liable. We expect such proceeding to
come to a final resolution during the fourth quarter of 2006.

In April 2005, the company initiated legal proceedings in the Netherlands against Royal Ahold N.V., seeking damages the claim is for US$47.5 million, plus interest and expenses to the extent not recovered from Disco-Ahold, because of what we believe constitutes tortious interference in the actions of Ahold and Disco S.A. After the commencement of litigation against Royal Ahold N.V. Ahold requested and was allowed by the court to join the proceedings as a party that may be affected by them. The company agreed to such joinder of parties. We cannot ascertain at this time when an award will be rendered on this proceeding.

We have not yet sued Disco S.A. in Argentina, the main debtor of the account receivable on the Ekono transaction. However, we have not waived our rights to do so and such rights have not been affected by any statute of limitations.

|Item 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------

Basis of Presentation

The following discussion should be read in conjunction with our audited consolidated financial statements including the notes thereto included elsewhere in this annual report. We prepare our financial statements in accordance with Chilean GAAP, which differs in certain important respects from U.S. GAAP. Note 25 to our audited consolidated financial statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP of net income and total shareholders equity.

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Chilean GAAP requires that financial statements recognize the effects of inflation. We are therefore required to adjust our financial statements to reflect the effect of variations in the purchasing power of the Chilean peso during each year. See Impact of Inflation, Price-level Restatement and Foreign Exchange and Note 2 to our consolidated financial statements.

Unless otherwise specified, our financial data is presented in this annual report in constant Chilean pesos of December 31, 2005 purchasing power.

Certain of our liabilities are denominated in Unidades de Fomento(UFs). A UF is a daily, inflation-indexed, Chilean peso-denominated monetary unit which is set in advance based on changes in the Chilean CPI of the immediately preceding month. The adjustments to the closing value of UF-denominated assets and liabilities are included in the price-level restatement account in our consolidated statements of income.

Overview

Key Factors Affecting Net Revenues and Results of Operations

Key Factors Affecting Our Net Revenues

Our Supermarket and Hypermarket Revenues.We generate our supermarket and hypermarket revenues primarily from sales of groceries, perishables and non-food products in our stores and contractually agreed upon participation fees paid by suppliers to us for advertising and distribution services, special promotions, and opening new stores. Product revenues are generally driven by volume and average selling prices. Contractual vendor allowances are generally a function of volume. Key factors influencing our hypermarket and supermarket revenues include:

| | Pricing policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 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 2005, new or remodeled stores   accounted for 7.0% of our net sales. We added six new stores and reopened one   store in 2005, and we plan to add 20 new stores in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 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 is likely to continue during the first half of 2006, which is also   explained by the tough comparison against higher SSS recorded during the   first half of 2005. We have implemented a comprehensive operating efficiency   program that aims at improving processes and stardardizing 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 improve our SSS   performance during the second half of 2006, along with the fact that we will   be facing an easier comparison in terms of SSS given that the decline in SSS   became more pronounced during the period June-December 2005, as indicated   above.

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| | 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 3.4% for 2003, 6.1% for 2004 and 6.3% for 2005. During the same   period, unemployment, measured on the last moving quarter October-December   increased from 7.4% for 2003 to 7.8% for 2004 and declined to 6.9% in 2005.   Average unemployment rates for the full years 2003, 2004 and 2005 were   8.5%,  8.8% and 8.1% respectively. As   of April 30, 2005, (i.e., the moving quarter February-April), unemployment   was 8.3%, representing an increase as compared to 7.9% for the previous   moving quarter January-March; and an increase compared to the 8.2% in the   February-April quarter of last year at April 30, 2005.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Vendor allowances.Vendor allowances, which   are generally recorded at an agreed-upon percentage of sales to customers,   have increased steadily as a percentage of our hypermarket and supermarket   net revenues over the last three years, primarily as a result of our   increased purchase volumes with our suppliers and continued improvement in   our negotiations with vendors. We expect this trend to continue to the extent   we continue to increase our purchase volumes with our suppliers.                                                                                                                                                                                                                                                                                                                                            

The following table sets forth, for the periods indicated, changes in net revenues and same store sales together with certain macroeconomic indicators. Same store sales means net revenues earned during the period for all stores which were open and operated by us during the corresponding period in the previous year, excluding stores which underwent renovation during the prior twelve months:

|                                                                                          |  | Year ended December 31,
|----------------------------------------------------------------------------------------- |  | -----------------------
|                                                                                          |  |                        
|                                                                                          |  | 2003                   
|                                                                                          |  |                        
|Increase in net revenues                                                                  |  |                        
|Increase in sales of groceries, perishables and non-food items (including pharmacy sales) |  |                        
|Increase (decrease) in same store sales                                                   |  |                        
|Increase in suppliers fees                                                                |  |                        
|Increase in selling space(1)                                                              |  |                        
|Increase (decrease) in sales per square meter                                             |  |                        
|Increase in Chilean GDP(2)                                                                |  |                        
|Increase in Chilean consumption(2)                                                        |  |                        

|   
|---
|(1)
|(2)

Credit Card Revenues.We generate our credit card revenues primarily from finance charges on outstanding balances and late fees charged to our credit card customers. Our credit card revenues depend primarily on the total number of active Prestoaccounts, the average outstanding balances on those accounts, and the average interest rates we charge on those balances. We include, as part of our total trade receivables amounting to Ch$136,993 million (US$267.3 million) and also as part of our long term debtors amounting to Ch$49,415 million (US$96.4 million), Ch$168,794 million (US$329.3 million) of trade accounts receivable of our Prestosubsidiary (net of provisions), to be received from Prestocard users. Key factors influencing our credit card revenues include:

| |  | Finance charges.  Since we currently use our Prestocard 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.

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| |  | 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 Líderstores, 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 Líderstores. These Impactos Prestohave
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 2005, our Prestocard was used in approximately 20.0% of our sales   with respect to food products as compared to 13.6% for 2004. Sales of food   products represented 80.4% of our sales for 2005 as compared to 80.2% for   2004 resulting from our decision to grow both in volume and assortment of   non-food items offered in our stores, making inroads in an increasing number   of non-food product lines, in addition to pharmaceuticals through our FarmaLíderstores. The expansion of our   supermarket business to include higher priced durable goods, such as   household appliances and electronics, has contributed to the growth of our   credit card business. Our customers often require credit to purchase these   higher-priced items. For 2005, our Prestocard   was used in approximately 35.1% of our sales in non-food areas as compared to   32.1% in 2004. Sales of non-food products (including
pharmaceuticals in our FarmaLíderstores) represented 19.6% of   our sales for 2005 as compared to 19.8% in 2004. We believe our strategy of   expanding our non-food offerings will continue to play a major role in the   net revenues generated by our credit card business.                                          

Other
revenues.Our other revenues include revenues from our real estate
operations, which primarily comprise revenues from lease payments from merchants
that lease space in our stores and malls. Except for 2003, when increased lease
payments derived from other revenues resulted in an appreciable increase (See
 Results of Operations  2004 Compared to 2003  Net
Revenues  Other Revenues  below), our other revenues have remained
relatively constant, owing principally to the fact that we have not opened new
shopping centers in recent years and that we do not own the property on which
many of our newer stores operate.

Key Factors Affecting Our Cost Structure

Cost of Sales and Gross Profit.  Our operating margins rose in 2005 to 4.3% from 2.0% in 2004 due principally to adjustments in our pricing strategy. Our cost of sales includes our purchasing costs associated with our products, plus the shrinkage from our store operations, plus reductions in the prices of our products related to promotions that are not offset by corresponding decreases in the cost of such products to us. Shrinkage includes losses in inventory, losses and damage of our products during transportation and losses caused by theft. We always seek to reduce the purchasing cost of our products in part by increasing the volume of our purchases and, thereby, improving the terms under which we acquire our merchandise. As we have increased our sales of higher-priced non-food products, shrinkage has become an
increasingly important factor in our cost structure. Other costs such as inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and other costs of our distribution network are not accounted for in the cost of sales line item. Therefore, our cost of sales, gross profit and gross margin may not be comparable to those of other market players.

Selling and Administrative Expenses.Our selling and administrative expenses primarily include the following costs: labor and personnel, advertising, maintenance, provisions for doubtful accounts related to our credit card business, utilities, credit card commissions paid to third parties and insurance.

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| |  | Labor and personnel expenses:Our   labor and personnel expenses are the main component of the total operating   expenses and they represented 35.2% during the year 2005, 35.0% during the   year 2004 and 34.9% in 2003. As a percentage of net revenues, labor and   personnel expenses represented 8.4% in 2005, 7.4% in 2004 and 6.8% in 2003.   During 2005, our labor expenses increased 21.5% compared to 2004, explained   by the 7.1% growth in our companys net revenues and also the change in the   labor laws that reduced the number of working hours per week.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Advertising expenses:  Our advertising expenses represented 7.8%   of our total operating expenses in 2005, 6.3% in 2004 and 5.6% in 2003. As a   percentage of net revenues, advertising expenses represented 1.9% in 2005,   1.4% in 2004 and 1.0% in 2003. During 2004 and 2005, advertising expenses   increased due to the cost of promotional incentives given to Prestocard holders and the   implementation of our strategy which aims to deliver superior service and   quality at the lowest possible price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Provisions for doubtful accounts.  In connection with our credit card   operations, we record an allowance for doubtful accounts, which corresponded   to 11.0% of net credit card receivables or 9.9% of our gross credit   receivables for 2005, 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 higher delinquency   rates. Moreover, as a result of electing to open our Prestocard to unaffiliated merchants,   we have become subject to the regulations of the Chilean Superintendencia de Bancos e Instituciones   Financierasand 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.

Other Factors Affecting Our Net Income

Price-level Restatement and Foreign Exchange Gain (Loss).As required by Chilean GAAP, our financial statements have been price-level restated to reflect the effect of changes in the purchasing power of the Chilean peso during each period. See Note 2 to our consolidated financial statements. Exchange rate differences arising on the settlement of monetary items at rates different from those at which they were originally recorded are recognized in our consolidated statements of income for the period.

Our company has no significant debt in foreign currency. As of December 31, 2005, it held U.S. dollar-denominated letters of credit for US$37.1 million, which are exposed to exchange risks. At the same time, our company holds notes receivable in U.S. dollar currency for US$47.7  million mainly related to the divestment of Supermercados Ekono S.A. (Argentina). Our companys net exposure to exchange rate is US$10.6 million, therefore, price-level restatement and foreign exchange gain (loss) have no significant effect on our net income.

Income tax expense.  We account for income taxes using the asset and liability method. Accordingly, deferred taxes are recorded for the differences between the tax and book basis of assets and liabilities that will reverse in future periods. Changes in the tax versus the book basis of certain of our assets may, from time to time, increase our deferred tax assets in a given period.

Our Business Model

We seek to deliver service and quality at the lowest possible price by keeping a perceptual low price positioning along with incentives for holders of our Prestocredit card, the development of our Liderbrand name, and high-low pricing in perishables. Our strategy is based on savings achieved through operational excellence that are transferable to the customer.

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For 2005, as a result of the deployment of our strategy, our gross profit increased to 28.0% compared to 23.1% for 2004. Such deployment, together with the opening of six new stores, the reopening of one store and the growth of our Presto credit card had a positive impact on our net revenues in 2005 which increased 7.1% to Ch$1,598,767 million (US$3,119.5 million) for 2005 from Ch$1,492,318 million for 2004.

Our business model is a part of our strategy and is premised on several assumptions:

| | Low prices drive higher volume.  According to market surveys, price is one   of the key factors Chilean consumers consider when deciding where to shop. By   maintaining a discernible price difference compared to our competitors, we   expect to attract more customers to our stores.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 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 quality to appeal to the aspirational qualities   of the Chilean consumers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 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, offering   incentives to holders of our Prestocredit   card, developing our Líderbrand   name, and offering high-low pricing in perishables. By capturing a greater   share of the consumers wallet and achieving country-wide coverage through   our expansion program, we expect to increase our revenues.  Our same store sales decreased in 2005 by   1.3% compared to a 1.6% increase in 2004, mainly due to lower traffic as a   result of increased competition.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with Chilean GAAP with a reconciliation to U.S. GAAP. The preparation of our consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, including the disclosure of contingent assets and contingent liabilities and the reported amounts of revenue and expenses during the reporting period. Our critical accounting policies are those that are most important to our financial condition and results of operations and those that require the most difficult, subjective or complex judgments by our management. On an ongoing basis, management evaluates its estimates and assumptions. Management bases its estimates and assumptions on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of our consolidated financial statements, actual results may vary from these estimates. We believe that the following policies are our critical accounting policies.

Vendor Allowances and Distribution Network Revenue

We receive various types of previously agreed upon vendor allowances in the form of cash or credits that add to our revenues. Such payments are presented for Chilean GAAP purposes as net revenues in the income statement. For U.S. GAAP purposes, these payments are recorded as deductions from the cost of sales. In addition, we receive previously agreed upon payments from suppliers for use of our distribution system which are recorded as revenue and, in U.S. GAAP, as deductions from cost of sales.

The types of allowances offered are as follows:

(1) volume allowances, which are off-invoice based on the quantity of products purchased from a vendor. Rebates received relating to volume allowances are recognized on a systematic basis as an additional revenue as the products are delivered to the stores. These volume allowances are dependent on volume purchased, that is, they represent certain percentages of the purchases which are agreed annually with each vendor, neither contingent to achieving a minimum volume nor capped by a maximum. Therefore, any increase or decrease in sales has an impact on the amount of these allowances. Historically, our company has recorded growing sales volume.

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(2) promotional allowances, which generally relate to reductions in sales prices to customers for limited time periods which are reimbursed by the supplier to us. Promotional allowances are recognized as the sales to the customers, which are the requirement for earning the promotional allowance, are made.

(3) allowances for store opening or re-opening correspond to the contribution from vendors in case a new store is opened or re-opened after major remodeling. Such investments by our company provide them with additional meters and improved locations to sell their products and increase sales volume.

(4) allowances for distribution correspond to the amounts charged to vendors whose merchandise is centralized at our distribution center and shipped by our own fleet of trucks to stores throughout the country. Distribution services involve costs which are charged to vendors as their products are delivered in our distribution facilities, hence recognized as the service is provided.

Allowance for Doubtful Accounts and Delinquent Credit Card Balance Policy

We maintain an allowance for doubtful accounts for estimated losses, which result from our credit card customers not making required payments. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customers current creditworthiness, as determined by our review of their current credit information. We base our allowance on the likelihood of loss in our credit card loan portfolio based on past experience and by reviewing current collection trends that are expected to continue. In addition, we discontinue accruing interest on credit card loans that are more than 90 days past due and write off credit card loans that are more than 180 days past due.

Changes in the levels of provisions we record are recognized in the results for each period during which these changes are introduced. We believe that our policy for recording our provisions for doubtful accounts and credit card loan loss reserve is a critical accounting estimate because of the uncertainty related to the collectibility of these receivables. In addition, any assumption we make about when to discontinue accrual of interest income on delinquent accounts may differ from our actual experience of interest income default. If actual experience differs from our estimate, we would be required to adjust our provisions and allowances for doubtful accounts.

The detail of allowance for doubtful accounts for the years ended December 31, 2003, 2004 and 2005, and the potential impact of changes in uncollectibility rates are shown in the following table:

|                                                        |  | 2003        |        | 2004 |  | 2005    |  
|------------------------------------------------------- |  | ----------- | ------ | ---- |  | ------- | -
|                                                        |  |             |        |      |  |         |  
|                                                        |  | Ch$ million |       
|Net receivables                                         |  |             | 75,242 |      |  | 127,357 |  
|Allowance for doubtful   accounts                       |  |             | 14,836 |      |  | 18,928  |  
|Allowance for doubtful   accounts/total net receivables |  |             | 19.7   | %    |  | 14.9    | %
|Hypothetical   uncollectibility rose by 25%             |  |             | 24.6   | %    |  | 18.6    | %
|Impact on income statement   (increase in expenses)     |  |             | 3,674  |      |  | 4,760   |  

Receivable from Disco S.A.

We believe that our receivable from Disco S.A. for the sale of Ekono-Argentinawill ultimately be collected. The lack of a valuation allowance for this receivable is a critical accounting policy as management must make decisions regarding the viability of legal recourse where the outcome is uncertain. Moreover, if we are unable to recover, or if we determine that it is probable that we would be unable to recover any remaining amount and that the amount of such loss is estimable, we would be required to create a valuation allowance for such amount. As of December 31, 2005, the receivable from Disco S.A. amounted to Ch$24,459 million (US$47.7 million) recorded in the account sundry debtors within notes and in accounts receivable in current assets.

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Inventories

Inventories are valued at price-level restated purchase cost, on a weighted-average-cost basis, which does not exceed their net realizable sale value. Products that are obsolete or out of season are sold during the year through different promotional campaigns at discounted prices, therefore, we do not constitute allowances for product obsolescence. The company records shrinkage as indicated by its periodical physical inventory counts directly against cost of sales. This estimate is trued up periodically to our actual experience. We consider the valuation of inventories to be a critical accounting policy due to the uncertainty inherent in such assumptions.

The detail of provisions for shrinkage for the years 2003, 2004 and 2005 is the following:

|                                     |  |            | 2003   |            |  | 2004       |   |  | 2005   |  
|------------------------------------ |  | ---------- | ------ | ---------- |  | ---------- | - |  | ------ | -
|                                     |  |            |        |            |  |            |   |  |        |  
|                                     |  | Ch$million |        | Ch$million |  | Ch$million |  
|Shrinkage                            |  |            | 22,115 |            |  | 30,344     |   |  | 27,520 |  
|%/sales                              |  |            | 2.0    | %          |  | 2.3        | % |  | 2.0    | %
|Hypothetical increase by   25%       |  |            | 2.5    | %          |  | 2.9        | % |  | 2.5    | %
|Impact on cost of sales   (increase) |  |            | 5,060  |            |  | 7,174      |   |  | 6,278  |  

We are indeed seeking to reduce our shrinkage by centralizing our distribution system, improving the efficiency of our supply-chain, improving our operational processes, strengthening our extensive security systems and continuously training all our associates to implement the best practices of the industry, discourage theft and enhance shopper safety.

Purchase Accounting and Goodwill

Goodwill includes the cost of acquired subsidiaries in excess of the carrying value of the net assets recorded in connection with acquisitions. Accounting for goodwill requires managements estimate regarding (1) the amortization period and (2) the recoverability of the carrying value of goodwill.

The principal amounts recorded of goodwill for the years 2003, 2004 and 2005 are as follows:

|                                     |  | 2003          |        | 2004          |  | 2005          | 
|------------------------------------ |  | ------------- | ------ | ------------- |  | ------------- | 
|                                     |  |               |        |               |  |               | 
|                                     |  | Ch$   million |        | US$   million |  | Ch$   million | 
|Maquinsa (ex Fullmarket   S.A.)      |  |               | 10,236 |               |  | 19.9          | 
|Magallanes S.A. (Carrefour   Chile)  |  |               |        |               |  |               | 
|Alvi Supermercados   Mayoristas S.A. |  |               |       |               |  |              | 
|                                     |  |               |        |               |  |               | 
|Total                                |  |               | 10,236 |               |  | 19.9          | 
|                                     |  |               |        |               |  |               | 

Factors that are considered in estimating the useful life of goodwill include:

| | 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.            

We have considered goodwill as an asset with an indefinite life and have therefore always used the maximum amortization period allowed under Chilean GAAP for goodwill which is 20 years.

Under Chilean GAAP and U.S. GAAP, goodwill is tested for impairment when events or changes in circumstances so require (as well as annually under U.S. GAAP). Such changes in circumstances have not occurred nor have we, under U.S. GAAP, determined that our carrying value is less than our estimated fair value.

42

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Our goodwill as of December 31, 2005 primarily originated from the acquisition of Carrefour Chile (currently known as Magallanes S.A.) operations, from the purchase of Fullmarket S.A. (currently known as Maquinsa S.A.) in 1996, and from the purchase of 35% of the shares issued by Alvi Supermercados Mayoristas S.A.

In January 2004, we acquired Carrefour Chile. On January 1, 2004, Technical Bulletin 72 became effective for business combinations in Chile. This bulletin requires that goodwill be calculated in a manner similar to U.S. GAAP. However, unlike U.S. GAAP, goodwill will continue to be amortized over a maximum 20 year life as well as tested annually for impairment. Therefore, the goodwill related to our acquisition of Carrefour Chile has been determined under this new pronouncement and the factors listed above considered in determination of the useful life of the goodwill will continue to be used by us. In our annual calculations of the implied fair value of goodwill for determination of impairment, certain assumptions regarding the projected sales growth, operating income, and projected amount for capital expenditures will be used. Because a change in these assumptions could result in a significant change in
the recorded amount of goodwill, we believe that the accounting for goodwill is one of our critical accounting policies.

On October 13, 2005, we acquired 35% of the shares of Alvi Supermercados Mayoristas S.A.  The excess of the purchase price paid for the shares acquired from Alvi over the net book value of assets acquired and liabilities assumed was designated as goodwill.  The value of the goodwill will be modified based on current norms, once the process to define the fair value of the investment is concluded.

Severance Indemnities

We sponsor a severance indemnity plan for employees which is treated, for accounting purposes, as a defined benefit plan.

The defined benefit pension plans pay benefits to employees at retirement using formulas based on participants years of service and compensation. We fund these plans as claims are incurred.

Recorded severance indemnities reflect our best estimate of the future cost of honoring our obligations under these benefit plans. We believe the accounting estimate relating to costs for pensions is a critical accounting estimate because changes in it can materially affect the projected benefit obligations and net periodic pension costs. In accounting for defined benefit plans, we make actuarial calculations. These calculations contain key assumptions, which include: discount rates, employee service lives, employee turnover rates and annual average salaries. The assumptions for the calculations are uncertain and require judgment. Should these assumptions change, our pension benefit obligation would require increase or decrease in the balance sheet and the recording of the offsetting effect in the income statement.

The following table shows the accrual for voluntary severance indemnities, which has been accrued at the discounted present value of the vested benefit using 7% discount rate and considering future service until retirement (age 60 for women, age 65 for men). Additionally, it shows how this amount would increase or decrease in our balance sheet in case of a 9% or a 5% discount rate:

|Severance Indemnities                            |  | Ch$ million |       | US$ million | 
|------------------------------------------------ |  | ----------- | ----- | ----------- | 
|                                                 |  |             |       |             | 
|Short-term and long-term   with 7% discount rate |  |             | 6,026 |             | 
|With 5% discount rate                            |  |             | 7,748 |             | 
|Impact on income statement   (expense increase)  |  |             | 1,722 |             | 
|With 9% discount rate                            |  |             | 4,304 |             | 
|Impact on income statement   (expense decrease)  |  |             | 1,722 |             | 

Property, Plant and Equipment

Property, plant and equipment are stated at price-level restated purchase cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

43

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|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 preparation of consolidated financial statements in conformity with Chilean GAAP requires us to make estimates and assumptions, relating to the useful lives of such assets which affects the reported amounts of such assets and disclosure at the date of the publication of the financial statements as well as reported amounts of expenses during the reporting periods. The factors which we use to determine the useful lives include:

| | the   estimated service life of the asset; and  
|- | ------------------------------------------------
|  |                                                 
| | the   estimated technological life of the asset.

The detail of depreciation charges for the years 2003, 2004 and 2005 is the following:

|                         |  | 2003        |        | 2004 |  | 2005   | 
|------------------------ |  | ----------- | ------ | ---- |  | ------ | 
|                         |  |             |        |      |  |        | 
|                         |  | Ch$ million |       
|Depreciation             |  |             | 39,882 |      |  | 49,365 | 
|10% increase or decrease |  |             | 3,988  |      |  | 4,937  | 

However, the periods used by our company for useful lives are the shortest allowed by tax law (20 years for buildings and infrastructure), therefore, the only possible change would be to extend these final periods. In such case, there would be a positive impact on results since depreciation charges would be lower than those currently recorded by our company.

Impairment of Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, derived from the present value of expected cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Results of Operations

The following table sets forth, for the periods indicated, certain items in our income statement and their respective percentages of net revenues:

|                                                           |  | Year ended   December 31, |      
|---------------------------------------------------------- |  | ------------------------- | -----
|                                                           |  |                           |      
|                                                           |  | 2003                      |      
|                                                           |  |                           |      
|Net revenues                                               |  |                           | 100.0
|Cost of sales                                              |  |                           | (77.5
|                                                           |  |                           |      
|Gross profit                                               |  |                           | 22.5 
|Selling and administrative   expenses                      |  |                           | (19.6
|                                                           |  |                           |      
|Operating income                                           |  |                           | 3.0  
|Non-operating income                                       |  |                           | 0.1  
|Non-operating expenses                                     |  |                           | (1.6 
|Price-level restatement and   foreign exchange gain (loss) |  |                           | (0.1 
|Taxes                                                      |  |                           | (0.4 
|                                                           |  |                           |      
|Net income                                                 |  |                           | 1.0  
|                                                           |  |                           |      

44

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2005 Compared to 2004

For 2005, our net revenues increased 7.1% to Ch$1,598,767 million (US$3,119.5
million) compared to Ch$1,492,318 million for 2004. This increase resulted
primarily from the opening of new stores during the year (six new stores: four
Líder Expressand two Líder Vecino stores).
Additionally, we reopened one Líder hypermarket in December 2005.
Gross profit increased 29.9% to Ch$447,641 million (US$873.4 million) compared
to Ch$344,517 million in 2004 and gross margin increased 490 base points to
28.0% of revenues from 23.1% in 2004. This increase in gross margin occurred as
a result of the evolution of our business strategy which included more
aggressive introduction of private labels in the assortment, (which have a higher commercial margin than branded products) and increased
revenues from our financial services division.

Net Revenues.  Our net revenues for 2005 were Ch$1,598,767 million
(US$3,119.5 million), which represented an increase of 7.1% compared to
Ch$1,492,318 million for 2004.

The 7.1% increase in our net revenues for the period 2005 resulted primarily from a 5.1% increase in sales from LIDER and Farmalider stores, mainly driven by new sales from stores opened during the period. Additionally the 7.1% increase in revenues is explained by the 119.2% increase of financial revenues resulting from the 28.0% increase of accounts in good standing and the 28.1% increase in credit receivables. Finally, this is also explained by the 4.8% increase in real estate and logistic revenues attributable to increased lease payments for rental of commercial localtions in our stores and shopping malls and higher centralization of merchandise in our Distribution Center (66% for the year 2005 compared to 63% in 2004).

The following table shows the composition of net revenues for the periods indicated and the percentage change between periods:

|                                                       |  | Year ended   December 31, |          
|------------------------------------------------------ |  | ------------------------- | ---------
|                                                       |  |                           |          
|                                                       |  | 2004                      |          
|                                                       |  |                           |          
|Hypermarkets and Supermarkets   (including FarmaLíder) |  | Ch$                       | 1,425,530
|Credit cards                                           |  |                           | 26,480   
|Other (real estate and   logistics)                    |  |                           | 40,308   
|                                                       |  |                           |          
|Total                                                  |  | Ch$                       | 1,492,318
|                                                       |  |                           |          

| | Retail Formats(Líderand FarmaLíder).  A 5.1% increase in net revenues derived   from our hypermarkets, supermarkets and pharmacies, totaling Ch$1,498,474   million (US$2,923.9 million) for 2005 compared to Ch$1,425,530 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 Expresscompact hypermarkets, two Líder Vecinohypermarkets and the   reopening of one Lider   hypermarket), an increase of 5.4% over the total sales area at December 31,   2005. 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.                                                       
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Credit Card.  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$58,034 million (US$113.2 million)   for 2005 compared to Ch$26,480 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 Prestocard   totaled Ch$187,344 million (US$365.5 million) compared to Ch$146,284 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$42,259 million (US$82.5 million) for 2005 compared   to Ch$40,308 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.  Our gross profit for 2005 increased 29.9%, to Ch$447,641 million (US$873.4 million), from Ch$344,517 million for 2004.

As a percentage of net revenues, cost of sales for 2005 was 72.0% compared to
76.9% for 2004. The increase in gross margin was principally attributable to
adjustments following our pricing strategy, an increase of 23.1% in the share of
private label sales (which have a higher commercial margin than branded products) in mass consumption products, which represents a 62% of
total sales, and improved negotiations with suppliers. Additionally, the
sustained increase of Prestorevenues made a significant contribution to
the increase in gross margin.

45

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Selling and Administrative Expenses.  Selling and administrative expenses (including depreciation) for 2005 were Ch$379,572 million (US$740.6 million), representing a 20.9% increase as compared to Ch$313,935 million for year 2004.

As a percentage of net revenues, selling and administrative expenses increased to 23.7% for 2005 from 21.0% for 2004, principally due to the stores opened during 2005 (two Lider Vecinos, four Lider Express, one Lider hypermarket reopened and ten new FarmaLider stores), in addition to higher expenses in existing stores resulting from the reduction in the number of working hours per week and increases for our credit card operations.

Selling and administrative expenses related to our credit card operations increased by 91.6% to Ch$55,336 million (US$108.0 million) in 2005 compared to Ch$28,886 million for 2004. This increase was principally attributable to operating expenses excluding allowances for doubtful accounts which increased by 185.7% from Ch$9,661 million in 2004 to Ch$27,603 million (US$53.9 million) in 2005, as necessary to administer a 28.1% increase in outstanding credit from Ch$146,284 million at December 31, 2004 to Ch$187,344 million (US$53.9 million) at December 31, 2005, and the 28.0% increase in accounts in good standing and also explained by higher marketing expenses in connection with the Impactos Prestocampaign.

Costs related to the credit card operations are accounted for in selling and administrative expenses in the consolidated income statement.

Operating Income.  Operating income for 2005 was Ch$68,069 million (US$132.8 million), representing an increase of 122.6% as compared to Ch$30,582 million for 2004, reflecting the 29.9% increase in gross profit and the 7.1% in net revenues described above, which is only partially offset by the 20.9% increase in selling and administrative expenses. As a percentage of net revenues, operating income for 2005 was 4.3%, representing an increase of 230 base points as compared to operating income equivalent to 2.0% of net revenues for 2004.

Non-operating Income.  The following table sets forth, for the periods indicated, information concerning non-operating income on a consolidated basis:

|                                                                                     |  | As of   December 31,            |      
|------------------------------------------------------------------------------------ |  | ------------------------------- | -----
|                                                                                     |  |                                 |      
|                                                                                     |  |                                 | 2004 
|                                                                                     |  |                                 |      
|                                                                                     |  | (in   millions of constant Ch$) |      
|Financial income                                                                     |  |                                 | 1,350
|Other non-operating   income(1)                                                      |  |                                 | 1,148
|Amortization of negative   goodwill                                                  |  |                                 | 367  
|Minority Interest                                                                    |  |                                 | 128  
|                                                                                     |  |                                 |      
|Total   non-operating income                                                         |  | Ch$                             | 2,993
|                                                                                     |  |                                 |      
|                                                                                     |  |                                 |      
|                                                                                    
|(1)          Other   includes principally equity in earnings of related companies.

Non-operating income for 2005 was Ch$4,105 million (US$8.0 million), representing an increase of 37.2% compared to non-operating income of Ch$2,933 million for 2004. This increase resulted primarily the 109.0% increase in financial income which totaled Ch$2,822 million (US$5.5 million) for 2005 compared to Ch$1,350 million for 2004, explained by the investment of proceeds from the capital increase of August 2004 in marketable securities.

46

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Non-operating Expense.  The following table sets forth, for the periods indicated, the components of our non-operating expenses on a consolidated basis:

|                                                                                                    |  | As of   December 31,            |       
|--------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------
|                                                                                                    |  |                                 |       
|                                                                                                    |  | 2004                            |       
|                                                                                                    |  |                                 |       
|                                                                                                    |  | (in   millions of constant Ch$) |       
|Financial expense                                                                                   |  | Ch$                             | 19,368
|Minority interest                                                                                   |  |                                 |      
|Other non-operating   expense(1)                                                                    |  |                                 | 1,413 
|Amortization of goodwill                                                                            |  |                                 | 2,049 
|                                                                                                    |  |                                 |       
|Total   non-operating expense                                                                       |  | Ch$                             | 22,830
|                                                                                                    |  |                                 |       
|                                                                                                   
|                                                                                                   
|(1)          Other   includes equity in losses of related companies and charitable contributions.

Non-operating expense for 2005 was Ch$23,319 million (US$45.5 million), representing an increase of 2.1% compared to non-operating expense of Ch$22,830 million for 2004. This increase resulted primarily from higher financial expenses by 3.7%, which totaled Ch$20,092 million (US$39.2 million) for 2005 compared to Ch$19,368 million for 2004 explained by the higher indebtedness of our company and higher interest rates on debt, and by a 4.7% increase in charges of amortization of goodwill: Ch$2,146 million (US$4.2 million) for the year 2005 as compared to Ch$2,049 million for 2004, originated in goodwill from Carrefour.

Price-level Restatement and Foreign Exchange Gain (Loss).  Net price-level restatement and foreign exchange gain (loss) amounted to a net loss of Ch$1,659 million (US$3.2 million) for 2005, as compared to a net gain of Ch$2,189 million for 2004, representing a decrease of 175.8%. The net loss in 2005 compared to the net gain in 2004 is primarily attributable to foreign exchange insurance contracts entered into to hedge these exchange variations on foreign currency assets during the period.

Income Taxes.  Income taxes for 2005, including current and deferred taxes, amounted to Ch$4,829 million (US$9.4 million), representing a 119.1% increase as compared to a charge of Ch$2,204 million for 2004, partly due to the increase in income before income taxes recorded during 2005 compared to the amount recorded in 2004. The effective tax rate during the year 2005 was 10.2%. The lower effective tax rate (the statutory tax rate is 17%) is due to a tax loss generated in the sale of fixed assets from the parent company to a subsidiary, which resulted in a reduction of the base amount of taxable income.

Net Income.  Net income for 2005 was Ch$42,367 million (US$82.7 million) representing an increase of 294.8% as compared to net profit of Ch$10,730 million in 2004. As a percentage of net revenues, net income margin recorded in 2005 was 2.7%, an increase of 200 base points compared to 0.7% in 2004.

2004 Compared to 2003

For 2004, our net revenues increased 20.8% to Ch$1,492,318 million compared to Ch$1,234,990 million for 2003. This increase resulted primarily from the integration of six stores acquired from Carrefour, the remodeling of two stores (Arica and La Calera) and the opening of new stores during the year (six new stores: four Líder Vecinoand two Líder stores). Our EDLP strategy, which began in mid-2003, evolved in the last quarter of 2004 into our current strategy. Gross profit increased 23.9% to Ch$344,517 million compared to Ch$278,096 million in 2003 and gross margin increased 60 base points to 23.1% of revenues from 22.5% in 2003. This increase in gross margin occurred as a result of the evolution of our business strategy which included more aggressive introduction of private labels in the assortment, and increased revenues from our financial services division.

47

---



Net
Revenues.  Our net revenues for 2004 were Ch$1,492,318 million,
which represented an increase of 20.8% compared to Ch$1,234,990 million for
2003. The following table shows the composition of net revenues for the periods
indicated and the percentage change between periods:

The 20.8% increase in our net revenues for the period 2004 resulted primarily from:

|                                                       |  | Year ended   December 31, |          
|------------------------------------------------------ |  | ------------------------- | ---------
|                                                       |  |                           |          
|                                                       |  | 2003                      |          
|                                                       |  |                           |          
|Hypermarkets and   Supermarkets (including FarmaLíder) |  | Ch$                       | 1,181,107
|Credit cards                                           |  |                           | 20,267   
|Other                                                  |  |                           | 33,616   
|                                                       |  |                           |          
|Total                                                  |  | Ch$                       | 1,234,990
|                                                       |  |                           |          

| | Retail Formats(Líderand FarmaLíder).  A 20.7% increase in net revenues derived   from our hypermarkets, supermarkets and pharmacies, totaling Ch$1,425,530   million for 2004 compared to Ch$1,181.107 million for 2003. This increase   resulted principally from an addition of 71,123 square meters of sales area,   from 333,344 at December 31, 2003 to 404,467 at the same date in 2004   (opening of four Líder Vecinocompact   hypermarkets and two Líderhypermarkets,   in addition to stores acquired from Carrefour, the transformation of Líder ExpressArica into Líder Vecino, the enlargement of Líder ExpressLa Calera), an increase of 21.3% over the total sales area at   December 31, 2003. These new stores accounted for 17.5% of our hypermarket   and supermarket sales for 2004. Another factor which contributed to the   increase in revenues from retail formats was the

evolution of our business   strategy, which helped to increase customer traffic levels (20.5% increase in   total transactions and 2.7% increase in same store transactions for 2004   compared to 2003).
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Credit Card.  A 30.7% increase in net revenues derived from
Presto credit card operations compared to 2003, reflecting an increase in
our net financial revenues including primarily interest and commissions, to
Ch$26,480 million for 2004 compared to Ch$20,267 million for 2003. This increase
was attributable to an 80.9% increase in accounts in good standing at
period-end, from 652,541 accounts at December 31, 2003 to 1,180,456 accounts in
2004, and to the promotion of sales of food and non-food products through our
Presto card (16.6% of overall penetration of the credit card in total sales for
2004 compared to 14.2% for 2003). At December 31, 2004, the total outstanding of
the Prestocard totaled Ch$146,284 million compared to Ch$90,077 million
at the same date of 2003, representing a 62.4% increase.                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Other Revenues.  A 19.9% increase in other revenues derived from real estate and   logistic operations to Ch$40,308 million for 2004 compared to Ch$33,616 in   2003. This increase resulted primarily from increased lease payments   accounted for in the real estate division and higher logistic revenues due to   higher sales (19.0% increase in 2004 over 2003) and increased centralization   of merchandise in our distribution center (58.5% of centralization for 2003   compared to 63.2% for 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Cost of Sales and Gross Profit.  Our gross profit for 2004 increased 23.9%, to Ch$344,517 million, from Ch$278,096 million for 2003.

As a percentage of net revenues, cost of sales for 2004 was 76.9% compared to 77.5% for 2003. The increase in gross margin was principally attributable to the further implementation of our EDLP strategy with a higher share of private labels in the product assortment (27.1% increase of private label sales in groceries and 40% increase of private label sales products on beauty care) and improved negotiations with suppliers. Additionally, the sustained increase of Prestorevenues made a significant contribution to the increase in gross margin.

Selling and Administrative Expenses.  Selling and administrative expenses (including depreciation) for 2004 were Ch$313,935 million, representing a 29.9% increase as compared to Ch$241,639 million for year 2003.

As a percentage of net revenues, selling and administrative expenses rose to 21.0% for the year 2004 from 19.6% in 2003, principally due to increased operating costs from the integration of Carrefour stores and new stores opened in 2004 (additional expenses from Carrefour and new stores account for 22.5% of the expenses increase mentioned above); and increased operating expenses (excluding allowances for doubtful accounts) from the Presto financial services division from Ch$5,409 million in 2003 to Ch$9,661 million in 2004.

48

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Selling and administrative expenses related to our credit card operations increased by 10.6% to Ch$28,886 million in 2004 compared to Ch$26,112 million for 2003. This increase was principally attributable to operating expenses excluding allowances for doubtful accounts which increased by 78.6% from Ch$5,409 million in 2003 to Ch$9,661 million in 2004, as necessary to administer a 62.4% increase in outstanding credit from Ch$90,077 million at December 31, 2003 to Ch$146,284 million at December 31, 2004, and the 80.9% increase in accounts in good standing.

Costs related to the credit card operations are accounted for in selling and administrative expenses in the consolidated income statement.

Operating Income.  Operating income for 2004 was Ch$30,582 million, representing a decrease of 16.1% as compared to Ch$36,455 million for 2003, reflecting the 29.9% increase in operating costs described above, which is partially offset by the 23.9% increase in gross profit. As a percentage of net revenues, operating income for 2004 was 2.0%, representing a decrease of 100 base points as compared to operating income equivalent to 3.0% of net revenues for 2003.

Non-operating Income.  The following table sets forth, for the periods indicated, information concerning non-operating income on a consolidated basis:

|                                                                                     |  | As of   December 31,            |      
|------------------------------------------------------------------------------------ |  | ------------------------------- | -----
|                                                                                     |  |                                 |      
|                                                                                     |  | 2003                            |      
|                                                                                     |  |                                 |      
|                                                                                     |  | (in   millions of constant Ch$) |      
|Financial income                                                                     |  | Ch$                             | 572  
|Other non-operating   income(1)                                                      |  |                                 | 628  
|Amortization of negative   goodwill                                                  |  |                                 | 375  
|Minority Interest                                                                    |  |                                 |     
|                                                                                     |  |                                 |      
|Total   non-operating income                                                         |  | Ch$                             | 1,575
|                                                                                     |  |                                 |      
|                                                                                    
|(1)          Other   includes principally equity in earnings of related companies.

Non-operating Expense.  The following table sets forth, for the periods indicated, the components of our non-operating expenses on a consolidated basis:

|                                                                                                    |  | As of   December 31,            |       
|--------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------
|                                                                                                    |  |                                 |       
|                                                                                                    |  | 2003                            |       
|                                                                                                    |  |                                 |       
|                                                                                                    |  | (in   millions of constant Ch$) |       
|Financial expense                                                                                   |  | Ch$                             | 17,423
|Minority interest                                                                                   |  |                                 | 41    
|Other non-operating   expense(1)                                                                    |  |                                 | 1,368 
|Amortization of goodwill                                                                            |  |                                 | 844   
|                                                                                                    |  |                                 |       
|Total   non-operating expense                                                                       |  | Ch$                             | 19,676
|                                                                                                    |  |                                 |       
|                                                                                                   
|                                                                                                   
|(1)          Other   includes equity in losses of related companies and charitable contributions.

Non-operating expense for 2004 was Ch$22,829 million, representing an increase of 16.0% compared to non-operating expense of Ch$19,676 million for 2003. This increase resulted primarily from higher financial expenses by 11.2%, which totaled Ch$19,368 million for 2004 compared to Ch$17,423 million for 2003 explained by the higher indebtedness of our company and by a 142.8% increase in charges of amortization of goodwill: Ch$2,049 million for the year 2004 as compared to Ch$844 million for 2003, originated in goodwill from Carrefour.

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Price-level Restatement and Foreign Exchange Gain (Loss).  Net price-level restatement and foreign exchange gain (loss) amounted to a net gain of Ch$2,189 million for 2004, as compared to a net loss of Ch$925 million for 2003, representing an increase of 336.5%. The net gain in 2004 compared to 2003 is primarily attributable to foreign exchange insurance contracts entered into to hedge these exchange variations on foreign currency assets during the period.

Income Taxes.  Income taxes for 2004, including current and deferred taxes, amounted to Ch$2,205 million, representing a 55.3% reduction as compared to a charge of Ch$4,936 million for 2003, partly due to the decrease in income before income taxes recorded during 2004 compared to the amount recorded in 2003. Such reduction is mainly due to the increase of deferred tax assets in connection with tax losses from subsidiaries. The effective tax rate during the year 2004 was 17.0%.

Net Income.  Net income for 2004 was Ch$10,730 million representing a decrease of 14.1% as compared to net profit of Ch$12,495 million in 2003. As a percentage of net revenues, net income margin recorded in 2004 was 0.7%, a reduction of 30 base points compared to 1.0% in 2003.

Impact of Inflation, Price-level Restatement and Foreign Exchange

Chilean GAAP requires that financial statements recognize the effects of inflation. We are therefore required to adjust our financial statements to reflect the effect of variations in the purchasing power of the Chilean peso during each year. These adjustments are based on the variation of the official Chilean CPI (consumer price index) from December 1 to November 30 of each year, with the exception of assets and liabilities denominated in foreign currency which are adjusted to closing exchange rates at period-end. For practical reasons, the CPI adjustment used to compute the price-level restatement is delayed one month. See Note 2 to our consolidated financial statements for a description of these price-level adjustments.

Because of Chiles past history of relatively high inflation, the financial markets have developed a system of borrowing or lending in UFs. The debt associated with our long-term assets, including our property, plant and equipment and the bulk of our other current assets and liabilities is denominated in pesos and any adjustment necessary for price-level restatement is reflected in the price-level adjustment account. The use of UF-denominated transactions offsets the effect of inflation in the preparation of price-level adjusted financial statements. For example, a company with UF-denominated obligations will record both a financing cost (from the adjustment to the value of the UF due to the effects of inflation) and a price-level gain (from holding a liability during a period of inflation) of comparable amounts, excluding the difference between actual inflation and the inflation rate used for
purposes of the UF index. In the case of UF-denominated assets, the price-level adjustment (a loss) and the UF valuation (a gain) also offset each other, with the exception of the difference in the UF index referred to above.

The required price-level restatement of our non-monetary assets and liabilities, equity and income-expense accounts in 2005, together with foreign exchange gains, resulted in a net loss of Ch$1,659 million (US$3.2 million), compared to a net gain of Ch$2,189 million (US$4.3 million) in 2004. This was principally due to the appreciation of the Chilean peso affecting our dollar-denominated assets.

We finance a portion of our current and fixed assets with short-term and long-term liabilities denominated in foreign currency. Because assets are generally restated using the Chilean CPI and liabilities in foreign currency are restated to closing exchange rates, the price-level restatement line in our consolidated statements of cash flows is affected by the relationship between local inflation and the exchange rate of the Chilean peso against the applicable foreign currency. Lower rates of Chilean inflation have increased the relative importance of the foreign currency exchange rate conversion as a component of the price-level restatement credit or charge in our consolidated statements of income.

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Liquidity and Capital Resources

Overview

Our principal uses of funds are for capital expenditures, dividend payments and
the repayment of short-term and long-term liabilities, in addition to funding
the increase in outstanding credit of the Prestofinancial business. We
have historically met these requirements by using cash generated from our
operations, as well as through short-term and long-term debt. Our Ch$ 170,000
million (US$250 million) capital increase in 2004 has further strengthened our
capital resources. We believe that these sources of funds, together with our
cash and cash equivalents on hand, will be sufficient to enable us to meet our
currently contemplated capital and debt service requirements. If we decide to
increase our capital expenditure or succeed in increasing the use of the
Prestocredit card, granting additional new loans beyond our estimates,
we would be able to increase our debt without having a negative impact on our
net income, since higher revenues would offset higher financial expenses. Due to
the nature of our business, we benefit from significant cash flows and access to
vendor financing for purchases in the ordinary course of our business
activities, which we estimate will continue in the same terms. The growth of our
credit card business, as expected, will continue to increase our working capital
requirements. As a result of our Ch$ 170,000 million (US$250 million) capital
increase in 2004 and the additional operating cash flows generated during 2005,
we believe we are well positioned to finance our capital
requirements.

In 2003, we increased our cash in the amount of Ch$9,591 million since net cash provided by operating and financing activities exceeded the amount used in investing activities. In 2004, due to the capital increase, we increased our cash and cash equivalent in the amount of Ch$50,633 million, despite the fact that our net cash from our operating activities was negative in the amount of Ch$13,969 million, largely due to the implementation of our EDLP strategy, in addition to the increase in accounts receivable of our Prestofinancial business.

In 2005, our cash and cash equivalent decreased in the amount of Ch$19,830 million (US$38.7 million) since funds used in financing activities exceeded the amount of funds provided by financing activities. Therefore, we used our cash and cash equivalents in our commitments and investment activities.

In 2006, we expect our major cash needs to include:

| | repayment or   refinancing of short-term contractual obligations in the amount of Ch$213,876   million (US$417.3 million);                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                               
| | budgeted   capital expenditures of Ch$102,500 million (US$200 million);                                                                                                       
|  |                                                                                                                                                                               
| | budgeted   cash dividends of approximately Ch$20,500 million (US$40.0 million); and                                                                                           
|  |                                                                                                                                                                               
| | increased   working capital needs, primarily in connection with our planned expansion of   our credit card operations in the amount of Ch$51,250 million (US$100.0   million).
|  |                                                                                                                                                                               
|  | We expect to   meet these cash requirements in 2006 through a combination of:                                                                                                 
|  |                                                                                                                                                                               
| | existing   cash resources and cash flow to be generated from our operations in 2006;                                                                                          
|  |                                                                                                                                                                               
| | additional   short-term and long-term debt that we will incur as necessary; and                                                                                               
|  |                                                                                                                                                                               
| | proceeds   remaining from our Ch$ 170,000 million (US$250 million) equity offerings in 2004.                                                                                  

Sources and Uses of Funds

Cash and Working Capital.  At December 31, 2005, we had negative net working capital in the amount of Ch$100,390 million (US$195.9 million), compared with net working capital of Ch$39,823 million at December 31, 2004. We typically used to have a negative working capital position because of our extensive use of supplier financings. A negative working capital position does not affect our ability to obtain financing. However, the expansion of our Prestocredit card has resulted in significant increases in our working capital requirements, as shown in 2004. In 2005, we had a negative working capital position due to higher levels of short-term financial debt.

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Net Cash Provided by (Used in) Operations.  Net cash provided by operations in 2005 was Ch$63,711 million (US$124.3 million), representing an increase as compared to Ch$13,969 million used in operations in 2004. Funds provided by operations consist principally of funds from our net income which were Ch$42,367 million for 2005 and Ch$10,730 million in 2004.
Funds provided by operations consist principally of funds generated from our revenues increase (7.1% increase in 2005 compared to 2004) and gross margin increase (from 23.1% in 2004 to 28.0% in 2005).

Net Cash Used in Investing Activities.  Net cash used in investing activities was Ch$62,650 million (US$122.2 million) for 2005, a 36.9% decrease compared to 2004. The principal uses for investing activities in 2005 were Ch$50,344 million (US$98.2 million) for the purchases of property, plant and equipment (new stores and land).

Net Cash from Financing Activities.  In 2005, our financing activities resulted in a use of Ch$20,892 million (US$40.8 million) which included Ch$129,155 million (US$252.0 million) from the issuance of debt and bank loans. These amounts were offset by Ch$129,020 million (US$251.7 million) in repaid debt. We still maintain cash and cash equivalents in the amount of Ch$61,110 million (US$119.2 million) from the net proceeds from our 2004 equity offering.

Contractual Cash Obligations.  The following table summarizes our contractual cash obligations and commercial commitments as of December 31, 2005 and the breakdown of such obligations in specified future periods.

|                                                          |  | Payment   due by period   (in millions of constant Ch$as of December 31, 2005) |        
|--------------------------------------------------------- |  | ------------------------------------------------------------------------------ | -------
|                                                          |  |                                                                                |        
|Contractual   Obligations                                 |  | Total (1)                                                                      |        
|                                                          |  |                                                                                |        
|Long-term bank debt,   including current portion          |  | Ch$                                                                            | 75,402 
|Short-term bank debt                                      |  |                                                                                | 56,644 
|Capital lease obligations                                 |  |                                                                                | 6,237  
|Purchase obligations                                      |  |                                                                                |       
|Bonds and commercial paper                                |  |                                                                                | 196,692
|                                                          |  |                                                                                |        
|Total contractual   obligations (principal plus interest) |  | Ch$                                                                            | 334,975
|                                                          |  |                                                                                |        
|Principal                                                 |  | Ch$                                                                            | 330,137
|Interest                                                  |  |                                                                                | 4,839  

|   
|---
|(1)
|(2)

We have incurred our long-term debt obligations primarily to replace certain short-term debt obligations and to enable us to pursue strategic acquisitions.

Dividends. 
In 2005, dividends paid totaled Ch$13,327 million (US$26.0 million), as compared
with Ch$25,663 million (US$50.1 million) in 2004. Chilean law generally requires
us to distribute a minimum of 30% of our net income to our shareholders in the
form of dividends. For more information on our dividend policy, see Item 10  Additional InformationDividend Policy and
Dividends.

Capital Expenditures.  Our capital expenditures in 2005 totaled Ch$62,129 million (US$121.2 million), as compared with Ch$156,505 million (US$305.4 million) in 2004. These capital expenditures were invested in the opening of six new stores, including four Líder Express supermarkets and two Líder Vecino compact hypermarkets, and in the purchase of land and in the acquisition of 35% of the ownership of Alvi Supermercados Mayoristas S.A. We currently plan to make capital expenditures totaling Ch$102,500 million (US$200 million) in 2006. We plan to make capital expenditures in 2006 primarily to construct and develop new stores and to purchase additional properties.

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Working Capital.  In addition to the capital expenditures listed above, we also plan to allocate Ch$51,250 million (US$100.0 million) of cash to our credit card business in 2006 to cover additional working capital requirements in connection with the issuance of additional credit by Presto. This amount represents our estimated cash requirements based on our current projected levels of growth in credit card charge volume. Our expected growth in the use of our Prestocredit card may not materialize.

Debt

Debt Status.  In addition to cash flow from our operations, we also rely on external borrowings in the local Chilean capital markets, as well as other borrowings from financial institutions. The costs associated with using external sources of financing will depend in large part on our credit ratings. Currently, our local credit ratings from Fitch Chile Clasificadora de Riesgo Limitada and Feller-Rate Clasificadora de Riesgo Limitada are First Class - Level 2 for our shares and AA-, respectively, for our bonds and commercial papers, with a stable outlook. Since all our debt is issued locally and these are the ratings applicable to our debt, a significant downgrade by Fitch Chile Clasificadora de Riesgo Limitada or Feller-Rate Clasificadora de Riesgo Limitada may increase the cost of our future borrowings or make it more difficult to access the public debt markets. Such change is unlikely in
view of the stable outlook of these ratings. Regarding international ratings, at the date hereof, our senior unsecured local and foreign currency-denominated debt had a credit rating of BBB+ with a negative outlook with Fitch Ratings. Such rating was downgraded to BBB with a stable outlook by Fitch Ratings on May 22, 2006. In addition to our own performance, such credit agencies may give consideration to the general macroeconomic and political trends affecting Chile and Latin America generally.

The Superintendency of Securities and Insurance (SVS) approved the issuance of bonds by D&Ss subsidiary SAITEC (Sociedad Anónima Inmobiliaria y Establecimientos Commerciales) in the amount of UF4,500,000 (US$157.8 million).  This issuance was registered under number 463 of the SVS registry, dated April 18, 2006.  The proceeds will be used to refinance bank debt and to finance new real estate investment by the issuer.

Additionally, the series A1 and A2 of bonds issued by D&S in December of 2000, in the amount of UF3,500,000 (US$122.7 million) will mature in October of 2006.  We intend to issue new bonds for an equivalent amount in similar conditions to refinance the maturity of such bonds.

At December 31, 2005, our aggregate outstanding debt and lease obligations were Ch$334,975 million (US$653.6 million), consisting of:

| | long-term   debt including lease obligations of Ch$121,099 million (US$236.3 million),   which includes financial debt of Ch$119,656 million (US$233.5 million) and   lease obligations in the amount of Ch$1,443 million (US$2.8 million), and                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                
| | short-term   debt including the current portion of long-term debt of Ch$213.876 million   (US$417.3 million), including short-term financial debt of Ch$115,211 million   (US$224.8 million) and the current portion of long-term debt in the amount of   Ch$98,665 million (US$192.5 million).

In addition to our aggregate outstanding debt, we have short-term obligations incurred with our suppliers of Ch$221,544 million (US$432.3 million).

We are also party to various capital lease and lease-back operations, of which, the total long-term portion amounted to Ch$1,443 million (US$2.8 million) at December 31, 2005, as compared to Ch$6,039 million (US$11.8 million) at December 31, 2004. At December 31, 2005, our foreign currency liabilities totaled Ch$19,032 million (US$37.1 million). At December 31, 2004, we had liabilities of Ch$26,647 million denominated in U.S. dollars.

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Our major categories of indebtedness are as follows:

| | Bonds and   commercial paper placed in the local capital markets in an aggregate   principal amount of Ch$196,692 million (US$383.8 million) at December 31,   2005. We have issued four series of bonds in Chile which bear interest at a   rate of 7.0%, 6.5%, 4.5% and 5.5% and commercial paper bearing interest at a   rate of 4.2%, 4.32%, 4.80% and 5.64%.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                  
| | Local bank   debt in aggregate principal amount at December 31, 2005 of Ch$132,046 million   (US$257.7 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.                                                  

For further information regarding our debt, see Note 12 to our consolidated financial statements.

Debt Restrictions

Some of our long-term debt instruments contain standard financial covenants. Our principal covenants require us to maintain certain minimum ratios, such as debt-to-equity and interest coverage. We were in full compliance with our key financial covenants as of December 31, 2005. Moreover, we believe that our existing covenants will not significantly restrict our ability to borrow additional funds as needed to meet our capital expenditure requirements for 2006 and 2007. We believe that we will be able to operate within the terms of our financial covenants for the foreseeable future. If we fail to operate within our covenanted restrictions or to obtain waivers of these covenants, it would result in defaults under our debt agreements and potentially, in the acceleration of amounts due.

The material covenants of our long-term debt agreements at December 31, 2005 are described in the table below:

Our Principal Loan Covenants

|Banco   Santander- Santiago | 1. | Minimum   coverage of interest expenses of 3.75 (operating income plus depreciation   divided by interest expense) for June and December.                                                                                                           
|--------------------------- | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                            |    |                                                                                                                                                                                                                                                     
|                            | 2. | Not to sell   or use as collateral the Ekono, Almac   and Líder brands.                                                                                                                                                                             
|                            |    |                                                                                                                                                                                                                                                     
|                            | 3. | Financial   leverage less than 1.2 (interest-bearing liabilities divided by equity plus   accumulated amortization of goodwill and negative goodwill) for March, June,   September and December.                                                    
|                            |    |                                                                                                                                                                                                                                                     
|                            | 4. | Not to grant   new guarantees.                                                                                                                                                                                                                      
|                            |    |                                                                                                                                                                                                                                                     
|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 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.                                                                                                                                         

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U.S. GAAP Reconciliation and Accounting Pronouncements

Reconciliation

Our financial statements have been prepared in accordance with Chilean GAAP.

The following table sets forth net income and shareholders equity for the years ended and at December 31, 2003, 2004 and 2005 under Chilean GAAP and U.S. GAAP.

|                                      |  | Year ended   December 31,                          |        
|------------------------------------- |  | -------------------------------------------------- | -------
|                                      |  |                                                    |        
|                                      |  | 2003                                               |        
|                                      |  |                                                    |        
|                                      |  | (in   millions of constant Ch$and millions of US$) |        
|Net income (Chilean GAAP)             |  | Ch$                                                | 12,495 
|Net income (U.S. GAAP)                |  |                                                    | 15,651 
|Shareholders equity   (Chilean GAAP) |  | Ch$                                                | 320,456
|Shareholders equity (U.S.   GAAP)    |  |                                                    | 309,517

For further information as to these differences between Chilean GAAP and U.S. GAAP, see Note 25 to our consolidated financial statements.

The principal differences between Chilean GAAP and U.S. GAAP as they affected our results and shareholders equity in the three years ended December 31, 2003, 2004 and 2005 were:

| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| | purchase   accounting differences between U.S. GAAP and Chilean GAAP and the related   differences in goodwill, negative goodwill, amortization expense, accumulated   amortization, depreciation, and accumulated depreciation;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                 
| | the   reclassification of revenues obtained from suppliers to cost of goods sold   under U.S. GAAP; and                                                                                                                         
|  |                                                                                                                                                                                                                                 
| | the timing   difference related to the accrual of mandatory dividends under Chilean law.                                                                                                                                        

Pursuant to Chilean GAAP, our consolidated financial statements also recognize the effects of inflation. The effect of inflation has not been reversed in the reconciliation to U.S. GAAP as permitted by the rules and regulations of the U.S. Securities and Exchange Commission.

Under U.S. GAAP, the financial statements reflect, among others, differences from Chilean GAAP as follows:

| | 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.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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.                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Deferred tax   and minority interest adjustments, as applicable, are recorded under U.S.   GAAP for the items listed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Recent U.S. GAAP Accounting Pronouncements

In November 2005, the FASB issued FSP Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which address the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the timing and measurement of an impairment loss. These FSPs are required to be applied to reporting periods beginning after December 15, 2005 and will be adopted by us in the first quarter of fiscal 2006. We do not expect the adoption of these FSPs will have a material impact on our consolidated financial statements.

In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instrument - an amendment of FASB Statements No. 133 and 140.  This new statement:

| | (a) | permits fair   value remeasurement for any hybrid financial instrument that contains an   embedded derivative that otherwise would require bifurcation;                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                      
| | (b) | clarifies   which interest-only strips and principal-only strips are not subject to the   requirements of SFAS 133, Accounting for Derivative Instruments and Hedging   Activities;

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| | (c) | establishes   a requirement to evaluate interests in securitized financial assets to   identify interests that are freestanding derivatives or that are hybrid   financial instruments that contain an embedded derivative requiring   bifurcation;                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (d) | clarifies   that concentrations of credit risk in the form of subordination are not   embedded derivatives; and                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (e) | amends SFAS   140, Accounting for Transfers and Servicing of Financial Assets and   Extinguishments of Liabilities, to eliminate the prohibition on a qualifying   special purpose entity from holding a derivative financial instrument that   pertains to a beneficial interest other than another derivative financial   instrument.

SFAS 155 generally is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006.  The Company does not anticipate that the adoption of this statement will have a material effect on its financial position, results of operations or cash flows.

Research and Development

We do not currently conduct any significant research and development activities.

Trend Information

We are unaware of any trends, uncertainty, demands, commitments or events that would have a material effect on our net revenues, profitability, liquidity or capital resources that has not been discussed in this annual report or that would cause reported financial information to not necessarily be indicative of future operating results or financial conditions.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 6.     DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES

Directors

Pursuant to the Chilean Companies Law, as amended by Law No. 19,705 enacted in December 2000, Chilean publicly traded companies with a net worth exceeding the equivalent of UF1,500,000 (approximately US$52.6 million as of December 31, 2005) must have no less than seven directors and an audit committee composed of no less than three board members. We are now managed by a board of directors that consists of nine directors who are elected at the annual shareholders meeting as mandated by our bylaws and have an audit committee composed of three board members. The entire board of directors is elected every three years. If a vacancy occurs, our board of directors may elect a temporary director to fill the vacancy until the next annual shareholders meeting, at which time the entire board of directors will be renewed, without prejudice to the re-election of any members.

There are regularly scheduled monthly meetings of our board of directors. Extraordinary meetings are convened when called by the president of the board, when requested by any other director with the assent of the president or when requested by an absolute majority of the directors. Our board of directors is responsible, among other things, for the overall supervision and administration of our business activities, for the appointment and removal of the executive officers, for reviewing our financial statements, for approving our budget and for approving any purchase or sale of real estate.

The current board of directors was elected on April 26, 2005 and their three-year tenure will end upon the election of the new members at the annual shareholders meeting to be held at the end of April 2008. The following are the current members of the board of directors and their respective positions:

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|Name                          |  | Position       |  | Age
|----------------------------- |  | -------------- |  | ---
|                              |  |                |  |    
|Felipe   Ibáñez Scott(1)      |  | President      |  | 52 
|Hans Eben   Oyanedel          |  | Vice President |  | 64 
|Nicolás   Ibáñez Scott (1)(2) |  | Director       |  | 50 
|Jonny Kulka   Fraenkel        |  | Director       |  | 61 
|Gonzalo   Eguiguren Correa(3) |  | Director       |  | 47 
|Fernando   Larraín Cruzat(4)  |  | Director       |  | 47 
|Enrique   Ostalé Cambiaso(5)  |  | Director       |  | 46 
|Verónica   Edwards Guzmán(6)  |  | Director       |  | 48 
|René   Cortázar Sanz(7)       |  | Director       |  | 54 

|   
|---
|(1)
|(2)
|(3)
|(4)
|(5)
|(6)
|(7)

Audit Committee

Our audit committee(1) is composed of the following board member:

|Name                      |  | Position |  | Age
|------------------------- |  | -------- |  | ---
|                          |  |          |  |    
|René   Cortázar Sanz (2). |  | Director |  | 54 

|   
|---
|(1)
|(2)

Our audit committee has the following responsibilities:

| | 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;                                                                                                                                                                          

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| | 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

Our key executive officers are the following:

|Name                   |  | Position                  |  | Age |  | Years with   our company
|---------------------- |  | ------------------------- |  | --- |  | ------------------------
|                       |  |                           |  |     |  |                         
|Rodrigo Cruz   Matta   |  | Chief   Executive Officer |  | 53  |  | 33                      
|Miguel Núñez   Sfeir   |  | Chief   Financial Officer |  | 40  |  | 17                      
|Gonzalo   Smith Ferrer |  | General   Counsel         |  | 35  |  | 2                       

Division Managers

Our key division managers are the following:

|Name                           |  | Position                                      |  | Age |  | Years with   our company
|------------------------------ |  | --------------------------------------------- |  | --- |  | ------------------------
|                               |  |                                               |  |     |  |                         
|Marcelo   Gálvez Saldías(1)    |  | General   Manager of the Líder Division       |  | 42  |  | 18                      
|José Pedro Varela   Alfonso(2) |  | General   Manager of Comvesa                  |  | 46  |  | 21                      
|Elias Ayub   Uauy(3)           |  | General   Manager of Presto                   |  | 53  |  | 2                       
|Rodrigo   Cañas Gajardo (4)    |  | General   Manager of FarmaLíder               |  | 54  |  | 24                      
|Juan Pablo   Vega Walker       |  | Development   Manager                         |  | 38  |  | 3                       
|Sebastián   Rozas Heusser(5)   |  | General   Manager of the Real Estate Division |  | 35  |  | 5                       

|   
|---
|(1)
|(2)
|(3)
|(4)
|(5)

Biographical Information

The following is a selected biographical description of each of the members of our board of directors and our executive officers:

Directors

Felipe Ibáñez Scott has been the president of our board of directors since 1986. His previous positions with us include operations manager, manager of accounting and finance, commercial manager of Almac, general director of Ekono, executive vice president of Ekono, as well as director of Almac, Ekonoand other subsidiaries. Mr. Ibáñez graduated from the University of Edinburgh summa cum laudewith a degree in business administration. He is the son of Mr. Manuel Ibáñez, former director of D&S and the brother of Mr. Nicolás Ibañez Scott.

Hans Eben Oyanedel has been a director of our company since 1998. Mr. Eben was president of Gillette Chile and regional manager of Gillette South Cone for over 15 years until 1997. Before that, Mr. Eben held several management positions with The Gillette Company in Boston, USA, Mexico and Central America. Mr. Eben has served on the board of several other local and multinational companies such as Grupo Santander Santiago, Lan Chile, Telefónica CTC Chile, Ultramar, Sitrans, Senexco, and Carter Holt Harvey. Mr. Eben holds an MBA degree from the Universidad de Chile and postgraduate studies on Effective Management Program from Harvard University.

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Nicolás Ibáñez Scott has been a director of our company since 2003 and served as our companys chief executive officer from 1994 to 2002. Mr. Ibáñez previously held positions in our company in our accounting department, as commercial manager for Almac and as a buyer. Mr. Ibáñez, who received his primary education in England, holds a degree in business administration from the Universidad Adolfo Ibáñez. He serves as a member of the board of directors of Universidad Adolfo Ibáñez. He is the son of Mr. Manuel Ibáñez and the brother of Mr. Felipe Ibáñez Scott.

Jonny Kulka Fraenkel has been a director of our company since 1994. Prior to this position, Mr. Kulka served as chief executive officer of El Mercurio, Chiles leading daily newspaper, operations manager with Compañía Cervecerías Unidas, and director of administration and finance for Compañías Chilenas CIC S.A. In 2001, Mr. Kulka returned to El Mercurio to resume his post as chief executive officer. Mr. Kulka Fraenkel holds a degree in business administration from Universidad Adolfo Ibáñez.

Gonzalo Eguiguren Correa has been a director of our company since April of 2001. On the same date he was appointed member of D&S audit committee, of which he is currently the President. Mr. Eguiguren is the executive director of Kimberly Clark Chile. Between 1985 and 1995, Mr. Eguiguren held positions in our commercial operations department and served as our director of corporate finance. Mr. Eguiguren holds a degree in business administration from Universidad de Santiago.

Fernando Larraín Cruzat has been a director of our company and a member of our audit committee since April 2001. Mr. Larraín is the managing director of Larraín Vial S.A., a Chilean stock broker, investment bank, underwriting and financial services company. In addition to serving on our companys board of directors, Mr. Larraín also serves on the board of Industrias Tricolor S.A., Watts S.A., CIC S.A. and Salfacorp S.A. Mr. Larraín is also a professor at Universidad de Los Andes as well as a director for Casa de Acogida La Esperanza. Mr. Larraín holds a degree in economics from Pontificia Universidad Católica de Chile and an MBA degree from Harvard University.

Enrique Ostalé Cambiaso first joined our company in 1989, serving as manager in our companys finance division, as commercial director, as manager of the Líder division and as Chief Financial Officer from 1997 to 2000. Prior to returning as a board member in January 2005, Mr. Ostalé was CEO of El Mercurio Online (2000 and 2001) and Dean of the Business School of the Adolfo Ibáñez University from 2002 to date. Mr. Ostalé holds a degree in Business Administration from the Adolfo Ibáñez School of Business and a Master of Science from the London School of Economics and Political Science.

Verónica Edwards Guzmán was elected to the board of directors at the annual shareholders meeting held on April 26, 2005. She currently serves as executive director and partner of Adimark GfK, one of the largest and most prestigious market research firms in Chile, where she contributes with 22 years of experience in research and analysis of consumer behavior. She is also director of País DigitalFoundation and Advisor to the Woman Communityorganization. She holds a degree in business administration from the Pontificia Universidad Católica de Chile.

René Cortázar Sanz was elected to our companys board of directors at the annual shareholders meeting held on April 26, 2005 with the votes of Chilean pension funds. Mr. Cortázar also serves as director in other companies such as Entel, Corpbanca, Aes-Gener, A.D. Chile, Moneda S.A. He holds the position of Vice President of ICARE and director of the Centro de Estudios Laborales Alberto Hurtado (CELAH). Mr. Cortázar was Secretary of Labor during the government of former President Mr. Patricio Aylwin (1990-1994) and executive director of Televisión Nacional de Chile TVN, the state-owned broadcasting network, between 1995 and 2000. Mr. Cortázar holds a degree in business administration from the Pontificia Universidad Católica de Chile and a PhD in Economics from the MIT. He currently serves as Professor of the Institute of Economics of Universidad de Chile

and visiting professor to the Pontificia Universidad Católica of Río de Janeiro (Brasil) and to University of Notre Dame (USA).

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Corporate Executives

Rodrigo Cruz Matta has been our companys CEO since September 2004, after resigning from the board of directors and audit committee where he had served since April 2003 and June 2003 respectively. He has also been our corporate controller since 1992. Previously, Mr. Cruz held the positions of accounting assistant, buyer of meat products and internal auditor. He also serves as Chief Executive Officer and director in several of our companys subsidiaries.

Miguel Núñez Sfeir has been our chief financial officer since 2000. Over the past 16 years he has served as manager for our in-store credit card Presto and sub-manager of Finance. Mr. Núñez holds a degree in business administration from the Universidad Adolfo Ibáñez.

Gonzalo Smith Ferrer joined our company in October 2004 as general counsel. Before joining our company, Mr. Smith was a senior associate at Carey y Cía Abogados, Chiles largest law firm, where he practiced corporate, finance, and securities law for nearly 10 years. Between 2000 and 2001, Mr. Smith worked as a foreign associate at Davis, Polk &Wardwells office in New York. Between 2002 and 2003, Mr. Smith worked at Cuatrecasas in Madrid, Spain. Mr. Smith obtained his first law degree from the Pontificia Universidad Católica de Chile. In 1999, he was awarded a Fulbright Scholarship and in 2000 he obtained the degree of Master of Laws (LL.M.) from Harvard Law School. Mr. Smith is currently a professor of commercial law at the Faculty of Law of the Pontificia Universidad Católica de Chile.

Divisional Executive Officers

Marcelo Gálvez Saldías has been general manager of the Líder Division since September 2004. Mr. Gálvez was our companys chief operations officer from 2002 to 2004. Over the past 17 years, he has served as chief financial officer, store manager, buyer of groceries, dairy, and meat products and general manager of the Almac-EkonoDivision. Mr. Gálvez holds a degree in business administration from Universidad Adolfo Ibáñez and an MBA degree from the University of Bath, England.

Elías Ayub Uauy joined our company in January 2004, taking the office of General Manager of the Prestofinancial services division. Previously, he worked for 8 years at Banco Hipotecario de Chile Holding where he served as operations manager and finance and administration manager for the pension fund, insurance division, credit division and credit card branch. After that, he joined Citibank N.A. where he served as general manager, director and vice president of the board for the different credit and financial divisions. In 1990, he founded BST Consulting Group, a consulting firm specialized in banking services and credit cards, providing services to the main banks and credit divisions of department stores in Chile. Mr. Ayub holds a degree in business administration from Universidad Adolfo Ibáñez.

José Pedro Varela Alfonso has been general manager of the Apparel Division COMVESA since August 2004. Previously, he served as our companys chief commercial officer from 2002 to 2004. Over the past 20 years, he has served as buyer of groceries and manager of our apparel business area. Mr. Varela holds a degree in statistics from the Pontificia Universidad Católica de Chile and a post-graduate degree in administration from Universidad Adolfo Ibáñez.

Rodrigo Cañas Gajardo has been general manager of the FarmaLíderpharmacy division since July 2001. Mr. Cañas joined our company in 1981 and has been store manager, buyer, manager of the EkonoSupermarket Division in 1994, manager of the Almacdivision in 1997 and manager of the groceries business area in 2000. Mr. Cañas has studies in Food Technology.

Juan Pablo Vega Walker joined our company in July 2002 and currently serves as our development manager. Before joining our company, Mr. Vega spent three years at McKinsey & Company where he served several retail clients in both Chile and Brazil. Mr. Vega holds an MBA degree from the Kellogg School of Management at Northwestern University and a degree in engineering from the Pontificia Universidad Católica de Chile.

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Sebastián Rozas Heusser has been the general manager of the Real Estate Division SAITEC since January 2004. He has been with our company for four years and during that time he has held positions as Market Research Manager, E-Business Manager and Project Manager. Previous to joining our company, he worked as Head of Sales and Marketing for a real estate company. Since August 2001, he has been a professor of Market Research and Finance at Universidad Diego Portales. Mr. Rozas holds a degree in business administration from Universidad Diego Portales and an MBA degree from Clark University, USA.

Director and Executive Officer Compensation

Directors are paid a fee for serving as members of the board of directors, as approved by the annual shareholders meeting. The total compensation paid to each director of our company during 2005 was as follows:

|                                                                                                                                                                                                     |  | Board of   Directors |                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | --------------------------------------
|                                                                                                                                                                                                     |  |                      |                                       
|                                                                                                                                                                                                     |  |                      | Attendance   Fees (D&S Board Meetings)
|                                                                                                                                                                                                     |  |                      |                                       
|                                                                                                                                                                                                     |  | Ch$(1)               |                                       
|Felipe Ibáñez Scott                                                                                                                                                                                  |  | Ch$                  | 96,000,000                            
|Hans Eben Oyanedel                                                                                                                                                                                   |  |                      | 72,000,000                            
|Jonny Kulka Fraenkel                                                                                                                                                                                 |  |                      | 32,000,000                            
|Enrique Ostalé Cambiaso                                                                                                                                                                              |  |                      | 24,000,000                            
|Gonzalo Eguiguren Correa                                                                                                                                                                             |  |                      | 24,000,000                            
|Fernando Larraín Cruzat                                                                                                                                                                              |  |                      | 24,000,000                            
|Nicolás Ibáñez Scott                                                                                                                                                                                 |  |                      | 24,200,000                            
|René Cortázar Sanz                                                                                                                                                                                   |  |                      | 18,000,000                            
|Verónica Edwards Guzmán                                                                                                                                                                              |  |                      | 16,444,000                            
|Enrique Barros Bourie                                                                                                                                                                                |  |                      | 16,000,000                            
|Manuel Ibáñez Ojeda                                                                                                                                                                                  |  |                      | 8,000,000                             
|                                                                                                                                                                                                     |  |                      |                                       
|Total                                                                                                                                                                                                |  | Ch$                  | 394,444,000                           
|                                                                                                                                                                                                     |  |                      |                                       
|                                                                                                                                                                                                    
|                                                                                                                                                                                                    
|(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.

The member of the audit committee is also paid fees for serving at the same, in addition to those paid to him as member of the board of directors. The fees paid to the member of the audit committee during 2005 were as follows:

|                   |  | Audit   Committee   Attendance Fees |          
|------------------ |  | ----------------------------------- | ---------
|                   |  |                                     |          
|                   |  |                                     | Ch$      
|René Cortázar Sanz |  | Ch$                                 | 4,000,000
|Total              |  |                                     | 4,000,000
|                   |  |                                     |          

In 2005, the audit committee incurred expenses totaling Ch$7,817,000 (US$15,253).

For the year ended December 31, 2005, the aggregate amount of compensation we paid to all directors and executive and key officers was Ch$1,810,251,000 (US$3,532,197) of which Ch$992,018,000 (US$1,935,610) was paid to our executive and key officers as remunerations. We do not disclose to our shareholders or otherwise make available to the public, information as to the compensation of our individual executive officers.

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Employees

At December
31, 2005, we had a total of 30,124 full-time equivalent employees. Of these
full-time equivalent employees, 25,826 were employed in the stores (including
the 624 full-time equivalent employees employed in our FarmaLíderpharmacies), 1,015 were employed in the distribution facilities (the
distribution center, warehouses and transportation) and 3,283 were employed in
the headquarters, other support units and other business units. Of our 30,124
full-time equivalent employees working in the various divisions throughout
Chile, 16,719 are unskilled workers (55.5%), 13,074 are technicians and
administrative workers (43.4%) and 331 hold executive positions
(1.1%).

Store employees are typically subject to collective contracts at each store, which generally have a term of three years. Our employees receive benefits established by the collective bargaining agreements, salaries in accordance with our corporate policy, benefits provided for by law (including disability insurance) and certain additional benefits we provide. Among these, we provide educational training for our employees and opportunities for their families (including scholarships for children of employees) and assistance in financing the purchase of homes.

We operate a merit-based bonus program for our managers, both at the headquarters/service school and store level, as well as for department heads at each store. The bonus fluctuates between one and four months salary and is determined in accordance with clearly defined criteria, including our overall performance, the performance of the employees store, his or her performance as compared to specific targets established at the beginning of the year and more subjective standards such as fostering an open, constructive working environment.

Share Ownership

Certain of our directors and executive officers own shares of our company. Set forth below are the number of shares and the ownership percentages for the directors and executive officers (excluding indirectly held shares).

|                                                                                                                    |  | At   December 31, 2005         |          
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---------
|                                                                                                                    |  |                                |          
|Directors                                                                                                           |  | Number of   Shares   Owned (1) |          
|                                                                                                                    |  |                                |          
|Felipe Ibáñez Scott                                                                                                 |  |                                |         
|Hans Eben Oyanedel                                                                                                  |  |                                |         
|Nicolás Ibáñez Scott                                                                                                |  |                                | 2,010,476
|Jonny Kulka Fraenkel                                                                                                |  |                                | 343,736  
|Gonzalo Eguiguren Correa                                                                                            |  |                                | 680,848  
|Fernando Larraín Cruzat                                                                                             |  |                                |         
|Enrique Ostalé Cambiaso                                                                                             |  |                                |         
|Verónica Edwards Guzmán                                                                                             |  |                                |         
|René Cortázar Sanz                                                                                                  |  |                                |         
|Executive   Officers                                                                                                |  |                                |          
|Rodrigo Cruz Matta                                                                                                  |  |                                | 1,104,868
|Miguel Núñez Sfeir                                                                                                  |  |                                | 595,744  
|Gonzalo Smith Ferrer                                                                                                |  |                                |         
|Division   Managers                                                                                                 |  |                                |          
|Marcelo Gálvez Saldías                                                                                              |  |                                |         
|José Pedro Varela Alfonso                                                                                           |  |                                | 230,308  
|Elias Ayub Uauy                                                                                                     |  |                                |          
|Rodrigo Cañas Gajardo                                                                                               |  |                                | 62,400   
|Juan Pablo Vega Walker                                                                                              |  |                                |         
|Sebastián Rozas Heusser                                                                                             |  |                                |         
|Directors and executive   officers as a group                                                                       |  |                                | 5,028,380
|Directors and executive   officers as a group, excluding controlling shareholders (Nicolás Ibáñez   Scotts shares) |  |                                | 3,017,904
|                                                                                                                   
|                                                                                                                   
|(1)          Amount   refers to directly held shares only.                                                         

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A series of companies beneficially owned or controlled by Messrs. Felipe Ibáñez Scott, president of our board of directors and Nicolás Ibáñez Scott, a director and our former chief executive officer hold 63.47% of the shares issued by our company. The remainder of our directors and officers (excluding the controlling shareholders) hold 3,017,904 shares of our company, representing a 0.046% ownership.

Item 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Principal Shareholders

Control of our company is vested in a series of companies beneficially owned or controlled by Messrs. Felipe Ibáñez Scott and Nicolás Ibáñez Scott. Together, these companies and related parties controlled 63.47% of our outstanding capital stock at December 31, 2005. At December 31, 2005 (and at the date hereof), we had 6,520,000,000 shares outstanding. Our only outstanding voting securities are the shares. The following table sets forth certain information concerning ownership of our shares at December 31, 2005 with respect to each shareholder that we know to own 5% or more of the outstanding shares, all shareholders related to the controlling shareholders and all directors and executive officers as a group:

|                                                                                     |  | At   December 31, 2005   |              
|------------------------------------------------------------------------------------ |  | ------------------------ | -------------
|                                                                                     |  |                          |              
|Shareholders                                                                         |  | Number of   Shares
Owned |              
|                                                                                     |  |                          |              
|Servicios Profesionales y   de Comercialización S.A.(1)                              |  |                          | 2,305,831,496
|Empresas Almac S.A.(1)                                                               |  |                          | 599,758,172  
|Future Investments S.A.(2)                                                           |  |                          | 525,414,236  
|Servicios e Inversiones   Trucha S.A.(3)                                             |  |                          | 480,195,104  
|International Supermarket   Holdings S.A. (1)                                        |  |                          | 207,863,883  
|Inversiones Triplevis   Limitada(1)(7)                                               |  |                          | 11,404,604   
|Inversiones Triplesis   Limitada(1)(7)                                               |  |                          | 7,603,072    
|Controlling group(4)                                                                 |  |                          | 4,138,070,567
|TOTAL                                                                                |  |                          | 6,520,000,000
|Related parties(6)                                                                   |  |                          | 28,790,888   
|Directors and executive   officers as a group, excluding controlling shareholders(5) |  |                          | 3,017,904    

|   
|---
|(1)
|(2)
|(3)
|(4)
|(5)
|(6)
|(7)

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Purchase of Shares by Controlling Shareholders

During 2005, International Supermarket Holdings S.A. purchased 19,207,173 shares with an average price per share of Ch$178.33. At May 31, 2006, International Supermarket Holdings S.A. owned a total of 213,363,228 shares representing a 3.27% of ownership.

Related Party Transactions

In the ordinary course of our business, we engage in a variety of arms length related-party and intragroup transactions. These transactions are primarily for the purchase of goods and services which may also be provided by other suppliers. According to Chilean corporate law, related-party transactions and transactions between entities pertaining to a same group may only be entered into if they are communicated to and approved by the board of directors, and provided their terms are fair in a manner similar to contractual terms prevailing in the market. Prior to their approval by the board related-party and intragroup transactions have to be reviewed and reported by the audit committee to the board of directors. The report issued by the audit committee must be read to the board of directors during the meeting in which the relevant related-party transaction is to be approved. Additionally,
related-party transactions must be reported each year to the annual shareholders meeting. Under Chilean law related-party transactions include, but are not limited to, those in which a director, key officer or executive, has an interest, either directly or as the representative of another person or entity. Directors may be held liable for damages to a company and its shareholders for not fulfilling their obligations for the approval of related-party and intragroup transactions. We have complied with the requirements of the above-described legal provisions in all related-party and intragroup transactions and affirm that we will continue to comply with such requirements. See Note 19 of our consolidated financial statements for a more detailed accounting of transactions with related parties.

Donations to Universidad Adolfo Ibáñez

Universidad Adolfo Ibáñez is a highly reputed private university in Chile, which was founded by the family of our controlling shareholders and is named after the grandfather of Messrs. Nicolás Ibáñez Scott and Felipe Ibáñez Scott, our controlling shareholders. We have made charitable contributions to the Universidad Adolfo Ibáñez in previous years of:  Ch$259.6 million in 2004, and Ch$261.1 million in 2003.  During 2005, no contribution was made to this institution.

Loans from Servicios Profesionales y de Comercialización S.A.

We have historically received loans from Servicios Profesionales y de Comercialización S.A., or SERPROCOM, one of our controlling shareholders and a company beneficially owned or controlled by Messrs. Nicolás Ibáñez Scott and Felipe Ibáñez Scott. The amounts of these loans are equal to the amounts payable to SERPROCOM based on its pro rata ownership interest in our company. As of the date of this annual report, SERPROCOM holds approximately 35.4% of our shares. We make interest payments on these loans at market values. The loans we have received from SERPROCOM amounted to Ch$6,201 million (US$12.1 million) at December 31, 2005, Ch$13,829 million at December 31, 2004 and Ch$8,269 million at December 31, 2003.

Relationship with Larraín Vial S.A.

Fernando Larraín Cruzat, a member of our board of directors and audit committee, is a managing director of Larraín Vial S.A., a prominent Chilean stock broker, underwriter, investment bank and financial services company. From time to time, Larraín Vial S.A. has provided and continues to provide investment banking and other financial services to us. We have also engaged Larraín Vial S.A. as an underwriter in connection with the offering in Chile of our shares relating to the capital increase which took place in 2004.

Loans to Related Parties

Currently, there are no outstanding loans to executive officers or our controlling shareholders.

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Item 8.          FINANCIAL INFORMATION

See Item 18 - Financial Statements for our consolidated financial statements filed as part of this annual report.

Item 9.          THE OFFER AND LISTING

Our shares
are listed in the Bolsa de Comercio de Santiago(the Santiago Stock
Exchange), the Bolsa Electrónica de Chile(the Electronic Stock
Exchange) and the Bolsa de Valores de Valparaíso (the
Valparaíso Stock Exchange), collectively referred to as the Chilean
Stock Exchanges. The Santiago Stock Exchange, established in 1893, is a
private company whose equity consists of 48 shares held by 45 shareholders. At
December 31, 2005, the shares of 245 companies were listed in the Santiago Stock
Exchange. The Santiago Stock Exchange is Chiles principal exchange and
accounted for approximately 82% of the equity trading volume in Chile during
2005.

Since October 1997, our ADSs, each representing 60 shares of common stock, have been listed in the New York Stock Exchange under the symbol DYS. The Depositary for the ADSs is JPMorgan Chase Bank, N.A. (formerly Morgan Guaranty Trust Company of New York). Since December 2002, we have listed our common shares in the Madrid Stock Exchange (Latibex).

On August 6, 2004, in connection with a capital increase of 250,000,000 common shares, we conducted an offering of 166,637,636 shares of our common stock in Chile and in the United States, none of which were registered with the U.S. Securities and Exchange Commission. We also conducted a preemptive rights offering to the holders of our common stock and ADSs, as required by Chilean law, to subscribe 83,362,365 new shares of common stock in Chile and elsewhere outside Chile, of which 15,117,282 shares were represented by ADRs. The subscription price was Ch$620 per new common share and ADS. After the close of the preemptive rights offering, 248,381,101 shares were subscribed yielding total proceeds of Ch$153,996,282,620. The unsubscribed shares were later offered and sold to the open market in Chile; therefore the full 250,000,000 shares were subscribed and paid, totaling 1,630,000,000 outstanding shares on
completion of the process.

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.

On October 26, 2004, our shareholders approved a share repurchase program intended to implement a stock option compensation plan for our employees and our affiliates employees. Our board of directors may determine, without further approval by our shareholders, the timing and the terms and conditions of any such share repurchase program.

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The table below shows the high and low daily closing prices of our shares in Chilean pesos and the trading volume of our shares on the Santiago Stock Exchange and the high and low daily closing prices in U.S. dollars and trading volume of our ADSs on the New York Stock Exchange for the years ended December 31, 2001, 2002, 2003, 2004 and 2005 and for each quarter of 2004 and 2005.

|              |  | Closing Prices on the Santiago Stock Exchange |           | Closing Prices on the NYSE |                     
|------------- |  | --------------------------------------------- | --------- | -------------------------- | --------------------
|              |  |                                               |           |                            |                     
|              |  | Share   Volume (2)                            |           |                            | Ch$ per Share (1)(2)
|              |  |                                               |           |                            |                     
|              |  | (In thousands)                                |           | High                       |                     
|              |  |                                               |           |                            |                     
|2001          |  |                                               | 725,184   |                            |                     
|2002          |  |                                               | 941,116   |                            |                     
|2003          |  |                                               | 963,016   |                            |                     
|2004          |  |                                               | 3,071,010 |                            |                     
|1st   Quarter |  |                                               | 392,562   |                            |                     
|2nd   Quarter |  |                                               | 316,385   |                            |                     
|3rd   Quarter |  |                                               | 1,277,117 |                            |                     
|4th   Quarter |  |                                               | 1,084,946 |                            |                     
|2005          |  |                                               | 3,259,896 |                            |                     
|1st   Quarter |  |                                               | 991,633   |                            |                     
|2nd   Quarter |  |                                               | 895,715   |                            |                     
|3rd   Quarter |  |                                               | 736,433   |                            |                     
|4th   Quarter |  |                                               | 636,115   |                            |                     

|                                                                                          
|------------------------------------------------------------------------------------------
|(1)                                                                                       
|(2)                                                                                       
|Source:   Santiago Stock Exchange Official Quotations Bulletin, New York Stock   Exchange.

The table below sets forth the reported high and low closing prices of
our shares on the Santiago Stock Exchange and the high and low daily closing
prices of our ADSs on the New York Stock Exchange

|              |  | Closing Prices on the Santiago   Stock Exchange |        | Closing Prices on the NYSE | 
|------------- |  | ----------------------------------------------- | ------ | -------------------------- | 
|              |  |                                                 |        |                            | 
|              |  | Ch$ per Share (1)                               |        | US$ per ADS                | 
|              |  |                                                 |        |                            | 
|              |  | High                                            |        | Low                        | 
|              |  |                                                 |        |                            | 
|November 2005 |  |                                                 | 185.50 |                            | 
|December 2005 |  |                                                 | 181.00 |                            | 
|January 2006  |  |                                                 | 173.00 |                            | 
|February 2006 |  |                                                 | 177.00 |                            | 
|March 2006    |  |                                                 | 181.51 |                            | 
|April 2006    |  |                                                 | 168.50 |                            | 
|May 2006      |  |                                                 | 161.50 |                            | 

|                                                                                          
|------------------------------------------------------------------------------------------
|(1)                                                                                       
|Source:   Santiago Stock Exchange Official Quotations Bulletin, New York Stock   Exchange.

The Chilean stock exchanges are substantially smaller, less liquid and more volatile than major securities markets in the United States. The Santiago Stock Exchange had a market capitalization of approximately US$136.4 billion (Ch$68,891 billion) as of December 31, 2005 and an average monthly trading volume of US$1,727 million during 2005. Trading activity on the Santiago Stock Exchange is on average substantially less than that on the principal national securities exchanges in the United States. For the year ended December 31, 2005, the percentage of securities listed on the Santiago Stock Exchange that traded on an average of 90% or more of the trading days was approximately 17.2%. We estimate that for the year ended December 31, 2005, our shares were traded on the Santiago Stock Exchange on an average of approximately 100% of such trading days.

On December 31, 2005, the closing sales price for our shares was Ch$166.25 per share on the Santiago Stock Exchange, US$19.29 per ADS on the New York Stock Exchange and 16.40 per bundle of 60 shares on the Madrid Stock Exchange. At December 31, 2005, there were 3,212,986ADSs (equivalent to 192,779,160 shares). Such ADSs represented at such date 2.96% of the total number of issued and outstanding shares. At December 31, 2005 the equivalent of 2,909,704 shares, traded on the Madrid Stock Exchange in bundles of 60, representing 0.045% of the total number of our issued and outstanding shares.

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Item 10.          ADDITIONAL INFORMATION

Register and Entry Number

We are registered in the Chilean comercial registry (Registro de Comercio del Conservador de Bienes Raíces) under the entry number 7,603.

Bylaws

General.  Our authorized capital consists of 6,520,000,000 common shares, each without par value. All of our common shares provide our shareholders with the same rights. Our stated objective is to:

| | 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.  Our annual shareholders meeting is held within four months of the end of our fiscal year, generally in April, but, in any case, following the preparation of our financial statements for the previous fiscal year. Extraordinary shareholders meetings can be called by the board when, in its judgment, a meeting of the shareholders is warranted. Shareholders representing 10% of our total share capital may request that the board call an extraordinary shareholders meeting. Only shareholders of record as of five days prior to a meeting of shareholders will be allowed to vote on matters presented at that meeting.

Resolutions may be adopted at the annual meeting of shareholders by an absolute majority of the shares present at that meeting. Resolutions that relate to the following matters may only be adopted in extraordinary shareholders meetings by the vote of at least two-thirds of all outstanding shares:

| | 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.                                                                            

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Share Capital

Common Shares

At December 31, 2005, we had 6,520,000,000 shares outstanding. Those shares constitute our only outstanding voting securities. In 2004, we carried out a capital increase of 250,000,000 common shares, of which 166,637,636 shares of our common stock were offered in Chile and the United States. In August 2004, we also conducted a preemptive rights offering to the holders of our common stock and ADSs, as required by Chilean law, to subscribe 83,362,365 new shares of common stock in Chile and elsewhere outside Chile, of which 15,117,282 shares were represented by ADR rights. The subscription price was Ch$620 per new common share and Ch$9,300 per ADS. After the close of the preemptive rights offering, 248,381,101 shares were subscribed yielding total proceeds of Ch$153,996,282,620 (US$247 million). The unsubscribed shares were later offered and sold to the open market in Chile.

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.

On October 26, 2004, our shareholders approved a share repurchase program intended to implement a stock option compensation plan for our employees and our affiliates employees. Our board of directors may determine, without further approval by our shareholders, the timing and the terms and conditions of any such share repurchase program.

Voting

Holders of common stock are entitled to one vote for each share of record on all matters submitted to a vote of our shareholders.

American Depositary Shares

At December 31, 2005, we had 3,212,986 ADSs issued and outstanding, equivalent to 192,779,160 shares, which represented a 2.96% of the total shares of our company. Each ADS represents 60 shares of common stock.

Material Contracts

The Deposit Agreement

American Depositary Receipts (ADRs) evidencing American Depositary Shares (ADSs) are issuable by JPMorgan Chase Bank, N. A. (formerly, Morgan Guaranty Trust Company of New York), as Depositary, pursuant to the terms of the Deposit Agreement dated as of October 7, 1997 among our company, the Morgan Guaranty Trust Company of New York and the registered holders from time to time of the ADRs issued thereunder. The Deposit Agreement was amended by Amendment No. 1, dated December 3, 2004, among our company, JPMorgan Chase Bank, N.A. and all holders from time to time of ADRs issued thereunder. Pursuant to the Amendment No. 1 to Deposit Agreement, the number of the underlying shares of each ADS was increased from fifteen (15) shares to sixty (60) shares, deposited under the Deposit Agreement with Banco Santander-Santiago. On March 31, 2005, our companys shares were transferred from Banco Santander-Santiago
to a new custodian, Banco de Chile, which principal offices are located at Agustinas No. 975, Suite 314, Santiago, Chile. An ADR may evidence any number of ADSs. Only persons in whose names ADRs are registered on the books of the Depositary will be treated by the Depositary and us as holders of ADRs. Copies of the Deposit Agreement and the Amendment No. 1 to Deposit Agreement are available for inspection at the principal office of the Depositary in New York, which is presently located at Four New York Plaza, New York, New York 10004.

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During 2005, the company did not enter into any additional material contracts or further modification to existing contracts previously disclosed.

Exchange Controls

The Central Bank of Chile is responsible for, among other things, monetary policy and exchange controls in Chile. Appropriate registration of a foreign investment in Chile allows investors to access the exchange market known as the Mercado Cambiario Formal(the Formal Exchange Market), a regulated market. Foreign investments can be registered with the Foreign Investment Committee under Decree Law 600 of 1974, or can be registered with the Central Bank of Chile under Chapter XIV of the Compendium of Foreign Exchange Regulations of the Central Bank and the Central Bank Act. The Central Bank of Chile Act is a special type of law that, according to the Chilean Constitution, requires a special majority vote of 4/7 of the Chilean Congress to be modified.

Equity investments in Chile by persons who are not Chilean residents are generally subject to various exchange-control regulations which restrict the repatriation and earnings of the investment. The securities, however, are the subject of a contract (the Foreign Investment Contract) among Morgan Guaranty Trust Company of New York (in its capacity as the depositary for shares represented by the ADSs, the Depositary), our company and the Central Bank of Chile. Pursuant to Article 47 of the Central Bank of Chile Act and Chapter XXVI of the Compendium of Foreign Exchange Regulations of the Central Bank of Chile (Chapter XXVI), the Foreign Investment Contract is intended to grant the Depositary and the holders of ADSs access to the Formal Exchange Market.

Absent the Foreign Investment Contract, under applicable Chilean exchange controls, investors would not be granted access to the Formal Exchange Market for the purpose of converting from Chilean pesos to U.S. dollars and repatriating from Chile amounts received with respect to deposited shares or shares withdrawn from deposit on surrender of ADSs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying shares and any rights with respect thereto). The following is a summary of certain material provisions that are contained in the Foreign Investment Contract, a copy of which was filed as an exhibit to a Registration Statements on Form F-1 (file number 333-07616). This summary does not purport to be complete and is qualified by reference to Chapter XXVI and the Foreign Investment Contract.

Under Chapter XXVI and the Foreign Investment Contract, the Central Bank of Chile has agreed to grant to the Depositary, on behalf of ADR holders, and to any non-Chilean resident investor who withdraws shares upon delivery of ADSs (Withdrawn Shares) access to the Formal Exchange Market to convert pesos to dollars (and to remit such dollars outside of Chile) in respect of shares represented by ADSs or Withdrawn Shares, including amounts received as:

| | 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.                                                                                                                                                                                                                                                                                                                                                                                        

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Transferees of Withdrawn Shares are not entitled to any of the foregoing rights under Chapter XXVI, unless the Withdrawn Shares are redeposited with the Depositary. Investors receiving Withdrawn Shares in exchange for ADSs have the right to redeposit such shares in exchange for ADSs, provided that the conditions to redeposit are satisfied.

Chapter XXVI provides that access to the Formal Exchange Market in connection with dividend payments will be conditioned upon our certification to the Central Bank of Chile that a dividend payment has been made and that any applicable tax has been withheld. Chapter XXVI also provides that access to the Formal Exchange Market in connection with the sale of Withdrawn Shares or distributions thereon, will require that the Central Bank of Chile receives a certificate issued by the Depositary that such shares have been withdrawn in exchange for the pertinent ADSs and receipt of a waiver of the benefit of the Foreign Investment Contract with respect thereto until such Withdrawn Shares are redeposited.

Chapter XXVI and the Foreign Investment Contract provide that a person who brings foreign currency into Chile to purchase shares with the benefit of the Foreign Investment Contract must convert such currency into pesos on the date of entry and has five business days from such date to invest in shares in order to receive the benefits of the Foreign Investment Contract. If such person decides not to acquire shares within such period, he or she may access the Formal Exchange Market to reacquire dollars, provided that the applicable request is presented to the Central Bank of Chile within seven days of the initial conversion into pesos. Shares acquired as described above may be deposited for ADSs and receive the benefits of the Foreign Investment Contract, subject to:

| | 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.

Access to the Formal Exchange Market under any of the circumstances described above is not automatic. Pursuant to Chapter XXVI, such access requires approval of the Central Bank of Chile based on a request for such approval presented through a banking institution established in Chile. The Foreign Investment Contract provides that if the Central Bank of Chile has not acted on such request within seven banking days, the request will be deemed approved.

Pursuant to current Chilean law, the Foreign Investment Contract cannot be amended unilaterally by the Central Bank of Chile. Additionally, there are judicial precedents (which are not binding with respect to future judicial decisions) indicating that the Foreign Investment Contract may not be abrogated by future legislative changes. There can be no assurance, however, that additional Chilean restrictions applicable to the holders of ADSs, to the disposition of underlying shares or to the repatriation of the proceeds from such disposition will not be imposed in the future, nor can there be any assessment of the duration or impact of such restrictions if imposed. If for any reason, including changes in the Foreign Investment Contract or Chilean Law, the Depositary were unable to convert pesos to dollars, investors would receive dividends or other distributions in pesos.

Other Limitations

Dividends Policy

In accordance with Chilean law, we must distribute cash dividends equal to at least 30% of our annual net income calculated in accordance with Chilean GAAP, unless otherwise decided by a unanimous vote of all shares issued, and unless, and except to the extent, that we have accumulated losses. For a more detailed discussion of our policy on dividends, see Dividend Policy and Dividends.

Exchange Rates

All payments and distributions with respect to ADSs must be transacted in the Formal Exchange Market.

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Share Capital

Under Article 12 of the Securities Market Law and Circular 585 of the Chilean Superintendencia de Valores y Seguros(the SVS), certain information regarding transactions in shares of publicly held companies must be reported to the SVS and the Chilean stock exchanges. Since the ADSs are deemed to represent the underlying shares, transactions in ADSs will be subject to these reporting requirements. Shareholders of a publicly held corporation are required to report the following to the SVS and the Chilean stock exchanges:

| | 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.                                  

A beneficial owner of ADSs representing 10% or more of our share capital will be subject to these reporting requirements under Chilean law.

Under Article 54 of the Securities Market Law, persons or entities aiming to acquire direct or indirect control of an open stock corporation are also required to:

| | 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.                                                                                            

This written communication and notice must be published at least ten business days in advance of the date of the execution of the documents that will entitle the person to acquire control of the open stock corporation, and, in all cases, concurrently with the commencement of negotiations that include delivery of information and documentation about the corporation. The content of the notice and written communication are determined by SVS regulations and include, among other information, the identification of persons or entities purchasing or selling, the price as well as the other essential conditions of negotiation.

Title XV of the Securities Market Law sets forth the basis for determining what constitutes control, a direct holding and a related party, while Title XXV establishes a special procedure for acquiring control of an open stock corporation.

The Chilean Companies Act requires Chilean companies to offer existing shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage of such company whenever such company issues new shares. United States holders of ADSs are not entitled to exercise preemptive rights unless a registration statement under the Securities Act is effective with respect to such rights or an exemption from the registration requirement for such rights is available. At the time of any preemptive rights offering, we intend to evaluate the costs and potential liabilities associated with any such registration statement, as well as the indirect benefits to it from enabling the exercise by the holders of ADSs of such preemptive rights and any other factors we consider appropriate at the time, and then to make a decision as to whether to file such a registration statement. No assurance
can be given that any registration statement would be filed. If no registration statement is filed and no exemption from the registration requirements of the Securities Act is available, the Depositary will sell such holders preemptive rights and distribute the proceeds from the sale of such rights in a secondary market, if a market for such rights exists and a premium can be recognized over the cost of such sale. Should the Depositary not be permitted or otherwise be unable to sell such preemptive rights, the rights may be allowed to lapse with no consideration received.

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Dissenting Shareholders

The Chilean Companies Act provides that, upon the adoption at an extraordinary meeting of shareholders of any of the resolutions enumerated below, dissenting shareholders are entitled to withdraw from a Chilean issuer and to compel that issuer to repurchase their shares, subject to the fulfillment of certain terms and conditions described below. In order to exercise such rights, holders of ADSs must first withdraw the shares represented by their ADSs pursuant to the terms of the Depositary Agreement. Dissenting shareholders are defined as those who voted against a resolution that entitles the exercise of withdrawal rights, or if absent at such a meeting, those who stated their opposition to such resolution in writing within 30 days of its adoption. Dissenting shareholders must exercise their withdrawal rights by tendering their stock to the issuer within 30 days after adoption of the
resolution.

The resolutions that result in a shareholders right to withdraw are the following:

| | 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).                                                                                                       

Under Article 69 BIS of the Chilean Companies Act, the right to withdraw is also granted to shareholders, other than the Administradoras de Fondos de Pensiones (AFPs), subject to certain terms and conditions, if we become controlled by the Chilean government, directly or through any of its agencies, and if two independent rating agencies downgrade the rating of our stock from first class due to certain actions specified in Article 69 BIS and actions undertaken by us or the Chilean Government that negatively and substantially affect our earnings. Shareholders must exercise their withdrawal rights by tendering their stock to us within 30 days of the date of the publication or of the new rating by two independent rating agencies. If the withdrawal right is exercised by a shareholder invoking Article 69 BIS, the price paid to the dissenting shareholder shall be the weighted average of the
shares sales price as reported on the stock exchanges on which our shares are quoted for the six-month period preceding the publication of the new rating by two independent rating agencies. If the SVS determines that the shares are not actively traded, the price shall be book value calculated as described above.

Voting Shares of Common Stock

The Depositary will mail a notice to all holders containing the information (or a summary thereof) included in any notice of a shareholders meeting received by the Depositary, a statement that each holder of ADSs at the close of business on a specified record date will be entitled, subject to Chilean law or the regulations and provisions governing deposited shares, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the deposited securities represented by the ADSs evidenced by such holders ADSs and a brief statement as to the manner in which each such holder may instruct the Depositary to exercise voting rights in respect of shares represented by ADSs held by the holders. Holders on the record date set by the Depositary are entitled to instruct the Depositary in writing, subject to the terms of Chilean law, the Bylaws and the Deposit Agreement, as to the
exercise of voting rights attached to the deposited shares, and upon receipt of such instructions, the Depositary will endeavor, insofar as practicable, to vote or cause to be voted the shares underlying such holders ADSs in accordance with such written instructions.

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The Depositary has agreed not to, and shall instruct the Custodian and each of its nominees, if any, not to vote the shares evidenced by an ADS other than in accordance with such written instructions from the holder. The Depositary may not itself exercise any voting discretion over any shares. If no instructions are received by the Depositary from any holder with respect to any of the deposited securities represented by the ADSs evidenced by such holders ADSs on or before the date established by the Depositary for such purpose, the Depositary shall deem such holder to have instructed the Depositary to give a discretionary proxy to a person designated by us to vote the underlying shares.

Disclosure

Holders of ADSs are subject to certain provisions of the rules and regulations promulgated under the Exchange Act relating to the disclosure of interests in the shares. Any holder of ADSs who is or becomes directly or indirectly interested in 5% (or such other percentage as may be prescribed by law or regulation) or more of the outstanding shares must notify us, any U.S. securities exchange on which the ADSs or shares are traded and the Securities and Exchange Commission (as required by such rules and regulations) within ten days after becoming so interested and thereafter upon certain changes in such interests. In addition, holders of ADSs are subject to the reporting requirements contained in Articles 12 and 54 and Title XV of the Securities Market Law, which provisions may apply when a holder beneficially owns 10% or more of the shares or has the intention of taking control of us.

Chilean Tax Considerations

The following discussion is based on the opinion of Carey y Cía with respect to certain Chilean income tax laws presently in force, and summarizes the material Chilean income tax consequences of an investment in our common stock or ADSs by an individual who is not domiciled or resident in Chile or a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile (a Foreign Holder). This discussion is based upon Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal Revenue Service and other applicable regulations and rulings. The discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investors particular tax situation. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE CHILEAN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR SHARES. Under Chilean law, tax rates applicable to foreign investors, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may only be established or amended by another statute. In addition, the Chilean tax authorities enact rulings and regulations of both general and specific application and interpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who rely in good faith on such rulings, regulations and interpretations, but Chilean tax authorities may change such rulings, regulations and interpretations. There is no income tax treaty in force between Chile and the United States.

Cash Dividends and Other Distributions

Cash dividends paid by our company with respect to the ADSs or shares held by a Foreign Holder will be subject to a 35% Chilean withholding tax, which is withheld and paid to the Chilean tax authorities by us (the Withholding Tax). A credit against the Withholding Tax is available based on the level of corporate income tax actually paid by us on the income to be distributed (the First Category Tax). However, since the amount of First-Category Tax we pay is added to the taxable base in calculating the Withholding Tax, the overall tax burden to the holder will be 35%, regardless of whether we register a tax profit, with the corresponding credit for First-Category Tax paid, or a tax loss. Full applicability of the First Category-Tax Credit at the 17% rate results in an effective dividend withholding tax rate of 21.68%. Consequently, the effective withholding tax rate with respect to
dividends fluctuates between 21.68% and 35%, depending on whether or not the dividends are attributable to taxable profits that were subject to First-Category Tax at the corporate level.

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Under Chilean income tax law, dividends generally are assumed to have been paid out of our oldest retained profits for the purpose of determining the level of First-Category Tax that we paid. For information as to our retained earnings for tax purposes and the tax credit available on the distribution of such retained earnings, see Note 14 to the audited consolidated financial statements.

For dividends attributable to our profits during years when the First-Category Tax was 10% (before 1991), the effective dividend Withholding Tax rate will be 27.8%. However, whether the First-Category Tax is 10% or 17%, the effective overall tax burden imposed on our distributed profits will be 35%.

When the First-Category Tax credit is available, it does not reduce the Withholding Tax on a one-for-one basis because it also increases the base on which the Withholding Tax is imposed. In addition, if we distribute less than all of our distributable taxable income, the credit for First Category Tax is used proportionately. Presently, the First-Category Tax rate is 17%. The example below illustrates the effective Chilean Withholding Tax burden on a cash dividend received by a foreign holder, assuming a Withholding Tax rate of 35%, an effective First-Category Tax rate of 17% and a distribution of 30% of our consolidated net income distributable after payment of the First-Category Tax.

|D&S taxable income                                                                         |  |  | 100   |  
|------------------------------------------------------------------------------------------ |  |  | ----- | -
|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  | %
|                                                                                           |  |  |       |  

In general, the effective dividend Withholding Tax rate, after giving effect to the credit for the First-Category Tax, can be calculated using the following formula:

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

Dividend distributions made in property would be subject to the same Chilean tax rules as cash dividends. Stock dividends are not subject to Chilean taxation.

Capital Gains

Gain from the sale or exchange of ADSs (or ADRs evidencing ADSs) outside of Chile, including those traded on the Santiago Stock Exchange Offshore Market, will not be subject to Chilean taxation. The deposit and withdrawal of common shares in exchange for ADRs will not be subject to any Chilean taxes.

Gain recognized on a sale or exchange of shares (as distinguished from sales or exchanges of ADSs representing such shares) will be subject to both the First-Category Tax and the Withholding Tax (the former being creditable against the latter) if either:

| | 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;
|  |                                                                                                                                     
| | the foreign holder and the   purchaser of the shares are related parties.                                                         

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For these purposes, a related party is an entity in which the foreign holder is:

| | 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.

In all other cases, gain on the disposition of shares will be subject to a flat 17.0% First-Category Tax, and no Withholding Tax will apply.

The tax basis of our common shares received in exchange for ADRs generally will be the acquisition value of those shares on the date of the exchange, adjusted according to the Chilean consumer price index (domestic inflation) variation between the month preceding the exchange and the month preceding the sale. The valuation procedure set forth in the deposit agreement, which values common shares that are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, will determine the acquisition value for this purpose. Consequently, the conversion of ADRs into common shares and the immediate sale of those common shares for no more than the value established under the deposit agreement will not generate a gain subject to Chilean taxation.

Notwithstanding the foregoing, in accordance with a Chilean Internal Revenue Service ruling (Oficio No.3708/99), if a foreign holder sells the common shares received in exchange for ADRs on a Chilean Stock Exchange, within two business days prior to the date on which the share transfer with respect to the exchange for ADRs is registered in Santiagos registry, the acquisition value is permitted to be the price at which the shares were sold, as evidenced by the invoice issued by the stockbroker with respect to the sale. Consequently, such a sale would not generate a gain subject to taxation in Chile.

The exercise of preemptive rights relating to our common shares will not be subject to Chilean taxation. Any gain on the sale or assignment of preemptive rights relating to the common shares will be subject to both the First-Category Tax and the Withholding Tax (the former being creditable against the latter).

Other Chilean Taxes

There are no Chilean inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of ADRs by a foreign holder, but such taxes generally will apply to the transfer at death or by gift of the shares by a foreign holder. There are no Chilean stamp, issue, registration or similar taxes or duties payable by holders of ADRs or shares.

Withholding Tax Certificates

Upon request, we will provide to foreign holders appropriate documentation evidencing the payment of Chilean withholding taxes.

United States Tax Considerations

The following summary describes certain United States federal income tax consequences of the ownership of our shares and ADSs by U.S. Holders (as defined below) as of the date hereof. Except where noted, it deals only with shares and ADSs held as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, regulated investment companies, real estate investment trusts, tax-exempt entities, insurance companies, traders in securities that elect to use the mark-to-market method of accounting for their securities, persons holding shares or ADSs as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, persons owning 10% or more of our voting stock, persons liable for alternative minimum tax, investors in pass-through entities or persons whose functional currency is not the United States
dollar. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the Code), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in United States federal income tax consequences different from those discussed below.

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In addition, this summary is based, in part, upon representations made by the Depositary to us and assumes that the Deposit Agreement, and all other related agreements, will be performed in accordance with their terms. PERSONS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OR DISPOSITION OF SHARES OR ADSs IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.

As used herein, the term U.S. Holder means a beneficial holder of a share or ADS that is:

|                                                                                                                                                                                                                                                                                       | 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:                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                        | o                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                        | o                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                            
|If   a partnership holds shares or ADSs, the tax treatment of a partner will   generally depend upon the status of the partner and the activities of the   partnership. U.S. Holders that are partners of a partnership holding shares   or ADSs should consult their own tax advisors.

The U.S. Treasury has expressed concerns that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. Holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax described below, applicable to dividends received by certain non-corporate U.S. Holders. Accordingly, the analysis of the creditability of Chilean taxes and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, each described below, could be affected by actions taken by parties to whom the ADSs are released.

ADSs

In general, for United States federal income tax purposes, U.S. Holders of ADSs will be treated as the owners of the underlying shares that are represented by such ADSs. Accordingly, deposits or withdrawals of shares by U.S. Holders for ADSs will not be subject to United States federal income tax.

Taxation of Dividends

The gross amount of distributions made to U.S. Holders on the ADSs or shares (including the amount of any Chilean taxes withheld) will be taxable as dividend income to such U.S. Holders, to the extent paid out of current or accumulated earnings and profits, as determined under United States federal income tax principles. Such income (including withheld taxes) will be includable in the gross income of a U.S. Holder as ordinary income on the day received by the Depositary, in the case of ADSs, or by the U.S. Holder, in the case of shares. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code. With respect to non-corporate U.S. Holders, certain dividends received before January 1, 2011 from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to
dividends received from that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs (which are listed on the New York Stock Exchange), but not our shares, are readily tradable on an established securities market in the United States.

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Thus, we do not believe that dividends that we pay on our shares that are not backed by ADSs currently meet the conditions required for these reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as investment income pursuant to section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Non-corporate U.S. Holders should consult
their own tax advisors regarding the application of these rules given their particular circumstances.

The amount of any dividend paid in pesos will equal the United States dollar value of the pesos received calculated by reference to the exchange rate in effect on the date the dividend is received by the Depositary, in the case of ADSs, or by the U.S. Holder, in the case of shares, regardless of whether the pesos are converted into United States dollars. If the pesos received as a dividend are not converted into United States dollars on the date of receipt, a U.S. Holder will have a basis in the pesos equal to their United States dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the pesos will be treated as United States source ordinary income or loss.

Subject to certain conditions and limitations, Chilean withholding taxes (after taking into account the credit for the First-Category Tax) may be treated as foreign taxes eligible for credit against a U.S. Holders United States federal income tax liability. The overall limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes or baskets of income. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or shares will be treated as income from sources outside the United States and will generally constitute passive income. Foreign tax credits allowable with respect to each income basket cannot exceed the U.S. federal income tax otherwise payable with respect to such income. Further, in certain circumstances, if a U.S. Holder:

| | 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.                        
|  |                                                                                                                                                                                                              
| | The rules governing the   foreign tax credit are complex. U.S. Holders are urged to consult their tax   advisors regarding the availability of the foreign tax credit under their   particular circumstances.

To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the investor on a subsequent disposition of the ADSs or shares), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. Consequently, such distributions in excess of our current and accumulated earnings and profits would generally not give rise to foreign source income and a U.S. Holder would generally not be able to use the foreign tax credit arising from any Chilean withholding tax imposed on such distributions unless such credit can be
applied (subject to applicable limitations) against United States federal income tax due on other foreign source income in the appropriate category for foreign tax credit purposes. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be treated as a dividend (as discussed above).

Distributions of ADSs, shares or preemptive rights to subscribe for shares that are received as part of a pro rata distribution to all of our shareholders generally will not be subject to United States federal income tax. The basis of the new ADSs, shares or rights so received will be determined by allocating your basis in the old ADSs or shares between the old ADSs or shares and the new ADSs, shares or rights received, based on their relative fair market values on the date of distribution.

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Passive Foreign Investment Companies

We believe, based on our current operations and assets, that we should not be classified a passive foreign investment company (a PFIC) for United States federal income tax purposes and we to expect to operate in such a manner so as not to become a PFIC. This conclusion is a factual determination based on, among other things, a valuation of our assets, which is subject to change from time to time. The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition or changes in governing law. If we are or become a PFIC, a U.S. Holder could be subject to additional United States federal income taxes on gain recognized with respect to the ADSs or shares and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under

the PFIC rules.

Non-corporate U.S. Holders will not be eligible for reduced rates of taxation on any dividends received from us prior to January 1, 2011, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.

Capital Gains

For United States federal income tax purposes, a U.S. Holder will recognize taxable gain or loss upon the sale or other disposition of ADSs or shares in an amount equal to the difference between the amount realized for the ADSs or shares and the U.S. Holders basis in the ADSs or shares. Such gain or loss will generally be capital gain or loss. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. Holder generally will be treated as United States source gain or loss. Consequently, in the case of a disposition of shares (which, unlike a disposition of ADSs, may be taxable in Chile), the U.S. Holder may not be able to use the foreign tax credit for Chilean tax imposed on the gain unless it can apply the credit (subject

to applicable limitations) against tax due on other income from foreign sources.

Estate and Gift Taxation

As discussed above under Chilean Tax Considerations-Other Chilean Taxes, there are no Chilean inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of ADSs by a foreign holder, but such taxes generally will apply to the transfer at death or by gift of shares by a foreign holder. The amount of any inheritance tax paid to Chile may be eligible for credit against the amount of United States federal estate tax imposed on the estate or heirs of a U.S. Holder. U.S. Holders should consult their personal tax advisors to determine whether and to what extent they may be entitled to such credit. Chile also imposes a gift tax on the donation of any shares by a foreign holder. The Chilean gift tax generally will not be treated as a creditable foreign tax for United States tax purposes.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to dividends paid in respect of ADSs or shares or the proceeds received on the sale, exchange or redemption of ADSs or shares within the United States (and in certain cases, outside the United States) by U.S. Holders other than certain exempt recipients (such as corporations). A backup withholding tax may apply to such payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of other exempt status or fails to report in full dividend and interest income.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the U.S. Holders United States federal income tax liability provided the required information is furnished to the Internal Revenue Service.

INVESTORS SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF ADSs OR SHARES.

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Dividend Policy and Dividends

Our companys dividend policy is decided upon from time to time by the shareholders at the annual shareholders meetings, with the recommendations of the board of director. However, the board of directors must submit at the annual shareholders meeting for shareholder approval each year a proposal for the declaration of the final dividend or dividends to be paid for the preceding year, consistent with the then-established dividend policy. Our current dividend policy is to pay a minimum annual dividend as required by law. As required by the Chilean Companies Act, unless otherwise decided by unanimous vote of the issued and subscribed shares, we must distribute a cash dividend in an amount equal to at least 30% of our net income for a given year, unless and except to the extent we have a deficit in retained earnings. There can be no assurance that future dividends will be paid in an amount
exceeding the 30% level required by law. Our board has the authority to decide to pay such dividends in the form of interim dividend.

If interim dividends are paid during the fiscal year, a final dividend is declared at the annual shareholders meeting in an amount that, together with the interim dividends previously paid, is sufficient to satisfy the statutory requirement that at least 30% of net income for the year be paid out in dividends. Such final dividend is paid on a date fixed by the board of directors.

The amount and timing for payment of dividends is subject to revision from time to time, depending upon our current level of sales, costs, cash flow and capital requirements, as well as market conditions. Any change in dividend policy would ordinarily be effective for dividends declared in the year following adoption of the change, and a notice as to any such change of policy would be required to be filed with Chilean regulatory authorities and would be publicly available information. Notice of such a change of policy would not, however, be sent to each shareholder or ADS holder. There can be no assurance as to the amount or timing of the declaration or payment of dividends in the future.

Dividends are paid to shareholders of record on the fifth business day preceding the date set for payment of the dividend. The holders of ADSs on the applicable record dates for the ADSs will be entitled to all dividends paid on the ADSs.

Direct shareholders who are not residents of Chile must register as foreign investors under one of the foreign investment regimes contemplated by Chilean law to have dividends, sale proceeds or other amounts with respect to their shares remitted outside of Chile through the formal exchange market. Under our foreign investment contract, the depositary, on behalf of ADR holders, will be granted access to the formal exchange market to convert cash dividends from pesos to U.S. dollars and to pay such U.S. dollars to ADR holders outside of Chile. See Exchange Controls. Dividends received in respect of shares of common stock by holders, including holders of ADRs who are not Chilean residents, are subject to Chilean withholding tax. See Additional InformationChilean Tax Considerations.

The following table sets forth our dividend paid ratio and the amounts of total dividends paid on each fully paid share and ADS in respect of the year indicated. Amounts in Chilean pesos are presented in historical Chilean pesos as of the respective payment dates.

|Year Declared |  | Dividend   Paid Ratio |       | Dividend   per Share   (Ch$/share) (1) |  | Dividend   per ADS   (Ch $/ADS (1) | 
|------------- |  | --------------------- | ----- | -------------------------------------- |  | ---------------------------------- | 
|              |  |                       |       |                                        |  |                                    | 
|2001          |  |                       | 35.1  |                                        |  | 2.5                                | 
|2002          |  |                       | 58.0  |                                        |  | 2.5                                | 
|2003          |  |                       | 66.3  |                                        |  | 2.5                                | 
|2004          |  |                       | 194.9 |                                        |  | 1.875                              | 
|2005          |  |                       | 34.3  |                                        |  | 4                                  | 

|   
|---
|(1)

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Exchange Rates

All payments and distributions with respect to the ADSs must be transacted in the Formal Exchange Market. See Item 3. Key Information-Risk Factors.

New York Stock Exchange and Chilean Corporate Governance Requirements

In accordance with Section 303A.11 of the New York Stock Exchanges Listed Company Manual, the following table sets forth significant differences between Chilean corporate governance requirements and comparable corporate governance requirements applicable to U.S. corporations listed on the New York Stock Exchange.

|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.                                                                                                                                       

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|ITEM                                                                                         |  | NYSE   REQUIREMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | CHILEAN   LAW   REQUIREMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|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 id 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.
|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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|ITEM                                                                                   |  | NYSE   REQUIREMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | CHILEAN   LAW   REQUIREMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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.
|                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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

We are subject to the informational reporting requirements of the U.S. Securities Exchange Act of 1934, as amended, which requires that we file periodic reports and other information with the U.S. Securities and Exchange Commission. As a foreign private issuer, we file annual reports on Form 20-F as opposed to Form 10-K. We do not file quarterly reports on Form 10-Q but furnish reports in relation to material events on Form 6-K. As a foreign private issuer, we are exempt from the rules under the U.S. Securities Exchange Act of 1934, as amended, prescribing the furnishing and content of proxy statements and short-swing profit disclosure and liability.

We have filed with the Securities and Exchange Commission this annual report on Form 20-F, including exhibits, under the Securities Exchange Act of 1934 with respect to the common shares.

You may read and copy all or any portion of the annual report or other information in our files in the Securities and Exchange Commissions public reference room at 100 F Street, N.E., Washington, D.C. 20549. You can also access these documents through the Securities and Exchange Commissions website at http://www.sec.gov. You can request copies of these documents upon payment of a duplicating fee, by writing to the U.S. Securities and Exchange Commission. Please call the U.S. Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. In addition, reports and other information concerning us may be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, on which our ADSs are listed.

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We furnish JPMorgan Chase Bank, as the Depositary of our ADSs, with annual reports in English, which include a review of operations and annual audited consolidated financial statements prepared under Chilean GAAP, and our annual report on Form 20-F, which includes a reconciliation to U.S. GAAP of net income and shareholders equity. Upon our request, the Depositary will promptly mail such reports to all record holders of ADSs. We also furnish to the Depositary, in English, all notices of shareholders meetings and other reports and communications that are made generally available to our shareholders. Upon our request, the Depositary will make such notices, reports and communications available to holders of ADSs and will mail to all record holders of ADSs a notice containing a summary of the information contained in any notice of a shareholders meeting it receives.

Item 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to impacts from interest rate changes, foreign currency fluctuations and changes in the market values of our investments. Generally, we monitor our positions so as to seek lower costs of funds while maintaining our market risk within acceptable parameters. Our principal exposures relate to our investments in Chile, and short-term liabilities denominated in U.S. dollars.

Policies and Procedures

In the normal course of our business, we actively manage our exposure to changes in interest rates, foreign currencies and the fair market value of certain of our investments using a variety of financial instruments. It is our policy to enter into foreign currency and interest rate transactions and other financial instruments only to the extent considered necessary to meet our objectives as stated above. We do not enter into these transactions for speculative purposes.

The following discussion about our risk management includes forward-looking statements that involve risks and uncertainties. Actual results could differ from those projected in the forward-looking statements. See Special Note Regarding Forward Looking Statements. In addition to the inherent risks related to the operations in each of our segments in which we do business, we face material market risk exposures in two categories: foreign currency exchange rate risk and interest rate risk. The following discussion provides additional information regarding our exposure to each of these risks as of December 31, 2005.

Foreign Currency Exchange Rate Risk

Our company has no significant debt in foreign currency. As of December 31, 2005, it held US$-denominated letters of credit for US$37 million, which are exposed to exchange risks. At the same time, our company holds notes receivable in U.S. dollar currency for US$48 million related to the divestment of Supermercados Ekono S.A. (Argentina). Thus, our companys net exposure to exchange rate is US$11 million. Given that the Chilean peso has undergone appreciation during the year 2005 and the observed exchange rate reached its lowest historical rate for the last 3 years on December 31, 2005 at US$1= Ch$512.50, a rise in the exchange rise is deemed likely. In such case, there would be a positive impact on our companys net currency exposure of US$11 million. If the U.S. dollar to Chilean peso exchange rate increased by 10% from the exchange rate registered on December 31, 2005, there would be a net
gain of Ch$564 million (US$1.1 million). Conversely, if the U.S. dollar to Chilean peso exchange rate decreased by 10% from the exchange rate registered on December 31, 2005, there would be a net loss of Ch$5.64 million (US$1.1 million)

Interest Rate Risk

At December 31, 2005, 25.4% of our companys financial debt is at TAB rate + spread, another 41.2% corresponds to bonds issued by our company, at fixed rates ranging from UF (Chilean indexed currency) + 4.5% to UF + 7%. Another 17.5% represents the issue of commercial papers at fixed rates varying from 3.00% to 5.04% and a 6.50% at a fixed UF + 4.49% rate. Exposure to interest rate risk reflects our exposure to floating interest rate, therefore 25.4% of our debt was represented by floating rate debt, and our net exposure to interest rate risk as of December 31, 2005 was Ch$85,205 million (US$166.3 million). TAB stands for tasa bancariaand it is a referenced rate in the Chilean market corresponding to the weighted average rate for fund investments of 30, 90, 180 and 360 days. The TAB rate is issued by the Chilean Association of Banks and Financial Institutions on a daily basis.

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Interest rates showed a decreasing trend during most of the year 2005 since the Chilean Central Bank gradually lowered the referential interest rate due to depressed consumption levels. In August 2003, the referential interest rate was 2.75% versus a 1.75% in August 2004. By the fourth quarter 2004, the Chilean Central Bank started to gradually increase the referential interest rate, which closed the year 2004 at 2.25%, still lower than the 2.45% for December 2003. In order to deal with pressure towards inflation, the Central Bank has continued to gradually increase the referential rate during 2005 to 4.5% at December 31, 2005. At May 2006, this rate was 5.0%. Assuming a 100 basis points increase in the TAB floating rate with respect to 2005 year-end balances, the result would be an increase in our annual interest expenses of approximately Ch$2,000 million (US$3.9 million). However, historical TAB
floating rates have been in the range of 0.3% to 0.5% monthly. According to the Monetary Policy Report issued by the Central Bank in May 2006, inflation should remain controlled around 3.3% and interest rates would not suffer dramatic changes.

In addition, a significant amount of our debt is indexed to Chilean inflation (UF indexed debt), and as such, an increase in Chilean inflation would affect the total interest that we pay on such debt. 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 (CPI).

|                                         |  | Debt in UF |          
|---------------------------------------- |  | ---------- | ---------
|                                         |  |            |          
|                                         |  | Capital    |          
|                                         |  |            |          
|                                         |  |            |          
|                                         |  |            |          
|                                         |  | UF         |          
|                                         |  |            |          
|                                         |  |            |          
|Bonds D&S                                |  |            |          
|Series   A                               |  |            | 3,500,000
|Series   B                               |  |            | 1,200,000
|Series   C                               |  |            | 1,784,826
|Series   D                               |  |            | 1,000,000
|                                         |  |            |          
|Total bonds D&S                          |  |            | 7,484,826
|Debt BancoEstado                         |  |            | 1,200,000
|Lease obligations and   accounts payable |  |            | 347,013  
|                                         |  |            |          
|Total debt UF                            |  |            | 9,031,839
|                                         |  |            |          

All interest rate sensitive instruments issued or held by our company are non-trading instruments.

Item 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

Item 13.     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

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

None.

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Item 15.     CONTROLS AND PROCEDURES

The companys management under the supervision of the chief executive officer and the chief financial officer, performed an evaluation of the effectiveness of the companys disclosure controls and procedures as of December 31, 2005. The companys disclosure controls and procedures are designed to ensure that material information relating to the company required to be disclosed in the reports that it files or submits under the U.S. Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time frame periods specified in the Securities and Exchange Commissions rules and forms, and that such information is gathered and communicated to the companys management, including the chief executive officer and the chief financial officer. Based on this evaluation, the companys chief executive officer and chief financial officer
concluded that the companys disclosure controls and procedures are effective as of the date of such evaluation in ensuring that all material information we are required to disclose in the reports we file under the U.S. Securities and Exchange Act of 1934,as amended, is gathered and communicated to our management, including the chief executive officer and the chief financial officer, in a timely fashion, and that information required to be disclosed in this annual report or our other reports to be filed under the Exchange Act is timely recorded, processed, summarized and reported. There have been no significant changes in our internal controls over financial reporting that occurred during the year ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the companys internal control over financial reporting.

We are in the process of further assessing the effectiveness of our internal control over financial reporting in connection with the rules adopted by the U.S. Securities and Exchange Commission under Section 404 of the Sarbanes-Oxley Act of 2002. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 will be required in connection with the filing of our annual report on Form 20-F for the fiscal year ending December 31, 2006.  We began a comprehensive review of our internal controls in 2005 and have identified areas of focus for strengthening our internal controls.  A number of processes and systems are currently being changed in order to bring our internal controls into compliance with best practices in the industry.  We expect to complete this process by the end of 2006, but we cannot provide assurance that we will be able to do so.  Section 404 of the Sarbanes-Oxley Act
will require that our management provide an assessment of the companys internal control over financial reporting and that our external auditors provide an attestation report with respect to managements assessment.  See Item 3Key InformationRisk FactorsWe are currently reviewing our internal controls for the first time pursuant to the Sarbanes-Oxley Act of 2002, and if we identify any material weaknesses or significant deficiencies in our internal controls, the price of our ordinary shares and ADSs could be adversely affected.

Item 16.        [Reserved]

Item 16A.     AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Mr. René Cortázar Sanz is our audit committee financial expert as defined in Item 16A of Form 20-F. Our board of directors has also determined that Mr. Cortázar Sanz is an independent director as defined in Section 303A.02 of the NYSEs Listed Company Manual.

Item 16B.     CODE OF ETHICS

We have adopted a code of ethics that applies to our chief executive officer and all senior financial officers of our company, including the chief financial officer, chief accounting officer or controller, or persons performing similar functions. Our code of ethics is filed as Exhibit 11.1.

Item 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Under Chilean law, prior to the annual ordinary shareholders meeting taking place during the first four months of each calendar year, the audit committee is required to propose to the board of directors the names of the auditors and risk rating agencies of our company that will be proposed to the shareholders at the annual shareholders meeting for approval. The audit committee of our board of directors has been delegated the supervision of all audit and non-audit services provided by our companys external accountants and risk rating agencies. Our audit committee pre-approved 100% of all fees for audit services provided by its external accountants in 2005, all of which were then confirmed by the companys board of directors. Additionally, 100% of all fees for non-audit services provided by our companys external accountants were approved by our audit committee, from time to time

and as required, during its regular monthly meetings.

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Audit Fees.  The aggregate fees paid to Deloitte and Touche Sociedad de Auditores y Consultores Ltda. in connection with the annual audit of our financial statements and for services normally provided by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. in connection with our statutory and regulatory filings for the fiscal years ended December 31, 2004 and December 31, 2005 were Ch$277,164,689 and Ch$269,082,099 respectively, including out of pocket expenses. 100% of the audit services rendered by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. were approved by our audit committee.

Audit-Related Fees.  No fees were paid in connection with assurance and related services related to the annual audit of our company and for review of our financial statements, other than the Audit Fees described above, for the fiscal years ended December 31, 2004 and December 31, 2005

Tax Fees.  The aggregate fees paid for domestic and international tax-related services, including tax compliance, tax advice and tax planning, rendered by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. to our company for the fiscal years ended December 31, 2004 and December 31, 2005 were Ch$58,124,888 and Ch$111,027,856, respectively. 100% of the tax-related services rendered by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. were approved by our audit committee.

All Other Fees.  The aggregate fees billed for all other non-audit services rendered by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. to our company for the fiscal years ended December 31, 2004 and December 31, 2005 were Ch$214,186,061 and Ch$218,739,314 respectively. 100% of all other non-audit services rendered by Deloitte and Touche, Sociedad de Auditores y Consultores Ltda. were approved by our audit committee.

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

Not applicable.

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

During 2005, no issuer or affiliated parties made purchases pursuant to publicly announced plans or programs or not pursuant to such plans.

PART III

Item 17.     FINANCIAL STATEMENTS

Reference is made to Item 18 for a list of all financial statements filed as a part of this annual report.

Item 18.     FINANCIAL STATEMENTS

The following consolidated financial statements of our company and its subsidiaries are included at the end of this annual report:

|Index to Audited   Consolidated Financial Statements                                                  |  | F-1
|----------------------------------------------------------------------------------------------------- |  | ---
|                                                                                                      |  |    
|Report of Independent   Registered Public Accounting Firm                                             |  | F-2
|                                                                                                      |  |    
|Consolidated Balance   Sheets as of December 31, 2004 and 2005                                        |  | F-3
|                                                                                                      |  |    
|Consolidated Statements of   Income for the years ended December 31, 2003, 2004 and 2005              |  | F-4
|                                                                                                      |  |    
|Consolidated Statements of   Cash Flows for the years ended December 31, 2003, 2004 and 2005          |  | F-5
|                                                                                                      |  |    
|Notes to the Consolidated   Financial Statements for the years ended December 31, 2003, 2004 and 2005 |  | F-6

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Item 19.     EXHIBITS

The exhibits filed with or incorporated by reference in this annual report are listed in the index of exhibits below.

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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              |  | Amendment No. 1, dated as   of December 3, 2004, to Deposit Agreement, dated as of October 7, 1997,   between us and JPMorgan Chase Bank N.A. (formerly, Morgan Guaranty Trust   Company of New York), as Depository and the registered holders from time to   time of American Depository Receipts (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).
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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. Rodrigo Cruz Matta
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).                                                                                                                                                                                                                                                                                                                                      
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|12.2             |  | Certification of Mr. Miguel
Núñez pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).                                                                                                                                                                                                                                                                                                                                            
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|13.1             |  | Certification of Mr. Rodrigo Cruz Matta
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. Miguel
Núñez pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906
of the Sarbanes - Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                   

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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Report on Form 20-F to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of
Santiago, Chile on June 30, 2006.

| | DISTRIBUCION Y SERVICIO   D&S S.A.
| | ----------------------------------
| |                                   
| |                                   
| | /s/ Miguel Núñez Sfeir            
| |                                   
| | Miguel Núñez Sfeir                
| | Chief   Financial Officer         

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DISTRIBUCION Y SERVICIO D&S S.A.

INDEX TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                      |  | Page
|----------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                      |  |     
|Audited Consolidated Financial Statements                                                             |  |     
|Report of Independent Registered Public Accounting Firm                                               |  | F-2 
|Consolidated Balance Sheets as of December 31, 2004 and 2005                                          |  | F-3 
|Consolidated Statements of Income for the years ended December 31,   2003, 2004 and 2005              |  | F-4 
|Consolidated Statements of Cash Flows for the years ended December   31, 2003, 2004 and 2005          |  | F-5 
|Notes to the Consolidated Financial Statements for the years ended   December 31, 2003, 2004 and 2005 |  | F-6 

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

[Letterhead of Deloitte]

To the Shareholders of    Distribución y Servicio
D&S S.A.

We have audited the consolidated balance sheets of Distribución y Servicio
D&S S.A. and subsidiaries (the Company) as of December 31, 2004
and 2005 and the related consolidated statements of income and of cash flows for
each of the three years in the period ended December 31, 2005, all expressed in
thousands of constant Chilean pesos.  These consolidated financial
statements are the responsibility of the Companys management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).   Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The Company is
not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal
control over financial reporting. Accordingly, we express no such opinion. 
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements, present fairly, in all
material respects, the financial position of Distribución y Servicio
D&S S.A. and its subsidiaries as of December 31, 2004 and 2005 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2005 in conformity with accounting principles
generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant
respects from accounting principles generally accepted in the United States of
America.  The application of the latter would have affected the
determination of net income for each of the three years in the period ended
December 31, 2005, and the determination of shareholders equity as of
December 31, 2004 and 2005, to the extent summarized in Note 25.

Our audits also comprehended the translation of constant Chilean pesos amounts
into U.S. dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2.u.  Such U.S. dollar amounts are
presented solely for the convenience of readers in the United States of
America.

/s/ Deloitte Santiago, Chile June 28, 2006

F-2

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DISTRIBUCION Y SERVICIO D&S S.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2005 (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 |    | 2004 |  | 2005            |              
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|                                                                                                                                                                               |  |       |    |      |  |                 | ThCh$        
|ASSETS                                                                                                                                                                         |  |       |    |      |  |                 |              
|CURRENT ASSETS:                                                                                                                                                                |  |       |    |      |  |                 |              
|Cash                                                                                                                                                                           |  |       |    |      |  |                 | 23,603,811   
|Marketable securities                                                                                                                                                          |  |       | 4  |      |  |                 | 36,894,314   
|Notes and accounts   receivable (net of allowance for doubtful accounts of ThCh$22,588,159 and   ThCh$22,469,509 at December 31, 2004 and 2005, respectively)                  |  |       | 5  |      |  |                 | 162,243,920  
|Due from related companies                                                                                                                                                     |  |       | 19 |      |  |                 | 1,545,781    
|Inventories                                                                                                                                                                    |  |       | 6  |      |  |                 | 122,914,136  
|Refundable taxes                                                                                                                                                               |  |       | 14 |      |  |                 | 10,775,022   
|Prepaid expenses                                                                                                                                                               |  |       |    |      |  |                 | 3,228,525    
|Other current assets                                                                                                                                                           |  |       | 7  |      |  |                 | 34,097,099   
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|TOTAL CURRENT ASSETS                                                                                                                                                           |  |       |    |      |  |                 | 395,302,608  
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|PROPERTY, PLANT AND   EQUIPMENT  NET                                                                                                                                          |  |       | 8  |      |  |                 | 616,434,466  
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|OTHER ASSETS  NET                                                                                                                                                             |  |       | 9  |      |  |                 | 61,687,215   
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|TOTAL ASSETS                                                                                                                                                                   |  |       |    |      |  |                 | 1,073,424,289
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|LIABILITIES   AND SHAREHOLDERS EQUITY                                                                                                                                         |  |       |    |      |  |                 |              
|CURRENT LIABILITIES:                                                                                                                                                           |  |       |    |      |  |                 |              
|Banks and financial   institutions                                                                                                                                             |  |       | 12 |      |  |                 | 22,998,999   
|Current portion of   long-term liabilities                                                                                                                                     |  |       | 12 |      |  |                 | 21,677,536   
|Commercial paper                                                                                                                                                               |  |       | 12 |      |  |                 | 60,109,568   
|Dividend payable                                                                                                                                                               |  |       | 13 |      |  |                 |             
|Accounts payable                                                                                                                                                               |  |       | 10 |      |  |                 | 208,960,504  
|Sundry creditors                                                                                                                                                               |  |       | 12 |      |  |                 | 7,710,731    
|Due to related companies                                                                                                                                                       |  |       | 19 |      |  |                 | 13,845,319   
|Accruals and withholdings                                                                                                                                                      |  |       | 11 |      |  |                 | 20,004,303   
|Other current liabilities                                                                                                                                                      |  |       |    |      |  |                 | 172,048      
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|Total current liabilities                                                                                                                                                      |  |       |    |      |  |                 | 355,479,008  
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|LONG-TERM LIABILITIES:                                                                                                                                                         |  |       |    |      |  |                 |              
|Banks and financial   institutions                                                                                                                                             |  |       | 12 |      |  |                 | 98,337,959   
|Bonds                                                                                                                                                                          |  |       | 12 |      |  |                 | 136,207,498  
|Lease obligations                                                                                                                                                              |  |       | 12 |      |  |                 | 6,038,836    
|Sundry creditors                                                                                                                                                               |  |       | 12 |      |  |                 | 205,383      
|Accruals                                                                                                                                                                       |  |       | 20 |      |  |                 | 4,507,005    
|Other long-term liabilities                                                                                                                                                    |  |       |    |      |  |                 | 318,802      
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|Total long-term liabilities                                                                                                                                                    |  |       |    |      |  |                 | 245,615,483  
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|MINORITY INTEREST                                                                                                                                                              |  |       |    |      |  |                 | 4,025        
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|SHAREHOLDERS EQUITY:                                                                                                                                                          |  |       |    |      |  |                 |              
|Paid-in capital (Common   stock, no par value; authorized, issued and outstanding   6,520,000,000 (as adjusted for stock split) at December 31, 2004 and 2005,   respectively) |  |       |    |      |  |                 | 392,452,496  
|Technical revaluation   reserve and other reserves                                                                                                                             |  |       |    |      |  |                 | (1,221,315   
|Retained earnings                                                                                                                                                              |  |       |    |      |  |                 | 81,094,592   
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|Total shareholders equity                                                                                                                                                     |  |       | 13 |      |  |                 | 472,325,773  
|                                                                                                                                                                               |  |       |    |      |  |                 |              
|TOTAL LIABILITIES AND   SHAREHOLDERS EQUITY                                                                                                                                   |  |       |    |      |  |                 | 1,073,424,289
|                                                                                                                                                                               |  |       |    |      |  |                 |              

The accompanying notes are an integral part of these consolidated financial statements

F-3

---



DISTRIBUCION Y SERVICIO D&S S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005 (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 |    | 2003 |  | 2004                            |              
|                                      |  |       |    |      |  |                                 |              
|                                      |  |       |    |      |  |                                 | ThCh$        
|OPERATING   RESULTS                   |  |       |    |      |  |                                 |              
|Net   revenue                         |  |       |    |      |  |                                 | 1,234,989,484
|Cost   of sales                       |  |       |    |      |  |                                 | (956,894,286 
|                                      |  |       |    |      |  |                                 |              
|Gross   profit                        |  |       |    |      |  |                                 | 278,095,198  
|Selling   and administrative expenses |  |       |    |      |  |                                 | (241,639,359 
|                                      |  |       |    |      |  |                                 |              
|Operating   income                    |  |       |    |      |  |                                 | 36,455,839   
|                                      |  |       |    |      |  |                                 |              
|NON-OPERATING   RESULTS               |  |       |    |      |  |                                 |              
|Non-operating   income                |  |       | 18 |      |  |                                 | 1,575,498    
|Non-operating   expenses              |  |       | 18 |      |  |                                 | (19,675,418  
|Foreign   exchange gain (loss)        |  |       | 16 |      |  |                                 | (3,182,310   
|Price-level   restatement             |  |       | 16 |      |  |                                 | 2,256,740    
|                                      |  |       |    |      |  |                                 |              
|Non-operating   loss                  |  |       |    |      |  |                                 | (19,025,490  
|                                      |  |       |    |      |  |                                 |              
|INCOME BEFORE INCOME TAXES            |  |       |    |      |  |                                 | 17,430,349   
|INCOME TAXES                          |  |       | 14 |      |  |                                 | (4,935,488   
|                                      |  |       |    |      |  |                                 |              
|NET INCOME                            |  |       |    |      |  |                                 | 12,494,861   
|                                      |  |       |    |      |  |                                 |              

The accompanying notes are an integral part of these consolidated financial statements

F-4

---



DISTRIBUCION Y SERVICIO D&S S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Restated for general price-level changes and expressed in thousands of constant Chilean pesos (ThCh$) as of December 31, 2005 and thousands of US dollars)

|                                                                                               |  |       |    |      |  | For the year ended December 31, |             
|---------------------------------------------------------------------------------------------- |  | ----- | -- | ---- |  | ------------------------------- | ------------
|                                                                                               |  |       |    |      |  |                                 |             
|                                                                                               |  | Notes |    | 2003 |  | 2004                            |             
|                                                                                               |  |       |    |      |  |                                 |             
|                                                                                               |  |       |    |      |  |                                 | ThCh$       
|CASH FLOWS   FROM OPERATING ACTIVITIES                                                         |  |       |    |      |  |                                 |             
|Net income                                                                                     |  |       |    |      |  |                                 | 12,494,861  
|Adjustments to reconcile   net income to net cash provided by operating activities:            |  |       |    |      |  |                                 |             
|Depreciation   and amortization expense                                                        |  |       |    |      |  |                                 | 40,350,662  
|Write   offs and accruals                                                                      |  |       |    |      |  |                                 | 18,589,470  
|Equity   in earnings of equity - method investees (gain - net)                                 |  |       |    |      |  |                                 | (480,812    
|Loss   (gain) on sales of property, plant and equipment, net                                   |  |       |    |      |  |                                 | (9,699      
|Minority   interest                                                                            |  |       | 18 |      |  |                                 | 41,901      
|Price-level   restatement                                                                      |  |       | 16 |      |  |                                 | (2,256,740  
|Foreign   exchange                                                                             |  |       | 16 |      |  |                                 | 3,182,310   
|Others   charges                                                                               |  |       | 23 |      |  |                                 | 2,181,874   
|Others   credits                                                                               |  |       |    |      |  |                                 |            
|Changes in assets and   liabilities:                                                           |  |       |    |      |  |                                 |             
|Increase   in accounts receivable                                                              |  |       |    |      |  |                                 | (55,500,099 
|Decrease   (increase)in inventory                                                              |  |       |    |      |  |                                 | 678,059     
|(Increase)   decrease in other assets                                                          |  |       |    |      |  |                                 | (3,538,231  
|Increase   (decrease) in accounts payable                                                      |  |       |    |      |  |                                 | 21,449,621  
|Decrease   in income tax payable                                                               |  |       |    |      |  |                                 | (3,728,019  
|(Decrease)   Increase in other accounts payable                                                |  |       |    |      |  |                                 | (4,097,076  
|Increase   in interest payable                                                                 |  |       |    |      |  |                                 | 809,759     
|Increase   in accruals and withholdings                                                        |  |       |    |      |  |                                 | 5,354,163   
|                                                                                               |  |       |    |      |  |                                 |             
|Net cash provided by (used   in) operating activities                                          |  |       |    |      |  |                                 | 35,522,004  
|                                                                                               |  |       |    |      |  |                                 |             
|CASH FLOWS   FROM INVESTING ACTIVITIES                                                         |  |       |    |      |  |                                 |             
|Purchases   of property, plant and equipment                                                   |  |       |    |      |  |                                 | (46,892,306 
|Proceeds   from sale of property, plant and equipment                                          |  |       |    |      |  |                                 | 328,946     
|Proceeds   from sale of Disco S.A. and others                                                  |  |       |    |      |  |                                 | 31,303,746  
|Purchase   of permanent investments                                                            |  |       |    |      |  |                                 |            
|Collection   of loans to related companies                                                     |  |       |    |      |  |                                 | 20,742      
|Payment   of capitalized interest                                                              |  |       |    |      |  |                                 | (425,254    
|Standby   deposit for letter of credit related to purchase of Carrefour and others             |  |       |    |      |  |                                 | (55,671,860 
|Other   investment income                                                                      |  |       |    |      |  |                                 |            
|Other   investment disbursements                                                               |  |       |    |      |  |                                 | (1,050,141  
|                                                                                               |  |       |    |      |  |                                 |             
|Net   cash used in investing activities                                                        |  |       |    |      |  |                                 | (72,386,127 
|                                                                                               |  |       |    |      |  |                                 |             
|CASH FLOWS   FROM FINANCING ACTIVITIES                                                         |  |       |    |      |  |                                 |             
|Shares   issuance                                                                              |  |       |    |      |  |                                 |            
|Bank   loans                                                                                   |  |       |    |      |  |                                 | 144,112,462 
|Paid   miscellaneous loans to related companies                                                |  |       |    |      |  |                                 | (299,362    
|Repayment   of bank loans                                                                      |  |       |    |      |  |                                 | (155,681,972
|Bonds   and commercial paper repayments                                                        |  |       |    |      |  |                                 | (25,728,842 
|Dividends   paid                                                                               |  |       | 13 |      |  |                                 | (14,654,220 
|Proceeds   from issuance of bonds                                                              |  |       |    |      |  |                                 | 99,831,442  
|Proceeds   from loans from related companies                                                   |  |       |    |      |  |                                 |            
|Payment   of charges for issuance of shares                                                    |  |       |    |      |  |                                 |            
|Payment   of charges for issuance of bonds and commercial paper                                |  |       |    |      |  |                                 | (1,123,905  
|                                                                                               |  |       |    |      |  |                                 |             
|Net   cash provided (used in) by financing activities                                          |  |       |    |      |  |                                 | 46,455,603  
|                                                                                               |  |       |    |      |  |                                 |             
|NET   INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                         |  |       |    |      |  |                                 | 9,591,480   
|EFFECT   OF CHANGES IN THE PURCHASING POWER OF THE CHILEAN PESO ON CASH AND CASH   EQUIVALENTS |  |       |    |      |  |                                 | 3,280,441   
|CASH   AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR                                           |  |       |    |      |  |                                 | 22,591,132  
|                                                                                               |  |       |    |      |  |                                 |             
|CASH   AND CASH EQUIVALENTS AT END OF THE YEAR                                                 |  |       |    |      |  |                                 | 35,463,053  
|                                                                                               |  |       |    |      |  |                                 |             

The accompanying notes are an integral part of these consolidated financial statements

F-5

---



DISTRIBUCION Y
SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Restated for general price-level changes)

|1. | THE COMPANY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Distribución   y Servicio D&S S.A. (D&S) is a corporation organized under the laws   of the Republic of Chile.  Its common   shares are listed on the Chilean Stock Exchange and its American Depositary Receipts   are listed on the New York Stock Exchange.    D&S is regulated by the Chilean Superintendency of Securities and   Insurance (SVS) with whom they file their annual audited financial   statements, and also by the United States Securities and Exchange Commission   (SEC).                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | D&S and   its subsidiaries (the Company) are engaged principally in the operation of   supermarkets in Chile.  As of December   31, 2005, the Company operated 85 supermarkets in Chile.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | a.     Basis of Presentation   - The accompanying consolidated financial statements have been prepared in   accordance with accounting principles generally accepted in Chile (Chilean   GAAP).                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | b.     Reporting Entity - Prior to
December 1996, the Ibáñez Scott family owned 100% of the outstanding
shares of the Company.  In December 1995 D&S acquired all of the
shares of three businesses previously held by the Ibáñez Scott family,
Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales S.A.
(SAITEC S.A.), Almac Internacional S.A. and Constructora e Inmobilaria El Rodeo
S.A. (El Rodeo S.A.).  These companies principally owned land and buildings
used by the supermarkets and held related investments.  Thus, this
acquisition consolidated into the Company all of the Ibañez Scott family
supermarket operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The   restructuring of the legal ownership of the companies controlled by the   Ibáñez Scott family was accounted for as a pooling of interest between   entities under common control which used the book value of the underlying net   assets acquired.  However, the book   value of the net assets of the companies acquired in the combination was   greater than the value of the consideration given in exchange.  The difference between these amounts was   recorded in the financial statements as negative goodwill.                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | On June 30,   1997, through purchases from the minority shareholders, D&S acquired 100%   of the shares of Almac Internacional S.A. and El Rodeo S.A., as a result of   which D&S absorbed the assets and liabilities of these companies and   became the legal successor to such companies.                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | c.     Basis of Consolidation   - Intercompany transactions and balances have been eliminated in   consolidation and the minority interests in subsidiaries have been recognized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The   consolidated group comprises D&S and all majority-owned   subsidiaries.  The principal   subsidiaries are the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                                        |  | Total ownership percentage |        
|----------------------------------------------------------------------- |  | -------------------------- | -------
|                                                                        |  |                            |        
|                                                                        |  | 2003                       |        
|                                                                        |  |                            |        
|                                                                        |  | %                          |        
|Sociedad Anónima   Inmobiliaria Terrenos y Establecimientos Comerciales |  |                            | 99.9600
|Administradora de   Concesiones Comerciales de Supermercados S.A.       |  |                            | 99.1693
|Administradora de   Concesiones Comerciales de Hipermercados S.A.       |  |                            | 99.5000
|Maquinsa S.A.                                                           |  |                            | 99.9999
|Magallanes S.A. (1)                                                     |  |                            |       
|Comercializadora de   Vestuario S.A. (2)                                |  |                            |       
|Servicios y Administración de Créditos Comerciales Presto S.A.
(3)      |  |                            |       
|Maquinsa Equipamiento   S.A.(4)                                         |  |                            |       
|Distribudora y   Comercializadora Farmalider S.A. (5)                   |  |                            |       
|Grupo Restaurante de Chile   S.A.(6)                                    |  |                            |       
|Servicios Financieros   D&S S.A. (7)                                    |  |                            |       
|Desarrollos de la Patagonia   S.A.(8)                                   |  |                            |       

F-6

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Restated for general price-level changes)

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (7)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | d.     Price-Level Restatement-   The cumulative inflation rate in Chile as measured by the Chilean Consumer   Price Index (CPI) for the three-year period ended December 31, 2005 was   approximately 7.2%.                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Chilean GAAP   requires that the financial statements be restated to reflect the effect of   changes in the purchasing power of the Chilean currency during each   period.  All non-monetary assets and   liabilities and income statement accounts have been restated to reflect the   changes in the Chilean Consumer Price Index (CPI) from the date they were   acquired or incurred to the end of the period.  The purchasing power gains and losses have been included in net   income within the account price-level restatement (See Note 16).

F-7

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The   restatements were calculated using the official Consumer Price Index of the   Chilean National Institute of Statistics and based on the prior month rule,   in which inflation adjustments are based on the consumer price index at the   close of the month preceding the close of the respective period or   transaction.  This index is considered   by the business community, the accounting profession and the Chilean   government to be the measure which most closely complies with the technical   requirement to reflect the variation in the general level of price in the   country and, consequently, it is widely used for financial reporting purposes   in Chile.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The values   of the Chilean consumer price index are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                               |  | Index  |  | Change   over previousDecember 31, | 
|------------------------------ |  | ------ |  | ---------------------------------- | 
|                               |  |        |  |                                    | 
|Year ended December 31,   2003 |  | 114.07 |  | 1.1%                               | 
|Year ended December 31,   2004 |  | 116.84 |  | 2.4%                               | 
|Year ended December 31,   2005 |  | 121.12 |  | 3.7%                               | 

| | The values   of the Chilean consumer price index used for financial accounting price-level   restatement purposes are as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------

|                  |  | Index  |  | Change over previousNovember 30, | 
|----------------- |  | ------ |  | -------------------------------- | 
|                  |  |        |  |                                  | 
|November 30, 2003 |  | 114.44 |  | 1.0%                             | 
|November 30, 2004 |  | 117.28 |  | 2.5%                             | 
|November 30, 2005 |  | 121.53 |  | 3.6%                             | 

| | The   above-mentioned price-level restatements do not purport to represent   appraisal or replacement values.  They   are only intended to restate all non-monetary financial statement components   in terms of local currency of a single purchasing power and to include in the   net result for each period the gain or loss in purchasing power arising from   the holding of monetary assets and liabilities exposed to the effects of   inflation.                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Assets and   liabilities that are denominated in index-linked units of account are stated   at the period-end values of their respective units of account.  The principal index-linked unit used in   Chile is the Unidad de Fomento (UF), which changes daily to reflect the   changes in Chiles Consumer Price Index.    Many of the Companys financial investments are denominated in   UFs.  As the Companys indexed   liabilities exceed its indexed assets, the increase in the index results in a   net loss on indexation.                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Comparative   financial statements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | For   comparative purposes, the consolidated balance sheets of the Company as of   December 31, 2004 and 2005 and the consolidated financial statements of   income, and cash flows for each of the three years in the period ended December   31, 2005, and the amounts disclosed in the related notes, have been restated   into constant Chilean pesos as of December 31, 2005.  This updated presentation does not change   the previously issued financial statements or note information in any way except   to present the comparative amounts in Chilean pesos at similar purchasing   power.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | e.     Assets and Liabilities Denominated in   Index-Linked Units of Account and in Foreign Currencies   - Assets and liabilities denominated in foreign currencies and UF are   presented in Chilean pesos at the following year-end rates (stated in Chilean   pesos per foreign currency):                                                                                                                                                                                                                                                                                                        

F-8

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|            |  | At   December 31, |          
|----------- |  | ----------------- | ---------
|            |  |                   |          
|            |  | 2003              |          
|            |  |                   |          
|            |  | Ch$               |          
|U.S. dollar |  |                   | 593.80   
|UF          |  |                   | 16,920.00

| | f.     Cash and Cash equivalents   - Cash and cash equivalents includes balances of cash in bank or brokerage   accounts, investments in closed - end mutual funds and investments in   repurchase agreements with original maturities of three months or less at the   date of acquisition by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | g.     Marketable Securities   - Marketable securities consist of investments in equity shares, mutual   funds, and fixed income securities, which are recorded as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | h.     Inventories -Inventories   are stated at price-level restated cost which is not in excess of the net   realizable value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The Company   periodically evaluates and physically counts its inventory on hand to   determine its losses on shrinkage, and slow-moving or obsolete   inventory.  Shrinkage losses are   recorded directly in the income statement based on the results of the   physical counts.  Based upon the aging   and marketability of slow-moving or potentially obsolete inventory, the   Company makes adjustments to the inventorys carrying value to bring it to   its estimated realizable value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | i.     Allowance for doubtful accounts -
With the purpose of covering the risk of doubtful accounts, the Parent Company
and its subsidiaries have determined provisions on the trade account receivables
and notes receivable balances outstanding as of December 31, 2005 and 2004,
calculated based on an adopted policy integrating such factors as historical
experience and current economic trends.  The allowance for doubtful
accounts for Servicios y Administración de Créditos Comerciales Presto
S.A., (Presto) which represents the majority of the amount, is
recorded based on, among other factors, historical non-collectibility and the
credit worthiness of the customer, customers in debtedness level, analysis of
payment ability, evaluation of risk of credit, analysis of customers income
level, this includes providing 100% for all past due balances over 180
days.  In addition, based on historical experience, the Company maintains a
higher provision for past due balances of which terms were
renegotiated.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | These provisions are presented on the face
of the balance sheet as net of the notes and accounts receivables
balances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Management   considers that the allowances for doubtful accounts are sufficient and that   the net balances are recoverable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | j.     Property, plant and equipment, and   depreciation -   Property, plant and equipment is stated at price-level restated purchase   cost.  The interest cost on debt   directly obtained to finance certain construction projects is capitalized   during the period of construction.    The amount capitalized is determined considering the weighted average   interest rate on the related debt.    The valuation of certain property, plant and equipment resulting from   an independent technical appraisal in years prior to those presented is   recorded in the balance of property, plant, and equipment, with a   corresponding increase in shareholders equity.  Depreciation is computed using the straight-line method over   the estimated useful lives of the assets.                                                                                                                                                                                                                                                         

F-9

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Assets   acquired under capital leases are accounted for in the same manner as   purchases of property, plant and equipment, with an offsetting liability   recorded for the present value of the minimum lease payments.  No gain or loss has been recorded or   deferred for any sale in a sales-leaseback transaction.  These assets are not legally owned by the   Company until it exercises its purchase option.                                                                                                                                                                                                
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | k.     Investment in Affiliated Companies   - Investments made prior to January 1, 2004 in the equity securities of   entities over which the Company exerts significant influence are accounted   for under the equity method.  This   method consists of allocating the respective proportion of the equity of the   issuer to Investment in related companies at acquisition and recognizing   any variation in such equity on a proportional basis, as stipulated in   Circular 368 of the Superintendency of Securities and Insurance and Technical   Bulletin No.42 of the Chilean Association of Accountants.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Investments   made after January 1, 2004 in the equity securities of entities over which   the Company exerts significant influence are valued at their fair value on   acquisition, revaluing the assets and liabilities of the investee, as   stipulated in circular No.1,697 of the Superintendency of Securities and   Insurance (SVS) and Technical Bulletin No.72 of the Chilean Association of   Accountants.                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | l.     Goodwill and Negative Goodwill   - According to Chilean SVS Rule No. 1,358 issued in December 1997, the excess   of the purchase price of an acquired enterprise over the net book value of   the assets acquired and liabilities assumed is recorded as goodwill and the   excess of the net book value of the assets acquired and liabilities assumed   over the purchase price of the acquired enterprise is recorded as negative   goodwill, which are amortized over 20 years.                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The balances   of goodwill and negative goodwill for acquisitions prior to January 1, 2004,   determined as explained above, were generated prior to the issue of Official   Circular 1,697 by the SVS and the Technical Bulletin No. 72 by the Chilean   Association of Accountants, effective as of January 1, 2004, which states   that the bases of goodwill and negative goodwill will be calculated based on   the difference between the acquisition cost and the fair value of the assets   acquired and the liabilities assumed.                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company   has evaluated the recovery of its goodwill for impairment under the   requirements of the regulation established in the Technical Bulletin No. 56   of Colegio de Contadores de Chile A.G. (Chilean Association of   Accountants).  As a result of this   evaluation, no impairment has been recorded.                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | m.     Bonds payable -Bonds   payable are presented on the balance sheet at their par value.  The difference between the proceeds   received and the par value of the bonds at the time of issuance, the discount   or premium, is deferred and amortized on a straight-line basis over their   term.  The discount or premium is   presented separately on the balance sheet.    The straight-line method of amortization for the discount or premium   on the bonds approximates the effective interest rate method of amortization.                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | n.     Commercial paper - These
investments are valued at the acquisition cost plus accrued interest at year end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | o.     Income taxes and deferred taxes   - The Company determines and records its income taxes on an accrual basis   based on the net taxable income in conformity with current Chilean tax   regulations.                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Deferred   income taxes are recorded in accordance with Technical Bulletin N°60 and the   complementary Technical Bulletins Nos68, 69, 71 and 73 issued by   the Chilean Association of Accountants, and with Circular N°1466 issued on   January 27, 2000 by the SVS.  Deferred   taxes are recorded based on the population of temporary differences between   the book and tax basis of assets and liabilities using the enacted tax rates   in effect at the estimated time of reversal.    In addition, a deferred tax asset is recognized for tax loss   carryforwards.                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | p.     Vacation Expense   - The cost of employee vacations and benefits is recorded on the accrual   basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-10

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | q.     Research and Development Expenses   - Research and development expenses are charged to the income statement in   the period incurred.  Over the last   five years, no significant research and development expenses have been   incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | r.     Severance Indemnities - The
liability for amounts payable to employees for voluntary severance indemnities
is accrued at the present value of the vested benefits using a 7%
discount-rate.  The liability considers future service until retirement
(age 60 for women; age 65 for men), adjusted for estimated employee
turnover.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | s.     Revenue Recognition - Revenue from product sales is recognized   at the point of sale, which represents the point at which the significant   benefits and risks of ownership transfer to the buyer.  At such point, all requirements for   completing the earnings process have been completed under Chilean GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Revenue   obtained from suppliers for reaching volume targets is recorded in net   revenue.  Such volume rebates are   recognized on a pro rata basis as purchases are made.  Other vendor allowances, such as   promotional allowances for store openings and remodelings and allowances for   distribution, are also included in net revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | t.     Use of Estimates   - The preparation of consolidated financial statements in conformity with   Chilean GAAP requires management to make estimates and assumptions that   affect the reported amounts of assets and liabilities and the disclosure of   contingent assets and liabilities at the date of the consolidated financial   statements, as well as the reported amounts of revenues and expenses during   the reporting period.  Actual results   could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | u.     Translation to U.S. Dollars - The
Company maintains its accounting records and prepares its financial statements
in Chilean pesos.  The U.S. dollar amounts disclosed in the accompanying
consolidated financial statements are presented solely for the convenience of
the readers.  Such translated amounts have been calculated based on the
December 31, 2005 observed exchange rate of Ch$512.50 per U.S.$1.00 reported by
the Chilean Central Bank.  This translation should not be construed as a
representation that the Chilean peso amounts actually represent or have been,
could have been or could in the future be converted into U.S. dollars at that or
any other rate.                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | v.     Forward contracts -   The Company has entered into foreign exchange forward contracts designated as   cash flow hedges of existing transactions that have been designated as hedge   instruments against variations in the foreign exchange rate of specific   items, and are recorded in accordance with Technical Bulletin No. 57 issued   by the Chilean Institute of Accountants.    In accordance with the Technical Bulletin No. 57, the unrealized gains   on these contracts are deferred while the unrealized losses are charged to   income.                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | w.     Long-lived assets -The   Company reviews long-lived assets for impairment whenever events or changes   in circumstances indicate that the carrying amount of the assets may not be   recoverable.  Recoverability of assets   to be held and used is measured by a comparison of the carrying amount of the   assets as a whole to the undiscounted future net cash flows expected to be   generated by the Company.  If there is   concrete evidence that the Company will not be able to generate sufficient   revenues to cover all its costs, including depreciation of property, plant   and equipment, and if the carrying amount of the assets exceeds their fair   value, an impairment loss is recognized reducing the net book value of   property, plant and equipment to an amount which will be recovered over the   remaining useful life.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Assets to be   disposed of are reported at the lower of the carrying amount or fair value   less costs to sell.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | x.     Cost of sales and Administrative and   selling expenses - The cost of sales line item   includes: Cost of goods sold (excluding certain costs related to delivery and   distribution as defined below as administrative and selling expenses).  The administrative and selling expense   line item includes: general and administrative, materials and office   supplies, overhead salaries, bad debt expense, inbound freight charges,   purchasing and receiving costs, inspection costs, warehousing costs, and   other distribution network costs.                                                                                                                                                                                                                                                                                                  

F-11

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | y.     Sales - lease back transactions -   The Company has entered into certain qualifying sales-leaseback transactions.                                                                                                                                                                                                                                                      
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                               
| | Under Technical Bulletin No. 49, these
transactions qualify as capital leases as the risks and rewards of ownership have been
substantially transferred to the lessor who has then entered into a contract to
lease back the assets to the Company.                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                               
| | z.     Instruments purchased under agreement
to resell - These instruments represent short-term investments in notes issued by banks,
which were purchased at a discount ranging from approximately 1% to 9% and included a resell agreement at an
agreed-upon price. They are recorded at their acquisition price plus accreted
interest under the effective interest method.
| |                                                                                                                                                                                                                                                                                                                                                                               
| | aa.     Intangible   - The Company has internally developed its trademarks and trade names.  The associated costs were charged to   expense when incurred.                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                               
| | bb.     Software  - The Company has acquired software   packages.  The cost paid to acquire   software packages is included in Other fixed assets and depreciated over 48   months.                                                                                                                                                                                         

|3. | CHANGES IN ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In 2005   there are no changes in accounting principles with regard to 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | As of   January 1, 2004, the Superintendency of Securities and Insurance, through   Circular Letter 1697, made effective the adoption of Technical Bulletin 72 on   Business Combinations issued by the Chilean Association of Accountants.  These regulations were applied by the   Company and pertain to the nature of permanent investments and financial   statement consolidation and business combinations.  The acquisition of Carrefour S.A. in 2004 was accounted for in   accordance with this Bulletin.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | MARKETABLE SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The detail   of marketable securities is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                            |  | At December 31, |           
|------------------------------------------- |  | --------------- | ----------
|                                            |  |                 |           
|                                            |  | 2004            |           
|                                            |  |                 |           
|                                            |  | ThCh$           |           
|Shares                                      |  |                 | 408,031   
|Mutual funds (fixed income   securities)(1) |  |                 | 34,932,586
|Mutual funds (2)                            |  |                 | 1,553,697 
|                                            |  |                 |           
|Total                                       |  |                 | 36,894,314
|                                            |  |                 |           

| |    
| | ---
| | (1)

F-12

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|                            |  | Principal   amount |            | Interest   rate (monthly) |  | Interest   income |  | Total Book   value |      
|--------------------------- |  | ------------------ | ---------- | ------------------------- |  | ----------------- |  | ------------------ | -----
|                            |  |                    |            |                           |  |                   |  |                    |      
|Institutions                |  | 2004               |            | 2005                      |  | 2004              |  | 2005               |      
|                            |  |                    |            |                           |  |                   |  |                    |      
|                            |  | ThCh$              |            | ThCh$                     |  | %                 |  | %                  |      
|Fondos Mutuos Security      |  |                    | 4,144,000  |                           |  | 7,500,000         |  |                    | 0.238
|Fondos Mutuos Scotiabank    |  |                    | 11,914,000 |                           |  | 12,820,000        |  |                    | 0.250
|Fondos Mutuos Bank Boston   |  |                    | 4,662,000  |                           |  |                  |  |                    | 0.235
|Fondos Mutuos Banco Estado  |  |                    | 4,144,000  |                           |  |                  |  |                    | 0.240
|Bandesarrollo Fondos Mutuos |  |                    | 2,590,000  |                           |  | 8,800,000         |  |                    | 0.250
|Fondos Mutuos BBVA          |  |                    | 5,180,000  |                           |  |                  |  |                    | 0.263
|Fondos Mutuos Corp Banca    |  |                    | 2,279,200  |                           |  | 8,700,000         |  |                    | 0.280
|                            |  |                    |            |                           |  |                   |  |                    |      
|Total                       |  |                    | 34,913,200 |                           |  | 37,820,000        |  |                    |      
|                            |  |                    |            |                           |  |                   |  |                    |      

|   |                                                             
|-- | ------------------------------------------------------------
|   | (2)                                                         
|   |                                                             
|5. | NOTES AND ACCOUNTS RECEIVABLE                               
|   |                                                             
|   | The detail   of notes and accounts receivable is as follows:

|                                |  | At December 31, |            
|------------------------------- |  | --------------- | -----------
|                                |  |                 |            
|                                |  | 2004            |            
|                                |  |                 |            
|                                |  | ThCh$           |            
|Trade accounts   receivable (a) |  |                 | 147,620,543
|Notes receivable                |  |                 | 2,418,420  
|Sundry debtors (b)              |  |                 | 34,793,116 
|Allowance for doubtful accounts |  |                 | (22,588,159
|                                |  |                 |            
|Total                           |  |                 | 162,243,920
|                                |  |                 |            

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Management has initiated legal actions to
collect the unpaid portion in the Netherlands Antilles and the Netherlands. On
September 5, 2005, the Netherlands Antilles Court ruled against D&S in the
suit relating to Disco Ahold, although based on the arguments contained in the
verdict, in Managements opinion, the Company has contractual and legal
resources to recover the remaining balance on appeal, in the form originally
agreed upon.  Therefore, management believes that no provision is necessary
for the receivable due from Disco S.A., which is guaranteed by Disco Ahold
International Holding N.V. (Note 22d.).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|6. | INVENTORIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The detail   of inventories is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                     |  | At December 31, |            
|------------------------------------ |  | --------------- | -----------
|                                     |  |                 |            
|                                     |  | 2004            |            
|                                     |  |                 |            
|                                     |  | ThCh$           |            
|Merchandise for sale                 |  |                 | 117,529,985
|Imports in transit                   |  |                 | 4,655,006  
|Supplies                             |  |                 | 729,145    
|                                     |  |                 |            
|Sub-total                            |  |                 | 122,914,136
|                                     |  |                 |            
|Provision for merchandise   for sale |  |                 |           
|                                     |  |                 |            
|Total                                |  |                 | 122,914,136
|                                     |  |                 |            

F-13

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|   | At December   31, 2005, the valuation provision for sale merchandise was calculated on   articles whose most recent purchase were made more than a year ago and which   were also discontinued and out of season products.  The valuation allowance reduces the merchandise book value to   its realizable value.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                  
|   | In 2004, the Company did not record
allowances for slow turnover as it had implemented strategies that yielded a
higher turn over and identified and wrote down to net realizable value items
held in stock for longer than average periods of time (see Note
2.h.).                                             
|   |                                                                                                                                                                                                                                                                                                                  
|7. | OTHER CURRENT ASSETS                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                  
|   | The detail   of other current assets is as follows:                                                                                                                                                                                                                                                              

|                           |  | At December 31, |           
|-------------------------- |  | --------------- | ----------
|                           |  |                 |           
|                           |  | 2004            |           
|                           |  |                 |           
|                           |  | ThCh$           |           
|Deferred taxes (Note 14.b) |  |                 | 5,334,113 
|Repurchase agreements      |  |                 | 25,918,771
|Other                      |  |                 | 2,844,215 
|                           |  |                 |           
|Total                      |  |                 | 34,097,099
|                           |  |                 |           

|8. | PROPERTY, PLANT AND EQUIPMENT - NET                         
|-- | ------------------------------------------------------------
|   |                                                             
|   | The detail   of property, plant and equipment is as follows:

|                                            |  | At December 31, |             
|------------------------------------------- |  | --------------- | ------------
|                                            |  |                 |             
|                                            |  | 2004            |             
|                                            |  |                 |             
|                                            |  | ThCh$           |             
|Land                                        |  |                 | 171,593,931 
|Buildings and   infrastructure:             |  |                 |             
|Buildings                                   |  |                 | 438,265,878 
|Construction   in progress                  |  |                 | 37,647,791  
|Machinery and equipment                     |  |                 | 169,474,090 
|Other:                                      |  |                 |             
|Leased   assets (1)                         |  |                 | 43,796,100  
|Fixtures                                    |  |                 | 31,228,347  
|                                            |  |                 |             
|Subtotal                                    |  |                 | 892,006,137 
|                                            |  |                 |             
|Technical revaluation (2):                  |  |                 |             
|Land                                        |  |                 | 3,739,078   
|Buildings                                   |  |                 | 578,612     
|                                            |  |                 |             
|Subtotal                                    |  |                 | 4,317,690   
|                                            |  |                 |             
|Total gross property, plant   and equipment |  |                 | 896,323,827 
|Accumulated depreciation                    |  |                 | (279,889,360
|                                            |  |                 |             
|Total net property, plant   and equipment   |  |                 | 616,434,466 
|                                            |  |                 |             

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The   depreciation is determined using the straight-line method.  Depreciation amounted to ThCh$39,881,769   in 2003, ThCh$49,365,323 in 2004 and ThCh$53,368,489 in 2005 and includes   ThCh$8,987, ThCh$8,958 and ThCh$8,958 related to depreciation of the   technical revaluation in 2003, 2004 and 2005 respectively.  The depreciation expense for the three   years in the period ended December 31, 2005 has been included in Selling and   Administrative Expense.  These amounts   include the amortization expense associated with leased assets,   ThCh$3,968,665, ThCh$5,159,894 and ThCh$3,802,571 in 2003, 2004 and 2005   respectively.

F-14

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Useful lives assigned to property, plant and equipment:                                 
| | ----------------------------------------------------------------------------------------
| |                                                                                         
| | The detail   of the useful life assigned to property, plant and equipment is as follows:

| 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                       
|-- | -----------------------------------------
|   |                                          
|   | Other assets   are summarized as follows:

|                                   |  | At December 31, |           
|---------------------------------- |  | --------------- | ----------
|                                   |  |                 |           
|                                   |  | 2004            |           
|                                   |  |                 |           
|                                   |  | ThCh$           |           
|Goodwill (net) (Note 9a)           |  |                 | 32,537,092
|Other long-term assets   (Note 9b) |  |                 | 29,150,123
|                                   |  |                 |           
|Total                              |  |                 | 61,687,215
|                                   |  |                 |           

| | a.     Goodwill and negative goodwill                                                      
| | -------------------------------------------------------------------------------------------
| |                                                                                            
| | Goodwill and   (negative goodwill) net of accumulated amortization are detailed as follows:

|                                   |  | At December 31, |           
|---------------------------------- |  | --------------- | ----------
|                                   |  |                 |           
|                                   |  | 2004            |           
|                                   |  |                 |           
|                                   |  | ThCh$           |           
|Saitec   S.A.                      |  |                 | (146,759) 
|El Rodeo S.A.                      |  |                 | (220,623  
|Maquinsa S.A.                      |  |                 | 9,438,130 
|Magallanes S.A.                    |  |                 | 23,066,849
|Alvi Supermercados Mayoristas S.A. |  |                 |          
|Supermercados La Frontera   S.A.   |  |                 | 206,647   
|Alimentos y Servicios Ltda.        |  |                 | 192,848   
|                                   |  |                 |           
|Total                              |  |                 | 32,537,092
|                                   |  |                 |           

| | The   accumulated amortization for goodwill was ThCh$9,074,049 and ThCh$11,219,799   at December 31, 2004 and December 31, 2005, respectively, and the accumulated   amortization for negative goodwill was ThCh$2,708,173 and ThCh$3,075,555 at   December 31, 2004 and December 31, 2005, respectively.  The amortization for goodwill is included   in non operating expense and the amortization for negative goodwill is included   in non operating income (see Note 18).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Incorporation of Saitec S.A., El Rodeo S.A. and Almac Internacional   S.A.                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | On December   28, 1995, the Company received 99.96%, 99.99% and 99.99% interests in SAITEC   S.A., El Rodeo S.A., and Almac Internacional S.A., respectively, as payment   for the capital increase approved at the Extraordinary Shareholders Meeting   held on that date.  These investments   were contributed by the shareholders Empresas Almac S.A. and Estudios y   Proyectos Comerciales e Inmobiliarios S.A.                                                         

F-15

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The acquisitions were accounted for as
described in Note 2b.  The excess of the carrying value of the underlying
net assets over the stated increase in the Companys capital (negative
goodwill) was recognized on Saitec S.A. and El Rodeo S.A. and is being amortized
over ten years and have been fully amortized by December 31, 2005.  There
was no goodwill related to Almac Internacional S.A.                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Acquisition of Maquinsa S.A. (formerly Fullmarket S.A.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | On October   31, 1996, the Company acquired from unrelated third parties a 100% interest   in Maquinsa S.A. for ThCh$13,450,614, that was paid during 1997.  During 1999 the Company increased the   goodwill balance by ThCh$1,107,833 paid as the result of an arbitration   proceeding that settled a dispute with Fullmarkets former owners.  The acquisition was accounted for as a   purchase.  Excess of cost over the   book value assets acquired and liabilities assumed was designated as   goodwill, which is being amortized over twenty years.                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Acquisition of Magallanes S.A. (formerly Carrefour S.A.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | On January   7, 2004, the 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$43. With these purchases, the Company acquired the entirety of the   issued shares of Carrefour Chile S.A.    The Company made the acquisition to increase its market share.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The goodwill   resulting from the purchase of shares of Carrefour S.A., currently Magallanes   S.A., has been calculated considering the acquired companys equity at fair   value and is being amortized over the term established by Circular No.1367 of   the Superintendency of Securities and Insurance.  The Company consolidated Magallanes S.A. in its operations as   of January 1, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The detail of fair values of assets and
liabilities acquired in the purchase of Magallanes S.A. is the
following                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                |  | 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
|                                |  |       |           

| | For the calculation of fair values related
to fixed assets, an independent appraiser was requested to
appraise the assets of Carrefour Chile S.A., based on the financial statements
as of December 31, 2003.  By December 31, 2004 the process for calculating
the fair value was completed, adjusting the differences against the goodwill
initially calculated.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-16

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Acquisition of Alvi Supermercados Mayorista S.A.                                                                                                                                                                                                                                          
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                           
| | 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.                                                                 
| |                                                                                                                                                                                                                                                                                           
| | The excess of the purchase price paid for
the shares acquired from ALVI over the net book value of assets acquired and
liabilities assumed was designated as goodwill. If necessary said value will be
modified, once the process to define the fair value of the investment is
concluded.
| |                                                                                                                                                                                                                                                                                           
| | b.     Other long-term assets                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                           
| | Other   long-term assets are detailed as follows:                                                                                                                                                                                                                                         

|                                                         |  | At December 31, |           
|-------------------------------------------------------- |  | --------------- | ----------
|                                                         |  |                 |           
|                                                         |  | 2004            |           
|                                                         |  |                 |           
|                                                         |  | ThCh$           |           
|Electric utility refundable   advances                   |  |                 | 232,883   
|Deferred discount on bond   issuance                     |  |                 | 2,754,553 
|Deferred expenses of bond   placement and issuance costs |  |                 | 1,462,381 
|Investment in related   companies (2)                    |  |                 | 1,976,424 
|Long term trade accounts   receivable (1)                |  |                 | 15,192,497
|Deferred tax (Note 14.b)                                 |  |                 | 5,674,149 
|Other                                                    |  |                 | 1,857,236 
|                                                         |  |                 |           
|Total                                                    |  |                 | 29,150,123
|                                                         |  |                 |           

| |    
| | ---
| | (1)
| | (2)

|                                     |  | Ownership    percentage                   |       | Book value of     investment |  | Equity in income    (losses) of investee |      
|------------------------------------ |  | ----------------------------------------- | ----- | ---------------------------- |  | ---------------------------------------- | -----
|                                     |  |                                           |       |                              |  |                                          |      
|                                     |  | (as of all      year-ends    presented)
% |       | 2004                         |  | 2005                                     |      
|                                     |  |                                           |       |                              |  |                                          |      
|                                     |  |                                           |       | ThCh$                        |  |                                          | ThCh$
|Alimentos y Servicios Ltda.          |  |                                           | 50.00 |                              |  | 1,004,169                                |      
|Inversiones Solpacific S.A.          |  |                                           | 50.00 |                              |  | 43,413                                   |      
|Alvi Supermercados   Mayoristas S.A. |  |                                           | 35.00 |                              |  |                                         |      
|Inmobiliaria Mall Calama   S.A.      |  |                                           | 25.00 |                              |  | 928,842                                  |      
|                                     |  |                                           |       |                              |  |                                          |      
|Total                                |  |                                           |       |                              |  | 1,976,424                                |      
|                                     |  |                                           |       |                              |  |                                          |      

|10. | ACCOUNTS PAYABLE                             
|--- | ---------------------------------------------
|    |                                              
|    | Accounts   payable are summarized as follows:

|                   |  | At December 31, |            
|------------------ |  | --------------- | -----------
|                   |  |                 |            
|                   |  |                 | 2004       
|                   |  |                 |            
|                   |  |                 | ThCh$      
|Domestic suppliers |  |                 | 207,333,104
|Foreign suppliers  |  |                 | 1,627,400  
|                   |  |                 |            
|Total              |  |                 | 208,960,504
|                   |  |                 |            

F-17

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|11. | ACCRUALS AND WITHHOLDINGS                             
|--- | ------------------------------------------------------
|    |                                                       
|    | Accruals and   withholdings are summarized as follows:

|                             |  | At December 31, |           
|---------------------------- |  | --------------- | ----------
|                             |  |                 |           
|                             |  | 2004            |           
|                             |  |                 |           
|                             |  | ThCh$           |           
|Accruals:                    |  |                 |           
|Vacations                    |  |                 | 4,120,940 
|Bonuses   payable            |  |                 | 2,181,409 
|Accrued   expenses (1)       |  |                 | 8,856,272 
|                             |  |                 |           
|Subtotal                     |  |                 | 15,158,621
|Employee withholdings/taxes: |  |                 |           
|Other                        |  |                 | 4,845,682 
|                             |  |                 |           
|Total                        |  |                 | 20,004,303
|                             |  |                 |           

|    |                                                  
|--- | -------------------------------------------------
|    | (1)                                              
|    |                                                  
|12. | BANK DEBT, SUNDRY CREDITORS AND OTHER LIABILITIES
|    |                                                  
|    | a.     Short-term bank debt                      
|    |                                                  
|    | Short-term   bank debt is summarized as follows: 

|                                                  |  | At December 31, |           
|------------------------------------------------- |  | --------------- | ----------
|                                                  |  |                 |           
|                                                  |  |                 | 2004      
|                                                  |  |                 |           
|                                                  |  |                 | ThCh$     
|Payable in:                                       |  |                 |           
|United   States dollars                           |  |                 | 17,879,609
|Chilean   pesos (not indexed)                     |  |                 | 4,477,374 
|Inflation-linked   units (UFs)                    |  |                 | 642,016   
|                                                  |  |                 |           
|Total                                             |  |                 | 22,998,999
|                                                  |  |                 |           
|Weighted average interest   rates are as follows: |  |                 |           
|Loans in U.S. Dollars                             |  |                 | 2.37      
|Loans in Chilean pesos (not   indexed)            |  |                 | 3.04      
|Loans in inflation-linked   units (UFs)           |  |                 | 0.40      

F-18

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|Bank/Financial Institution       |  | Balance     December 31,    2004 |  | Currency |  | Balance    December 31,    2005 |  | Stated    Interest Rate | 
|-------------------------------- |  | -------------------------------- |  | -------- |  | ------------------------------- |  | ----------------------- | 
|                                 |  |                                  |  |          |  |                                 |  |                         | 
|                                 |  | ThCh$                            |  |          |  | ThCh$                           |  |                         | 
|Santander    Santiago           |  | 5,415,425                        |  | US$      |  | 11,311,522                      |  | Libor   + 0.27          | 
|                                 |  | 642,016                          |  | UF       |  | 222,762                         |  | 0.40%                   | 
|                                 |  | 4,149,905                        |  | Ch$      |  | 4,034,000                       |  | 6.00%                   | 
|                                 |  |                                 |  | Ch$      |  | 31,695,858                      |  | TAB+0.85%               | 
|Bice                             |  | 1,198,215                        |  | US$      |  |                                |  | Libor   + 0.41          | 
|Chile                            |  | 3,460,563                        |  | US$      |  | 3,225,837                       |  | Libor   + 0.26          | 
|Scotiabank                       |  | 1,626,523                        |  | US$      |  | 2,333,314                       |  | Libor   + 0.35          | 
|                                 |  | 309,916                          |  | Ch$      |  |                                |  | 4.90%                   | 
|Citibank                         |  | 15,276                           |  | Ch$      |  |                                |  | 4.95%                   | 
|Estado                           |  | 1,438,912                        |  | US$      |  | 10,752                          |  | Libor   + 0.35          | 
|Banco de Crédito e   Inversiones |  | 4,739,971                        |  | US$      |  | 1,512,186                       |  | Libor   + 0.15          | 
|                                 |  |                                 |  | Ch$      |  | 1,399,032                       |  | 4.86%                   | 
|BankBoston                       |  |                                 |  | US$      |  | 638,613                         |  | Libor   + 0.22          | 
|                                 |  | 2,277                            |  | Ch$      |  | 259,873                         |  | 7.30%                   | 
|                                 |  |                                  |  |          |  |                                 |  |                         | 
|Total                            |  | 22,998,999                       |  |          |  | 56,643,749                      |  |                         | 
|                                 |  |                                  |  |          |  |                                 |  |                         | 

| | b.     Long-term bank debt                     
| | -----------------------------------------------
| |                                                
| | Long-term   bank debt is summarized as follows:

|                                        |  | At December 31, |            
|--------------------------------------- |  | --------------- | -----------
|                                        |  |                 |            
|                                        |  | 2004            |            
|                                        |  |                 |            
|                                        |  | ThCh$           |            
|Payable in:                             |  |                 |            
|Inflation-linked units   (UFs)          |  |                 | 31,196,933 
|Chilean pesos                           |  |                 | 76,809,403 
|                                        |  |                 |            
|Total                                   |  |                 | 108,006,336
|Less: Current portion (see   Note 12.g) |  |                 | 9,668,377  
|                                        |  |                 |            
|Long-term portion                       |  |                 | 98,337,959 
|                                        |  |                 |            

|Bank/Financial Institution        |  | Currency |  | Balance    December 31,    2004 |  | Currency |  | Balance    December 31,    2005 |  | Stated    Interest rate |  | Maturitydate | 
|--------------------------------- |  | -------- |  | ------------------------------- |  | -------- |  | ------------------------------- |  | ----------------------- |  | ------------ | 
|                                  |  |          |  |                                 |  |          |  |                                 |  |                         |  |              | 
|Santander - Santiago              |  | Ch$      |  | 27,703,003                      |  |          |  |                                |  | TAB+0.85%               |  | 27-06-2006   | 
|Estado                            |  | UF       |  | 21,528,556                      |  | UF       |  | 21,569,772                      |  | 4.49%                   |  | 02-09-2007   | 
|Citibank                          |  | Ch$      |  | 23,206,400                      |  | Ch$      |  | 11,200,000                      |  | TAB+0.80%               |  | 20-09-2007   | 
|Banco Bilbao Vizcaya   Argentaria |  | Ch$      |  | 25,900,000                      |  | Ch$      |  | 18,750,000                      |  | TAB+0.80%               |  | 22-12-2009   | 
|                                  |  |          |  |                                 |  |          |  |                                 |  |                         |  |              | 
|                                  |  |          |  | 98,337,959                      |  |          |  | 51,519,772                      |  |                         |  |              | 
|                                  |  |          |  |                                 |  |          |  |                                 |  |                         |  |              | 

| | TAB is a   referenced rate in the Chilean Market, and corresponds to the average rate   for fund investments of 90, 180 and 360 days.
| | -------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                      
| | Long-term   bank debt is payable as follows:                                                                                         

|Bank/Financial Institution        |  | Currency |     | 2007 |       | 2008       |       | 2009 |           | Total |      
|--------------------------------- |  | -------- | --- | ---- | ----- | ---------- | ----- | ---- | --------- | ----- | -----
|                                  |  |          |     |      |       |            |       |      |           |       |      
|                                  |  |          |     |      | ThCh$ |            | ThCh$ |      | ThCh$     |       | ThCh$
|Estado                            |  |          | UF  |      |       | 21,569,772 |       |      |          |       |      
|Citibank                          |  |          | Ch$ |      |       | 11,200,000 |       |      |          |       |      
|Banco Bilbao Vizcaya   Argentaria |  |          | Ch$ |      |       | 6,250,000  |       |      | 6,250,000 |       |      
|                                  |  |          |     |      |       |            |       |      |           |       |      
|Total                             |  |          |     |      |       | 39,019,772 |       |      | 6,250,000 |       |      
|                                  |  |          |     |      |       |            |       |      |           |       |      

| | The material   covenants of our long-term debt agreements at December 31, 2005 are described   in the table below:
| | ------------------------------------------------------------------------------------------------------------------

F-19

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Principal Loan Covenants
| | ------------------------

| | Banco   Santander Santiago                                                  |  | 1. | Minimum   coverage of interest expenses of 3.75 (operating income plus depreciation   divided by interest expense) for June and December               
| | --------------------------------------------------------------------------- |  | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                             |  |    |                                                                                                                                                        
| |                                                                             |  | 2. | Not to sell   or use as collateral the Ekono, Almac and Lider brands.                                                                                  
| |                                                                             |  |    |                                                                                                                                                        
| |                                                                             |  | 3. | No leverage   more than 1.2 times (interest - bearing liabilities divided by equity plus   accumulated amortization of goodwill and negative goodwill).
| |                                                                             |  |    |                                                                                                                                                        
| |                                                                             |  | 4. | Not to grant   new guarantees.                                                                                                                         
| |                                                                             |  |    |                                                                                                                                                        
| | At December   31, 2005, the Company was in compliance with these covenants.
| |                                                                            
| | c.     Capital lease and leaseback   obligations                           
| |                                                                            
| | Capital   lease and leaseback obligations are summarized as follows:       

|                                                  |  | At December 31, |          
|------------------------------------------------- |  | --------------- | ---------
|                                                  |  |                 |          
|                                                  |  | 2004            |          
|                                                  |  |                 |          
|                                                  |  |                 | ThCh$    
|Lease obligations                                 |  |                 | 7,341,104
|Less: Current portion                             |  |                 | 3,733,282
|                                                  |  |                 |          
|Long-term portion                                 |  |                 | 3,607,822
|                                                  |  |                 |          
|Leaseback obligations                             |  |                 | 4,933,861
|Less: Current portion                             |  |                 | 2,502,847
|                                                  |  |                 |          
|Long-term portion                                 |  |                 | 2,431,014
|                                                  |  |                 |          
|Total long-term lease and   leaseback obligations |  |                 | 6,038,836
|                                                  |  |                 |          

|Future minimum lease payments |  | 2006  |           | 2007  |  | 2008    |  | 2009  |         | 2010  |  | Total   | 
|----------------------------- |  | ----- | --------- | ----- |  | ------- |  | ----- | ------- | ----- |  | ------- | 
|                              |  |       |           |       |  |         |  |       |         |       |  |         | 
|                              |  | ThCh$ |           | ThCh$ |  | ThCh$   |  | ThCh$ |         | ThCh$ |  | ThCh$   | 
|Total                         |  |       | 4,794,055 |       |  | 692,532 |  |       | 411,906 |       |  | 268,644 | 
|                              |  |       |           |       |  |         |  |       |         |       |  |         | 

| | Lease and   leaseback obligations are denominated in US$and U.F. and accrue interest at   rates that range from 7.00% to 13.56%.
| | --------------------------------------------------------------------------------------------------------------------------------

|                                                                    |  | Currency |     | 2004  |  | 2005       | 
|------------------------------------------------------------------- |  | -------- | --- | ----- |  | ---------- | 
|                                                                    |  |          |     |       |  |            | 
|                                                                    |  |          |     | ThCh$ |  | ThCh$      | 
|Short -   term lease and leaseback obligations                      |  |          | US$ |       |  | 3,123,037  | 
|                                                                    |  |          | UF  |       |  | 3,113,092  | 
|                                                                    |  |          |     |       |  |            | 
|Total short - term lease and   leaseback obligations (see Note 12g) |  |          |     |       |  | 6,236,129  | 
|                                                                    |  |          |     |       |  |            | 
|Long - term   lease and leaseback obligations                       |  |          | US$ |       |  | 3,535,990  | 
|                                                                    |  |          | UF  |       |  | 2,502,846  | 
|                                                                    |  |          |     |       |  |            | 
|Total long - term lease and   leaseback obligations (see Note 12g)  |  |          |     |       |  | 6,038,836  | 
|                                                                    |  |          |     |       |  |            | 
|Total lease and leaseback   obligations                             |  |          |     |       |  | 12,274,965 | 
|                                                                    |  |          |     |       |  |            | 

F-20

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Restated for general price-level changes)

| | Leaseback agreements
| | --------------------

|Creditor             |  | Asset                      |  | Sales    price to    buyer    lessor |  | Contractual      installment    payments |  | N° of    installments |  | Interest    rate |  | Term of   contract       |  | Income    (loss) from    transactions | 
|-------------------- |  | -------------------------- |  | ------------------------------------ |  | ---------------------------------------- |  | --------------------- |  | ---------------- |  | ------------------------ |  | ------------------------------------- | 
|                     |  |                            |  |                                      |  |                                          |  |                       |  |                  |  |                          |  |                                       | 
|                     |  |                            |  | UF                                   |  | UF                                       |  |                       |  | %                |  |                          |  | ThCh$                                 | 
|Bansa Santander S.A. |  | Land and buildings Alameda |  | 380,518                              |  | 570,504                                  |  | 121                   |  | 8.57             |  | 18.12.1996 to 20.01.2007 |  |                                      | 
|Bansa Santander S.A. |  | Land and buildings Maipú   |  | 519,499                              |  | 763,499                                  |  | 121                   |  | 8.28             |  | 30.08.1996 to 02.10.2006 |  | (328,596)                             | 
|Bansa Santander S.A. |  | Land San Bernardo          |  | 109,893                              |  | 111,711                                  |  | 121                   |  | 8.20             |  | 14.03.1997 to 14.03.2007 |  | (53,734)                              | 
|Bansa Santander S.A. |  | Land San Bernardo          |  | 21,026                               |  | 30,904                                   |  | 123                   |  | 8.65             |  | 04.12.1997 to 14.03.2007 |  |                                      | 

| | The   difference between the leaseback portion of the real estate and its carrying   value is depreciated straight-line over its useful life.  Under paragraph 5 of Technical Bulletin   49, the Company determined the fair value and the carrying value of the   assets leased back at the initiation of the contract and, as no differences   between the two were noted, no further accounting adjustments were necessary.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | d.     Short-term sundry creditors                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Short-term   sundry creditors are summarized as follows:                                                                                                                                                                                                                                                                                                                                                                      

|                                                |  | At December 31, |          
|----------------------------------------------- |  | --------------- | ---------
|                                                |  |                 |          
|                                                |  | 2004            |          
|                                                |  |                 |          
|                                                |  | ThCh$           |          
|Provision for merchandise rebate obligation (1) |  |                 | 1,841,160
|Accrued insurance expense                       |  |                 | 2,321,645
|Other (in Chilean pesos)(2)                     |  |                 | 3,547,926
|                                                |  |                 |          
|Total                                           |  |                 | 7,710,731
|                                                |  |                 |          

| |                        
| | -----------------------
| | (1)                    
| |                        
| | (2)                    
| |                        
| | e.     Commercial paper

|              |  | At December 31, |           
|------------- |  | --------------- | ----------
|              |  |                 |           
|Short term    |  | 2004            |           
|              |  |                 |           
|              |  | ThCh$           |           
|Payable in:   |  |                 |           
|Chilean pesos |  |                 | 60,109,568
|              |  |                 |           

F-21

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The detail   of maturities as of December 31, 2005 and 2004 is as follows:
| | --------------------------------------------------------------------------

|Series |  | Stated    interest rate |      | Principal amount |       | Maturity Date |      
|------ |  | ----------------------- | ---- | ---------------- | ----- | ------------- | -----
|       |  |                         |      |                  |       |               |      
|       |  |                         |      | 2004             |       | 2005          |      
|       |  |                         |      |                  |       |               |      
|       |  |                         |      |                  | ThCh$ |               | ThCh$
|003-6  |  |                         | 3.24 | %                |       | 12,025,000    |      
|003-7  |  |                         | 4.20 | %                |       | 12,000,000    |      
|003-8  |  |                         | 3.96 | %                |       | 12,000,000    |      
|011-3  |  |                         | 3.00 | %                |       | 10,580,000    |      
|011-4  |  |                         | 3.00 | %                |       | 10,570,000    |      
|003-9  |  |                         | 4.20 | %                |       |              |      
|003-10 |  |                         | 5.64 | %                |       |              |      
|003-11 |  |                         | 5.64 | %                |       |              |      
|011-5  |  |                         | 4.32 | %                |       |              |      
|011-6  |  |                         | 4.80 | %                |       |              |      

| | Bonds:                                      
| | --------------------------------------------
| |                                             
| | Long-term   bonds are summarized as follows:

|                                         |  | At December 31, |            
|---------------------------------------- |  | --------------- | -----------
|                                         |  |                 |            
|                                         |  | 2004            |            
|                                         |  |                 |            
|                                         |  | ThCh$           |            
|Payable in:                              |  |                 |            
|Inflation-linked units   (UFs)           |  |                 | 141,957,243
|Less: current portion (See   Note 12.g.) |  |                 | 5,749,745  
|                                         |  |                 |            
|Total                                    |  |                 | 136,207,498
|                                         |  |                 |            

| | D&S and   its subsidiary SAITEC S.A. have issued bonds to the Chilean public in   UFs.  The issues are summarized as   follows:
| | -------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                
| | D&S   issued four series of bonds in 2001 and 2003.  The detail is as follows:                                                 

|Bond Issued |  | Date of    Issuance |  | Indexation |  | Amount    issued |  | Series              |  | Maturity    date    |  | Nominal    interest rate |  | Amortization      Terms      |  | Interest    Payment                                      | 
|----------- |  | ------------------- |  | ---------- |  | ---------------- |  | ------------------- |  | ------------------- |  | ------------------------ |  | ---------------------------- |  | -------------------------------------------------------- | 
|            |  |                     |  |            |  |                  |  |                     |  |                     |  |                          |  |                              |  |                                                          | 
|SERIES A    |  | 15.11.2001          |  | U.F.       |  | 3,500,000        |  | A1   U.F.   A2 U.F. |  | 300,000   3,200,000 |  | 2006   2006              |  | 7.0% compounded semiannually |  | 1 installment due on April ,   2006                      | 
|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 October, 2022 | 
|SERIES C    |  | 01.12.2003          |  | U.F.       |  | 2,000,000        |  | C1   U.F.           |  | 2,000,000           |  | 2009                     |  | 4.5% compounded semiannually |  | 10 semiannual Installments   as from December, 2009      | 
|SERIES D    |  | 01.12.2003          |  | U.F.       |  | 1,000,000        |  | D1   U.F.           |  | 1,000,000           |  | 2025                     |  | 5.5% compounded semiannually |  | 38 semiannual Installments   as from December, 2009      | 

| | SAITEC S.A. issued UF350,000 of 22
year bonds issued in 1992.  Principal is paid down semiannually from
October 1, 1995, after a three-year grace period.  Interest is payable
semiannually at 6.5%.  These bonds are not collateralized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Interest accrued on the D&S and SAITEC
bonds, at December 31, 2003, 2004 and 2005 was ThCh$1,667,822, ThCh$1,662,814
and ThCh$1,656,007 respectively and is included in accordance with Chilean GAAP
with the bond principal in Bonds in the balance sheet.  The
difference between par value and the proceeds is being deferred and amortized by
the straight line method which approximates the effective interest method. 
The discount at December 31, 2005, was ThCh$2,725,219 (ThCh$3,171,384 in 2004)
of which the current portion is included in other current assets for
ThCh$411,264 (ThCh$416,831 in 2004) and the long term portion is included in
other assets-net for ThCh$2,313,955 (ThCh$2,754,553 in 2004).

F-22

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Commercial paper:                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                 
| | On November   15, 2002, the Company registered an issue of bearer promissory notes   amounting to UF2,150,000, with the SVS, under number 003.  
| |                                                                                                                                                 
| | On October   14, 2003, the Company also registered with the SVS, under the number 011, an   issuance of bearer promissory notes for UF1,250,000.
| |                                                                                                                                                 
| | The   principal characteristics of this commercial paper are:                                                                                   

| | 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.                                                                                                                                                                                                                              
| | ------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                      |                                                                                                                                                                                                                                                                                                                                                                                                        
| | b)                                   | Long-term   principal is shown under bonds on the consolidated balance sheets.                                                                                                                                                                                                                                                                                                                         
| |                                      |                                                                                                                                                                                                                                                                                                                                                                                                        
| | c)                                   | The   promissory notes are not secured.                                                                                                                                                                                                                                                                                                                                                                
| |                                      |                                                                                                                                                                                                                                                                                                                                                                                                        
| | d)                                   | At December   31, 2005, the premium from the placement of the promissory notes amounted to   ThCh$93,933 (ThCh$88,779 in 2004).  At   December 31, 2005, these amounts are shown in other current assets.                                                                                                                                                                                              
| |                                      |                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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, 2005,   ThCh$61,898 have been amortized and included in the financial expenses for   2005 (ThCh$477,699 in 2004 and ThCh$773,818 in 2003).  ThCh$25,534 is included in other current   assets. (ThCh$31,511 in 2004).
| |                                      |                                                                                                                                                                                                                                                                                                                                                                                                        
| | f)                                   | The duration   term for these issuances is ten years and the commercial paper is repaid and   renewed every year.                                                                                                                                                                                                                                                                                      
| |                                      |                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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.                                                                                                                                         
| |                                                                             |  |    |                                                                                                                                                                                                                                                     
| | At December   31, 2005, the Company was in compliance with these covenants.

F-23

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | f.     Long-term sundry creditors                                  
| | -------------------------------------------------------------------
| |                                                                    
| | The detail   of long - term portion sundry creditors is as follows:

|                                                                                       |  | At December 31, |        
|-------------------------------------------------------------------------------------- |  | --------------- | -------
|                                                                                       |  |                 |        
|                                                                                       |  | 2004            |        
|                                                                                       |  |                 |        
|                                                                                       |  | ThCh$           |        
|Due to Compañía de   Petróleos de Chile S.A. and accruing interest at 8.59% a year (1) |  |                 | 228,668
|Less: Current portion                                                                  |  |                 | 23,285 
|                                                                                       |  |                 |        
|Total                                                                                  |  |                 | 205,383
|                                                                                       |  |                 |        

| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                                         
| |                                                                                                                                             
| | 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, 2004                                                                                                                   

|Bank or   Other Institution Name |  | Principal       |  | Interest rate  |  | Date of    maturity |  | Amount of principalpayable within one    year and accrued    interest as of    December 31, 2004 |  | Amount of principalpayable in more    than one year | 
|-------------------------------- |  | --------------- |  | -------------- |  | ------------------- |  | ------------------------------------------------------------------------------------------------ |  | --------------------------------------------------- | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                  |  |                                                     | 
|                                 |  |                 |  |                |  |                     |  | ThCh$                                                                                            |  | ThCh$                                               | 
|Estado                           |  | ThCh$21,528,557 |  | 4.49%          |  | 2007                |  | 322,211                                                                                          |  | 21,528,556                                          | 
|Santander                        |  | ThCh$30,781,114 |  | TAB   +0.85%   |  | 2009                |  | 3,393,849                                                                                        |  | 27,703,003                                          | 
|Citibank                         |  | ThCh$29,008,000 |  | TAB   +0.80%   |  | 2007                |  | 5,922,273                                                                                        |  | 23,206,400                                          | 
|BBVA                             |  | ThCh$25,900,000 |  | TAB   +0.80%   |  | 2009                |  | 30,044                                                                                           |  | 25,900,000                                          | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                  |  |                                                     | 
|Subtotal-Banks                   |  |                 |  |                |  |                     |  | 9,668,377                                                                                        |  | 98,337,959                                          | 
|Bonds                            |  |                 |  |                |  |                     |  |                                                                                                  |  |                                                     | 
|SERIE A                          |  | UF3,500,000     |  | UF   +7%       |  | 2006                |  | 1,074,364                                                                                        |  | 62,791,623                                          | 
|SERIE B                          |  | UF1,200,000     |  | UF   + 6.5%    |  | 2022                |  | 342,446                                                                                          |  | 21,528,557                                          | 
|SERIE C                          |  | UF2,000,000     |  | UF   + 4.5%    |  | 2009                |  | 3,991,925                                                                                        |  | 32,020,613                                          | 
|SERIE D                          |  | UF1,000,000     |  | UF   + 5.5%    |  | 2025                |  | 80,235                                                                                           |  | 17,940,464                                          | 
|SERIEA-162                       |  | UF120,000       |  | UF   + 6.5%    |  | 2014                |  | 260,775                                                                                          |  | 1,926,241                                           | 
|Subtotal   Bonds                 |  |                 |  |                |  |                     |  | 5,749,745                                                                                        |  | 136,207,498                                         | 
|Lease   Obligations              |  | ThCh$12,274,965 |  | 7%   to 13.56% |  | 2007                |  | 6,236,129                                                                                        |  | 6,038,836                                           | 
|Other                            |  | ThCh$196,840    |  | 0.86%          |  | 2013                |  | 23,285                                                                                           |  | 205,383                                             | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                  |  |                                                     | 
|Total                            |  |                 |  |                |  |                     |  | 21,677,536                                                                                       |  | 240,789,676                                         | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                  |  |                                                     | 

| | As of   December 31, 2005
| | -------------------------

|Bank or   Other Institution Name |  | Principal       |  | Interestrate   |  | Date of    maturity |  | Amount of principal    payable within one    year and accrued    interest as of    December 31, 2005 |  | Amount of principal    payable in more    than one year | 
|-------------------------------- |  | --------------- |  | -------------- |  | ------------------- |  | ---------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------- | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                      |  |                                                         | 
|                                 |  |                 |  |                |  |                     |  | ThCh$                                                                                                |  | ThCh$                                                   | 
|Estado                           |  | ThCh$21,569,772 |  | 4.49%          |  | 2007                |  | 322,828                                                                                              |  | 21,569,772                                              | 
|Citibank                         |  | ThCh$28,000,000 |  | TAB   +0.80%   |  | 2007                |  | 17,263,306                                                                                           |  | 11,200,000                                              | 
|BBVA                             |  | ThCh$25,000,000 |  | TAB   +0.80%   |  | 2009                |  | 6,296,250                                                                                            |  | 18,750,000                                              | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                      |  |                                                         | 
|Subtotal-Banks                   |  |                 |  |                |  |                     |  | 23,882,384                                                                                           |  | 51,519,772                                              | 
|Bonds                            |  |                 |  |                |  |                     |  |                                                                                                      |  |                                                         | 
|SERIE A                          |  | UF3,500,000     |  | UF   +7%       |  | 2006                |  | 63,994,170                                                                                           |  | -                                                       | 
|SERIE B                          |  | UF1,200,000     |  | UF   + 6.5%    |  | 2022                |  | 344,987                                                                                              |  | 21,569,772                                              | 
|SERIE C                          |  | UF1,784,826     |  | UF   + 4.5%    |  | 2009                |  | 5,311,371                                                                                            |  | 26,888,220                                              | 
|SERIE D                          |  | UF1,000,000     |  | UF   + 5.5%    |  | 2025                |  | 80,389                                                                                               |  | 17,974,810                                              | 
|SERIEA-162                       |  | UF107,368       |  | UF   + 6.5%    |  | 2014                |  | 257,672                                                                                              |  | 1,702,878                                               | 
|Subtotal   Bonds                 |  |                 |  |                |  |                     |  | 69,988,589                                                                                           |  | 68,135,680                                              | 
|Lease   Obligations              |  | ThCh$6,237,490  |  | 7%   to 13.56% |  | 2007                |  | 4,794,055                                                                                            |  | 1,443,434                                               | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                      |  |                                                         | 
|Total                            |  |                 |  |                |  |                     |  | 98,665,028                                                                                           |  | 121,098,886                                             | 
|                                 |  |                 |  |                |  |                     |  |                                                                                                      |  |                                                         | 

F-24

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|    | Our debt   with Santander Bank was entered into on a four year maturity schedule for the   purpose of financing the expansion of our business.  This resulted in large principal payments during 2004 on a   total principal amount of ThCh$73,097,853 originating in 2001.  In 2004, the Company paid off a portion of   this debt with the proceeds of certain bond issuance, specifically the series   C issuance.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Interest   expense is classified as non-operating expense (see Note 18).                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|13. | SHAREHOLDERS EQUITY                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The changes   in shareholders equity accounts are as follows:                                                                                                                                                                                                                                                                                                                                                       

|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            | Retained earnings |                      |   |       |            
|---------------------------------------------- |  | ------------------ | ----------- | ----------------------------------- |  | ----------------- |  | -------------------- | ---------- | -------------------------- | ----------------- | -------------------- | - | ----- | -----------
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|                                               |  | Paid-in    capital |             | Technical    revaluation    reserve |  | Other    reserves |  | Retained    earnings |            | Net income    for the year |                   | Interim    dividends |   | Total |            
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|                                               |  | ThCh$              |             | ThCh$                               |  | ThCh$             |  | ThCh$                |            | ThCh$                      |                   | ThCh$                |   | ThCh$ |            
|Balances, January 1, 2003                      |  |                    | 214,784,612 |                                     |  | 1,267,377         |  |                      | 33,417     |                            |                   | 67,770,224           |   |       | 23,777,482 
|Transfers                                      |  |                    |            |                                     |  |                   |  |                      |           |                            |                   | 23,777,482           |   |       | (23,777,482
|Dividends paid                                 |  |                    |            |                                     |  |                  |  |                      |           |                            |                   | (13,800,000          | ) |       |           
|Price level restatement                        |  |                    | 2,147,846   |                                     |  | 12,674            |  |                      | 334        |                            |                   | 894,777              |   |       |           
|Net income for the year                        |  |                    |            |                                     |  |                  |  |                      |           |                            |                   |                     |   |       | 11,766,514 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances, December 31, 2003                    |  |                    | 216,932,458 |                                     |  | 1,280,051         |  |                      | 33,751     |                            |                   | 78,642,483           |   |       | 11,766,514 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances as of December 31,   2003 (1)         |  |                    | 230,360,577 |                                     |  | 1,359,286         |  |                      | 35,840     |                            |                   | 83,510,453           |   |       | 12,494,861 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances, January 1, 2004                      |  |                    | 216,932,458 |                                     |  | 1,280,051         |  |                      | 33,751     |                            |                   | 78,642,483           |   |       | 11,766,514 
|Transfers                                      |  |                    |            |                                     |  |                  |  |                      |           |                            |                   | 11,766,514           |   |       | (11,766,514
|Capital increase with   increase in new shares |  |                    | 155,048,729 |                                     |  |                  |  |                      | (2,510,459 | )                          |                   |                      |   |       |            
|Dividends paid                                 |  |                    |            |                                     |  |                  |  |                      |           |                            |                   | (13,779,300          | ) |       |           
|Price level restatement                        |  |                    | 6,833,964   |                                     |  | 32,001            |  |                      | (14,219    | )                          |                   | 1,908,841            |   |       |           
|Net income for the year                        |  |                    |            |                                     |  |                  |  |                      |           |                            |                   |                     |   |       | 10,357,195 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances, December 31, 2004                    |  |                    | 378,815,151 |                                     |  | 1,312,052         |  |                      | (2,490,927 | )                          |                   | 78,538,538           |   |       | 10,357,195 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances as of December 31,   2004 (1)         |  |                    | 392,452,496 |                                     |  | 1,359,286         |  |                      | (2,580,601 | )                          |                   | 81,365,926           |   |       | 10,730,054 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances, January 1, 2005                      |  |                    | 378,815,151 |                                     |  | 1,312,052         |  |                      | (2,490,927 | )                          |                   | 78,538,538           |   |       | 10,357,195 
|Transfers                                      |  |                    |            |                                     |  |                  |  |                      |           |                            |                   | 10,357,195           |   |       | (10,357,195
|Dividends paid                                 |  |                    |            |                                     |  |                  |  |                      |           |                            |                   | (10,619,100          | ) |       |           
|Price level restatement                        |  |                    | 13,637,345  |                                     |  | 47,234            |  |                      | (90,468    | )                          |                   | 2,817,958            |   |       |           
|Recognition of equity value   adjustment       |  |                    |            |                                     |  |                  |  |                      | (19,854    | )                          |                   |                     |   |       |            
|Net income for the year                        |  |                    |            |                                     |  |                  |  |                      |           |                            |                   |                     |   |       | 42,367,120 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            
|Balances, December 31, 2005                    |  |                    | 392,452,496 |                                     |  | 1,359,286         |  |                      | (2,601,249 | )                          |                   | 81,094,591           |   |       | 42,367,120 
|                                               |  |                    |             |                                     |  |                   |  |                      |            |                            |                   |                      |   |       |            

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In   accordance with article 10 of Law No18,046, the amount corresponding to   monetary correction of capital has been included in paid-in capital.  The Companys paid-in capital is divided   into 6,520,000,000 no-par-value shares.                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Effective   December 6, 2004, we conducted a four-for-one 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.

F-25

---

DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Capital increases                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | The Eleventh   Extraordinary Shareholders Meeting held on May 23, 2002 approved a capital   increase of ThCh$163,622,500 through the issue of 250 million new no-par   value registered shares of the same series, which must be issued, subscribed   to and paid in within 3 years from this date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | The Twelfth   Extraordinary Shareholders Meeting held on April 12, 2004 agreed to annul the   aforementioned corporate capital increase. The same Extraordinary   Shareholders Meeting replaced it, approving a maximum capital increase of   ThCh$170,000,000 through the issue of 250 million new no-par value registered   shares of the same series, which are issued, subscribed to and paid in at   December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The   Fourteenth Extraordinary Shareholders Meeting held on October 26, 2004 agreed   to redenominate the number of shares in which the Companys capital is   divided by replacing each existing share of the Company by four shares. The   Companys capital of ThCh$392,452,496 will therefore be divided into 6,520   million new no-par value registered shares of the same series.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Income distribution policy                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | In   compliance with current Chilean law, the Company must distribute at least 30%   of its net income as a cash dividend, unless the General Shareholders   Meeting decides otherwise by a unanimous vote of the issued shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | Interim   dividends are recorded in the interim dividends column of the stockholders   equity note when they are provisionally declared by the Board of Directors   during any given fiscal year.  They   are recorded as a debit in the interim dividend column of the stockholders   equity note in the line item Net income for the year.  The offsetting credit is against dividends   payable as a liability.  These   provisional interim dividends are approved formally by the annual   Shareholders Meeting in April of the subsequent year.  The final dividends, of which the interim   dividends are a portion, may differ from the provisionally declared interim   dividends.  Once the final dividend is   approved and paid to shareholders, a credit is recorded for the amount of   interim dividends preliminarily approved in the prior year in the interim   dividends column of the stockholders equity



note and the final declared   dividend is shown as a reduction in the retained earnings column.  This treatment is mandated by Circular 1501   of the Chilean Superintendency of Securities and Insurance.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Reserve for technical revaluation of property, plant and equipment
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | This reserve   corresponds to technical revaluations made by subsidiaries in prior years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | e.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Dividends paid                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                   
| | During the   years ended December 31, 2003, 2004 and 2005 the Company paid dividends per   share for Ch$2.5 Ch$1.9, and Ch$4.0, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-26

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | f.                                               | Other reserves
| | ------------------------------------------------ | --------------
| |                                                  |               
| | The   breakdown of the balance is the following:

|                                             |  | 2004  |            | 2005  | 
|-------------------------------------------- |  | ----- | ---------- | ----- | 
|                                             |  |       |            |       | 
|                                             |  | ThCh$ |            | ThCh$ | 
|Capital Increase Expenses   Reserve (1)      |  |       | (2,616,441 | )     | 
|Recognition of equity value   adjustment (2) |  |       |           |       | 
|Other Reserves                               |  |       | 35,840     |       | 
|                                             |  |       |            |       | 
|Totals                                       |  |       | (2,580,601 | )     | 
|                                             |  |       |            |       | 

|    |             
|--- | ------------
|    | (1)         
|    |             
|    | (2)         
|    |             
|    |             
|14. | INCOME TAXES
|    |             
|    | a.          

|                                                                |  | 2004 |            | 2005 | 
|--------------------------------------------------------------- |  | ---- | ---------- | ---- | 
|                                                                |  |      |            |      | 
|                                                                |  |      | ThCh$      |      | 
|First category income taxes                                     |  |      | (7,626,420 | )    | 
|Less:                                                           |  |      |            |      | 
|Monthly   payments                                              |  |      | 7,944,058  |      | 
|Personnel   training credit and real estate tax credit          |  |      | 4,491,962  |      | 
|Recovery of first category   income tax by applying tax losses: |  |      |            |      | 
|To   the year                                                   |  |      | 1,165,112  |      | 
|Benefit   from carryback of tax losses                          |  |      | 544,511    |      | 
|Arica   Law tax credit                                          |  |      | 9,464      |      | 
|Austral   Law tax credit                                        |  |      |           |      | 
|                                                                |  |      |            |      | 
|Net income taxes refundable                                     |  |      | 6,528,687  |      | 
|                                                                |  |      |            |      | 

| | At December   31, 2004 and 2005 Refundable taxes on the balance sheet is shown together   with other Value Added Taxes (VAT) receivable of ThCh$4,246,335 and   ThCh$2,489,209 respectively within current assets.                                                                                                                                                                                      
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                           
| | At December   31, 2005, D&S and its subsidiaries have unremitted taxable earnings of   approximately ThCh$156,299,463 (ThCh$134,973,481 in 2004).  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$90,246,012 as of December 31, 2005   (ThCh$72,014,512 in 2004).

F-27

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

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

|                                                |  | Balance, December 31, 2004 |           | Balance, December 31, 2005 | 
|----------------------------------------------- |  | -------------------------- | --------- | -------------------------- | 
|                                                |  |                            |           |                            | 
|                                                |  | Deferred Assets            |           | Deferred Liabilities       | 
|                                                |  |                            |           |                            | 
|                                                |  | Short-term                 |           | Long-term                  | 
|                                                |  |                            |           |                            | 
|                                                |  | ThCh$                      |           | ThCh$                      | 
|Temporary   difference                          |  |                            |           |                            | 
|Allowance for uncollectible   accounts          |  |                            | 3,651,071 |                            | 
|Vacation accrual                                |  |                            | 700,560   |                            | 
|Leased assets                                   |  |                            |          |                            | 
|Depreciation of property,   plant and equipment |  |                            |          |                            | 
|Severance indemnity                             |  |                            | 106,939   |                            | 
|Other events                                    |  |                            | 499,367   |                            | 
|Sundry provisions                               |  |                            | 118,438   |                            | 
|Realization allowance on   inventory            |  |                            |          |                            | 
|Interest income                                 |  |                            |          |                            | 
|Allowance for uncollectible   sundry debtors    |  |                            | 188,917   |                            | 
|Capitalized financial cost                      |  |                            |          |                            | 
|Deferred charges                                |  |                            |          |                            | 
|Tax loss                                        |  |                            | 688,395   |                            | 
|                                                |  |                            |           |                            | 
|Total deferred taxes                            |  |                            | 5,953,687 |                            | 
|Complementary accounts   balance                |  |                            | (5,519)   |                            | 
|                                                |  |                            |           |                            | 
|Net balances per balance   sheet                |  |                            | 5,948,168 |                            | 
|                                                |  |                            |           |                            | 

| | Long-term   deferred tax assets are presented net of long-term deferred tax liabilities   and are included in Other long-term assets (See Note 9b).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                     
| | Short-term   deferred tax assets are presented net of short-term deferred tax liabilities   and are included in Other current assets (See Note 7).
| |                                                                                                                                                     
| | The   complementary accounts are amortized over the estimated period the   differences will reverse.                                                
| |                                                                                                                                                     
| | c.                                                                                                                                                  

|                                                                                          |  | 2003  |            | 2004  |  | 2005       |  
|----------------------------------------------------------------------------------------- |  | ----- | ---------- | ----- |  | ---------- | -
|                                                                                          |  |       |            |       |  |            |  
|                                                                                          |  | ThCh$ |            | ThCh$ |  | ThCh$      |  
|Current   tax expense                                                                     |  |       |            |       |  |            |  
|For the year                                                                              |  |       | (6,313,044 | )     |  | (7,626,420 | )
|Prior year adjustment                                                                     |  |       | (45,962    | )     |  | (19,189    | )
|Benefit from tax loss carry   back                                                        |  |       | 540,105    |       |  | 1,165,112  |  
|Deferred   taxes                                                                          |  |       |            |       |  |            |  
|Change in deferred taxes                                                                  |  |       | 1,570,943  |       |  | 4,266,187  |  
|Effect of amortization of   complementary accounts of deferred tax assets and liabilities |  |       | (687,530   | )     |  | (139,680   | )
|Effect on assets and   liabilities of deferred tax from changes in valuation allowance    |  |       |           |       |  | 149,622    |  
|                                                                                          |  |       |            |       |  |            |  
|Total charge to income                                                                    |  |       | (4,935,488 | )     |  | (2,204,368 | )
|                                                                                          |  |       |            |       |  |            |  

F-28

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|15. | FOREIGN CURRENCIES                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                      
|    | Balances in   foreign currencies, all of which are denominated in United States dollars,   are summarized as follows:

|                      |  | At December 31, |           
|--------------------- |  | --------------- | ----------
|                      |  |                 |           
|                      |  | 2004            |           
|                      |  |                 |           
|                      |  | ThCh$           |           
|ASSETS                |  |                 |           
|Current assets        |  |                 | 28,463,429
|                      |  |                 |           
|LIABILITIES           |  |                 |           
|Current liabilities   |  |                 | 23,110,522
|Long-term liabilities |  |                 | 3,535,990 
|                      |  |                 |           
|Total liabilities     |  |                 | 26,646,512
|                      |  |                 |           
|Net asset position    |  |                 | 1,816,917 
|                      |  |                 |           

|16. | PRICE-LEVEL RESTATEMENT AND FOREIGN EXCHANGE                                                                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                 
|    | Price-level   restatement (monetary correction) and foreign exchange, described in Note 2d   and 2e, credited (charged) to income is as follows:

|                                                                        |  | For the year ended December 31, |           
|----------------------------------------------------------------------- |  | ------------------------------- | ----------
|                                                                        |  |                                 |           
|                                                                        |  | 2003                            |           
|                                                                        |  |                                 |           
|                                                                        |  | ThCh$                           |           
|Property, plant and   equipment - net                                   |  |                                 | 5,198,006 
|Non-monetary liabilities -   net of other long-term non-monetary assets |  |                                 | 810,010   
|Shareholders equity                                                    |  |                                 | (3,266,756
|Liabilities (UFs)                                                      |  |                                 | (433,182  
|Income statement amounts                                                |  |                                 | (51,338   
|                                                                        |  |                                 |           
|Price-level restatements -   net                                        |  |                                 | 2,256,740 
|Foreign exchange gain   (loss) (1)                                      |  |                                 | (3,182,310
|                                                                        |  |                                 |           
|Gain (loss) from changes in   the purchasing power of the Chilean peso  |  |                                 | (925,570  
|                                                                        |  |                                 |           

| |    
| | ---
| | (1)

|                                              |  |          |     |       | At December 31, |            
|--------------------------------------------- |  | -------- | --- | ----- | --------------- | -----------
|                                              |  |          |     |       |                 |            
|                                              |  | Currency |     | 2003  |                 | 2004       
|                                              |  |          |     |       |                 |            
|                                              |  |          |     | ThCh$ |                 | ThCh$      
|Current   assets                              |  |          |     |       |                 |            
|Marketable securities                         |  |          | US$ |       |                 | 2,445,131  
|Sundry debtors                                |  |          | US$ |       |                 | (10,602,584
|                                              |  |          |     |       |                 |            
|Total gain (loss)                             |  |          |     |       |                 | (8,157,453 
|                                              |  |          |     |       |                 |            
|Current   liabilities                         |  |          |     |       |                 |            
|Debt due to banks and   financial institution |  |          | US$ |       |                 | 4,975,143  
|Current portion of   long-term liabilities    |  |          | US$ |       |                 |           
|Accruals                                      |  |          | US$ |       |                 |           
|                                              |  |          |     |       |                 |            
|Total gain (loss)                             |  |          |     |       |                 | 4,975,143  
|                                              |  |          |     |       |                 |            
|Foreign exchange gain   (loss)                |  |          |     |       |                 | (3,182,310 
|                                              |  |          |     |       |                 |            

F-29

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|17. | DIRECTORS REMUNERATION                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                             
|    | The   remuneration paid to the Directors of D&S and its subsidiaries for   performing their duties is summarized as follows:

|                |  | For the year ended December 31, |        
|--------------- |  | ------------------------------- | -------
|                |  |                                 |        
|                |  | 2003                            |        
|                |  |                                 |        
|                |  | ThCh$                           |        
|Attendance fees |  |                                 | 386,850
|                |  |                                 |        

| | The   following amounts were also paid to the Directors for activities not related   to their positions as Directors:
| | ---------------------------------------------------------------------------------------------------------------------

|           |  | For the year ended December 31, |       
|---------- |  | ------------------------------- | ------
|           |  |                                 |       
|           |  | 2003                            |       
|           |  |                                 |       
|           |  | ThCh$                           |       
|Per - diem |  |                                 | 55,992
|           |  |                                 |       

|    | All of these   fees are included in Selling and administrative expenses.
|--- | ------------------------------------------------------------------------
|    |                                                                         
|18. | NON-OPERATING INCOME AND EXPENSES                                       
|    |                                                                         
|    | a.                                                                      

|                                    |  | For the year ended December 31, |          
|----------------------------------- |  | ------------------------------- | ---------
|                                    |  |                                 |          
|                                    |  | 2003                            |          
|                                    |  |                                 |          
|                                    |  | ThCh$                           |          
|Interest income                     |  |                                 | 571,910  
|Amortization of negative   goodwill |  |                                 | 375,050  
|Equity in income of   investee      |  |                                 | 480,812  
|Gain from sale of fixed   assets    |  |                                 | 72,124   
|Other                               |  |                                 | 75,602   
|Minority interest                   |  |                                 |         
|                                    |  |                                 |          
|Total                               |  |                                 | 1,575,498
|                                    |  |                                 |          

| | b. | Non-operating   expense for each year is summarized as follows:
| | -- | ---------------------------------------------------------------

|                                 |  | For the year ended December 31, |           
|-------------------------------- |  | ------------------------------- | ----------
|                                 |  |                                 |           
|                                 |  | 2003                            |           
|                                 |  |                                 |           
|                                 |  | ThCh$                           |           
|Interest expense                 |  |                                 | 17,423,511
|Amortization of goodwill         |  |                                 | 843,943   
|Minority interest                |  |                                 | 41,901    
|Equity in losses of   investee   |  |                                 |          
|Donations                        |  |                                 | 493,784   
|Loss from sale of fixed   assets |  |                                 | 62,425    
|Other                            |  |                                 | 809,854   
|                                 |  |                                 |           
|Total                            |  |                                 | 19,675,418
|                                 |  |                                 |           

F-30

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|19. | TRANSACTIONS WITH RELATED PARTIES
|--- | ---------------------------------
|    |                                  
|    | a.                               

|                                                         |  | Receivable      |           | Payable | 
|-------------------------------------------------------- |  | --------------- | --------- | ------- | 
|                                                         |  |                 |           |         | 
|                                                         |  | At December 31, |          
|                                                         |  |                 |          
|                                                         |  | 2004            |           | 2005    | 
|                                                         |  |                 |           |         | 
|                                                         |  | ThCh$           |           | ThCh$   | 
|Short-term:                                              |  |                 |           |         | 
|Servicios Profesionales y de   Comercialización S.A. (1) |  |                 |          |         | 
|Intersuper Argentina S.A.   (2)                          |  |                 |          |         | 
|Aquapuro S.A.                                            |  |                 | 216,366   |         | 
|Inversiones Solpacific S.A.                              |  |                 | 110,877   |         | 
|Inmobiliaria Mall Calama   S.A.                          |  |                 | 1,218,538 |         | 
|                                                         |  |                 |           |         | 
|Totals                                                   |  |                 | 1,545,781 |         | 
|                                                         |  |                 |           |         | 

| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                  
| |                                                                                                                      
| | (2)                                                                                                                  
| |                                                                                                                      
| | The accounts   receivable and payable, other than that mentioned in (1), are not subject to   interest or indexation.
| |                                                                                                                      
| | b.                                                                                                                   



|Company                                              |  | Relationship   to    Company |  | Description   of    services or goods    received/ disbursed |  | Cash value   of the    transaction for the    year ended December 31, |  | (Charged)   to income    for the year ended December 31, | 
|---------------------------------------------------- |  | ---------------------------- |  | ------------------------------------------------------------ |  | --------------------------------------------------------------------- |  | -------------------------------------------------------- | 
|                                                     |  |                              |  |                                                              |  |                                                                       |  |                                                          | 
|                                                     |  |                              |  |                                                              |  | 2003                                                                  |  | 2004                                                     | 
|                                                     |  |                              |  |                                                              |  |                                                                       |  |                                                          | 
|                                                     |  |                              |  |                                                              |  | ThCh$                                                                 |  | ThCh$                                                    | 
|Servicios Profesionales y de   Comercialización S.A. |  | Parent company               |  | Interest on checking account                                 |  | 444,570                                                               |  | 655,349                                                  | 
|                                                     |  |                              |  | Readjustment on current   account                            |  | 47,309                                                                |  | 482,718                                                  | 
|Aquapuro S.A.                                        |  | Member of controlling group  |  | Purchase of merchandise                                      |  | 7,339,160                                                             |  | 6,670,520                                                | 
|Alimentos y Servicios Ltda.                          |  | Member of controlling group  |  | Purchase of merchandise                                      |  | 3,616,412                                                             |  | 3,795,045                                                | 
|Larrain Vial S.A. Corredora   de Bolsa               |  | Member of controlling group  |  | Professional services                                        |  | 419,799                                                               |  | 2,035,338                                                | 
|Kimberly Clarke Chile S.A.                           |  | Common management            |  | Purchase of merchandise                                      |  | 5,398,757                                                             |  | 7,486,617                                                | 
|BST Consulting Group S.A.                            |  | Common management            |  | Services                                                     |  | 112,676                                                               |  | 136,208                                                  | 
|BST Bancheque                                        |  | Common management            |  | Control of checks                                            |  | 15,956                                                                |  | 502,528                                                  | 
|BST Procesadora Automatic                            |  | Common management            |  | Search and recruitment                                       |  |                                                                      |  | 2,887                                                    | 
|BST Retail Services                                  |  | Common management            |  | Collection services                                          |  | 2,182,600                                                             |  | 1,307,511                                                | 
|BST Seguros Ltda.                                    |  | Common management            |  | Insurance brokers                                            |  |                                                                      |  | 47,726                                                   | 
|Promociones Financieras   Ltda.                      |  | Common management            |  | Commissions paid                                             |  | 119,315                                                               |  | 1,361,175                                                | 
|Shopn Check (Chile) Ltda.                           |  | Common management            |  | Consultants offices in   marketing                          |  |                                                                      |  | 29,912                                                   | 
|Soc Agrícola Panquehue Ltda.                         |  | Member of controlling group  |  | Purchase of merchandise                                      |  | 4,666,940                                                             |  | 4,022,586                                                | 
|Agrícola y Forestal Arcoiris   S.A.                  |  | Member of controlling group  |  | Purchase of merchandise                                      |  | 719,778                                                               |  | 925,915                                                  | 
|Empresas El Mercurio S.A.P.                          |  | Common directors             |  | Publicity                                                    |  | 218,117                                                               |  | 611,712                                                  | 
|El Mercurio Valparaíso                               |  | Common directors             |  | Publicity                                                    |  | 107,884                                                               |  | 93,908                                                   | 
|BBDO Publicidad S.A.                                 |  | Common directors             |  | Publicity                                                    |  |                                                                      |  |                                                         | 
|Entel PCS Telecomunicaciones   S.A.                  |  | Common directors             |  | Communications                                               |  | 5,413                                                                 |  | 17,661                                                   | 
|Entel Telefonía Local S.A.                           |  | Common directors             |  | Communications                                               |  | 6,074                                                                 |  | 7,247                                                    | 
|Entel Call Center S.A.                               |  | Common directors             |  | Communications                                               |  |                                                                      |  | 203,002                                                  | 
|Entel S.A.                                           |  | Common directors             |  | Communications                                               |  | 16,441                                                                |  | 16,220                                                   | 
|Universidad Adolfo Ibañez                            |  | Common directors             |  | Donations                                                    |  | 261,072                                                               |  | 259,621                                                  | 

F-31

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|20. | SEVERANCE INDEMNITIES                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                       
|    | The Company   records an accrual for voluntary severance indemnities, which has been   recorded at the discounted present value of the vested benefit using a 7%   discount rate and considering future service until retirement (age 60 for   women, age 65 for men).
|    |                                                                                                                                                                                                                                                                       
|    | Long term   accruals include employee severance indemnities, calculated in accordance   with the policy described in Note 2.r.    An analysis of the changes in the accruals in each year is as follows:                                                              
|    |                                                                                                                                                                                                                                                                       

|                                   |  | As of December 31, |           
|---------------------------------- |  | ------------------ | ----------
|                                   |  |                    |           
|                                   |  | 2004               |           
|                                   |  |                    |           
|                                   |  | ThCh$              |           
|Opening   balance as of January 1, |  |                    | 4,470,568 
|Increase in accruals               |  |                    | 4,241,349 
|Payments during the period         |  |                    | (3,575,861
|                                   |  |                    |           
|Total                              |  |                    | 5,136,056 
|                                   |  |                    |           

|    | The   long-term accrual amounts to ThCh$4,507,005 in 2004 and ThCh$5,638,231 in   2005, and is included as accruals under long-term liabilities.  The short-term accrual in 2004 and 2005,   respectively, amounts to ThCh$629,051 and ThCh$387,472 (Note 11).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                               
|21. | FINANCIAL DERIVATIVES                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                               
|    | As of   December 31, 2004 and 2005 the Company and its subsidiaries do not have   financial derivative contracts with financial institutions.                                                                                                                 
|    |                                                                                                                                                                                                                                                               
|22. | CONTINGENCIES AND COMMITMENTS                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                               
|    | Parent Company                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                               

| | a. | Direct commitments:                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company   has commitments for imports of inventories and fixed assets through bank   letters of credit for ThCh$4,001,593.                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                             
| | b. | Indirect commitments:                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                             
| |    | The Company   has committed contractually with Citibank N.A. to maintain its ownership   interest in Aquapuro S.A.                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                             
| | c. | Management restrictions and financial covenants:                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                             
| | I. | In   accordance with the long-term loan credit agreements signed with Banco Estado   and the credit agreements signed with Banks Santander Santiago, Banco Bilbao   Vizcaya Argentaria and Citibank, respectively, the Company must comply with   certain financial indicators calculated based on its consolidated financial   statements at June 30 and December 31, 2005.
| |    |                                                                                                                                                                                                                                                                                                                                                                             
| |    | Coverage of   financial expenses, understood as the ratio of the EBITDA (Operating income   excluding depreciation) to interest expense must be greater than 3.5. At   December 31, 2005, the coverage was 6.32.                                                                                                                                                            

F-32

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| |  | Leverage,   understood as the ratio of current liabilities (which generate interest) to   net shareholders equity must be less than 1.2. At December 31, 2005, the   leverage was 0.74.                                    
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                             
| |  | Furthermore,   according to the aforementioned credit agreements signed with Banks Santander   Santiago, Banco Bilbao Vizcaya Argentaria and Citibank, the following   conditions must be met for them to be fully in force.

| |     | 1.                                                                                                                                                                                                                                                                                                                                                                                                                                    | Loans from   Banco Santander Santiago:       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       | a.                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       | b.                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                              
| |     | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                    | Loans from   Banco Bilbao Vizcaya Argentaria:
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                              
| |     | The Bank may   declare the loan to be immediately and fully due and payable, if the Debtor   or Original Debtor find themselves in any of the following situations:  If there is any non-performance of   obligations with third parties, except for suppliers, and it is not resolved   within 10 calendar days; if the debtor, for items with similar   characteristics, grants better conditions to other creditors, among others.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                              
| |     | 3.                                                                                                                                                                                                                                                                                                                                                                                                                                    | Loans from   Citibank N.A. Agencia en Chile: 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                              
| |     | The stipulations   of the debt contract and original amendment stay fully in force, between the   new instrument and the original plus its amendments forming a single   contract.                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | II. | Bond   liability covenants are disclosed in Note 12.e.                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | d.  | Legal actions:                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | At December   31, 2005, the Company and its subsidiaries have litigation pending against   them due to lawsuits related to their normal operations, most of which do not   entail any risk of significant loss, according to the Companys legal   counsel.                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The main   causes, among others, are detailed below:                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Company: Distribución y Servicio D&S S.A.Subject: Collection of remunerations and unfair dismissal.   Quantum: ThCh$ 14,530 plus adjustment   Status: First stage. Evidence stage.                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Company: Distribución y Servicio D&S S.A.Subject: Unfair dismissal.   Quantum: ThCh$ 22,249 plus adjustments, interest and costs   Status: Distribución y Servicio D&S S.A., is being sued.  First instance.  Parties to submit evidence.    Hearing set for 10:00 a.m. on April 18, 2006.                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Company: Distribución y Servicio D&S S.A.Subject: Non-performance of contract   Quantum: ThCh$ 33,879 plus adjustments, interest and undetermined   compensation for deferred damages.   Status: Presentation of pleas and proceedings                                                                                                                                                                                               

F-33

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| |  | Company: Distribución y Servicio D&S S.A.Subject: Compensation for damages   Quantum: ThCh$ 204,300    Status: Appeal and appeal for annulment (writ of error) pending                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Company:   Supermercado Santa Rosa Ltda.   Subject: Unfair dismissal.   Quantum: ThCh$ 6,936 plus adjustments, interest and costs   Status: First instance. Evidence presented.    Procedures requested for enhanced verdict.                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Company:   Hipermercados Maipú Ltda.   Subject: Lawsuit for compensation for damages   Quantum: ThCh$ 6,500    Status: Presentation of pleadings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Company:   Líder Alameda   Subject: Lawsuit for violation of the consumer law   Quantum: ThCh$1,579   Status: Arbitration hearing suspended, because the court still had to rule on   the impossibility of Líder being sued in a lawsuit, because it is a   trademark.  Setting of new date for   same hearing and submission of evidence pending.                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Company:   Hipermercdao Alameda   Subject: Local Police Proceeding   Quantum: ThCh$20,700   Status: Final decision pending                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Company:   Supermercado La Dehesa Ltda.   Subject: Unfair dismissal.   Quantum: ThCh$1,782   Status: Second instance.  Favorable   decision for Supermercado La Dehesa.    Appeal lodged by plaintiff is pending.                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | At December 31, 2005, the
Company and its subsidiaries were involved in legal proceeding against them
which are related to their normal business activities. In the Companys
legal advisors opinion and managements opinion, as of December 31,
2005, there are no lawsuits or possible lawsuit, legal or non-legal matters, tax
issues or any liens which may materially affect the financial statements of the
Company.                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Due to the   non-payment of the full amount agreed to in the purchase and sale agreement   for the shares of Supermercados Ekono S.A. (Argentina), the Company notified   the guarantor of this debt, Disco Ahold International Holdings N.V., of   non-payment of the full amount of the debt and demanded its payment.  Due to the lack thereof, the Company has   initiated legal actions in the Netherlands Antilles against the guarantor, and also   against the guarantors parent company, Royal Ahold of the Netherlands.                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | In the   opinion of management,   the Company has contractual and legal recourses that will allow it to recover   the balance in the form originally agreed to, and, consequently, no provision   has been made for the debt guaranteed by Disco Ahold International N.V.                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Management   has initiated legal actions to collect the unpaid portion in the Netherlands Antilles and the Netherlands.

 On September 5, 2005, the Netherlands Antilles Court ruled against   D&S in the suit relating to Disco Ahold, although based on the arguments   contained in the verdict, in Managements opinion, the Company has contractual and legal   resources to recover the remaining balance on appeal, in the form originally   agreed upon.  Therefore, management   believes that no provision is necessary for the receivable due from Disco   S.A., which is guaranteed by Disco Ahold International Holding N.V.

F-34

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Indirect guaranties:
| | --------------------

|                         |  | Indebted |        |          |  | Assets   Committed |  | Outstanding   payment balance |         
|------------------------ |  | -------- | ------ | -------- |  | ------------------ |  | ----------------------------- | --------
|                         |  |          |        | Type of  |  |                    |  |                               |         
|Guaranty Creditor        |  | Entity   |        | Relation |  | Guaranty           |  | Type                          |         
|                         |  |          |        |          |  |                    |  |                               |         
|Banco Santander Santiago |  |          | Saitec |          |  | Subsidiary         |  |                               | Mortgage

|Guaranties   release | 
|-------------------- | 
|                     | 
|31-12-2006           | 
|                     | 
|30,082,358           | 

|23. | SUPPLEMENTARY CASH FLOW INFORMATION
|--- | -----------------------------------

|                                                                           |  | For the year ended December 31, |           
|-------------------------------------------------------------------------- |  | ------------------------------- | ----------
|                                                                           |  |                                 |           
|                                                                           |  | 2003                            |           
|                                                                           |  |                                 |           
|                                                                           |  | ThCh$                           |           
|Interest collected                                                         |  |                                 | 86,248    
|                                                                           |  |                                 |           
|Interest paid                                                              |  |                                 | 15,676,814
|                                                                           |  |                                 |           
|Income taxes paid                                                          |  |                                 | 681,364   
|                                                                           |  |                                 |           
|Property, plant and   equipment acquired by assuming directly related debt |  |                                 | 6,069,077 
|                                                                           |  |                                 |           

| | The detail   in Other charges included in operating activities, is as follows:
| | --------------------------------------------------------------------------------

|                                                                 |  | 2003  |           | 2004  |  | 2005      | 
|---------------------------------------------------------------- |  | ----- | --------- | ----- |  | --------- | 
|                                                                 |  |       |           |       |  |           | 
|                                                                 |  | ThCh$ |           | ThCh$ |  | ThCh$     | 
|Description                                                      |  |       |           |       |  |           | 
|Amortization of debt   issuance costs                            |  |       | 1,004,137 |       |  | 782,200   | 
|Amortization of   premium/discount associated with bond issuance |  |       | 162,998   |       |  | 394,546   | 
|Miscellaneous adjustments   to other investments                 |  |       | 265,197   |       |  | 58,258    | 
|Other accruals                                                   |  |       | 447,084   |       |  | 676,855   | 
|Others                                                           |  |       | 302,458   |       |  |          | 
|                                                                 |  |       |           |       |  |           | 
|Total                                                            |  |       | 2,181,874 |       |  | 1,911,859 | 
|                                                                 |  |       |           |       |  |           | 

| | The detail   in Other investment disbursements included in investing activities, is as   follows:
| | ---------------------------------------------------------------------------------------------------

|                                              |  | 2003  |            | 2004  |  | 2005       |  
|--------------------------------------------- |  | ----- | ---------- | ----- |  | ---------- | -
|                                              |  |       |            |       |  |            |  
|                                              |  | ThCh$ |            | ThCh$ |  | ThCh$      |  
|Description                                   |  |       |            |       |  |            |  
|Lease prepayment                              |  |       | (925,409   | )     |  |           |  
|Others costs - investment   in Carrefour S.A. |  |       |           |       |  | (1,073,414 | )
|Other                                         |  |       | (124,732   | )     |  | (7,910     | )
|                                              |  |       |            |       |  |            |  
|Total                                         |  |       | (1,050,141 | )     |  | (1,081,324 | )
|                                              |  |       |            |       |  |            |  

F-35

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|24. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | On February   22, 2006, the General Manager of subsidiary Sociedad Anónima Inmobiliaria   Terrenos y Establecimientos Comerciales S.A. was sanctioned by the SVS due to   lack of compliance with the five-day period after year end of the respective   calendar quarter to present the list of shareholders as of December 31, 2005,   pursuant to the provisions of Section III of Circular 1481 of the SVS.  The default was remedied on the same day.                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In the   period between January 1, 2006 and the date of presentation of these   financial statements, no other significant events that might affect their   presentation have occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|25. | DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED   ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The   Companys consolidated financial statements have been prepared in accordance   with Chilean GAAP, which varies in certain respects from U.S. GAAP.  Such differences involve methods for   measuring the amounts shown in the consolidated financial statements as well   as additional disclosures required by U.S. GAAP.  The principal differences between Chilean GAAP and U.S. GAAP   for the Company are quantified and described below.                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Under   Chilean GAAP, financial statements are restated to reflect the full effects   of the gain (loss) in the purchasing power of the Chilean peso on the   financial position and results of operations of reporting entities.  The method is based on a model that   enables calculation of net inflation gains or losses caused by monetary   assets and liabilities exposed to changes in the purchasing power of the   Chilean peso, by restating all non-monetary accounts in the financial   statements.  The model prescribes that   the historical cost of such accounts be restated for general price-level   changes between the date of origin of each item and the year-end.  The price-level restatement adjustments   under Chilean GAAP are not reversed in the U.S. GAAP reconciliation as   allowed under Securities and Exchange Commission rules.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | a.1. Deferred income taxes - Since January   1, 2000, under Technical Bulletin No. 60 of the Chilean Institute of   Accountants, the Company records income taxes using the liability method   where deferred tax effects of temporary differences between the financial   statement and tax values of assets and liabilities are booked.  Upon adoption, contra assets or   liabilities (complementary accounts) were recorded offsetting the effects   of the deferred tax assets and liabilities not recorded prior to January 1,   2000.  The complementary accounts are   amortized to income over the estimated average reversal periods corresponding   to the underlying temporary differences to which the deferred tax asset or   liability relates.                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Under U.S.   GAAP, companies must account for deferred taxes in accordance with SFAS   No.109 Accounting for Income Taxes, which requires an asset and liability   approach for financial accounting and reporting of income taxes, under the following   basic principles:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                
| | Temporary   differences are defined as any difference between the financial reporting   basis and the tax basis of an asset and liability that at some future date   will reverse, thereby resulting in taxable income or expense.  Temporary differences ordinarily become   taxable or deductible when the related asset is recovered or the related   liability is settled.  A deferred tax   liability or asset represents the amount of taxes payable or refundable in   future years as a result of temporary differences at the end of the current   year.

F-36

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The   principal difference between U.S. GAAP and Chilean GAAP relates to the   reversal of the complementary assets and liabilities recorded as a   transitional provision for unrecorded deferred taxes as of January 1, 2000   and their corresponding amortization into income.  When required, the income tax effects of U.S. GAAP adjustments   are recorded in our reconciliations to U.S. GAAP.  The effect of these differences on the net income and   shareholders equity of the Company is included in the reconciliation below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | a.2. Mandatory dividends - As required by   Law No. 18,046, unless the shareholders unanimously agree otherwise, the   Company must distribute a minimum cash dividend equivalent to 30% of net   income.  Since the payment of these   dividends is a legal requirement in Chile, an accrual for U.S. GAAP purposes   is made to recognize the corresponding decrease in equity at each balance   sheet date.  Under Chilean GAAP,   dividends are not recognized until approved at the annual shareholders meeting   subsequent to year-end.  In 2004 and   2005 the Company paid interim dividends in excess of the minimum dividend   amount required by the Law No.18,046.    For this reason, there is no effect recorded in the reconciliation of   equity below.                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | a.3. Marketable debt and equity securities -   Under U.S. GAAP, marketable debt and equity securities other than those   accounted for under the equity method are required to be accounted for under   SFAS 115 Accounting for Certain Investments in Debt and Equity Securities.  This standard requires investments to be   accounted for as follows:  (1)   held-to-maturity securities, which are defined as debt securities that a   company has a positive intent and ability to hold to maturity, are reported   at amortized cost, (2) trading securities, which are defined as those that   are bought and held principally for the purpose of selling them in the near   term, are reported at fair value with unrealized gains and losses included in   earnings, and (3) available for sale securities, which include securities not   classified in either of the other two categories, are reported at fair value   with unrealized gains and losses excluded from
earnings and included as a   separate component of shareholders equity.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Under   Chilean GAAP, the Company presents marketable equity securities (see Note 4   for detail) at the lower of cost plus price-level restatement or market   (recording any adjustment through the income statement).  Under U.S. GAAP, all investments in marketable   equity securities which the Company holds would be classified as   available-for-sale and be presented at fair value with unrealized gains and   losses included as a separate component of shareholders equity.  The effect of this difference is included in   the reconciliation below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Unrealized   losses that are considered to be other-than-temporary are recorded in the   income statement.  The Company has not   recorded any other than temporary impairment under U.S. GAAP related to these   securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | An   impairment is deemed other than temporary unless:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | The investor   has the ability and intent to hold an investment for a reasonable period of   time sufficient for a forecasted recovery of fair value up to (or beyond) the   cost of the investment, and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                         
| | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Evidence   indicating that the cost of the investment is recoverable within a reasonable   period of time outweighs evidence to the contrary.                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                         
| | a.4. Property plant and equipment - Under   Chilean GAAP, certain property, plant and equipment is reported in the   financial statements at amounts determined in accordance with a technical   appraisal.  The difference between the   carrying value and the revalued amount is included in shareholders equity in   Other reserves.  Such revaluation is   not permitted under U.S. GAAP.  The   effects of this revaluation, as well as of the reversal of the related   accumulated depreciation, depreciation expense, and monetary correction for   the year, are included in the reconciliations below.

F-37

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | a.5. Purchase accounting and impairment of goodwill   - In accordance with Chilean GAAP through December 31, 2003, business   combinations are accounted for at the book value of the underlying net assets   with the excess of cost over net book value recorded as goodwill to be   amortized to income over a period not exceeding 20 years.  Any book value in excess of acquisition   cost resulted in the recording of negative goodwill.  With the effective date of Technical   Bulletin 72 on January 1, 2004, Chilean GAAP adopted purchase method   accounting for business combinations requiring all assets acquired and   liabilities assumed to be recorded at their fair value.                                                                                                                                                                                                                                 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Under US   GAAP, prior to FAS 141, business combinations were accounted for in   accordance with APB Opinion No.16 which provided for the use of either the   purchase method or pooling of interests method.  SFAS 141 eliminated the pooling of interests method allowing   only the purchase accounting method to be used.  SFAS 141 was effective as of January 1, 2002 and applied to all   business combinations consummated after June 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Under SFAS   141, the excess of the cost of an acquired entity over the net of the amounts   assigned to assets acquired and liabilities assumed is recognized as   goodwill.  If the sum of the amounts   assigned to assets acquired and liabilities assumed exceed the cost of the   acquired entity (negative goodwill), that excess is allocated as a pro rata   reduction of the amounts that are otherwise assigned to all of the acquired   assets except (a) financial assets other than investments accounted for by   the equity method, (b) assets to be disposed of by sale, (c) deferred tax   assets, (d) prepaid assets relating to pension or other postretirement   benefit plans, and (e) any other current assets.  If any excess remains after reducing to zero the amounts that   otherwise would have been assigned to those assets, that remaining excess   shall be recognized as an extraordinary gain.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Under U.S.   GAAP, in accordance with the adoption of SFAS No.142 on January 1, 2002,   goodwill is no longer amortized, but an impairment test is performed on the   reporting unit level annually or whenever indicators of impairment arise.  The Company tests goodwill for impairment   by comparing the carrying value of net assets to the fair value of the   related operations.  If the fair value   is determined to be less than carrying value, a second step is performed to   compute the amount of the impairment.    None of the annual tests have resulted in a U.S. GAAP impairment   adjustment.                                                                                                                                                                                                                                                                                                             

| | (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.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The effects   of such differences are recorded in the reconciliation below and include   differences in the carrying values for assets, liabilities and goodwill and   the resulting depreciation and amortization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The   differences generated in goodwill between US GAAP and Chile GAAP created in   the Maquinsa acquisition for the subsequent pay-out described above are   reversing, if applicable, through the line Reversal of amortization of   goodwill- Maquinsa in the reconciliations of net income and shareholders   equity.                                                                                                                                                                                                                                                                                                                                                                    

F-38

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Under   Chilean GAAP, the goodwill resulting from the purchase of shares of Carrefour   S.A., currently doing business as Magallanes S.A., has been calculated in   accordance with Technical Bulletin No.72.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | In connection   with this acquisition, with the exception of the difference mentioned in   paragraph a.8, purchase accounting entries for this entity did not   differ.  Subsequent to the   acquisition, goodwill has been amortized under Chilean GAAP, but not under   U.S. GAAP, as previously described.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | The   differences generated in goodwill between US GAAP and Chile GAAP created in   the Carrefour acquisition for the forward contract to hedge the Euro   acquisition price (See a.8), if applicable, are reversing through the line Reversal of   amortization of goodwill - Carrefour in the reconciliations of net income   and shareholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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 US GAAP shareholders' equity and net income in 1999, as
a result of which shareholders' equity under US GAAP for comparative periods was
understated by ThCh$2,780,618. 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 the 2005 reconciliations to U.S. GAAP,
resulting in an increase of shareholders' equity by ThCh$2,780,618 and an
increase in net income for 2005 by ThCh$1,434,340, under US GAAP.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | a.6. Severance indemnities - The Company has   committed to provide a lump sum payment to each employee with more than six   months of service at the end of his or her employment.  Under Chilean GAAP, the Company records   the present value of the liability, calculated based on total expected service,   current salary levels of all employees with more than six months of service,   and a discount rate of 7%.  Under U.S.   GAAP, this arrangement is considered to be a benefit plan, in accordance with   SFAS 87, Employers Accounting for Pensions and the liability should be   measured by projecting future expected severance payments using an assumed   average salary progression rate, workforce rotation, workforce mortality,   average service life and discounting the resulting amounts to their present   value.  In practice, the Company   believes that the salary progression rate will not differ significantly from   the general
inflation rate.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Under U.S.   GAAP, prior service are costs charged to income using the straight-line   method over the estimated average remaining service period of the   employees.  For Chilean GAAP, prior   service costs which arose when the Company started recording severance   indemnity liabilities in 1995, were expensed immediately.  The difference related to the treatment   for prior service costs is recorded as an adjustment in the reconciliation to   U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-39

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The Company   recognizes actuarial gains or losses immediately for severance indemnity plans   for both Chilean GAAP and US GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The   severance indemnity plan is unfunded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | a.7. Present value adjustment on accounts receivable   - Under Chilean GAAP, the account receivable from Disco S.A. for the sale of   Ekono Argentina in 1999, with a maturity date in 2003, was recorded at its   cash value.  Under U.S. GAAP, in   accordance with Accounting Principle Board Opinion No. 21, such receivable   would be recorded at its net present value, using a 7% discount rate with the   associated interest being accreted into income over time through maturity of   the account receivable.  The effects   of conforming with U.S. GAAP are shown in the reconciliation below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | a.8. Derivative instruments - Under U.S.   GAAP, SFAS No. 133 Accounting for Derivative Instruments and Hedging   Activities, was adopted by the Company as of January 1, 2001.  SFAS No. 133 establishes accounting and   reporting standards for derivative instruments, including embedded   derivatives, and for hedging activities.    SFAS No. 133 requires that all derivatives be recognized as either   assets or liabilities in the consolidated balance sheet and measured at fair   value.  Changes in fair value are   either recognized in either income or shareholders equity (as a component of   other comprehensive income), depending on the designation of the derivative   instrument.  As the Company did not   meet documentation standards for its forward exchange contracts, the   unrealized gains which are deferred for Chilean GAAP purposes associated with   its forward exchange contracts would be recognized through the income



statement for U.S. GAAP purposes. Unrealized losses are charged to income   under both U.S. GAAP and Chilean GAAP for these forward exchange   contracts.  For the periods ended   December 31, 2003, 2004 and 2005, the Company had no forward exchange except   as detailed below.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The Company   entered into a forward exchange contract (designated as a cash flow hedge of   a forecasted transaction under Chilean GAAP) to cover the fluctuation in the   Chilean peso versus the Euro for its anticipated 100,000,000 purchase of   Carrefour Chile S.A. on December 19, 2003, which purchase was completed on   January 7, 2004.  At December 31,   2003, the fair value of the financial instrument did not differ significantly   from its recorded value.  On January   7, 2004, upon settlement of this financial instrument, the Company realized a   loss of ThCh$2,532,720.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The   adjustments required to conform reported net income under Chilean GAAP to   U.S. GAAP is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|Forward exchange contract    (Assignment Agreement signed on December 19, 2003) |  | Exchange rate |             | Total of   payment | 
|---------------------------------------------------------------------------------- |  | ------------- | ----------- | ------------------ | 
|                                                                                   |  |               |             |                    | 
|                                                                                   |  |               |            |                    | 
|                                                                                   |  |               |             |                    | 
|Euro adopted on the   agreement                                                    |  |               | 100,000,000 |                    | 
|Euro day of payment on   January 7, 2004                                           |  |               | 100,000,000 |                    | 
|                                                                                   |  |               |             |                    | 
|The Company realized a loss   of                                                   |  |               |             |                    | 
|                                                                                   |  |               |             |                    | 

| |    
| | ---
| | (1)
| |    
| |    

F-40

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | a.9. Effects of minority interest on the U.S. GAAP adjustments   - The net income and shareholders equity under Chilean GAAP are adjusted in   the reconciliations to U.S. GAAP for the impact of the U.S. GAAP reconciling   items on the allocation of income and loss to minority interests.  There are no other theoretical differences   between Chile GAAP and U.S. GAAP related to recording minority interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The effect   of this adjustment on net income and shareholders equity reconciliation to   US GAAP are as presented below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | a.10. Effects of Capitalization of
rebate associated with unsold inventory on the U.S. GAAP adjustments - The
Company receives certain volume rebates from its suppliers but did not allocate
a portion of these rebates to unsold inventory under Chilean GAAP.  Rebates
associated with unsold inventory are recorded as a reduction of inventory
carrying value at each year-end under U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The effect   of this adjustment is included in net income and shareholders equity   reconciliation to US GAAP as presented below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | a.11. Leaseback transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Certain of   the transactions which the Company has entered into qualify for   characterization as sales-leasebacks of real estate in Chilean GAAP and are   described as such in our Chilean GAAP footnotes.  Those transactions do not qualify for similar treatment as   sales-leaseback contracts under U.S. GAAP due to the continuing involvement   of the Company as defined under paragraph 26 of SFAS 66, Accounting for   Sales of Real Estate.  As there was   no difference between the carrying value of the real estate and its fair   value on the dates the contracts to finance the assets values were entered   into, no gain or loss was recorded under Chilean GAAP.  Although the transaction would be   accounted for as a capital lease under Chilean GAAP and a note payable under   U.S. GAAP, the interest rates under both U.S. GAAP and Chilean GAAP are the   same.  Therefore, no difference is   generated over time for the
accreted interest expense. As a result, no   adjustment appears in our reconciliation to U.S. GAAP.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | a.12. Effect of Conforming to U.S. GAAP -   The adjustments required to conform reported net income under Chilean GAAP to   U.S. GAAP are as follows (all amounts are expressed in thousands of constant   Chilean pesos of December 31, 2005 purchasing power and thousands of U.S.   dollars).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                                                                         |  |           |           |       | Year ended December 31, |           
|---------------------------------------------------------------------------------------- |  | --------- | --------- | ----- | ----------------------- | ----------
|                                                                                         |  |           |           |       |                         |           
|                                                                                         |  |           |           | 2003  |                         | 2004      
|                                                                                         |  |           |           |       |                         |           
|                                                                                         |  | Paragraph |           | ThCh$ |                         | ThCh$     
|Net income, in accordance   with Chilean GAAP                                            |  |           |           |       |                         | 12,494,861
|Reversal of depreciation of   the technical revaluation of property, plant and equipment |  |           | a.4       |       |                         | 30,750    
|Adjustment for deferred   taxes                                                          |  |           | a.1       |       |                         | 687,530   
|Amortization of severance   indemnity prior service cost                                 |  |           | a.6       |       |                         | (24,228   
|Reversal of amortization of   negative goodwill                                          |  |           | a.5   (a) |       |                         | (375,050  
|Reversal amortization   goodwill Maquinsa S.A.                                           |  |           | a.5   (b) |       |                         | 797,588   
|Reversal amortization   goodwill Carrefour S.A.                                          |  |           | a.5   (c) |       |                         |          
|Reversal amortization   goodwill Alvi S.A.                                               |  |           | a.5   (d) |       |                         |          
|Reversal amortization others   goodwill                                                  |  |           |           |       |                         | 46,355    
|Present value adjustment on   accounts receivable from Disco S.A.                        |  |           | a.7       |       |                         | 1,928,323 
|Depreciation of fair value   Maquinsa S.A.                                               |  |           | a.5   (b) |       |                         | (12,757   
|Monetary correction of fair   value Maquinsa S.A.                                        |  |           | a.5   (b) |       |                         | 1,041     
|Loss on forward exchange   contract associated with purchase of Carrefour S.A.           |  |           | a.8       |       |                         |          
|Deferred tax from   adjustments to U.S.GAAP                                              |  |           | a.1       |       |                         | 131,744   
|Capitalization of volume   rebate on unsold inventory                                    |  |           | a.10      |       |                         | (57,222   
|Minority interest                                                                        |  |           | a.9       |       |                         | 2,394     
|Adjustment to net loss on sale of Supermercados Ekono Argentina S.A.                     |  |           | a.5 (e)   |       |                         |           
|                                                                                         |  |           |           |       |                         |           
|Net income in accordance   with US GAAP                                                  |  |           |           |       |                         | 15,651,329
|                                                                                         |  |           |           |       |                         |           
|Other comprehensive income                                                               |  |           |           |       |                         |           
|Unrealized gain on   marketable securities (net of tax)                                  |  |           | a.3       |       |                         | 37,487    
|                                                                                         |  |           |           |       |                         |           
|Comprehensive income in   accordance with U.S.GAAP                                       |  |           |           |       |                         | 15,688,816
|                                                                                         |  |           |           |       |                         |           

F-41

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The   adjustments to reported net equity required to conform to U.S. GAAP are as   follows (amounts are expressed in thousands of constant Chilean pesos using   December 31, 2005 purchasing power and thousands of U.S. dollars):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                       |  |           |           |       | December 31, |            
|---------------------------------------------------------------------------------------------------------------------- |  | --------- | --------- | ----- | ------------ | -----------
|                                                                                                                       |  |           |           |       |              |            
|                                                                                                                       |  |           |           | 2004  |              | 2005       
|                                                                                                                       |  |           |           |       |              |            
|                                                                                                                       |  | Paragraph |           | ThCh$ |              | ThCh$      
|Shareholders equity, in   accordance with Chilean GAAP                                                                |  |           |           |       |              | 472,325,773
|Reversal of the technical   revaluation of property, plant and equipment                                               |  |           | a.4       |       |              | (1,989,380 
|Reversal of the accumulated   depreciation of the technical revaluation of property, plant and equipment               |  |           | a.4       |       |              | 749,695    
|Deferred tax on adjustments   to U.S. GAAP                                                                             |  |           | a.1       |       |              | 237,967    
|Adjustments for deferred tax                                                                                           |  |           | a.1       |       |              | (1,929,779 
|Reversal of severance   indemnity prior service cost                                                                   |  |           | a.6       |       |              | 726,865    
|Amortization of severance   indemnity prior service cost                                                               |  |           | a.6       |       |              | (242,286   
|Reversal of negative   goodwill                                                                                        |  |           | a.5   (a) |       |              | 3,673,824  
|Reversal of amortization of   negative goodwill                                                                        |  |           | a.5   (a) |       |              | (3,340,953 
|Reversal of goodwill   Maquinsa S.A.                                                                                   |  |           | a.5   (b) |       |              | (1,759,832 
|Reversal of amortization of   goodwill Maquinsa S.A.                                                                   |  |           | a.5   (b) |       |              | 5,973,116  
|Reversal of amortization of   goodwill Carrefour S.A.                                                                  |  |           | a.5   (c) |       |              | 1,205,321  
|Reversal amortization   goodwill Alvi S.A.                                                                             |  |           | a.5   (d) |       |              |           
|Reversal amortization others   goodwill                                                                                |  |           |           |       |              | 203,949    
|Dividend paid in connection   with the purchase of Supermercados Ekono S.A. (Argentina) from controlling   shareholder |  |           | a.5   (e) |       |              | (1,434,340 
|Adjustment to net loss on   sale of Supermercados Ekono S.A. (Argentina)                                               |  |           | a.5   (e) |       |              | (1,356,278 
|Loss on forward exchange   contract associated with purchase of Carrefour Chile S.A.                                   |  |           | a.8       |       |              | (2,532,720 
|Adjustment for difference   for arbitration settlement for Maquinsa S.A.                                               |  |           | a.5   (b) |       |              | (1,107,833 
|Capitalization of volume   rebate on unsold inventory                                                                  |  |           | a.10      |       |              | (544,213   
|Unrealized gain on   marketable securities                                                                             |  |           | a.3       |       |              | 264,014    
|Minority interest                                                                                                      |  |           | a.9       |       |              | (1,385     
|                                                                                                                       |  |           |           |       |              |            
|Shareholders equity, in   accordance with U.S. GAAP                                                                   |  |           |           |       |              | 469,121,525
|                                                                                                                       |  |           |           |       |              |            

| | The changes   in shareholders equity accounts determined under U.S. GAAP are summarized as   follows (all amounts are expressed in thousands of constant Chilean pesos   using December 31, 2005 purchasing power):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                       |  | ThCh$ |            
|---------------------------------------------------------------------- |  | ----- | -----------
|                                                                       |  |       |            
|Balance at January 1, 2003                                             |  |       | 307,714,351
|Dividends declared                                                     |  |       | (14,580,950
|Mandatory dividend required   by law                                   |  |       | 694,647    
|Comprehensive income for the   year                                    |  |       | 15,688,816 
|                                                                       |  |       |            
|Balance at January 1, 2004                                             |  |       | 309,516,864
|Dividends declared                                                     |  |       | (9,946,815 
|Capital increase                                                       |  |       | 160,630,483
|Expenses for share issuance                                            |  |       | (2,600,836 
|Price-level restatement   related to capital increase                  |  |       | 1,445,803  
|Comprehensive income for the   year                                    |  |       | 10,076,026 
|                                                                       |  |       |            
|Balance at December 31, 2004                                           |  |       | 469,121,525
|Dividends declared                                                     |  |       | (26,345,727
|Comprehensive income for the   year                                    |  |       | 46,606,480 
|Adjustment to net loss on sale of Supermercados Ekono Argenitna S.A. * |  |       | 1,356,278  
|                                                                       |  |       |            
|Balance at December 31, 2005                                           |  |       | 490,738,556
|                                                                       |  |       |            
|                                                                      
|                                                                      
|*       See Note 25 a.5 (e)                                           

F-42

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | b.                                         | Additional Disclosure Requirements
| | ------------------------------------------ | ----------------------------------
| |                                            |                                   
| | b.1. Basic and diluted earnings per share:

|                                                           |  | For the year ended December 31, |              
|---------------------------------------------------------- |  | ------------------------------- | -------------
|                                                           |  |                                 |              
|                                                           |  | 2003                            |              
|                                                           |  |                                 |              
|                                                           |  | Ch$                             |              
|Chilean GAAP earnings per   share                          |  |                                 | 1.92         
|U.S.GAAP earnings per share                                |  |                                 | 2.40         
|Weighted average number of   common shares outstanding (a) |  |                                 | 6,520,000,000

| | (a)                                                                                                                                                                                                                                                                  | For comparative purposes   number of common shares outstanding in 2003 and 2004, have been adjusted for   stock split (see Note 13.a.).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                      |                                                                                                                                        
| | b.2. Reporting Comprehensive Income                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                     
| | U.S. GAAP requires   that comprehensive income be displayed within the consolidated financial   statements. Comprehensive income is defined as the change in equity during a   period from transactions and other events and circumstances from non-owner   sources.

|                                |  | December 31, 2003                              |       
|------------------------------- |  | ---------------------------------------------- | ------
|                                |  |                                                |       
|                                |  | Unrealized gain (loss) on marketablesecurities |       
|                                |  |                                                |       
|                                |  | ThCh$                                          |       
|Beginning Balance               |  |                                                | 28,408
|Credit (Charge) of the   period |  |                                                | 50,984
|                                |  |                                                |       
|Ending balance                  |  |                                                | 79,392
|                                |  |                                                |       

|                                |  | December 31, 2004                                    |        
|------------------------------- |  | ---------------------------------------------------- | -------
|                                |  |                                                      |        
|                                |  | Unrealized gain   (loss) on marketable    securities |        
|                                |  |                                                      |        
|                                |  | ThCh$                                                |        
|Beginning Balance               |  |                                                      | 79,392 
|Credit (Charge) of the   period |  |                                                      | 184,622
|                                |  |                                                      |        
|Ending balance                  |  |                                                      | 264,014
|                                |  |                                                      |        

|                                |  | December 31, 2005                                     |        
|------------------------------- |  | ----------------------------------------------------- | -------
|                                |  |                                                       |        
|                                |  | Unrealized gain (loss) on    marketable    securities |        
|                                |  |                                                       |        
|                                |  | ThCh$                                                 |        
|Beginning Balance               |  |                                                       | 264,014
|Credit (Charge) of the   period |  |                                                       | 245,900
|                                |  |                                                       |        
|Ending balance                  |  |                                                       | 509,914
|                                |  |                                                       |        

| | b.3. Income Taxes - The consolidated   provision for income taxes charged to income is as follows:
| | --------------------------------------------------------------------------------------------------

|                                                 |  | 2003  |            | 2004  |  | 2005       |  
|------------------------------------------------ |  | ----- | ---------- | ----- |  | ---------- | -
|                                                 |  |       |            |       |  |            |  
|                                                 |  | ThCh$ |            | ThCh$ |  | ThCh$      |  
|Income tax provision under   Chilean GAAP:       |  |       |            |       |  |            |  
|Current   income taxes under Chilean GAAP        |  |       | (5,818,901 | )     |  | (6,480,497 | )
|Deferred   income taxes under Chilean GAAP       |  |       | 883,413    |       |  | 4,276,129  |  
|                                                 |  |       |            |       |  |            |  
|Total income provision under   Chilean GAAP      |  |       | (4,935,488 | )     |  | (2,204,368 | )
|                                                 |  |       |            |       |  |            |  
|U.S.GAAP Adjustments:                            |  |       |            |       |  |            |  
|Deferred   tax effect of applying SFAS No.109    |  |       | 687,530    |       |  | 139,680    |  
|Deferred   tax effect of adjustments to U.S.GAAP |  |       | 131,744    |       |  | 24,871     |  
|                                                 |  |       |            |       |  |            |  
|Total US GAAP adjustments                        |  |       | 819,274    |       |  | 164,551    |  
|                                                 |  |       |            |       |  |            |  
|Total income tax provision   under US GAAP       |  |       | (4,116,214 | )     |  | (2,039,817 | )
|                                                 |  |       |            |       |  |            |  

F-43

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The   consolidated U.S. GAAP deferred tax assets (liabilities) are summarized as   follows:
| | -------------------------------------------------------------------------------------------

|                                             |  | 2004                                                 |            | 2005                                                 | 
|-------------------------------------------- |  | ---------------------------------------------------- | ---------- | ---------------------------------------------------- | 
|                                             |  |                                                      |            |                                                      | 
|                                             |  | SFAS N°109    Applied to    Chilean GAAP    Balances |            | SFAS N°109    applied to    U.S. GAAP    Adjustments | 
|                                             |  |                                                      |            |                                                      | 
|                                             |  | ThCh$                                                |            | ThCh$                                                | 
|Deferred   income tax assets:                |  |                                                      |            |                                                      | 
|Property, plant and   equipment              |  |                                                      | 1,330,284  |                                                      | 
|Severance indemnity                          |  |                                                      | 873,129    |                                                      | 
|Allowance for doubtful   accounts            |  |                                                      | 3,651,071  |                                                      | 
|Allowance for uncollectible   sundry debtors |  |                                                      | 307,354    |                                                      | 
|Vacation accrual                             |  |                                                      | 700,560    |                                                      | 
|Other events                                 |  |                                                      | 499,368    |                                                      | 
|Allowance on inventory                       |  |                                                      |           |                                                      | 
|Interest yield                               |  |                                                      |           |                                                      | 
|Tax loss carryforwards (1)                   |  |                                                      | 12,242,467 |                                                      | 
|                                             |  |                                                      |            |                                                      | 
|Total deferred income tax   assets           |  |                                                      | 19,604,233 |                                                      | 
|                                             |  |                                                      |            |                                                      | 
|Deferred   income tax liabilities:           |  |                                                      |            |                                                      | 
|Property, plant and   equipment              |  |                                                      | 5,620,480  |                                                      | 
|Deferred charges                             |  |                                                      | 1,712,814  |                                                      | 
|Leased assets                                |  |                                                      | 745,748    |                                                      | 
|Marketable securities                        |  |                                                      |           |                                                      | 
|Inventory                                    |  |                                                      |           |                                                      | 
|Capitalized interest                         |  |                                                      | 1,687,876  |                                                      | 
|                                             |  |                                                      |            |                                                      | 
|Total deferred income tax   liabilities      |  |                                                      | 9,766,918  |                                                      | 
|                                             |  |                                                      |            |                                                      | 
|Net deferred assets   (liabilities)          |  |                                                      | 9,837,315  |                                                      | 
|                                             |  |                                                      |            |                                                      | 
|Complementary Account                        |  |                                                      | 1,170,947  |                                                      | 
|                                             |  |                                                      |            |                                                      | 
|Net deferred assets   (liabilities)          |  |                                                      | 11,008,262 |                                                      | 
|                                             |  |                                                      |            |                                                      | 

| |                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                               
| | The   consolidated U.S. GAAP provision for income taxes differs from the amount of   income tax determined by applying the applicable tax rate of 16.5% in 2003,   17% in 2004 and 17% in 2005 (Chilean statutory income tax rate) to U.S. GAAP   pre-tax income as a result of the following:

|                                                      |  | Year ended December 31, |           
|----------------------------------------------------- |  | ----------------------- | ----------
|                                                      |  |                         |           
|                                                      |  | 2003                    |           
|                                                      |  |                         |           
|                                                      |  | ThCh$                   |           
|Statutory tax rate                                    |  |                         | 16.50     
|Pretax U.S.GAAP income                                |  |                         | 19,767,543
|Pretax income multiplied by   the applicable tax rate |  |                         | (3,261,645
|Differences in price-level   restatement              |  |                         | 104,358   
|Non-deductible items                                  |  |                         | (1,451,932
|Other Deductible items                                |  |                         | 801,672   
|Income tax due to sale of fixed assets                |  |                         |          
|Other                                                 |  |                         | (308,668  
|                                                      |  |                         |           
|Tax expense                                           |  |                         | (4,116,214
|                                                      |  |                         |           

F-44

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | b.4. Cash flow information
| | --------------------------
| |                           
| | i.                        

|                                                                                  |  | Year ended December 31, |            
|--------------------------------------------------------------------------------- |  | ----------------------- | -----------
|                                                                                  |  |                         |            
|                                                                                  |  | 2003                    |            
|                                                                                  |  |                         |            
|                                                                                  |  | ThCh$                   |            
|Cash provided by (used in)   operating activities under Chilean GAAP and U.S.GAAP |  |                         | 35,522,004 
|                                                                                  |  |                         |            
|Cash provided by (used in)   financing activities under Chilean GAAP and U.S.GAAP |  |                         | 46,455,603 
|                                                                                  |  |                         |            
|Cash used in investing   activities under Chilean GAAP and U.S.GAAP               |  |                         | (72,386,127
|                                                                                  |  |                         |            

| | ii. | Cash   equivalents includes all highly liquid debt instruments purchased with an   original maturity of three months or less:
| | --- | -----------------------------------------------------------------------------------------------------------------------------

|                                                                     |  | Year ended December 31, |           
|-------------------------------------------------------------------- |  | ----------------------- | ----------
|                                                                     |  |                         |           
|                                                                     |  | 2003                    |           
|                                                                     |  |                         |           
|                                                                     |  | ThCh$                   |           
|Cash                                                                 |  |                         | 33,339,099
|Money market funds                                                   |  |                         | 2,123,954 
|Other current assets (1)                                             |  |                        |           
|                                                                     |  |                         |           
|Total cash and cash   equivalents under  Chilean GAAP and   U.S.GAAP |  |                         | 35,463,053
|                                                                     |  |                         |           

| |    
| | ---
| | (1)

|                                |  | Principal amount |            | Interest rate (month) |  | Interest  |  | Total |      
|------------------------------- |  | ---------------- | ---------- | --------------------- |  | --------- |  | ----- | -----
|                                |  |                  |            |                       |  |           |  |       |      
|Institutions                   |  | 2004             |            | 2005                  |  | 2004      |  | 2005  |      
|                                |  |                  |            |                       |  |           |  |       |      
|                                |  | ThCh$            |            | ThCh$                 |  | %         |  | %     |      
|Banchile S.A.                   |  |                  | 17,612,000 |                       |  |          |  |       | 0.255
|Corp Corredores de Bolsa   S.A. |  |                  | 8,288,000  |                       |  |          |  |       | 0.250
|BCI Corredores de Bolsa S.A.    |  |                  |           |                       |  | 2,500,000 |  |       |     
|                                |  |                  |            |                       |  |           |  |       |      
|Total                           |  |                  | 25,900,000 |                       |  | 2,500,000 |  |       |      
|                                |  |                  |            |                       |  |           |  |       |      

| | b.5. Estimated Fair Value of Financial Instruments   - U.S. GAAP requires disclosure of the fair value of financial instruments   owned by the Company, other than investments in related companies that are   accounted for under the equity method of accounting. The estimated fair   values are based on the following methods and assumptions:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Cash-The   fair value of the Companys cash is equal to its carrying value.                      
| | - | -------------------------------------------------------------------------------------------------
| |   |                                                                                                  
| |  | Marketable securities - The fair value of   the investments was determined based on market value.

F-45

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| |                                                                                   | Notes and accounts receivable and payable -   The carrying amount of trade notes and accounts receivable and payable   approximate fair value because of the short maturity of these   instruments.  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 5b.
| | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                   | 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.                                                                                                                                                                                         
| |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                   | 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.                                                                                                                                                  
| |                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                           
| | The   estimated fair values of the Companys financial instruments are as follows:

|                                     |  | As of December 31, |            
|------------------------------------ |  | ------------------ | -----------
|                                     |  |                    |            
|                                     |  | 2004               |            
|                                     |  |                    |            
|                                     |  | Carrying amount    |            
|                                     |  |                    |            
|                                     |  | ThCh$              |            
|Cash                                 |  |                    | 23,603,811 
|Marketable securities                |  |                    | 36,894,314 
|Notes and accounts   receivable, net |  |                    | 162,243,920
|Due from related companies           |  |                    | 1,545,781  
|Accounts payable                     |  |                    | 208,960,504
|Bonds                                |  |                    | 141,957,243
|Commercial paper                     |  |                    | 60,109,568 
|Due to related companies             |  |                    | 13,845,319 
|Bank and financial   institutions    |  |                    | 121,336,958
|Sundry creditors                     |  |                    | 7,916,114  

| | b.6. U.S. GAAP Condensed Balance Sheet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Certain reclassifications and adjustments would be made to the   Chilean GAAP balance sheet in order to present amounts in accordance with   presentation requirements under U.S. GAAP.    Debt discounts are included in other assets in Chilean GAAP while the   discounts would be offset against the debt under U.S. GAAP.  In Chilean GAAP, income tax payable is included   in current assets netting refundable income tax; in U.S. GAAP, income tax   payable is recorded in other current liabilities within taxes payable.  The detail of the nature of the   adjustments to U.S. GAAP is disclosed in Note 25.a.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The effect of the following reclassifications and adjustments in the   respective columns discloses amounts as they would be presented in a US GAAP   condensed balance sheet:                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                             |  | 2004         |              
|-------------------------------------------- |  | ------------ | -------------
|                                             |  |              |              
|                                             |  | Chilean GAAP |              
|                                             |  |              |              
|                                             |  | ThCh$        |              
|Current assets                               |  |              | 395,302,608  
|Property, plant and   equipment, net         |  |              | 616,434,466  
|Other assets                                 |  |              | 61,687,215   
|                                             |  |              |              
|Total assets                                 |  |              | 1,073,424,289
|                                             |  |              |              
|Current liabilities                          |  |              | 355,479,008  
|Long-term liabilities                        |  |              | 245,615,483  
|Minority interest                            |  |              | 4,025        
|Shareholders equity                         |  |              | 472,325,773  
|                                             |  |              |              
|Total liabilities and   shareholders equity |  |              | 1,073,424,289
|                                             |  |              |              

F-46

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

|                                             |  | 2005           |              
|-------------------------------------------- |  | -------------- | -------------
|                                             |  |                |              
|                                             |  | Chilean   GAAP |              
|                                             |  |                |              
|                                             |  | ThCh$          |              
|Current assets                               |  |                | 387,032,901  
|Property, plant and   equipment, net         |  |                | 606,186,638  
|Other assets                                 |  |                | 111,041,948  
|                                             |  |                |              
|Total assets                                 |  |                | 1,104,261,487
|                                             |  |                |              
|Current liabilities                          |  |                | 487,423,132  
|Long-term liabilities                        |  |                | 128,509,203  
|Minority interest                            |  |                | 23,788       
|Shareholders equity                         |  |                | 488,305,364  
|                                             |  |                |              
|Total liabilities and   shareholders equity |  |                | 1,104,261,487
|                                             |  |                |              

| | These reclassifications
include ThCh$1,965,763 for 2004 and ThCh$4,798,559 for 2005, corresponding to
long term portion of Allowance for Doubtful Accounts Receivable.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                       
| | ii. Income statement (certain line items presentation)                                                                                                                
| |                                                                                                                                                                       
| | Certain reclassifications would be made to the Chilean GAAP income   statement in order to present the following line items in conformity with   U.S. GAAP.           
| |                                                                                                                                                                       
| | The detail of the nature of adjustment to U.S. GAAP is disclosed in Note 25a.                                                                                         

|                           |  | 2003         |            
|-------------------------- |  | ------------ | -----------
|                           |  |              |            
|                           |  | Chilean GAAP |            
|                           |  |              |            
|                           |  | ThCh$        |            
|Operating income           |  |              | 36,455,839 
|Non-operating expense, net |  |              | (19,025,490
|Income taxes               |  | (4,935,488   | )          
|                           |  |              |            
|Net income                 |  |              | 12,494,861 
|                           |  |              |            

|                           |  |              |             |                         |  |                  |   |           |            |   |  |             |  
|-------------------------- |  | ------------ | ----------- | ----------------------- |  | ---------------- | - | --------- | ---------- | - |  | ----------- | -
|                           |  | 2004         |            
|                           |  |              |            
|                           |  | Chilean GAAP |             | Adjustment    U.S. GAAP |  | Reclassification |   | U.S. GAAP |           
|                           |  |              |             |                         |  |                  |   |           |            |   |  |             |  
|                           |  | ThCh$        |             | ThCh$                   |  | ThCh$            |   | ThCh$     |           
|Operating income           |  |              | 30,582,259  |                         |  | (117,711         | ) |           | (3,076,743 | ) |  | 27,387,805  |  
|Non-operating expense, net |  |              | (17,647,837 | )                       |  | (854,105         | ) |           | 3,076,743  |   |  | (15,425,199 | )
|Income taxes               |  |              | (2,204,368  | )                       |  | 164,551          |   |           |           |   |  | (2,039,817  | )
|                           |  |              |             |                         |  |                  |   |           |            |   |  |             |  
|Net income                 |  |              | 10,730,054  |                         |  | (807,265         | ) |           |           |   |  | 9,922,789   |  
|                           |  |              |             |                         |  |                  |   |           |            |   |  |             |  

|                           |  | 2005         |            
|-------------------------- |  | ------------ | -----------
|                           |  |              |            
|                           |  | Chilean GAAP |            
|                           |  |              |            
|                           |  | ThCh$        |            
|Operating income           |  |              | 68,068,976 
|Non-operating expense, net |  |              | (20,873,135
|Income taxes               |  |              | (4,828,721 
|                           |  |              |            
|Net income                 |  |              | 42,367,120 
|                           |  |              |            

| | These   reclassifications include ThCh$2,391,666 for 2003; ThCh$2,535,903 for 2004;   and ThCh$2,608,906 for 2005, corresponding to financial expenses related to   the credit card operations, ThCh$439,784 for 2003; ThCh$316,508 for 2004; and   ThCh$677,836 for 2005, corresponding to expenses for donations; ThCh$9,699   for 2003; ThCh$(142,049) for 2004; and ThCh$(42,265) for 2005, corresponding   to net gain (loss) in sale of fixed assets, which are included in non   operating income / expenses in the consolidated income statements in Chilean   GAAP and reclassed under U.S. GAAP.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-47

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | b.7. Lease Commitments                                                                                                                                                                                                                                                                                                                                                                                                         
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company   and its subsidiaries lease eight of their retail outlets and five of their   warehouses under rental agreements for remaining terms of two to twelve   years, substantially all of which have options for renewal.  For the most part, rentals are determined   as a percentage of sales ranging from 1% to 3% with minimum rentals.  Minimum future rentals, in accordance with   FASB 13 par. 5 are as follows:

|                                           |  | ThCh$ |           
|------------------------------------------ |  | ----- | ----------
|                                           |  |       |           
|2006                                       |  |       | 11,078,541
|2007                                       |  |       | 5,898,519 
|2008                                       |  |       | 5,513,211 
|2009                                       |  |       | 5,326,355 
|2010                                       |  |       | 5,002,420 
|Thereafter                                 |  |       | 28,596,774
|                                           |  |       |           
|Present value net minimum   lease payments |  |       | 61,415,821
|                                           |  |       |           

| | Consolidated   rental expense was ThCh$4,361,583, ThCh$6,588,649 and ThCh$9,544,657 for the   years ended December 31, 2003, 2004 and 2005, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b.8. Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company   is organized into two reportable segments:    Hypermarket and Supermarket Format and Credit Card.  Hypermarkets and Supermarkets represent   two established store formats, allowing the Company to divide the market and   target growth areas with the preferred format for the local market   conditions.  The formats provide the   flexibility to match each store site with the format best suited to the   surrounding area.                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The   Companys store formats are one reporting segment (supermarket   format/hypermarket formats) as defined under Statement of Financial   Accounting Standards No.131.  The   Company has also identified its credit card operations as a segment.  These operations consist of the financing   of customer accounts receivable on a long-term basis.  The accounting policies of the segments   are the same as those described in the summary of accounting policies   included in the Chilean GAAP financial statements.  The Company has reflected this method of segmentation in all   years presented.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company   operates only in Chile.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Summarized   financial information concerning the segments of the Company and its   subsidiaries is shown in the following table.  Management uses operating income as its measure of performance   for segments.                                                                                                                                                                                                                                                                                                                                                                                              

|                                |  | Hypermarket    and    Supermarket    format |               | Credit card |  | Other       |   | Total |            
|------------------------------- |  | ------------------------------------------- | ------------- | ----------- |  | ----------- | - | ----- | -----------
|                                |  |                                             |               |             |  |             |   |       |            
|                                |  | ThCh$                                       |               | ThCh$       |  | ThCh$       |   | ThCh$ |            
|2003                            |  |                                             |               |             |  |             |   |       |            
|Revenues                        |  |                                             | 1,181,106,454 |             |  | 20,267,732  |   |       | 33,615,298 
|Segment gross profit            |  |                                             | 236,692,170   |             |  | 20,267,732  |   |       | 21,135,296 
|Identifiable assets             |  |                                             | 605,696,106   |             |  | 89,774,473  |   |       | 172,415,148
|Goodwill (1)                    |  |                                             | 10,681,567    |             |  |            |   |       |           
|Operating income                |  |                                             | 30,951,110    |             |  | (6,984,859  | ) |       | 12,489,588 
|Depreciation and   amortization |  |                                             | 34,828,882    |             |  |            |   |       | 5,521,780  
|Capital expenditures            |  |                                             | 43,140,921    |             |  |            |   |       | 3,751,385  
|2004                            |  |                                             |               |             |  |             |   |       |            
|Revenues                        |  |                                             | 1,425,529,839 |             |  | 26,480,225  |   |       | 40,308,197 
|Segment gross profit            |  |                                             | 279,462,534   |             |  | 26,480,225  |   |       | 38,574,008 
|Identifiable assets             |  |                                             | 692,484,758   |             |  | 136,384,100 |   |       | 227,929,905
|Goodwill (1)                    |  |                                             | 32,537,092    |             |  |            |   |       |           
|Operating income                |  |                                             | 17,599,030    |             |  | 2,567,514   |   |       | 10,415,715 
|Depreciation and   amortization |  |                                             | 45,040,761    |             |  |            |   |       | 6,006,444  
|Capital expenditures            |  |                                             | 147,255,454   |             |  |            |   |       | 9,249,157  
|2005                            |  |                                             |               |             |  |             |   |       |            
|Revenues                        |  |                                             | 1,498,473,963 |             |  | 58,033,942  |   |       | 42,258,841 
|Segment gross profit            |  |                                             | 350,433,454   |             |  | 58,033,942  |   |       | 39,173,544 
|Identifiable assets             |  |                                             | 775,816,411   |             |  | 183,516,359 |   |       | 129,992,651
|Goodwill (1)                    |  |                                             | 37,771,018    |             |  |            |   |       |           
|Operating income                |  |                                             | 51,915,535    |             |  | 14,799,144  |   |       | 6,802,271  
|Depreciation and   amortization |  |                                             | 45,063,874    |             |  | 236,563     |   |       | 9,846,420  
|Capital expenditures            |  |                                             | 29,622,118    |             |  | 3,573,814   |   |       | 17,147,837 

| |    
| | ---
| | (1)

F-48

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | Reconciliation   of identifiable assets to total assets:
| | --------------------------------------------------------

|                       |  | 2004  |               | 2005  | 
|---------------------- |  | ----- | ------------- | ----- | 
|                       |  |       |               |       | 
|                       |  | ThCh$ |               | ThCh$ | 
|Identifiable assets    |  |       | 1,056,798,763 |       | 
|Corporate headquarters |  |       | 16,625,526    |       | 
|                       |  |       |               |       | 
|Total assets           |  |       | 1,073,424,289 |       | 
|                       |  |       |               |       | 

| | Supermarkets/Hypermarkets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Supermarkets   are characterized by traditional neighborhood supermarkets (average selling   area of 2,000 m2) providing a pleasant, friendly atmosphere and   personalized attention, with an emphasis on food.  These stores offer a broad assortment of quality perishables   and groceries.  Additionally, a   variety of prepared dishes is available in those stores located in higher   income areas.  The hypermarket, which   was modeled on the European model, is characterized by selling spaces of   between 6,000 and 13,000 square meters offering, in addition to traditional   food items, non - food items such as home appliances, electronics, hardware,   sports, toys, textiles and articles for the home.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Credit card operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The   following information is disclosed related to credit card operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Servicios y Administración de Créditos Comerciales Presto S.A. is a   subsidiary of the Company.  Its   corporate purpose is the placement of long-term financing on personal   consumer debt taking advantage of all synergies of the supermarket   segment.  This segments income   consists of the interest income associated with its credit cards.  The financing of its operations is   generated 100% by the Company, for which Presto pays interest to the parent,   D&S, for funding its operations.                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Allowance for credit risk associated to accounts receivable-   The allowance for credit risk associated with accounts receivable is   established taking into account the experience of delinquency and   write-offs.  Accounts and notes   receivable are stated net of such allowance.                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Interest- The amount recorded in the   balance sheet for loans includes accrued interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company   discontinues the accrual of interest on high - risk or past - due loans (90   days).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The   allowance for doubtful credit card accounts receivable was ThCh$14,835,160 at   December 31, 2003, ThCh$18,927,783 in December 31, 2004 and ThCh$18,175,330   at December 31, 2005.  See provisions   and write-offs below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-49

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The short -   term and long - term components of the credit card loan receivables, net of   allowance provision, are included in trade account receivable (See Note 5)   and the detail is as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           |  | 2003  |            | 2004  |  | 2005        | 
|---------- |  | ----- | ---------- | ----- |  | ----------- | 
|           |  |       |            |       |  |             | 
|           |  | ThCh$ |            | ThCh$ |  | ThCh$       | 
|Short-term |  |       | 69,429,632 |       |  | 112,163,626 | 
|Long-term  |  |       | 7,548,481  |       |  | 15,192,497  | 
|           |  |       |            |       |  |             | 
|Total      |  |       | 76,978,113 |       |  | 127,356,123 | 
|           |  |       |            |       |  |             | 

| | Amount of   past due (90 days) credit card loans at each year end were as follows:
| | ----------------------------------------------------------------------------------

|     |  | ThCh$ |           
|---- |  | ----- | ----------
|     |  |       |           
|2003 |  |       | 12,125,727
|2004 |  |       | 19,271,672
|2005 |  |       | 10,335,000

| | The past due   credit card loans decreased at December 31, 2005 due to a better management   of the outstanding receivable balances and the change in the companys policy   for writing off accounts receivables.                          
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                             
| | The   Companys policy for writing off accounts receivables is that a receivable is   automatically written off upon attaining an overdue age of 180 days (365 days   until 2004) after any installment payment recovered has been recorded.
| |                                                                                                                                                                                                                                             
| | The   following summarizes the activity in the allowance for doubtful credit card   accounts receivables for the periods indicated:                                                                                                         

|                      |  | 2003  |            | 2004  |  | 2005        |  
|--------------------- |  | ----- | ---------- | ----- |  | ----------- | -
|                      |  |       |            |       |  |             |  
|                      |  | ThCh$ |            | ThCh$ |  | ThCh$       |  
|January 1, balance    |  |       | 1,040,625  |       |  | 14,835,161  |  
|Additional provisions |  |       | 20,702,801 |       |  | 19,225,718  |  
|Write-offs, net       |  |       | (6,908,266 | )     |  | (15,133,096 | )
|                      |  |       |            |       |  |             |  
|December 31, balance  |  |       | 14,835,160 |       |  | 18,927,783  |  
|                      |  |       |            |       |  |             |  

| | The average   interest rates and the range of interest rates charged to customers for the   years presented, is as follows:
| | ---------------------------------------------------------------------------------------------------------------------------

|Description                           |  | 2003 |             | 2004 |  | 2005        | 
|------------------------------------- |  | ---- | ----------- | ---- |  | ----------- | 
|                                      |  |      |             |      |  |             | 
|Average interest rate annual   (%)    |  |      | 33.00       |      |  | 37.20       | 
|Interest income (ThCh$)               |  |      | 20,267,732  |      |  | 26,480,225  | 
|Range of interest rates   monthly (%) |  |      | 2.7   - 2.8 |      |  | 3.1   - 3.3 | 

| | Other                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------
| |                                                                                                                   
| | This amount   is mainly composed by rental revenue, from kiosks, etc., within the   supermarkets and hypermarkets.
| |                                                                                                                   
| | The Company   operates in only one geographic segment, Chile.                                                     

F-50

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | b.9. Concentration of risk                                                                                          
| | --------------------------------------------------------------------------------------------------------------------
| |                                                                                                                     
| | The Company   believes it is not exposed to any unusual credit risk from any individual   customer.                 
| |                                                                                                                     
| | No single   customer accounted for more than 10% of revenues for the years ended December   31, 2003, 2004 and 2005.
| |                                                                                                                     
| | b.10. Schedule of long-term debt and bond maturity:                                                                 
| |                                                                                                                     
| | Following is   a schedule of debt maturity in each of the next five years and thereafter:                           

|                               |  | ThCh$ |            
|------------------------------ |  | ----- | -----------
|                               |  |       |            
|2006                           |  |       | 213,876,478
|2007                           |  |       | 47,280,875 
|2008                           |  |       | 16,303,683 
|2009                           |  |       | 18,684,160 
|2010                           |  |       | 1,077,122  
|Thereafter                     |  |       | 37,753,047 
|                               |  |       |            
|Balance at December 31,   2005 |  |       | 334,975,365
|                               |  |       |            

| | b.11. Disclosure regarding interest capitalization:
| | ---------------------------------------------------

|                                          |  | Year ended December 31, |           
|----------------------------------------- |  | ----------------------- | ----------
|                                          |  |                         |           
|                                          |  | 2003                    |           
|                                          |  |                         |           
|                                          |  | ThCh$                   |           
|Interest expense incurred                 |  |                         | 17,423,511
|Interest capitalized under   Chilean GAAP |  |                         | 425,254   
|Interest capitalized under   U.S. GAAP    |  |                         | 425,254   

| | b.12. Advertising Costs                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The Company   expenses advertising costs as incurred.    Consolidated advertising costs for the years ended December 31, 2003,   2004 and 2005 were ThCh$12,800,090, ThCh$20,285,455 and ThCh$29,719,933,   respectively.                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | b.13. Vendor allowances                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Net revenue   includes revenue obtained from suppliers for reaching selling goals and   purchasing in volume, which is recorded on an accrual basis   based on delivery of products to the stores and included in net revenue on the statements of income. 
The percentages are negotiated annually with suppliers.
 The amounts recorded have been   reclassified from revenue to deductions from the cost of sales line for U.S.   GAAP purposes as follows:

|                  |  | 2003            |              | 2004            |  | 2005            |  
|----------------- |  | --------------- | ------------ | --------------- |  | --------------- | -
|                  |  |                 |              |                 |  |                 |  
|                  |  | ThCh$   Dr (Cr) |              | ThCh$   Dr (Cr) |  | ThCh$   Dr (Cr) |  
|OPERATING RESULTS |  |                 |              |                 |  |                 |  
|Net revenue       |  |                 | 100,557,613  |                 |  | 132,377,625     |  
|Cost of sales     |  |                 | (100,557,613 | )               |  | (132,377,625    | )

F-51

---



DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | The detail   of the reclassification of net revenue to reduction of costs of sales in U.S.   GAAP consists of the following:
| | ----------------------------------------------------------------------------------------------------------------------------

|                                                 |  | 2003  |             | 2004  |  | 2005        | 
|------------------------------------------------ |  | ----- | ----------- | ----- |  | ----------- | 
|                                                 |  |       |             |       |  |             | 
|                                                 |  | ThCh$ |             | ThCh$ |  | ThCh$       | 
|Description                                      |  |       |             |       |  |             | 
|Volume rebates                                   |  |       | 79,512,377  |       |  | 101,274,551 | 
|Slotting fees                                    |  |       | 5,662,930   |       |  | 7,937,781   | 
|Allowances for store opening   and remodeling    |  |       | 2,545,163   |       |  | 3,745,042   | 
|Reinbursements for use of   distribution network |  |       | 12,837,143  |       |  | 19,420,251  | 
|                                                 |  |       |             |       |  |             | 
|Total                                            |  |       | 100,557,613 |       |  | 132,377,625 | 
|                                                 |  |       |             |       |  |             | 

| | b.14. Valuation and Qualifying Accounts
| | ---------------------------------------

|                                      |  | Balance at    beginning of    period |            | Additions    charged to costs  and expenses |  | Deductions |  | Other |                | Balance    at end of    period | 
|------------------------------------- |  | ------------------------------------ | ---------- | ------------------------------------------- |  | ---------- |  | ----- | -------------- | ------------------------------ | 
|                                      |  |                                      |            |                                             |  |            |  |       |                |                                | 
|                                      |  | ThCh$                                |            | ThCh$                                       |  | ThCh$      |  | ThCh$ |                | ThCh$                          | 
|December   31, 2003                   |  |                                      |            |                                             |  |            |  |       |                |                                | 
|Allowance for doubtful   accounts     |  |                                      | 4,967,806  |                                             |  | 21,430,417 |  |       | (7,003,080)(a  | )                              | 
|Allowance for inventory   realization |  |                                      | 1,226,235  |                                             |  |           |  |       | (1,226,235)(b  | )                              | 
|Allowance for restructuring           |  |                                      | 5,306,824  |                                             |  |           |  |       | (5,306,824)(c  | )                              | 
|December   31, 2004                   |  |                                      |            |                                             |  |            |  |       |                |                                | 
|Allowance for doubtful   accounts     |  |                                      | 19,395,143 |                                             |  | 19,292,909 |  |       | (16,099,894)(a | )                              | 
|Allowance for inventory   realization |  |                                      |           |                                             |  |           |  |       |               |                                | 
|Allowance for restructuring           |  |                                      |           |                                             |  |           |  |       |               |                                | 
|December   31, 2005                   |  |                                      |            |                                             |  |            |  |       |                |                                | 
|Allowance for doubtful   accounts     |  |                                      | 22,588,158 |                                             |  | 17,912,622 |  |       | (18,031,271)(a | )                              | 
|Allowance for inventory realization   |  |                                      |           |                                             |  | 127,349    |  |       |               |                                | 
|Allowance for restructuring           |  |                                      |           |                                             |  |           |  |       |               |                                | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | b.15. Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | In November   2005, the FASB issued FSP Nos. FAS 115-1 and FAS 124-1, The Meaning of   Other-Than-Temporary Impairment and Its Application to Certain Investments,   which address the determination as to when an investment is considered   impaired, whether that impairment is other than temporary, and the timing and   measurement of an impairment loss. These FSPs are required to be applied to   reporting periods beginning after December 15, 2005 and will be adopted by us   in the first quarter of fiscal 2006. We do not expect the adoption of these   FSPs will have a material impact on our consolidated financial statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | In February   2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial   Instrument - an amendment of FASB Statements No. 133 and 140.  This new statement:                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-52

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DISTRIBUCION Y SERVICIO D&S S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Restated for general price-level changes)

| | d)                                                                                                                                                                                                                                                                                                                                                     | clarifies   that concentrations of credit risk in the form of subordination are not   embedded derivatives; and                                                                                                                                                                                                                          
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                          
| | e)                                                                                                                                                                                                                                                                                                                                                     | amends SFAS   140, Accounting for Transfers and Servicing of Financial Assets and   Extinguishments of Liabilities, to eliminate the prohibition on a qualifying   special purpose entity from holding a derivative financial instrument that   pertains to a beneficial interest other than another derivative financial   instrument.
| |                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                          
| | SFAS 155   generally is effective for all financial instruments acquired or issued after   the beginning of an entitys first fiscal year that begins after September   15, 2006.  The Company does not   anticipate that the adoption of this statement will have a material effect on   its financial position, results of operations or cash flows.

* * * * * *

F-53

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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            |  | Amendment   No. 1, dated as of December 3, 2004, to Deposit Agreement, dated as of   October 7, 1997, between us and JPMorgan Chase Bank N.A. (formerly, Morgan   Guaranty Trust Company of New York), as Depository and the registered holders   from time to time of American Depository Receipts (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)
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|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. Rodrigo Cruz Matta
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).                                                                                                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|12.2           |  | Certification of Mr. Miguel
Núñez pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).                                                                                                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|13.1           |  | Certification of Mr. Rodrigo Cruz Matta
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. Miguel
Núñez pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906
of the Sarbanes - Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                  

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