Table ofContents

 

**As filedwith the Securities and Exchange Commission on June 30, 2010**

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 20-F**

 

| **o**      | **REGISTRATION STATEMENT PURSUANT  TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**                                    |
|------------|----------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                             |
| **OR**     |
| ** ** | ** **                                                                                                                             |
| **x**      | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2009** |
| ** ** | ** **                                                                                                                             |
| **OR**     |
| ** ** | ** **                                                                                                                             |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                          |
| ** ** | ** **                                                                                                                             |
| **o**      | **SHELL COMPANY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                       |

 

**For the transition period from                      to                        **

 

Commissionfile number 001-13142

 
| **Embotelladora Andina S.A.**                                                                                                               |
|---------------------------------------------------------------------------------------------------------------------------------------------|
|  (Exact name of Registrant as  specified in its charter)                                                                               |
|                                                                                                                                        |
| **Andina Bottling Company**                                                                                                                 |
|  (Translation of the  Registrant’s name in English)                                                                               |
|                                                                                                                                        |
| **Republic of Chile**                                                                                                                       |
| (Jurisdiction of incorporation or organization)                                                                                             |
|                                                                                                                                        |
| **Avenida El Golf 40, Office 401**                                                                                                          |
| **Las Condes - Santiago, Chile**                                                                                                            |
| (Address of principal executive offices)                                                                                                    |
|                                                                                                                                        |
| **Giuliana Gorrini, Tel. (56-2) 338-0520  E-mail: ggorrini@koandina.com  Avenida El Golf 40, 4th Floor, Las Condes - Santiago, Chile** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of  Company Contact Person)                                                    |

 

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

 

| Title of each  class                                                                      |   | Name of each  exchange on which registered |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------|
| Series A Shares, Series B Shares of Registrant represented by  American Depositary Shares |   | New York Stock Exchange                    |

 

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act: 

 

**None**

 

----

 

Securitiesfor which there is a reporting obligation pursuant to Section 15(d) of the Act

 
| **7.625% Notes due October 1, 2027** |
|--------------------------------------|
|                                 |
| **7.875% Notes due October 1, 2097** |

 

Thenumber of outstanding shares of the issuer’s stock as of December 31, 2009 was760,274,542 as follows:
|   | 380,137,271 Series A Shares |
|--------|----------------------------------|
|   | 380,137,271 Series B Shares |

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.

x Yes   o No

 

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

o Yes   x No

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

x Yes   o No

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).

o Yes   o No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):

 

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

 

Indicateby check mark which basis of accounting the registrant has used to prepare thefinancial statements included in this filing 

 

| U.S. GAAP o |   | International Financial Reporting Standards as issued  by the international Accounting Standards Board o |   | Other. x |
|-------------|--------|----------------------------------------------------------------------------------------------------------|--------|----------|

 

IfOther has been checked in response to the previous question, indicate by checkmark which financial statement item the registrant has elected to follow

o Item 17   x Item 18

 

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

o Yes   x No

 

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Table ofContents

 

**TABLE OF CONTENTS**

 
| ** **     | ** **                                                                                                                                                                                                | **Page** |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| PART I    |                                                                                                                                                                                                      | 3        |
|           |                                                                                                                                                                                                      |     |
| ITEM 1.        | IDENTITY OF DIRECTORS,  SENIOR MANAGEMENT AND ADVISERS                                                                                                                                                    | 3        |
| ITEM 2.        | OFFER STATISTICS AND EXPECTED  TIMETABLE                                                                                                                                                                  | 3        |
| ITEM 3.        | KEY INFORMATION                                                                                                                                                                                           | 3        |
| ITEM 4.        | INFORMATION ON  THE COMPANY                                                                                                                                                                               | 13       |
| ITEM 4A.       | UNRESOLVED  SECURITIES AND EXCHANGE COMMISSION STAFF COMMENTS                                                                                                                                             | 34       |
| ITEM 5.        | OPERATING  AND FINANCIAL REVIEW AND PROSPECTS                                                                                                                                                             | 34       |
| ITEM 6.        | DIRECTORS,  SENIOR MANAGEMENT AND EMPLOYEES                                                                                                                                                               | 48       |
| ITEM 7.        | MAJOR  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                                                                                                                                        | 56       |
| ITEM 8.        | FINANCIAL  INFORMATION                                                                                                                                                                                    | 57       |
| ITEM 9.        | THE OFFER AND  LISTING                                                                                                                                                                                    | 58       |
| ITEM 10.       | ADDITIONAL  INFORMATION                                                                                                                                                                                   | 61       |
| ITEM 11.       | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                                                                                               | 71       |
| ITEM 12.       | DESCRIPTION  OF SECURITIES OTHER THAN EQUITY SECURITIES                                                                                                                                                   | 72       |
| ITEM 12D.3     | AMERICAN  DEPOSITARY RECEIPTS                                                                                                                                                                             | 72       |
| ITEM 12D.4     | DIRECT AND  INDIRECT PAYMENTS BY THE DEPOSITARY                                                                                                                                                           | 73       |
|           |                                                                                                                                                                                                      |     |
| PART II   |                                                                                                                                                                                                      | 73       |
|           |                                                                                                                                                                                                      |     |
| ITEM 13.       | DEFAULTS,  DIVIDEND ARREARAGES AND DELINQUENCIES                                                                                                                                                          | 73       |
| ITEM 14.       | MATERIAL  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS                                                                                                                             | 73       |
| ITEM 15.       | CONTROLS AND  PROCEDURES                                                                                                                                                                                  | 73       |
| ITEM 16A. | AUDIT  COMMITTEE FINANCIAL EXPERT                                                                                                                                                                         | 74       |
| ITEM 16B.      | CODE OF ETHICS                                                                                                                                                                                            | 74       |
| ITEM 16C.      | PRINCIPAL  ACCOUNTANT FEES AND SERVICES                                                                                                                                                                   | 75       |
| ITEM 16D. | EXEMPTIONS  FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                                                                                                                                               | 75       |
| ITEM 16E.      | PURCHASERS  OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS                                                                                                                                  | 76       |
| ITEM 16F.      | CHANGE IN  REGISTRANT’S CERTIFYING ACCOUNTANT                                                                                                                                                        | 76       |
| ITEM 16G.      | CORPORATE  GOVERNANCE                                                                                                                                                                                     | 77       |
|           |                                                                                                                                                                                                      |     |
| PART III  |                                                                                                                                                                                                      | 79       |
|           |                                                                                                                                                                                                      |     |
| ITEM 17.       | FINANCIAL  STATEMENTS                                                                                                                                                                                     | 79       |
| ITEM 18.       | FINANCIAL  STATEMENTS                                                                                                                                                                                     | 79       |
| ITEM 19.       | EXHIBITS                                                                                                                                                                                                  | 80       |
|           | EX-8.1:  LIST OF OUR SUBSIDIARIES 

EX-8.2:  LETTER ADDRESSED TO SEC RE: DISMISSAL OF PREVIOUS AUDITORS 

EX-12.1: CERTIFICATION

EX-12.2: CERTIFICATION

EX-13.1: CERTIFICATION

EX-13.2:  CERTIFICATION |     |

 

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Table ofContents

 

**INTRODUCTION**

**References**

 

Unlessthe context otherwise requires, as used in this annual report the followingterms have the meanings set forth below:

·             the “Company”and “we” means Andina and its consolidated subsidiaries;

·             “Andina” means Embotelladora Andina S.A.;

·             “Andina Brazil”means the Company’s subsidiary, Rio de Janeiro Refrescos Ltda. and itssubsidiaries;

·             “EDASA” means the Company’s subsidiary, Embotelladora delAtlántico S.A.;

·             “CMF” means theCompany’s affiliate, Envases CMF S.A.;

·             “Vital” meansthe Company’s subsidiary, Vital S.A.;

·             “VASA” meansthe Company’s subsidiary, Vital Aguas S.A.;

·             “TAR” means theCompany’s subsidiary, Transportes Andina Refrescos Ltda.

·              “The Coca-ColaCompany” or “TCCC” means The Coca-Cola Company or any of its subsidiaries,including without limitation Coca-Cola de Chile S.A. (“CC Chile”), whichoperates in Chile, Recofarma Industrias do Amazonas Ltda. (“CC Brazil”), whichoperates in Brazil and Servicios y Productos para Bebidas Refrescantes S.R.L. (“CCArgentina”), which operates in Argentina.

·             the “Chileanterritory” means the Metropolitan Region of Santiago and the neighboringprovinces of Cachapoal and San Antonio;

·             the “Brazilianterritory” means the majority of the State of Rio de Janeiro, and the totalityof the State of Espírito Santo; and

·             the “Argentineterritory” means the provinces of Córdoba, Mendoza, San Juan, San Luis, EntreRios, Buenos Aires (only San Nicolás and Ramallo) and most of Santa Fe.

 

**PRESENTATION OF FINANCIAL AND CERTAIN OTHERINFORMATION**

 

Unlessotherwise specified, references herein to “dollars,” “U.S. dollars” or “US$”are to United States dollars; references to “pesos,” “Chilean pesos”, “Ch$” or “ThCh$”are to Chilean pesos; references to “UF” are to Unidades de Fomento, a daily indexed Chilean peso-denominatedmonetary unit that takes into account the effect of the Chilean inflation rateduring the previous month; references to “Argentine pesos” or “AR$” are toArgentine pesos; and references to “real” or “reais” or “R$” are to Brazilianreais. Certain percentages and amounts contained in this annual report havebeen rounded for ease of presentation.

 

Forthe convenience of the reader, this annual report contains translations ofcertain Chilean peso amounts into U.S. dollars at specified rates. Unlessotherwise indicated, U.S. dollar equivalent information for amounts in Chileanpesos is based on the Observed Exchange Rate (as defined under “Item 3. KeyInformation—Exchange Rates”) reported by the Banco Central de Chile (the Central Bank of Chile), which werefer to as the “Central Bank.” The Federal Reserve Bank of New York does notreport a noon buying rate in New York City for Chilean pesos. No representationis made that the peso or U.S. dollar figures presented in this annual reportcould have been or could be converted into U.S. dollars or pesos, as the casemay be, at any particular rate or at all.

 

OnAugust 28, 2007 the Chilean Superintendence of Securities and Insurance (*Superintendencia de Valores y Seguros*) announced theadoption in Chile of International Financial Reporting Standards (“IFRS”)(which will be mandatory for Chilean companies starting 2010). The Companyagreed to adopt IAS and IFRS of the IASB as its accounting and reportingstandards beginning January 1, 2010.

 

Alsoas part of the adoption of IFRS, shareholders’ equity will undergo significantchanges resulting from the revaluation on property, plant and equipment,differed income taxes, minimum dividend and the determination of the functionalcurrency in the company’s subsidiaries.

 

**Forward-looking information**

 

Thisannual report contains or incorporates by reference statements that constitute “forward-lookingstatements,” in that they include statements regarding the intent, belief orcurrent expectations of our directors and officers with respect to our futureoperating performance. Such statements include any forecasts, projections anddescriptions of anticipated cost savings or other synergies. Words such as “anticipate,”“expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” variations of suchwords, and similar expressions are intended to identify such forward-lookingstatements. You should be aware that any such forward-looking statements arenot guarantees of future performance and may involve risks and uncertainties,and 

 

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thatactual results may differ from those set forth in the forward-lookingstatements as a result of various factors (including, without limitations, theactions of competitors, future global economic conditions, market conditions,foreign exchange rates, and operating and financial risks related to managinggrowth and integrating acquired businesses), many of which are beyond ourcontrol. The occurrence of any such factors not currently expected by us wouldsignificantly alter the results set forth in these statements. You should notplace undue reliance on such statements, which speak only as of the date thatthey were made. Our independent auditors have not examined or compiled theforward-looking statements and, accordingly, do not provide any assurance withrespect to such statements. These cautionary statements should be considered inconnection with any written or oral forward-looking statements that we mightissue in the future. We do not undertake any obligation to release publicly anyrevisions to such forward-looking statements after filing of this annual reportto reflect later events or circumstances or to reflect the occurrence ofunanticipated events.

 

**Market Data**

 

Wehave computed the information contained in this annual report regarding annualvolume and per capita growth rates and levels, and market share, productsegment, and population data in bottling and franchise territories, and it isbased upon statistics accumulated and certain assumptions we have made. Additionaldata was obtained from third parties. Market share information presented withrespect to soft drinks, juices, waters and beer is based on data supplied byA.C. Nielsen Company (“A.C. Nielsen”) and is believed to be accurate althoughno assurances to that effect can be given. Certain market data herein(including percentage amounts) may not sum due to rounding.

 

**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**

 

**A.****           ****Selected Financial Data**

 

Thefollowing table presents our selected consolidated and other financial andoperating information at the dates and for the periods indicated. The selectedfinancial information at December 31, 2009 and 2008 and for each of thethree years ended December 31, 2009 has been derived from, should be readin conjunction with, and is qualified in its entirety by reference to ourConsolidated Financial Statements and the notes thereto, included in Item 18of this annual report, that we refer to in this annual report as the “ConsolidatedFinancial Statements.” Our Consolidated Financial Statements are prepared inaccordance with Chilean GAAP, which differs in certain significant respectsfrom accounting principles generally accepted in the United States which werefer to as “U.S. GAAP.” Note 30 of the notes to the Consolidated FinancialStatements provides a description of the principal differences between ChileanGAAP and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP ofnet income and total shareholders’ equity for the periods and as of the datescovered thereby.

 

Ourconsolidated financial results include the results of our subsidiaries locatedin Chile, Brazil and Argentina. Our subsidiaries outside Chile prepare theirfinancial statements in accordance with Chilean GAAP and, to comply with localregulations, in accordance with accounting principles generally accepted intheir country of operation. Our Consolidated Financial Statements reflect theChilean GAAP results of our subsidiaries outside Chile translated into Chileanpesos. Chilean GAAP requires monetary assets and liabilities to be translatedat year-end rates of exchange, non-monetary assets and liabilities to betranslated at historical rates of exchange as of the date of acquisition orincurrence, as the case may be, and income and expense accounts to betranslated at the average monthly exchange rate for the month in which incomeor expense is recognized. Unless otherwise specified, our financial data ispresented herein in constant Chilean pesos (which factors in the purchasingpower of the Chilean peso) as of December 31, 2009. See Notes 1(c) and30(a) and (b) to our Consolidated Financial Statements.

 

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Thefollowing table presents our selected consolidated financial information. Thisinformation should be read in conjunction with, and is qualified in itsentirety by reference to, our Consolidated Financial Statements, including thenotes thereto in Item 18. The selected financial information containedherein is presented on a consolidated basis, and is not necessarily indicativeof our financial position or results of operations at or for any future date orperiod.

 
| ** **                                      | ** ** | **For the years ended December 31,**                                                                                                     | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **2009**                                                                                                                                      | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                      | ** ** | **(in million constant Ch$ as of December 31, 2009  and million US$, except ratios, per share and per ADS data, and sales volume)** | ** ** |
| ** **                                      | ** ** | **MUS$**                                                                                                                                      | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| ***Income Statement Data:***          |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***Chilean GAAP*****:**                         |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Net sales**                                   |       | 1,465                                                                                                                                         |       | 743,116 |   | 827,813 |   | 677,407 |   | 624,743 |   | 544,000 |   |
| Cost of sales                                   |       | (815                                                                                                                                          | )          | (413,356 | ) | (459,825 | ) | (373,927 | ) | (356,606 | ) | (321,074 | ) |
| Administrative and selling expenses             |       | (394                                                                                                                                          | )          | (199,699 | ) | (232,501 | ) | (180,599 | ) | (159,511 | ) | (132,032 | ) |
| Operating income                                |       | 256                                                                                                                                           |       | 130,061 |   | 135,487 |   | 122,881 |   | 108,626 |   | 90,894 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Non-operating (expense) income, net             |       | (9                                                                                                                                            | )          | (4,681 | ) | (10,743 | ) | (507 | ) | (708 | ) | (8,287 | ) |
| Income taxes and minority interest              |       | (64                                                                                                                                           | )          | (32,368 | ) | (24,652 | ) | (28,635 | ) | (15,524 | ) | (9,960 | ) |
| Amortization of goodwill                        |       | (12                                                                                                                                           | )          | (6,094 | ) | (7,437 | ) | (6,919 | ) | (7,430 | ) | (7,267 | ) |
| **Net income**                                  |       | 171                                                                                                                                           |       | 86,918 |   | 92,655 |   | 86,821 |   | 84,964 |   | 65,380 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Basic and diluted earnings per  share**       |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Series A                                   |       | 0.21                                                                                                                                          |       | 108,88 |   | 116,07 |   | 108,76 |   | 106,44 |   | 81,90 |   |
| Series B                                   |       | 0.24                                                                                                                                          |       | 119,77 |   | 127,67 |   | 119,63 |   | 117,07 |   | 90,09 |   |
| **Basic and diluted earnings per  ADR(3)**      |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Series A                                   |       | 1.29                                                                                                                                          |       | 653,30 |   | 696,41 |   | 652,56 |   | 638,61 |   | 491,41 |   |
| Series B                                   |       | 1.42                                                                                                                                          |       | 718,60 |   | 766,03 |   | 717,79 |   | 702,45 |   | 540,53 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***U.S.GAAP:***                                 |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Net income**                                  |       | 185                                                                                                                                           |       | 93,676 |   | 100,158 |   | 91,090 |   | 87,853 |   | 87,702 |   |
| **Total number of shares:**                     |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Series A                                   |       |                                                                                                                                          |       | 380,137,271 |   | 380,137,271 |   | 380,137,271 |   | 380,137,271 |   | 380,137,271 |   |
| Series B                                   |       |                                                                                                                                          |       | 380,137,271 |   | 380,137,271 |   | 380,137,271 |   | 380,137,271 |   | 380,137,271 |   |
| **Dividends declared per series:**              |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Series A                                   |       | 58.57                                                                                                                                         |       | 29,700 |   | 34,262 |   | 36,991 |   | 35,459 |   | 33,908 |   |
| Series B                                   |       | 64.43                                                                                                                                         |       | 32,760 |   | 37,688 |   | 40,690 |   | 39,005 |   | 37,299 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Basic and diluted earnings per  share**       |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Series A                                   |       | 0.23                                                                                                                                          |       | 117.35 |   | 125.47 |   | 114.11 |   | 110.05 |   | 109.86 |   |
| Series B                                   |       | 0.25                                                                                                                                          |       | 129.08 |   | 138.01 |   | 125.52 |   | 121.05 |   | 120.85 |   |
| **Basic and diluted earnings per  ADR(3)**      |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Series A                                   |       | 1.39                                                                                                                                          |       | 704.08 |   | 752.82 |   | 684.66 |   | 660.03 |   | 659.16 |   |
| Series B                                   |       | 1.53                                                                                                                                          |       | 774.46 |   | 828.06 |   | 753.12 |   | 726.30 |   | 725.10 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***Balance Sheet  Data:***                      |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***Chilean GAAP:***                             |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Total assets                                    |       | 1,154                                                                                                                                         |       | 585,252 |   | 589,089 |   | 567,361 |   | 586,882 |   | 613,733 |   |
| Short-term debt (1)                             |       | 7                                                                                                                                             |       | 3,733 |   | 8,604 |   | 11,690 |   | 37,596 |   | 49,122 |   |
| Long-term debt                                  |       | 145                                                                                                                                           |       | 73,685 |   | 75,672 |   | 79,092 |   | 87,351 |   | 119,301 |   |
| **Total shareholders’ equity**             |       | 664                                                                                                                                           |       | 336,579 |   | 338,285 |   | 299,129 |   | 313,934 |   | 313,180 |   |
| ***U.S.GAAP:***                                 |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| **Total shareholders’ equity**             |       | 719,53                                                                                                                                        |       | 364,881 |   | 359,495 |   | 318,512 |   | 329,551 |   | 339,148 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***Other Financial  Information:***             |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***Chilean GAAP:***                             |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operating activities            |       | 241                                                                                                                                           |       | 122,052 |   | 155,666 |   | 145,910 |   | 145,032 |   | 112,962 |   |
| Cash flows from investing activities            |       | (142                                                                                                                                          | )          | (72,136 | ) | (73,730 | ) | 33,457 |   | 6,836 |   | 12,726 |   |
| Cash flows from financing activities            |       | (133                                                                                                                                          | )          | (67,532 | ) | (77,469 | ) | (96,540 | ) | (128,341 | ) | (133,144 | ) |
| Depreciation                                    |       | 61                                                                                                                                            |       | 30,852 |   | 37,182 |   | 31,012 |   | 33,771 |   | 33,877 |   |
| Capital expenditures                            |       | 98                                                                                                                                            |       | 49,763 |   | 65,532 |   | 59,607 |   | 42,284 |   | 31,961 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Ratio of total debt to total capitalization (2) |       | 0.19                                                                                                                                          |       | 0.19 |   | 0.20 |   | 0.23 |   | 0.28 |   | 0.35 |   |
|                                            |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| ***Other Operating  Data:***                    |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Sales volume of :                               |       |                                                                                                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Coca-Cola Soft Drinks (million UCs)(5)          |       | 419.6                                                                                                                                         |       | 419.6 |   | 411.2 |   | 402.4 |   | 381.9 |   | 360.1 |   |
| Other Beverages (million UCs) (4)(5)(6)    |       | 45.7                                                                                                                                          |       | 45.7 |   | 43.3 |   | 38.9 |   | 33.3 |   | 29.3 |   |

 

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| *(1)* | *Includes  short-term bank liabilities and the portion of long—term bank liabilities and  bonds payable within 12 months.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(2)* | *Total  debt is calculated as the sum of short—term and long—term financial debt.  Total capitalization is calculated as the sum of total financial debt,  non-controlling interest and total shareholders’ equity. Shareholders’ equity  under U.S. GAAP differs from Chilean GAAP in certain important respects. For  a summary of the principal differences between U.S. GAAP and Chilean GAAP as  they relate to us, see “Item 5 — Operating and Financial Review and Prospects  — U.S. GAAP Reconciliation” and Note 30 to our Consolidated Financial  Statements included elsewhere herein.* |
| *(3)* | *Each  ADR represents six shares of common stock.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *(4)* | *Includes  waters and juices (in Chile and Argentina) and beer, waters and juices (in  Brazil).*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| *(5)* | *Unit  cases (“UCs”) refer to 192 ounces of finished beverage product (24  eight-ounce servings) or 5.69 liters.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| *(6)* | *Volume  of waters and juices in Chile includes total sales volume of Vital Aguas S.A.  and Vital S.A.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

 

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**Exchange Rates**

 

Thefollowing table sets forth the annual low, high, average and period-endObserved Exchange Rate for U.S. dollars for each year beginning in 2005 and foreach month during the six months immediately preceding the month of this annualreport, as reported by the Central Bank.

 
| ** **         | ** ** | **Daily Observed Exchange Rate Ch$ per US$(1)** | ** ** |
|--------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **         | ** ** | **Low(2)**                                                                    | ** ** | **High(2)** | ** ** | **Average(3)** | ** ** | **Period End** | ** ** |
| ** **         |       |                                                                          |       |   |   |   |   |   |   |
| **Year**           |       |                                                                          |       |   |   |   |   |   |   |
|               |       |                                                                          |       |   |   |   |   |   |   |
| 2005               |       | 509.70                                                                        |       | 592.75 |   | 559.68 |   | 512.50 |   |
| 2006               |       | 511.44                                                                        |       | 549.63 |   | 530.34 |   | 532.39 |   |
| 2007               |       | 439.14                                                                        |       | 548.67 |   | 522.55 |   | 496.89 |   |
| 2008               |       | 431.22                                                                        |       | 676.75 |   | 522.35 |   | 636.45 |   |
| 2009               |       | 491.09                                                                        |       | 643.87 |   | 559.67 |   | 507.10 |   |
|               |       |                                                                          |       |   |   |   |   |   |   |
| **Month**          |       |                                                                          |       |   |   |   |   |   |   |
| ** **         |       |                                                                          |       |   |   |   |   |   |   |
| December 2009 |       | 494.84                                                                        |       | 508.75 |   | 501.45 |   | 507.10 |   |
| January 2010  |       | 489.47                                                                        |       | 531.75 |   | 500.66 |   | 523.10 |   |
| February 2010 |       | 523.10                                                                        |       | 546.18 |   | 532.56 |   | 527.84 |   |
| March 2010    |       | 508.66                                                                        |       | 533.87 |   | 523.16 |   | 524.46 |   |
| April 2010    |       | 514.91                                                                        |       | 527.38 |   | 520.62 |   | 517.23 |   |
| May 2010      |       | 517.23                                                                        |       | 549.17 |   | 533.21 |   | 530.62 |   |

* *

----

| *Source*: Central  Bank. |
|--------------------------|
| (1)                      | Nominal  Figures. |
| (2)                      | Exchange  rates are the actual low and high, on a day-by-day basis for each period. |
| (3)                      | With  respect to annual periods, the average of the exchange rates on the last day  of each month during the year and, with respect to monthly periods, the  actual daily exchange rates. |

 

TheObserved Exchange Rate on June 25, 2010 was Ch$539.68 per US$1.00.

 

**B.            Capitalizationand Indebtedness**

 

**Not applicable.**

 

**C.            Reasonsfor the offer and use of proceeds**

 

**Not applicable.**

 

**D.            RiskFactors**

 

TheCompany is subject to various economic, political, social and competitiveconditions. Any of the following risks, if they materialize, could materiallyand adversely affect our business, results of operations, prospects andfinancial condition.

 

**Risks Related to our Company**

 

***We rely heavily on our relationship withThe Coca-Cola Company (“TCCC”) which has substantial influence over ourbusiness and operations***

 

Approximately87% of our net sales in 2009 were derived from the distribution of Coca-Cola softdrinks and 9% from the distribution of other beverages bearing trademarks ownedby TCCC. We produce, market and distribute Coca-Cola products through standardbottler agreements between our bottler subsidiaries and, in each case, thelocal subsidiary of TCCC or, in the case of fruit juices and nectars, TheMinute Maid Company, a subsidiary of TCCC. TCCC has the ability to 

 

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exercisesubstantial influence over our business through its rights under the BottlerAgreements. See “Item 7. Major Shareholders and Related PartyTransactions—Bottler Agreements.” Under the Bottler Agreements, TCCCunilaterally sets the prices for Coca-Cola soft drink concentrates andCoca-Cola beverages (in the case of soft drinks pre-mixed by TCCC) sold to us.TCCC also monitors pricing changes we institute and has the right to review andapprove our marketing, operational and advertising plans. These factors mayimpact our profit margins which could adversely affect our net income andresults of operations. Our marketing campaigns for all Coca-Cola products aredesigned and controlled by TCCC. Pursuant to the Bottler Agreements, we are requiredto submit a business plan to TCCC for prior approval on a yearly basis. Inaccordance with the Bottler Agreements, TCCC may, among other things, requirethat we demonstrate financial ability to meet our business plan and if we arenot able to demonstrate our financial capacity TCCC may terminate our rights toproduce, market and distribute Coca-Cola soft drinks or other Coca-Colabeverages in territories where we have such approval. Under the BottlerAgreements, we are prohibited from producing, bottling, distributing or sellingany products that could be substituted for, be confused with or be consideredan imitation of, Coca-Cola soft drinks or other Coca-Cola beverages andproducts.

 

Wedepend on TCCC to renew the Bottler Agreements which are subject to terminationby TCCC in the event we default or upon expiration of their respective terms.We cannot assure you that the Bottler Agreements will be renewed or extendedupon their expiration, and even if they are renewed, we cannot be certain thatrenewal will be granted on the same terms as those currently in effect.Termination, non-extension or non-renewal of any of the Bottler Agreementswould have a material adverse effect on our business, financial condition andresults of operation.

 

Inaddition, any acquisition we make of bottlers of Coca-Cola products in othercountries may require, among other things, the consent of TCCC under bottleragreements to which such other bottlers are subject. We cannot assure you thatTCCC will consent to any future geographic expansion of our Coca-Cola beveragebusiness. In addition, we cannot assure you that our relationship with TCCCwill not undergo significant changes in the future. If such changes do occur,our operations, and financial results and condition could be materiallyaffected.

 

***Our business is highly competitive andsubject to price competition which may adversely affect our net profits andmargins***

 

Thesoft drink and non-alcoholic beverage businesses are highly competitive in eachof our Company’s franchise territories. In our franchise territories we competewith bottlers of regional brands, including low cost “B brand” beverages andPepsi products.  In Argentina and Brazilwe compete with Companhia de Bebidas das Americas, commonly referred to asAmBev, the largest brewer in Latin America and a subsidiary of InBev S.A.,which sells Pepsi products, in addition to a portfolio that includes localbrands with flavors such as guaraná. This competition is likely to continue,and we cannot assure you that it will not intensify in the future which couldmaterially and adversely affect our financial condition and results ofoperations. See “Item 4. Information on the Company — Part B. BusinessOverview— Soft Drink Business—Competition.”

 

***Changes in the nonalcoholic beveragesbusiness environment could adversely affect our financial results***

 

Thenonalcoholic beverages business environment is rapidly evolving as a result of,among other things, changes in consumer preferences, including changes based onhealth and nutrition considerations and obesity concerns, shifting consumertastes and needs, changes in consumer lifestyles and competitive product andpricing pressures. In addition, the industry is being affected by the trendtoward consolidation in the retail channel. If we are unable to successfullyadapt to this rapidly changing environment, our net income, share of sales andvolume growth could be negatively affected.

 

***Raw material prices may be subject to U.S.dollar/local currency exchange risk and price volatility which could increaseour costs of operations***

 

Numerousraw materials, including sugar and resin, are used in producing beverages andcontainers. We purchase raw materials from both domestic and internationalsuppliers. See “Item 4. Information on the Company—Part B. BusinessOverview—Soft Drink Business—Raw Materials and Supplies.” Because the prices ofraw materials are fixed in U.S. dollars, we are subject to local currency riskin each of our operations. If the Chilean peso, Brazilian real or Argentinepeso were to depreciate significantly against the U.S. dollar, the cost ofcertain raw materials could rise significantly, which could have an adverseeffect on our financial condition and results of operations. We cannot assureyou that these currencies will not lose value against the U.S. dollar in thefuture.   Additionally, these rawmaterials are subject to international price volatility that could also have amaterial negative effect over our profitability.

 

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***Instability in the supply of utilityservices and oil prices may adversely impact our results of operations***

 

Ouroperations depend on a stable supply of utilities and fuel in the countrieswhere we operate. Given recent economic instability, particularly in Argentina,we cannot assure you that such instability will not impair our ability toprocure required utility services or fuel in the future which could adverselyimpact our results or operations. Fluctuations in oil prices have adverselyaffected our cost of energy and transportation in the three countries weoperate and we expect that they will continue to do so in the future.   We believe that the increase of energyprices will not have a significant effect over our results of operations.

 

***Water scarcity and poor quality could negatively impact the Company’sproduction costs and capacity.***

 

Water is the main ingredientin substantially all of our products. It is also a limited resource in manyparts of the world, facing unprecedented challenges from overexploitation,increasing pollution and poor management. As demand for water continues toincrease around the world, and as the quality of available water deteriorates,the Company may incur increasing production costs or face capacity constraintsthat could adversely affect our profitability or net operating revenues in thelong run.

 

***Significant additional labeling or warning requirements may inhibit salesof affected products.***

 

In the countries in which weoperate, authorities may seek to adopt significant additional product labelingor warning requirements relating to the chemical content or perceived adversehealth consequences of certain of the Coca-Cola products. These types ofrequirements, if they become applicable to one or more of the Coca-Colaproducts under current or future environmental or health laws or regulations,may inhibit sales of such products.

 

***If we are unable to protect our information systems against datacorruption, cyber-based attacks or network security breaches, our operationscould be disrupted.***

 

We are increasinglydependent on information technology networks and systems, including theInternet, to process, transmit and store electronic information. In particular,we depend on our information technology infrastructure for digital marketingactivities and electronic communications among the Company and our clients,suppliers and also among our subsidiaries. Security breaches of thisinfrastructure can create system disruptions, shutdowns or unauthorizeddisclosure of confidential information. If we are unable to prevent suchbreaches, our operations could be disrupted, or we may suffer financial damageor loss because of lost or misappropriated information.

 

***Perception of risk in emerging economiesmay impede our access to international capital markets, hinder our ability tofinance our operations and adversely affect the market price of our commonshares and American Depositary Receipts .***

 

Asa general rule, international investors consider Argentina, and to a lesserextent Chile and Brazil, to be emerging market economies. Consequently,economic conditions and the market for securities of emerging market countriesinfluence investors’ perceptions of Chile, Brazil and Argentina and theirevaluation of companies’ securities located in these countries.

 

Duringperiods of heightened investor concern regarding emerging market economies, inparticular Argentina and to a lesser extent Brazil , have experiencedsignificant outflows of U.S. dollars. In addition, Brazilian and Argentinecompanies have faced higher costs for raising funds, both domestically andabroad, as well as limited access to international capital markets, which havenegatively affected the prices of Brazilian and Argentine securities. Althougheconomic conditions are different in each of the emerging-market countries,investors’ reactions to developments in one of these countries may affect thesecurities of issuers in the others, including Chile. For example, adversedevelopments in other developing or emerging market countries may lead todecreased investor interest in investing in Chile or in the securities ofChilean companies, including securities of the Company.

 

***It may be difficult to enforce civilliabilities against us or our directors, executive officers or controllingpersons***

 

Weare a *sociedad anónima*, or stockcorporation, organized under the laws of Chile. Some of our directors,executive officers and controlling persons reside in Chile or outside of theUnited States. In addition, all or a substantial portion of the assets of thesepersons and of our assets are located outside of the United States. As aresult, it may not be possible for investors to effect service of processwithin the United States upon such persons, or to enforce against them in U.S.courts 

 

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judgmentspredicated upon civil liability provisions of the federal securities laws ofthe United States or otherwise obtained in U.S. courts. Because our assets arelocated outside of the United States, any judgment obtained in the UnitedStates against us may not be fully collectible in the United States.

 

***If we experience strikes, work stoppages or labor unrest, ourbusiness would suffer.***

 

Strikes, work stoppages orother forms of labor unrest at any of our production facilities could impairour ability to supply products to customers, which would reduce our revenuesand could expose us to customer claims.

 

**Risks Relating to Chile**

 

***Our growth and profitability depend oneconomic conditions in Chile***

 

Approximately51% of our assets and 37% of our net sales in 2009 were derived from ouroperations in Chile. Thus, our financial condition and results of operationsdepend significantly on economic conditions prevailing in Chile. According todata published by the Central Bank, the Chilean economy grew at a rate of 4.6%in 2007, 3.7% in 2008 and -1.5% in 2009. Our financial condition and results ofoperations could also be adversely affected by changes over which we have nocontrol, including, without limitation:

 

·                          the economic orother policies of the Chilean government, which has a substantial influenceover many aspects of the private sector;

·                          other politicalor economic developments in or affecting Chile;

·                          regulatorychanges or administrative practices of Chilean authorities;

·                          inflation andgovernmental policies to combat inflation;

·                          currencyexchange movements; and

·                          global andregional economic conditions.

 

***Inflation in Chile may disrupt our businessand have an adverse effect on our financial condition and results of operations***

 

Theannual rates of inflation in Chile which in 2007, 2008 and 2009 were 7.8%, 7.1%and -1.4%, respectively (as measured by changes in the consumer price index andas reported by the Chilean National Institute of Statistics) could adverselyaffect the Chilean economy and have a material adverse effect on our financialcondition and results of operations. We cannot assure you that Chileaninflation will not continue to increase significantly. We cannot assure youthat, under competitive pressure, we will be able to realize price increases,which could adversely impact our financial condition and results of operations.

 

***The Chilean peso is subject to depreciationand volatility which could adversely affect the value of an investment in oursecurities***

 

TheChilean government’s economic policies and any future changes in the value ofthe Chilean peso against the U.S. dollar, could adversely affect our operationsand financial results and the dollar value of an investor’s return . TheChilean peso has been subject to large nominal devaluations in the past and maybe subject to significant fluctuations in the future. Based on the ObservedExchange Rates for U.S. dollars in the period from 2006 to 2009 the Chileanpeso relative to the U.S. dollar appreciated 4.8% in nominal terms. During 2009the Chilean peso relative to the U.S. dollar appreciated 20.3% in nominalterms.. See “Item 3. Key Information-ExchangeRates.”

 

OurClass A shares and Class B shares are traded in Chilean pesos on theChilean Stock Exchanges. Cash distributions with respect to the shares will bereceived in Chilean pesos by the depositary, currently The Bank of New YorkMellon Corporation (as depositary for the Series A and Series Bshares represented by the Series A and Series B ADRs), which willconvert such Chilean pesos to U.S. dollars at the then prevailing exchange rateto make U.S. dollar payments in respect of the ADRs. If the value of theChilean peso depreciates relative to the U.S. dollar, the value of the ADRs andany distributions to be received from the depositary would be adverselyaffected. In addition, the depositary will incur costs (to be ultimately borneby theADR holders) in connection with the foreign currency conversion andsubsequent distribution of dividends or other payments with respect to our ADRs.

 

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***Exchange controls and withholding taxes inChile may limit repatriation of foreign investments***

 

Equityinvestments in Chile by persons who are not Chilean residents are generallysubject to various exchange control regulations that govern the convertibilityand repatriation of the investments and earnings. The ADRs are governed by anAgreement among us, the depositary and the Central Bank of Chile (the “ForeignInvestment Agreement”). The Foreign Investment Agreement guarantees thedepositary and the ADR holders access to Chile’s Formal Exchange Market,permits the depositary to remit dividends it receives from us to the ADRholders and permits the holders of ADRs to repatriate the proceeds of the saleof shares withdrawn from the ADR facility, thereby enabling them to acquirecurrencies necessary to repatriate investments in the shares and earnings therefrom.  Pursuant to current Chilean law,the Foreign Investment Agreement may not be amended unilaterally by the CentralBank of Chile, and there are judicial precedents (which are not binding withrespect to future judicial decisions) indicating that the Foreign InvestmentAgreement may not be voided by future legislative changes.

 

Dividendsreceived by ADR holders of are paid net of foreign currency exchange fees andexpenses of the depositary and are subject to Chilean withholding tax,currently imposed at a rate of 35%, subject to credits in certain cases asdescribed under “Item 10. Additional Considerations —Tax ConsiderationsRelating to Equity Securities”.

 

Wecannot assure you that additional restrictions applicable to ADR holders , thedisposition of the shares underlying the ADRs and the convertibility and/or therepatriation of the proceeds from such disposition or the payment of dividendswill not be imposed in the future, nor can we advise as to the duration orimpact of such restrictions if imposed. If for any reason, including changes inthe Foreign Investment Agreement or Chilean law, the depositary was unable toconvert Chilean pesos to U.S. dollars, investors would receive dividends orother distributions, if any, in Chile and in Chilean pesos.

 

**Risks Relating to Brazil**

 

***Our business is dependent to some extent oneconomic conditions in Brazil***

 

Approximately35% of our assets and 42% of our consolidated net sales in 2009 were derivedfrom our operations in Brazil. Because demand for soft drinks and beverageproducts is usually correlated to economic conditions prevailing in therelevant local market, which in turn is dependent on the macroeconomiccondition of the country in which the market is located, our financialcondition and results of operations to a considerable extent are dependent uponpolitical and economic conditions prevailing in Brazil.  According to data available to generalpublic, the Brazilean economy grew at a rate of 6.1% in 2007, 5.1% in 2008 and-0.2% in 2009.

 

***The Brazilian government exercisesinfluence over the Brazilian economy, which together with historically volatileBrazilian political and economic conditions, could adversely affect ourfinancial condition and results of operations and the market price of ourshares and ADRs***

 

Historically,the Brazilian government has changed monetary, credit, tariff, and otherpolicies to influence the course of Brazil’s economy. Such government actionshave included wage and price controls as well as other measures such asfreezing bank accounts, imposing exchange controls and imposing limits onimports and exports. Changes in policy and other political and economicdevelopments could adversely affect the Brazilian economy and have a materialadverse effect on our business, financial condition and results of operations.

 

Brazil’scurrent President, Luiz Inácio Lula da Silva, was elected in October 2002and took office on January 1, 2003. During 2006 he was reelected and willcontinue in office until the end of 2010. We cannot assure you that presenteconomic conditions and policies intended to promote a sustainable economicdevelopment will continue.

 

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***Although inflation in Brazil has stabilizedin recent years, increased inflation may adversely affect the operations ofAndina Brazil which could adversely impact our financial condition and resultsof operations***

 

As measured by theBrazilian *Índice Nacional de Preços aoConsumidor* or INPC, inflation in Brazil was 5.2%, 6.5% and 4.3% in2007, 2008 and 2009, respectively. Increased inflation rates may result in lowerconsumer purchasing power on behalf of consumers and lower sales volume forAndina Brazil. We cannot assure you that levels of inflation in Brazil will notincrease in future years and have a material adverse effect on our business,financial condition or results of operations. Inflationary pressures may leadto further government intervention in the economy, including the introductionof government policies that could adversely affect the results of operations ofAndina Brazil and consequently our financial condition and results ofoperations and the market price of our shares and ADSs.

 

***The Brazilian real is subject todepreciation and volatility which could adversely affect our financialcondition and results of operations***

 

During2006 and 2007, the *real*appreciated 8.7% and 17.2%, respectively against the U.S. dollar compared tothe prior year period and in 2008, the *real*depreciated 31.9% due to the world economic crisis and in 2009, it appreciated25.5%.  In the event of a devaluation ofthe real, the financial condition and results of operations of our Braziliansubsidiary could be adversely affected.

 

Depreciationof the *real* relative to the U.S.dollar may increase the cost of servicing foreign currency-denominated debtthat we may incur in the future, which could adversely affect our results ofoperations and financial condition. In addition, depreciation of the *real*can create inflationary pressures in Brazil that may negativelyaffect our results of operations. Depreciation generally curtails access tointernational capital markets and combined with other macroeconomic aspects,may prompt recessionary government intervention. It also reduces the U.S.dollar value of our revenues, distributions and dividends, and the U.S. dollarequivalent of the market price of our common shares. On the other hand, theappreciation of the real against the U.S. dollar may lead to the deteriorationof Brazil’s public accounts and balance of payments, as well as to lowereconomic growth from exports.

 

***The Brazilian government imposes certainrestrictions on currency conversions and remittances abroad which could affectthe timing and amount of any dividend or other payment we receive***

 

Brazilianlaw guarantees foreign shareholders of Brazilian companies the right to repatriatetheir invested capital and to receive all dividends in foreign currencyprovided that their investment is registered with Brazil’s Central Bank. Weregistered our investment in Andina Brazil with the Brazilian Central Bank onOctober 19, 1995. Although dividend payments related to profits obtainedsubsequent to January 1, 1996 are not subject to income tax, after the sumof repatriated capital and invested capital exceeds the investment amountregistered with the Brazilian Central Bank, repatriated capital is subject to acapital gains tax of 15%. Under current Chilean tax law, we will realize a taxcredit in respect of all Brazilian taxes paid relating to Andina Brazil. Therecan be no assurance that the Brazilian government will not impose additionalrestrictions or modify existing regulations that would have an adverse effecton an investor’s ability to repatriate funds from Brazil nor can there be anyassurance of the timing or duration of such restrictions, if imposed in thefuture.

 

**Risks Relating to Argentina**

 

***Our business is dependent to some extent oneconomic conditions in Argentina***

 

Approximately14% of our assets and 21% of our net sales in 2009 were derived from ouroperations in Argentina. Because demand for soft drinks and beverage productsusually is correlated to economic conditions prevailing in the local market,which in turn is dependent on the macroeconomic condition of the country, thefinancial condition and results of operations of our franchise in Argentinaare, to a considerable extent, dependent upon political and economic conditionsprevailing in Argentina.

 

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Aftersix consecutive years of GDP increases of 8% to 9%, the economy contracted anestimated 3% during 2009, breaking the growth cycle. Facing the internationalfinancial crisis, the public sector did not default and carried out paymentsusing the reserves of Argentina’s Central bank and loans from Banco Nación,generating new and significant macroeconomic policy challenges. AlthoughArgentina managed to roll with the punches of a recessive year and aninternational crisis without upsetting the main financial variables, we cannotassure that economic conditions in Argentina will continue improving or thatour operations will continue experiencing good results.

 

***Political and economic instability mayrecur which could have a material adverse effect on our Argentine operationsand on our financial condition and results of operations.***

 

Inthe period from 1998 through 2003, Argentina experienced acute economicproblems that culminated with the restructuring of substantially all ofArgentina’s sovereign bond indebtedness. A succession of presidents wereinaugurated during this crisis period and various states of emergency weredeclared that suspended civil liberties and instituted restrictions ontransfers of funds abroad and foreign exchange controls, among other measures.Argentina’s GDP contracted by 10.9% in 2002. Beginning 2003, Argentine GDPbegan to recover and from 2004 to 2008 recorded an average rate of growth of8.4%.  According to official records, GDPgrowth for the year 2009 was 1%.

 

In the political environment, legislative electionscarried out in June of 2009 were a misfortune for the government’s politicalparty losing the majority in both houses.This new political scenario in Argentina could make the executive power need toarrive at a consensus with the opposition regarding rules and regulations inorder for them to be approved by the legislative power.

 

Themacroeconomic condition in Argentina has been characterized by:

 

·                  increasedinflation which has been slightly controlled by price control;

·                  deeper stateintervention in the economy;

·                  high nominalexchange rate;

·                  deficit andcommercial surplus, with a decreasing tendency; and

·                  strong salarypressures.

 

Theexchange rate underwent a 10% depreciation during 2009. ,  The unemployment rate increased to 8.4%during 2009 compared to the 7.2% recoreded during the same period of 2008. TheArgentine government continues to face significant exposure to litigation fromholders of its defaulted debt that did not participate in the Argentinegovernment’s exchange offer. At present, there are legal proceedings againstthe Argentine government in the United States, Italy and Germany. Although itis impossible to predict what the outcome of these proceedings will be, ajudgment against the Argentine government in such cases could result in areduction in funding sources and investment capital, which could have asignificant effect on the Argentine government’s capacity to implement reformsand reinstate sustainable economic growth, all of which could adversely affectour results of operations.

 

***The Argentine government imposes certainrestrictions on currency conversions and remittances abroad which could affectthe timing and amount of any dividends or other payment we receive from ourArgentine franchise***

 

UntilDecember 2001, the Argentine peso was pegged 1-to-1 to the U.S. dollar. FromJanuary 1st, 2002, theArgentine peso has been allowed to float freely against the U.S. dollar and otherforeign currencies.

 

Since2003 and following a series of restrictive measures in the money market andfund movements, the Argentine Central Bank removed several of the foreignexchange restrictions, including elimination of the requirement that the ArgentineCentral Bank approve the pre-payment of principal of financial indebtedness,extended the term for the repatriation of export proceeds, allowed earlier paymentsof imports, and starting 2004, increased up to US$2 million, the monthly amountthat Argentine-domiciled individuals or corporations are allowed to purchaseand transfer abroad.

 

Therecan be no assurance that the Argentine Central Bank will not once again requireits prior authorization for the transfer of funds abroad in the form of dividendsor payment of inter-company or third party loans. Any such inability totransfer funds outside of Argentina, in the form of dividends or otherwise,could adversely affect the value of our Argentine operations and the marketvalue of our ADRs.

 

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***Inflation in Argentina may adversely affectour operations which could adversely impact our financial condition and resultsof operations***

 

Argentinahas experienced high levels of inflation in recent decades, resulting in largedevaluations of its currency. Argentina’s historically high rates of inflationresulted mainly from its lack of control over fiscal policy and the moneysupply. The official annual rates of inflation (published by INDEC-InstitutoNacional de Estadisticas y Censos- National Statistics and Census Institute asmeasured by changes in the consumer price index) between 2005 and 2009 were12.3%, 9.8%, 8.5%, 7.2% and 7.3%, respectively for each year.  However, unofficial records place theconsumer index at levels close to 15% for 2009. High levels of inflation inArgentina could adversely affect the Argentine economy and have a materialadverse effect on our financial condition and results of operations.

 

***The Argentine peso is subject todepreciation and volatility which could adversely affect our financialcondition and results of operations***

 

TheArgentine government’s economic policies and any future devaluation of theArgentine peso against the U.S. dollar could adversely affect our financialcondition and results of operations. The Argentine peso has been subject tolarge devaluations in the past and may be subject to significant fluctuationsin the future.

 

ThePublic Emergency Law and Foreign Exchange Regime Reform Law of 2002 put an endto more than ten years of U.S. dollar-peso parity and authorized the Argentinegovernment to set the exchange rate. Subsequent to the devaluation of theArgentine peso in early 2002 and since the beginning of the Argentine economiccrisis, there have been significant fluctuations in the value of the Argentinepeso causing repeated Argentine Central Bank interventions to stabilize theArgentine peso through purchases and sales of U.S. dollars said devaluation ofthe Argentine peso has had a negative impact on our results.

 

Wecannot assure you that the policies to be implemented by the Argentinegovernment in the future will stabilize the value of the Argentine peso againstforeign currencies. Therefore, the Argentine peso may continue to be subject tosignificant fluctuations and further depreciations which might significantlyand adversely affect our financial condition and the results of our operations.

 

***Argentina continues to face political andeconomic uncertainty***

 

Thestrong deterioration of global and local economic conditions, the rapid andradical nature of the changes in the Argentine social, political, economic andlegal environment over the past years and the absence of a clear politicalconsensus in favor of any particular set of economic policies raises doubtsabout Argentina’s economic and political future. It is possible that, despiterecent economic growth, Argentina could return to a deeper recession, higher inflationand unemployment and greater social unrest. We cannot assure you that laws andregulations implemented by the Argentine government to regulate the economywill not continue to change in the future or that any changes will notadversely affect our business, financial condition or results of operations.

 

***Risk Factors Relating to the ADRs andCommon Stock***

 

***Preemptive rights may be unavailable to ADRholders***

 

Accordingto the *Ley de Sociedades Anónimas*No. 18.046 and the *Reglamento deSociedades Anónimas* (collectively, the “Chilean Companies Law”),whenever we issue new shares for cash, we are required to grant preemptiverights to holders of our shares (including shares represented by ADRs), givingthem the right to purchase a sufficient number of shares to maintain theirexisting ownership percentage. However, we may not be able to offer shares toUnited States holders of ADRs pursuant to preemptive rights granted to ourshareholders in connection with any future issuance of shares unless a registrationstatement under the U.S. Securities Act of 1933, as amended, is effective withrespect to such rights and shares, or an exemption from the registrationrequirements of the U.S. Securities Act of 1933, as amended, is available.

 

Underthe procedure established by the Central Bank of Chile, the foreign investmentagreement of a Chilean company with an existing ADR program will become subjectto an amendment (which will also be deemed to incorporate all laws andregulations applicable to international offerings in effect as of the date ofthe amendment) that will extend the benefits of such contract to new sharesissued pursuant to a preemptive rights offering to existing ADR owners and toother persons residing and domiciled outside of Chile that exercise preemptiverights, upon request to the Central Bank of Chile. We intend

 

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toevaluate at the time of any rights offering the costs and potential liabilitiesassociated with any such registration statement as well as the indirectbenefits to us of enabling United States ADR holderss to exercise preemptiverights and any other factors that we consider appropriate at the time, and thenmake a decision as to whether to file such registration statement.

 

Wecannot assure you that any registration statement would be filed. To the extentADR holders are unable to exercise such rights because a registration statementhas not been filed, the depositary will attempt to sell such holders’preemptive rights and distribute the net proceeds thereof if a secondary marketfor such rights exists and a premium can be recognized over the cost of anysuch sale. If such rights cannot be sold, they will expire and ADR holders willnot realize any value from the grant of such preemptive rights. In any suchcase, such holder’s equity interest in the Company would be dilutedproportionately.

 

***Shareholders’ rights are less well definedin Chile than in other jurisdictions, including the United States***

 

Underthe United States federal securities laws, as a foreign private issuer, we areexempt from certain rules that apply to domestic United States issuers withequity securities registered under the United States Securities Exchange Act of1934, as amended, including the proxy solicitation rules, the rules requiringdisclosure of share ownership by directors, officers and certain shareholders.We are also exempt from certain of the corporate governance requirements of theSarbanes-Oxley Act of 2002 and the New York Stock Exchange, Inc., including therequirements concerning independent directors.

 

Ourcorporate affairs are governed by the laws of Chile and our *estatutos* or bylaws, which function not onlyas our bylaws but also as our articles of incorporation. Under such laws, ourshareholders may have fewer or less well-defined rights than they might have asshareholders of a corporation incorporated in a U.S. jurisdiction.

 

Pursuantto Law No. 19,705, enacted in December 2000, the controlling shareholdersof an open stock corporation can only sell their controlling shares via atender offer issued to all shareholders in which the bidder would have to buyall the offered shares up to the percentage determined by it, when the pricepaid is substantially higher than the market price (that is, when the pricepaid was higher than the average market price of a period starting 90 daysbefore the proposed transaction and ending 30 days before such proposed transaction,plus 10%).

 

***The market for our shares may be volatileand illiquid***

 

TheChilean securities markets are substantially smaller, less liquid and morevolatile than major securities markets in the United States. The *Bolsa de Comercio de Santiago* (the “SantiagoStock Exchange”), which is Chile’s principal securities exchange, had a marketcapitalization of approximately US$231,106 million at December 31, 2009and an average monthly trading volume of approximately US$3,147 million for2009. The lack of liquidity owing, in part, to the relatively small size of theChilean securities markets may have a material adverse effect on the tradingprices of our shares. Because the market for our ADRs depends, in part, oninvestors’ perception of the value of our underlying shares, this lack ofliquidity for our shares in Chile may have a significant effect on the tradingprices of our ADRs.

 

**ITEM 4.****                             ****INFORMATION ON THE COMPANY**

 

**A.****                    ****History and development of the Company**

 

Ourlegal name is Embotelladora Andina S.A. and our commercial name is Andina. Wewere incorporated and organized on February 7, 1946 under the ChileanCompanies Law as a *sociedad anónima*(stock corporation). An abstract of our bylaws is registered with the *Registro de Comercio de Santiago* (Public Registryof Commerce of the City of Santiago) under No. 581 on page 768 of the year1946. Pursuant to our bylaws, our term of duration is indefinite.

 

Ourshares of common stock are listed and traded on the Bolsa de Comercio deSantiago (Santiago Stock Exchange),  onthe Bolsa Electrónica de Chile (theChilean Electronic Stock Exchange) and the Bolsa de Comercio de Valparaiso (the Valparaiso Stock Exchange). Our Series A and Series B ADRsrepresenting our Series A and Series B shares, respectively, are listed on theNew York Stock Exchange. Our principal executive offices are located at AvenidaEl Golf 40, Piso 4, Las Condes, Santiago, Chile. Our telephone number is+56-2-338-0520 and our website is www.embotelladoraandina.com.

 

Ourdepositary agent for the ADRs in the United States is The Bank of New YorkMellon Corporation, located at One Wall Street, New York, New York 10286. Ourdepositary agent’s telephone number is (212) 815-2296. Our authorized

 

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representativein the United States is Puglisi & Associates, located at 850 LibraryAvenue, Suite 204, Newark, Delaware 19711, United States and their phone numberis (302) 738-6680.

 

**History**

 

In1941, The Coca-Cola Company licensed a private Chilean company to produceCoca-Cola soft drinks in Chile, and production began in 1943. In 1946, theoriginal licensee withdrew from the license arrangement, and a group of U.S.and Chilean investors formed Andina, which became The Coca-Cola Company’s solelicensee in Chile. Between 1946 and the early 1980s, Andina developed theChilean market for Coca-Cola soft drinks with a system of production anddistribution facilities covering the central and southern regions of Chile. Inthe early 1980s, Andina sold its Coca-Cola licenses for most areas outside theSantiago metropolitan region and concentrated on the development of its softdrink business in the Santiago area. Although no longer the sole Coca-Colabottler in Chile, Andina has been the principal manufacturer of Coca-Colaproducts in Chile for an uninterrupted period of 64 years.

 

In1985, a majority of Andina’s shares was acquired by four Chilean families whocompromise Inversiones Freire Ltda. (“Freire” or “the Controlling Shareholders”).On December 31, 2009, the Controling Shareholders owned 52.6% of ouroutstanding Series A shares, which have preferred voting rights and therebycontrol the Company; and 42.4% of our outstanding Series B shares, consequentlythe Controlling Shareholders of Andina hold a 47.5% ownership interest in theCompany.   Further information regardingour Controlling Shareholders can be found on page 74 of our 2009 Annual Reportwhich is available at our website: www.embotelladoraandina.com.

 

AndinaBrazil, our Brazilian subsidiary, began production and distribution ofCoca-Cola soft drinks in Rio de Janeiro in 1942. In June 1994, we acquired 100%of the capital stock of Andina Brazil for approximately US$120 million andcontributed an additional US$31 million to Andina Brazil’s capital immediatelyafter the acquisition to repay certain indebtedness of Andina Brazil.   In 2000, we purchased through Andina Brazil,from the Coffin Group, a Coca-Cola franchise license for a territory in Brazilcomprising the State of Espírito Santo and part of the States of Rio de Janeiroand Minas Gerais (NVG), for US$74.5 million. NVG was merged into Andina Brazilin 2000, and its operations were integrated with Andina Brazil in 2001.   In 2004, Andina Brazil entered into afranchise swap agreement with the Brazilian subsidiary of The Coca-ColaCompany, Recofarma Indústria do Amazonas Ltda., for (1) an exchange offranchising rights, goods and other assets of Andina Brazil in the territory ofGovernador Valadares in the State of Minas Gerais, and (2) other franchiserights of The Coca-Cola Company in the territories of Nova Iguaçú in the stateof Rio de Janeiro, which was previously owned by Companhia Mineira de RefrescosS.A.  In 2007 TCCC along with theCoca-Cola bottlers in Brazil create a Joint Venture, Mais Indústria deAlimentos, in order to enhance the non-carbonated business for the entireSystem in that country.  In 2008 throughthe Mais joint venture The Coca-Cola System acquires the Sucos del Valle brand,leader in the juice segment in this market.

 

Productionof Coca-Cola soft drinks in the Argentine territory began in 1943 with thestart-up of operations in the province of Córdoba, Argentina, through IntiS.A.I.C., which we refer to as Inti. In July 1995, we (through Inversiones delAtlántico S.A., an investment company incorporated in Argentina), which werefer to as IASA, acquired a 59% interest in Edasa, the parent company ofRosario Refrescos S.A. and Mendoza Refrescos S.A. These entities weresubsequently merged to create Rosario Mendoza Refrescos S.A., which we refer toas Romesa. In 1996 we acquired an additional 35.9% interest in Edasa, anadditional 78.7% interest in Inti, a 100% interest in Cipet located in BuenosAires (a PET plastic bottle and packaging business) and a 15.2% interest inCican S.A. Currently, Edasa is the Coca-Cola bottler in the provinces of EntreRios, San Luis, San Juan, Mendoza, part of Santa Fe and part of Buenos Aires(San Nicolás y Ramallo). During 1997, the operations of Romesa were merged intoInti. In 1999, Edasa was merged into IASA. In 2000, IASA was merged into Inti,which in turn changed its corporate name to Embotelladora del Atlántico S.A.(EDASA). In 2002 Cipet merged into Edasa. During 2007 EDASA’s ownershipinterest in Cican S.A. was sold to Femsa. In 1998, Andina repurchased from TheCoca-Cola Company its 49% stake in Vital. Concurrently with that transaction,The Coca-Cola Company purchased Vital’s mineral water springs located atChanqueahue, 80 miles south of Santiago. As part of the transaction, the Vitalbottler agreement was replaced with a juice bottler agreement with Minute MaidInternational Inc., as well as a new mineral water bottling agreement with TheCoca-Cola Company. In addition, the 1995 shareholders’ agreement between us andThe Coca-Cola Company regarding ownership of Vital was terminated. Therestructuring of the water and juice business in Chile enhanced our focus onthe production of soft drinks, water and juice. During 2005, the production and packaging business of water, juice andnon-carbonated beverages licensed by TCCC in Chile was restructured. VitalAguas S.A., which we refer to as VASA, was created to develop the productionand packaging businesses of Vital de Chanqueahue, mineral water and other waterproducts. VASA is focused on developing juice and non-carbonated beverages.Andina, Embonor S.A. and Embotelladora Coca-Cola Polar S.A. own 56.5%, 26.4%and 17.1%, respectively, of the outstanding capital of VASA.

 

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InChile we participate in the business of producing PET bottles through a 50/50joint venture we entered into with Cristalerías de Chile in the year 2001.

 

In1996, our shareholders approved the Reclassificationof Capital Stock,which we refer to as the Reclassification, of Andina’scommon stock into two new series of shares. Pursuant to the Reclassification,each outstanding share of Andina’s common stock was replaced by one newlyissued Series A share and one newly issued Series B share,. The Series A andSeries B shares are principally differentiated by their voting and economicrights: the holders of the Series A shares have full voting power and areentitled to elect six of seven regular and alternate members of the board ofdirectors, and the holders of the Series B shares have no voting rightsbut for the right to elect one regular and one alternate member of the board ofdirectors. In addition, holders of Series B shares are entitled to a dividend10% greater than any dividend on Series A shares.

 

Afterthe Reclassificaction, the Superintendence of Pension Fund Managers (*Superintendencia de Administradores de Fondos dePensiones*) decreed that Chilean pension funds would not be permittedto acquire Series B Shares due to their limited voting rights. Later, during2004, the Superintendence approved Series B shares as investment instrumentsfor Chilean Pension funds. Series A shares have always been eligible asinvestment instruments.

 

**Capital Expenditures**

 

During2009 the Company financed its permament investments exclusively from internalresources.

 

Thefollowing table sets forth our capital expenditures by territory and line ofbusiness for the periods indicated:

 
| ** **           | ** ** | **Year ended December 31,** | ** ** |
|----------------------|------------|----------------------------------|------------|
| ** **           | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **           | ** ** | **MCh$**                         | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| **Soft Drinks:**     |       |                             |       |   |   |   |   |
| Chilean territory    |       | 21,309                           |       | 23,397 |   | 35,932 |   |
| Brazilian territory  |       | 19,231                           |       | 33,066 |   | 16,499 |   |
| Argentine territory  |       | 6,248                            |       | 6,588 |   | 4,895 |   |
| **Other Beverages:** |       |                             |       |   |   |   |   |
| Vital S.A. and EDASA |       | 2,765                            |       | 1,851 |   | 1,668 |   |
| **PET Packaging:**   |       |                             |       |   |   |   |   |
| Argentine territory  |       | 210                              |       | 630 |   | 613 |   |
|                 |       |                             |       |   |   |   |   |
| Total                | ** ** | **$**                            | **49,763** | ** ** | **$** | **65,532** | ** ** | **$** | **59,607** | ** ** |
|                      |            |                                  |            |  |  |  |  |  |  |  |

 

During2009, the company disbursed approximately Ch$4.530 million to improve itsindustrial processes, industrial waste metering equipment, laboratory analysis,environmental impact consultancy, and other studies.

 

Ourtotal capital expenditures were Ch$49,763 million in 2009, Ch$65,532 million in2008 and Ch$59,607 million in 2007.  In2009, capital expenditures were principally related to the following:

 

**Soft drinks:**

 

***Chile***

·                  Returnablebottles (glass and PET bottles) and bottle cases;

·                  Coolingequipments, freezers, post mix and other point of sale equipments;

·                  New equipmentto increase efficiency and production capacity;

·                  Completion ofthe architecture project for the new Renca bottling facility.

 

***Brazil***

·                  Glass bottlesand bottle cases;

·                  Coolers,freezers, post-mix and other point-of-sale equipment; and

·                  Building thenew logistics and distribution center at São Gonçalo and São Pedro D’Aldeia.

 

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***Argentina***

·                  Bottles (glassand PET bottles) and bottle cases;

·                  New equipmentto increase operating efficiency; Investments in coolers and freezers;

·                  Transformationof waste water treatment to an anaerobic process.

·                  Juice plant:construction of facilities and installation of 1 production line for Tetra 200cc and 1000 cc.

 

**Juices and Waters**

 

**Juices**

·                  Renewal of OneWay PET line equipment due to obsolesence;

·                  Automationprocess for glass bottle line and change equipment due to obsolesence;

·                  Acquireequipment for the production of new 500 cc non returnable PET and 250 ccreturnable glass formats;

·                  Implementationand intitiation of operations of new Tettra Pak line for the production ofTetra Classic 65 cc format (Fruitopia);

·                  Implementationof production processes for managing a product based on juice and milk (Hugo);and

·                  Investment insupply equipment and nets.

 

**Waters**

·                  Civil works fornew in-line blowing plant;

·                  Security systemagainst fire;

·                  Increase usefullife cold compressors;

·                  Renew forklifts;

·                  Laser codingequipment; and

·                  CIF system andGlicol cooling system.

 

**Divestitures**

 

InNovember 2007, Edasa sold to Femsa for a total amount of US$1.4 million, its15.2% ownership interest in Cican S.A., an Argentine company dedicated to thecanning of Coca-Cola products and the packaging of Cepita juices.

 

**B.****                    ****Business Overview**

 

Andinais among the ten largest Coca-Cola bottlers in the world, servicing franchisedterritories with 37 million people, delivering over seven million liters ofsoft drinks, juices, and bottled waters on a daily basis.We are the largestproducer of soft drinks in Chile and the second largest soft drink producer inBrazil and in Argentina. Our principal business is the production anddistribution of Coca-Cola soft drinks, which accounted for 87.1% of ourconsolidated net sales in 2009.

 

In2009, we recorded consolidated net sales of Ch$743,116 million and total salesvolume of 419.6 million unit cases of Coca-Cola soft drinks.

 

Inaddition to the Coca-Cola soft drinks business, through Vital S.A., we produceand distribute fruit juices and other fruit-flavored beverages in Chile undertrademarks owned by TCCC. Through Vital Aguas S.A., we produce and sell mineralwater and purified water in Chile under trademarks owned by TCCC.  Through Envases Central S.A. we produceflavored waters and certain formats for soft drinks under trademarks owned byTCCC.  We also manufacture PET bottlesprimarily for our own use in the packaging of Coca-Cola soft drinks in Chileand Argentina. In Brazil, we also distribute the beer brands Sol, Kaiser,Heineken, Bavaria, Xingú, and Dos Equis (XX).

 

**Our Products**

 

Weproduce, market and distribute the following Coca-Cola trademark beverages andbrands licensed from third parties throughout our franchise territories:

 

*Chile:* Andina, Andina Frut, Andina Frut Light, AndinaNéctar, Andina Néctar Light, Benedictino, Burn, Coca-Cola, Coca-Cola Light,Coca-Cola Zero, Dasani, Dasani Active, Dasani Balance, Dasani Citrus, DasaniTangerine, Dasani AntiOx, Fanta Limón, Fanta Naranja, Fanta Naranja Zero, FantaUva, Fruitopia, Hugo, Kapo, Nestea, Nestea Light, Nordic Mist Ginger Ale,Nordic Mist Tónica, Powerade, Powerade Light, Quatro Guaraná, Quatro Light,Sprite, Sprite Zero and Vital.

 

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*Brazil:* Aquarius, Aquarius Fresh, Bavaria, Burn, Coca-Cola,Coca-Cola Light, Coca-Cola Light Lemon, Coca-Cola Zero, Crystal, Del Valle Frut, Del Valle Kapo, Del Valle Mais, Del Valle Mais Soja, DosEquis (XX), Fanta China, Fanta Mundo, Fanta Laranja, Fanta Laranja Zero, FantaUva, Fanta Uva Zero, Gladiator, Heineken, I9, Kaiser, Kaiser Summer, KapoChocolate (flavored milk), Kuat, Kuat Guaraná, Kuat com Laranja, Kuat Eko, KuatZero, Nestea Cha, Nestea Cha Light, Nestea Mate, Nestea Mate Light, SchweppesCitrus, Schweppes Citrus Light, Schweppes Club Soda, Schweppes Soda, SchweppesTónica, Schweppes Tónica Light, Sol, Sprite, Sprite Zero and Xingú.

 

*Argentina:* Aquarius, Cepita (4 flavors), Cepita Naranja Light, Coca-Cola,Coca-Cola Light, Coca-Cola Zero, Crush Lima-Limón, Crush Naranja, Dasani,Dasani Active, Dasani Balance, Dasani Citrus, Dasani Durazno, Fanta Limón,Fanta Naranja, Fanta Naranja Light, PoweradeNaranja, Powerade Manzana, Powerade Mountain Blast, Powerade Light, PoweradeLight Naranja, Quatro Light, Quatro Pomelo, Schweppes Citrus, Scweppes Tonica,Sprite and Sprite Zero.

 

Weproduce, market and distribute Coca-Cola soft drinks in our franchiseterritories through standard bottler agreements between our bottlersubsidiaries and the local subsidiary in each jurisdiction of TCCC(collectively, the “Bottler Agreements”). We consider the enhancement of ourrelationship with TCCC an integral part of our business strategy.

 

Weseek to enhance our business throughout the franchise territories by developingexisting markets, penetrating other soft drink, waters and juices markets,forming strategic alliances with retailers to increase consumer demand for ourproducts, increasing productivity, and by further internationalizing ouroperations.

 

**1. Soft Drink Business**

 

**Sales Overview**

 

Wemeasure sales volume in terms of unit cases, which we refer to as UCs. Unitcases contain 192 ounces of finished beverage product (24 eight-ounce servings)or 5.69 liters. The following table illustrates our historical sales volumesfor each of our territories:

** **

**Soft Drink Sales Volumes**

 
| ** ** | ** ** | **Year ended December 31,** | ** ** |
|------------|------------|----------------------------------|------------|
| ** ** | ** ** | **200****9**                     | ** ** | **200****8** | ** ** | **200****7** | ** ** |
| ** ** | ** ** | **(millions of UCs)**            | ** ** |
| Chile      |       | 128.0                            |       | 127.6 |   | 123.9 |   |
| Brazil     |       | 173.7                            |       | 163.5 |   | 164.9 |   |
| Argentina  |       | 117.9                            |       | 120.1 |   | 113.6 |   |

 

In2009, our Coca-Cola soft drinks business accounted for net sales of Ch$646,899million and operating income of Ch$117,841 million representing 87.1% and 90.6%of our consolidated net sales and operating income, respectively.

 

OurChilean soft drink operations accounted for net sales in 2009 of Ch$224,864million; the Brazilian soft drink operations for net sales of Ch$275,311million; and the Argentine soft drink operations for net sales of Ch$146,724million.

 

Thefollowing tables set forth, for the periods indicated, our net sales and volumeof Coca-Cola soft drinks sold in our franchise territories for the periodsindicated.

 
| ** **           | ** ** | **Year ended December 31,  2009** | ** ** |
|----------------------|------------|----------------------------------------|------------|
| ** **           | ** ** | **Chile**                              | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **           | ** ** | **MCh$**                               | ** ** | **MUCs** | ** ** | **MCh$** | ** ** | **MUCs** | ** ** | **MCh$** | ** ** | **MUCs** | ** ** |
| Colas                |       | 179,108                                |       | 102.5 |   | 233,957 |   | 144.3 |   | 110,876 |   | 90.8 |   |
| Flavored soft drinks |       | 45,756                                 |       | 25.5 |   | 41,354 |   | 29.4 |   | 35,848 |   | 27.1 |   |
| **Total**            | ** ** | **224,864**                            | ** ** | **128.0** | ** ** | **275,311** | ** ** | **173.7** | ** ** | **146,724** | ** ** | **117.9** | ** ** |

 

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| ** **           | ** ** | **Year ended December 31,  2008** | ** ** |
|----------------------|------------|----------------------------------------|------------|
| ** **           | ** ** | **Chile**                              | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **           | ** ** | **MCh$**                               | ** ** | **MUCs** | ** ** | **MCh$** | ** ** | **MUCs** | ** ** | **MCh$** | ** ** | **MUCs** | ** ** |
| Colas                |       | 176,449                                |       | 104,0 |   | 266,498 |   | 135.5 |   | 140,680 |   | 90.4 |   |
| Flavored soft drinks |       | 43,510                                 |       | 23.6 |   | 55,358 |   | 28.0 |   | 42,620 |   | 29.7 |   |
| **Total**            | ** ** | **219,959**                            | ** ** | **127.6** | ** ** | **321,856** | ** ** | **163.5** | ** ** | **183,300** | ** ** | **120.1** | ** ** |

 
| ** **           | ** ** | **Year ended December 31,  2007** | ** ** |
|----------------------|------------|----------------------------------------|------------|
| ** **           | ** ** | **Chile**                              | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **           | ** ** | **MCh$**                               | ** ** | **MUCs** | ** ** | **MCh$** | ** ** | **MUCs** | ** ** | **MCh$** | ** ** | **MUCs** | ** ** |
| Colas                |       | 175,794                                |       | 102.0 |   | 209,872 |   | 134.5 |   | 89,231 |   | 85.2 |   |
| Flavored soft drinks |       | 39,997                                 |       | 21.9 |   | 48,449 |   | 30.4 |   | 31,726 |   | 28.4 |   |
| **Total**            | ** ** | **215,791**                            | ** ** | **123.9** | ** ** | **258,321** | ** ** | **164.9** | ** ** | **120,957** | ** ** | **113.6** | ** ** |

 

InChile, Coca-Cola soft drinks are distributed in returnable and non-returnableglass and PET bottles and aluminum cans of various sizes. It is alsodistributed as Post-mix syrup, which is mixed with carbonated water in a dispenserat the point of sale, in stainless steel and bag-in-box containers. In Brazil,Coca-Cola soft drinks are distributed in returnable and non-returnable glass,in PET bottles of various sizes, in aluminum cans and also as post-mix syrup.In Argentina, Edasa produces and distributes Coca-Cola soft drinks inreturnable and non-returnable glass and PET bottles of various sizes, inaluminum cans and as post-mix syrup.  RegardingJuices, they are distributed in non-returnable glass and PET bottles,returnable glass bottles, in bi-laminated sachettes, cardboard Tetra Pakcontainers and bag-in-box as concentrated juice that is mixed with water at thepoint of sale. Waters are distributed in returnable glass bottles andnon-returnable PET bottles.

 

Thefollowing table sets forth, for the periods indicated, our sales of Coca-Colasoft drinks in Chile, Brazil and Argentina, by packaging type, measured as apercentage of total sales volume:

 

**Soft Drink Sales by Packaging Type**

 
| ** **     | ** ** | **Year Ended December 31,** | ** ** |
|----------------|------------|----------------------------------|------------|
| ** **     | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **     | ** ** | **Chile**                        | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **     | ** ** | **% Total  Mix**            | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** | **% Total  Mix** | ** ** |
|           |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Returnable     |       | 62.2                             |       | 13.9 |   | 50.1 |   | 61.0 |   | 14.3 |   | 48.8 |   | 61.0 |   | 13.7 |   | 48.3 |   |
| Non-returnable |       | 34.3                             |       | 83.4 |   | 49.2 |   | 35.1 |   | 82.7 |   | 50.5 |   | 34.9 |   | 83.5 |   | 51.0 |   |
| Post Mix       |       | 3.5                              |       | 2.7 |   | 0.7 |   | 3.9 |   | 2.9 |   | 0.7 |   | 4.1 |   | 2.8 |   | 0.7 |   |
| **Total**      | ** ** | **100.0**                        | ** ** | **100.0** | ** ** | **100.0** | ** ** | **100.0** | ** ** | **100.0** | ** ** | **100.0** | ** ** | **100.0** | ** ** | **100.0** | ** ** | **100.0** | ** ** |

 

**Customers and Distribution**

 

Asof December 31, 2009, we sold our products to approximately 46,244customers in Chile, 72,493 customers in Brazil, and 45,901 customers inArgentina. Although the mix varies significantly among the franchiseterritories, our distribution network generally relies on a combination ofCompany-owned trucks and independent distributors in each territory.

 

Thefollowing table sets forth, for the periods indicated, our sales of Coca-Colasoft drinks in Chile, Brazil and Argentina, by type of customer, measured as apercentage of total sales volume:

 

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**Soft Drink Sales by Type of Customer**

 
| ** **             | ** ** | **Year ended December 31,** | ** ** |
|------------------------|------------|----------------------------------|------------|
| ** **             | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **             | ** ** | **Chile**                        | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **             | ** ** | **(%)**                          | ** ** |
|                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mom & Pops    |       | 57.6                             |       | 24.2 |   | 49.7 |   | 56.4 |   | 20.9 |   | 49.3 |   | 55.5 |   | 20.1 |   | 48.5 |   |
| Supermarkets           |       | 21.0                             |       | 29.1 |   | 16.3 |   | 21.0 |   | 27.8 |   | 15.7 |   | 21.6 |   | 28.2 |   | 15.3 |   |
| On Premise             |       | 13.4                             |       | 23.3 |   | 7.1 |   | 14.1 |   | 29.8 |   | 7.0 |   | 14.3 |   | 31.2 |   | 6.8 |   |
| Wholesale distributors |       | 8.0                              |       | 23.4 |   | 26.9 |   | 8.5 |   | 21.5 |   | 28 |   | 8.6 |   | 20.5 |   | 29.4 |   |
| Total                  |       | 100                              |       | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   |

 

*Chile*. As of December 31,2009, Andina’s sales force in Chile consisted of 202 salespeople (147 workershired indefinitely and 55 hired on a fixed term basis) who call on mostcustomers on average 1.8 times per week. For sales to major supermarkets, weemploy 5 key account managers, 12 field supervisors and 535 promoters (479 fulltime and 56 part time) who are on-site supervisors who handle our products,monitor displays and track the pricing and marketing strategies of ourcompetitors. Account executives are also assigned to major fast food outlets towork with the customer to develop sales on a consistent basis. Our distributionsystem for our soft drink products consisted of a group of 18 exclusivedistributors, which are independent businesses that collectively deployapproximately 350 trucks (30 of which are company property), depending onseasonal demand. The 18 distributors collectively service all of our Chileancustomers. In most cases, the distributor collects payment from the customer incash or check. Where applicable, the driver also either collects emptyreturnable glass or PET bottles of the same type and quantity as the bottlesbeing delivered, or collects cash deposits for the net returnable bottlesdelivered. This task is particularly significant in the Chilean territory wherereturnable containers accounted for approximately 62% of total soft drinksvolume in 2009. Certain important customers (such as supermarkets), maintainaccounts receivables with us, which are settled on average every 44 days afterinvoices are issued. On average, accounts receivable from all clients areliquidated on a 22-day term.

 

*Chilean Law 20,123(regulates Subcontracting employment) beginning January 16, 2007.*The most significant aspects are the following: (i) amendmenton the responsibility that the main company formerly had with the workers ofits contractors. The main company shared responsibility regarding labor andsocial security obligations that can affect contractors and subcontractorsfavoring the workers of the contractors and subcontractors, expressly includingthe corresponding legal indemnities pursuant to termination of the laborrelation of the workers assigned to the services. Nevertheless, thisresponsibility could be supplementary if the main company exerts informationand retention rights in accordance to the law; (ii)  an obligation isestablished for the main company in the sense of adopting necessary measures toeffectively protect the life and health of all workers who perform duties forthe company, at any of the company’s locations; (iii) creation of theconcept “temporary services companies” (EST for its meaning in Spanish-*Empresa de Servicios Transitorios*) that are solely andexclusively dedicated to providing workers to third parties as temporaryworkers for other companies; as well as selection, qualification and formationof workers and other activities within the scope of human resources; and (iv) jurisdictionalfaculties are granted to *la Direccion del Trabajo*by which resolutions of this organism could be appealed before the respectiveCourt of Appeals. During the 2009, Andina implemented different actions toassure a proactive fulfillment of the new law, among other actions, the Companyincorporated a group of contractor workers, as company employees, updatingservice agreements and implementing a Labor Audit system with contractorcompanies. A Contractor Regulation was established along with an internalprocedure for the hiring of contractors, which must be fulfilled permanently,and must include a process of pre-qualification and a compliance assessment.

 

*Brazil*. As of December 31,2009, Andina Brazil’ sales force in Brazil consisted of an average of 367salespeople, divided into three major groups responsible for: (i) sales tokey accounts and fast food chains (who purchase soft drinks in post-mixdispensers, in cans and bottles), (ii) sales to supermarkets (consisting ofbottle and can sales) and (iii) all other traditional customers. Each ofthese three groups also manages sales of the other beverages (beer, water,juice, energy drinks and ready-to-drink tea) distributed by Andina Brazil. InBrazil, we generally distribute Coca-Cola soft drinks through a distributionsystem that includes: (i) trucks operated by independent distributorspursuant to exclusive distribution arrangements with us and (ii) trucksoperated by independent transport companies on a non-exclusive basis. In 2009,11% were distributed by exclusive distributors, and 89% by independenttransport companies. Distribution of all of Andina Brazil’ beverages takesplace from distribution centers and production facilities. High volumecustomers such as supermarkets are serviced exclusively from the distributioncenters located at Andina Brazil’ production facilities. In 2009, approximately12%

 

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ofAndina Brazil’ soft drink sales were paid for in cash at the time of delivery,16% were paid by check to be cashed between one and ten days after delivery and72% were paid between 10 and 45 days after delivery by invoice.

 

*Argentina*. As of December 31,2009, our sales force in Argentina consisted of 403 employees, grouped insalespeople, merchandisers, and Contact Center personnel. In 2009, 73% of Edasa’sCoca-Cola soft drinks were distributed by direct distribution (trucking) and 27%by wholesale distribution. All of the direct distribution is done by a group ofindependent transport companies (each with three or more trucks). In 2009,approximately 80% of Edasa’s soft drink sales were paid for in cash and 20%were credit sales.

 

**Competition**

 

Weface intense competition throughout the franchise territories principally frombottlers of competing soft drink brands. See “Item 3. Key Information — RiskFactors — Risks Related to our Company — Our business is highly competitive andsubject to price competition which may adversely affect our net profits andmargins.”

 

*Chile.*The soft drink segment ofthe Chilean beverage industry is highly competitive. The most important areasof competition are product image, pricing, advertising, ability to deliverproduct in popular bottle sizes, distribution capacity, and the amount ofreturnable bottles held by retailers or by consumers. Returnable bottles can beexchanged at the time of new purchases in lieu of paying a bottle deposit,thereby decreasing the purchase price. Our main competitor in the Chileanfranchise territory is Embotelladora Chilenas Unidas or ECUSA, a subsidiary ofCompañía Cervecerías Unidas S.A. or CCU, the major brewer in Chile. ECUSAproduces and distributes Pepsi-Cola products and its own brands (soft drinksand bottled water).

 

*Brazil.*The soft drink segment ofthe Brazilian beverage industry is highly competitive. The most important areasof competition are product image, pricing, advertising and distributioncapacity (including the number and location of sales outlets). According toA.C. Nielsen, our main soft drink competitor in the Brazilian territory isAmerican Beverage Company or Ambev, the largest beer producer and distributorin Brazil and also produces soft drinks, including Pepsi-Cola products.

 

*Argentina.*The soft drink segment ofthe Argentine beverage industry is highly competitive. The most important areasof competition are product image, pricing, advertising, ability to producebottles in popular sizes and distribution capacity. The greatest competitor isAmbev, the Latin American unit of the largest brewery group of the world(Inbev) that produces and commercializes Pepsi-Cola products. As far asB-brands, the most significant are: Talca, Pritty and Naranpol representingover 75% of the volume for B-brands. Productora Alimentaria S.A. is dedicatedto the production, commercialization, and distribution of juices, soft drinks,appetizers and mass consumption products; and among others it alsocommercializes, the Naranpol brand with a strong market presence in the coastof Argentina. Pritty S.A., a company established in the city of Córdoba, isdedicated to the production and sale of beverages without alcohol; itcommercializes Pritty, Doble Cola, Saldán, Switty, Rafting, Hook and Magna.O.E.S.A., a preceding Pepsi bottler in the province of Mendoza, produces andcommercializes soft drinks and soda water under the brand Talca.

 

Basedon reports by A.C. Nielsen, we estimate that in 2009, our average soft drinkmarket share within our franchise territories reached 68.5%, 57.5%, and 53.0%for Chile, Brazil, and Argentina, respectively.

 

Thefollowing table presents the market share of our main competitors in Chile,Brazil and Argentina for the periods indicated:

 

**Market Share**

** **
| ** **                    | ** ** | **Year ended December 31,** | ** ** |
|-------------------------------|------------|----------------------------------|------------|
| ** **                    | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                    | ** ** | **Chile**                        | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **                    | ** ** | **(%)**                          | ** ** |
| Coca-Cola soft drinks         |       | 69                               |       | 57 |   | 53 |   | 67 |   | 57 |   | 51 |   | 67 |   | 57 |   | 51 |   |
| ECUSA soft drinks             |       | 20                               |       | — |   | — |   | 21 |   | — |   | — |   | 20 |   | — |   | — |   |
| Pepsi-Cola and 7 Up  products |       | 3                                |       | 5 |   | 22 |   | 3 |   | 5 |   | 22 |   | 3 |   | 6 |   | 20 |   |
| Pritty products               |       | —                           |       | — |   | 9 |   | — |   | — |   | 9 |   | — |   | — |   | 9 |   |
| Antarctica products           |       | —                           |       | 10 |   | — |   | — |   | 10 |   | — |   | — |   | 10 |   | — |   |
| Brahma products               |       | —                           |       | 2 |   | — |   | — |   | 1 |   | — |   | — |   | 1 |   | — |   |
| Other                         |       | 8                                |       | 26 |   | 16 |   | 9 |   | 27 |   | 18 |   | 10 |   | 26 |   | 20 |   |
| Total                         |       | 100                              |       | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   | 100 |   |

 

Source:A.C. Nielsen

 

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**Seasonality**

 

Eachof our lines of business is seasonal. Most of our beverage products have theirhighest sales volumes during the South American summer (October throughMarch), with the exception of nectar products, which have a higher sales volumeduring the South American winter (April through September). Our Chileanand Argentine operations generally experience higher levels of seasonal pricefluctuations than our Brazilian operations.

 

**Raw Materials and Supplies(1)**

 

Theprincipal raw materials used in the production of Coca-Cola soft drinks areconcentrate, sweetener, water and carbon dioxide gas. Production also requiresglass and plastic bottles, bottle tops and labels. Water used in soft drinkproduction is treated for impurities and adjusted for taste reasons. All rawmaterials, especially water, are subjected to continuous quality control.

 

*Chile—Raw Materials.* We purchase concentrate atprices established by TCCC. We mainly purchase sugar from Industria AzucareraNacional S.A., IANSA, the only producer of sugar in Chile, although we maypurchase sugar in the international market when prices are favorable, and havedone so on occasion. Chilean sugar prices are subject to a price bandestablished by the Chilean government on an annual basis. We obtain carbondioxide gas from AGA Chile S.A.

 

Andina’saffiliate Envases CMF, produces returnable PET bottles and non-returnable PETpre-forms which are blown at our San Joaquín plant. We purchase glass bottlesprincipally from Cristalerías de Chile S.A. and Cristalerías Toro S.A.I.C.  Bottle caps are purchased from ClosureSystems International, Alucaps Mexicana S.A. de C.V., Inyecal S.A. andother suppliers.

 

During2009 74% of variable cost of sales for soft drinks produced by Andinacorresponded to main raw materials. The cost of each raw material withinthe total of main raw materials is the following: concentrate represents 61%;sugar and artificial sweeteners 24%; non-returnable bottles 10%; bottle caps 4%and carbon dioxide 1%. Water does not constitute an important cost as rawmaterial. Additionally, the cost of finished products purchased from thirdparties is included within the cost of sales of soft drinks. These costsrepresent 24% of the total costs of sales of soft drinks and correspond to cansand some PET bottles.

 

*Brazil - Raw Materials.* Andina Brazilpurchases concentrate in the city of Manaus at prices established by TCCC.Manaus has been designated as a duty-free development zone by the Braziliangovernment. Andina Brazil purchases sugar from Brazilian suppliers, inparticular from Copersucar Ltda. It purchases carbon dioxide gas mainly fromCompanhia White Martins Gases S.A and Linde Gases Ltda.  PET pre-forms from Amcor Ltd., Braspla Ltda.,and from Edasa’s Packaging Division. Glass bottles are purchased from Owens-Illinois and metal bottle capsfrom Aro S.A. Plastic bottle caps are purchased from Closure SystemsInternational and Rexam.  Andina Brazilpurchases water from the municipality of Rio de Janeiro.

 

During2009, 98% of variable cost of sales for soft drinks produced by AndinaBrazil corresponded to main raw materials. The cost of each raw materialwithin the total of main raw materials is the following: concentrate (includingjuice used for some flavors) represents 33%; sugar and artificial sweeteners19.%; non-returnable bottles 23%; cans 17%, bottle caps 4% and carbon dioxide2%. Additionally, the cost of finished products purchased from thirdparties is included within the cost of sales of soft drinks. These costsrepresent 2% of the total costs of sales of soft drinks and correspond to someformats of cans, PET and non returnable glass bottles.

 

*Argentina - Raw Materials.* Edasapurchases concentrate at prices established by The Coca-Cola Company. Edasapurchases sugar mainly from Ing. y Refinería San Martín de Tabacal S.A., Cía.Azucarera Concepción S.A., and Atanor S.C.A.; fructose from Productos de Maíz S.A. and Glucovil S.A., and carbondioxide gas from Praxair S.A. and Air Liquide S.A. Edasa producesnon-returnable and returnable PET bottles through its own packaging division, andglass bottles from Cattorini Hermanos S.A. ,Cristalerías de Chile S.A. andCristalerías Toro de Chile, plastic caps from Alusud S.A. and InyecalS.A.,  and metal caps from MetalgráficaCearense S.A. and Aro S.A. in Brazil. Regarding water supply for the productionof

 

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*(1) For detailed information please visit our website www.embotelladoraandina.com*

 

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softdrink, Edasa owns water wells and pays a fee to the Dirección Provincial deAguas Sanitarias.  Edasa also buysstretch wrap from Manuli Packaging Argentina, Plastiandino S.A., SanlufilmS.A., Atiles S.A., IPESA Ind. Plast. S.A. and Rio Chico S.A., and carton fromCartocor S.A. and Papeltécica S.A.

 

During2009, 70% of variable cost of sales for soft drinks produced by Edasacorresponded to main raw materials. The cost of each raw material as apercentage of the total cost of main raw materials is the following:concentrate 56%; sugar and artificial sweeteners 21%; non-returnable bottles16%; bottle caps 4% and carbon dioxide 1%, and the remaining 2% correspond topackaging. Water does not represent a significant cost as raw material.  Additionally, the cost of finished productspurchased from third parties is included within the cost of sales of softdrinks. These costs represent 2% of the total costs of sales of softdrinks and correspond to can formats, juices and some bottled water products.

 

*PET Packaging - Raw Materials.* The principalraw material required for production of PET bottles is PET resin, during 2009this raw material was from DAK Américas de Argentina S.A. In 2009, the EdasaPackaging Division’s costs for PET resin accounted for 90.1% of the totalvariable cost of its sales of PET bottles and preforms.

 

**Marketing**

 

Weand TCCC jointly promote and market Coca-Cola soft drinks in our franchiseterritories, in accordance with the terms of our respective Bottler Agreements.During 2009, we paid approximately 50% of the advertising and promotionalexpenses incurred by TCCC in our franchise territories. Nearly all mediaadvertising and promotional materials for Coca-Cola soft drinks are producedand distributed by TCCC . See “Item 4. Information on the Company —BottlerAgreements.”

 

*Channel Marketing*. In order to provide moredynamic and specialized marketing of our products, our strategy is tosegment our market and develop targeted efforts for each segment ordistribution channel. Our principal channels are small retailers, “on-premise”consumption such as restaurants and bars, supermarkets and third partydistributors. Presence in these channels entails a comprehensive anddetailed analysis of the purchasing patterns and preferences of variousgroups of soft drink consumers in each type of location or distributionchannel. In response to this analysis, we seek to tailor our product,price, packaging and distribution strategies to meet the particular needs ofand exploit the potential of each channel.

 

Webelieve that the implementation of our channel marketing strategy also enablesus to respond to competitive initiatives with channel-specific responsesas opposed to market-wide responses. This focused responsecapability isolates the effects of competitive pressure in a specificchannel, thereby avoiding costlier market-wide responses. Our channelmarketing activities are facilitated by our management information systems. Wehave invested significantly in creating such systems, including providinghand-held computer and data gathering equipment to support the gathering ofproduct, consumer and delivery information required to implement ourchannel marketing strategies effectively for most of our sales routes in Chile,Brazil and Argentina. We will continue investing to increase pre-salecoverage in our territories.

 

Ourconsolidated total marketing and advertising expenditures in 2009 wereCh$28,114 million.

 

**Retailer Incentive Programs**

 

Wehave implemented incentive programs to provide retailers with coolers forthe display and cooling of soft drink products and of point-of-saledisplay materials. We seek, in particular, to increase the distribution ofcoolers among retailers to magnify the visibility and consumption of ourproducts and to ensure that they are sold at the proper temperature. Salespromotions include sponsorship of community activities, sporting, culturaland social events, and consumer sales promotions such as contests,sweepstakes and product giveaways.

 

**Advertising**

 

Weadvertise in all major communications media. We focus our advertising effortson increasing brand recognition by consumers and improving our customerrelations. National advertising campaigns are designed and proposed byTCCC ‘s local affiliates, with our input at the local or regional level.

 

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**2.  Other Beverages**

 

*Chile*. In addition to Coca-Colasoft drinks, through Vital S.A., we produce and sell juices, other fruitflavored beverages, ready-to-drink tea and sports drinks, and through VitalAguas S.A. we produce and sell mineral water and purified water. Juices areproduced and sold under the brands Andina Frut (fruit juices), Andina Nectar(fruit nectars), Kapo (fantasy drink) Nestea (ready-to-drink tea), Fruitopia(concentrate beverage with fruit juice) and Powerade (isotonic).Vital (mineralwater) in the following versions: with gas, without gas and Soft Gas;Dasani (purified water) in the following versions: with gas, without gas,and flavored; Benedictino (purified water) in the following versions:  with gas and without gas; and Aquarius(flavored water). Additionally, we distribute HUGO (dairy product with fruitjuice).

 

*Brazil*. We distribute beer underthe Kaiser, Bavaria, Heineken, Sol, Xingu and Dos Equis (XX) labels. Wealso distribute water under the labels Aquarius and Crystal and sell anddistribute ready-to-drink juices under the labels Del Valle Frut, Del ValleMais, Del Valle Kapo, milk and cocoa-based beverages under the Kapo Chocolatebrand, energy drinks under the brand names Burn and Gladiator, isotonics underi9 brand name and Nestea ready-to-drink tea.

 

*Argentina*. We produce and distributeready-to-drink juices under the Cepita brand name. We also produce and sellwater under the brands Dasani (purified water)and Aquarius (flavored water), aswell as Powerade in the isotonic segment..

 

**Waters and Juices in Chile**

 

*Sales*. In 2009, netsales of waters and juices in Chile represented 6.5% of our consolidated netsales. On a consolidated basis, sales of waters and juices in Chile wereCh$47,480 million, reflecting additional revenue we received from Vital’s salesto third parties together with Andina’s operating margin realized from the saleand distribution of these products.

 

Thefollowing table sets forth for the periods indicated, Vital’s net sales andsales by volume of unit cases of waters and juices:

** **

**Waters andJuices Sales by Net Sales and Volume(1)**

** **
| ** **                                  | ** ** | **Year-ended December 31,**                                                                          | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **2009**                                                                                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                  | ** ** | **(in millions of constant Ch$ as  of December 31, 2009, and millions of UCs, as  applicable)** | ** ** |
| ** **                                  | ** ** | **Ch$**                                                                                                   | ** ** | **UCs** | ** ** | **Ch$** | ** ** | **UCs** | ** ** | **Ch$** | ** ** | **UCs** | ** ** |
| Andina Frut and Andina  Néctar         |       | 21,741                                                                                                    |       | 12.0 |   | 20,618 |   | 11.4 |   | 19,605 |   | 10.5 |   |
| Kapo                                        |       | 4,685                                                                                                     |       | 3.3 |   | 4,577 |   | 3.4 |   | 4,234 |   | 3.2 |   |
| Andina HI-C                                 |       | —                                                                                                    |       | — |   | — |   | — |   | 35 |   | — |   |
| Powerade                                    |       | 1,533                                                                                                     |       | 0.6 |   | 1,164 |   | 0.4 |   | 1,001 |   | 0.4 |   |
| Nestea                                      |       | 411                                                                                                       |       | 0.3 |   | 371 |   | 0.3 |   | 335 |   | 0.1 |   |
| Fruitopia                                   |       | 372                                                                                                       |       | 0.1 |   | — |   | — |   | — |   | — |   |
| Dasani (purified water and  flavored water) |       | 827                                                                                                       |       | 0.8 |   | 1,415 |   | 0.9 |   | 2,425 |   | 1.3 |   |
| Benedictino (purified  water)               |       | 1,451                                                                                                     |       | 2.5 |   | 1,207 |   | 1.2 |   | — |   | — |   |
| Vital (mineral water)                       |       | 7,545                                                                                                     |       | 11.5 |   | 7,938 |   | 5.6 |   | 7,704 |   | 5.0 |   |
| **Total(2)**                                | ** ** | **38,565**                                                                                                | ** ** | **31.0** | ** ** | **37,290** | ** ** | **23.2** | ** ** | **35,339** | ** ** | **20.5** | ** ** |

 

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*(1)Reflectsthe sale of Vital and Vital Aguas to bottlers of The Coca-Cola Company.*

*(2)Includes sales to related companies which are eliminated uponconsolidation.*

 

*Marketing.* Marketing and promotionalprograms, including television, radio and print advertising, point-of-saleadvertising, sales promotions and entertainment are developed by TCCC for allVital and Vital Aguas’ products.

 

*Customers and Distribution*. Juices andwaters throughout Chile are distributed by means of distribution agreementsbetween us and two other Coca-Cola bottlers. In 2009, Andina distributedapproximately 56% of Vital’s products, and the other two Coca-Cola bottlers inChile distributed an aggregate of 44%. Each Coca-Cola bottler in Chiledistributes Vital and Vital Aguas products in its respective franchiseterritory. Under Vital and Vital Aguas’ distribution agreements, each bottlerhas the exclusive right to distribute waters and juices in its territory andeach agrees not to distribute competing products.

 

Ourmanagement believes that our distribution arrangements for waters and juicesprovide an effective means of distributing those products throughout Chileusing the extensive distribution system of the Coca-Cola bottlers. We have agood working relationship with the Coca-Cola bottlers that distribute watersand juices. If any Coca-Cola bottler were to

 

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ceasedistribution, our management believes it could arrange alternative distributionarrangements, but the transition to the new arrangements could involvesignificant delays in distributing products and would involve additional costsand an initial reduction in sales.

 

*Competition*. Vital Aguas’ principalcompetitor regarding water is CCU with the Cachantún brand.   Additionally there are low priced brands(B-brands) in the water segment in Chile.  Vital S.A.’s principal competitors regarding juices are, Watt’s-CCU,Corpora Tres Montes and three of the leading dairy producers in Chile: SoproleS.A., Nestlé Chile S.A. and Loncoleche S.A., who is also a subsidiary of Watt’sS.A. During 2006, the largest Chilean brewery CCU acquires from Watts S.A. a50% ownership interest of the juice brands in Chile, creating a joint venturefor the management of this business area. The Chilean market for fruit-flavoredbeverages and waters also includes low-cost, lower-quality fruit juiceconcentrates and artificially flavored powdered beverage mixes. We do notconsider these products to compete with our waters and juices business becausewe believe that these products are of lower quality and value.

 

Basedon reports by A.C. Nielsen, we estimate that in 2009, our market share withinour Chilean franchise territories reached 35.1% for juices, 33.0% for sportsdrinks, 14.3% for energy drinks, 49.8% for ready to drink tea flavored andfruit flavored beverages and 32.6% for water.

 

*Raw material for Juices*. The principalraw materials used by Vital S.A. in the production of juices and as apercentage of total raw material costs, are sweeteners 12.4%, fruit pulp andjuices 12.4%, flavors, aromas and citric acid 17.4%, containers 26.2% andwrapping material 5.2%, all of which during 2009 accounted for 80.3% of totalcosts for sales of juice, including packaging.

 

*Raw materials for Waters:* The principalraw materials used by Vital Aguas S.A. in the production of mineral water andpurified unflavored and purified flavored water and as a percentage of totalraw material costs are: Non returnable PET packaging 43.4%, mineral water,flavor, aromas, sweeteners and citric acid 25.7%, packaging material 4.8%, caps5.0% and carbonation 0.9%, all of which during 2009 accounted for 83.8% oftotal costs for sales of water, including packaging.

 

**Beer, Juices and Waters in Brazil**

 

*Sales*. In 2009, net sales ofbeer, juices, waters, tea based beverages, isotonics and energy drinks inBrazil were Ch$36,590 million, representing 4.9% of our consolidated net sales.

 

AndinaBrazil uses its distribution system to distribute beer in the Brazilianterritory. Andina Brazil started distributing beer in the 1980s as a result ofthe acquisition of Kaiser by a consortium of Coca-Cola bottlers (includingAndina Brazil) in Brazil. In March 2002, the Canadian brewing companyMolson Inc. acquired Cervejarias Kaiser S.A. (“Kaiser”). In 2006, Femsaacquired from Molson the controlling ownership interest over Kaiser.   Andina Brazil buys beer from Femsa at aprice determined by Femsa and sells it to its customers with a fixed margin. Inthe case of certain discount sales that have been approved by Femsa, Femsashares between 50% and 100% of the cost of such discounts. In 2009, AndinaBrazil’s net sales of beer were Ch$13,819 million, of which Bavaria brand beeraccounted for 52.5%, Sol for 16.6%, Kaiser for 15.4%, Heineken for 13.0%, Xingufor 2.2%, and Dos Equis (XX)  for 0.3% of net sales.

 

*Competition*. In the beer sector, AndinaBrazil’s main competitor is Ambev that during 2009 had a very dominant positionin the Brazilian market.

 

*The Distribution Agreements. *TCCC and the BrazilianAssociation of Coca-Cola Manufacturers entered into an agreement regardingthe distribution through the Coca-Cola System of beer produced andimported by Femsa. The agreements were signed May 30, 2003, and arerenewable for a period of 20 years.

 

AndinaBrazil is not allowed to produce, bottle, sell or obtain any interest in anybottled or tap beer under any other label or in any bottle or packaging thatcould be confused with brand beers, except as may be mutually agreed in writingbetween Andina Brazil and Femsa.

 

Underthe terms of the distribution agreement, Femsa assumes all responsibility forplanning and managing advertising, marketing and promotional activities relatedto beer.  Andina Brazil, however, is freeto undertake marketing or promotional activities with Femsa ́s prior approval.The parties have agreed to assume joint responsibility for the costs of certainpromotional activities (radio or television) and for certain outdoor eventswhich take place in the Rio de Janeiro region.

 

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AndinaBrazil has agreed to devote at least 3% of its sales net of taxes of Femsaproducts to such promotional activities or events.

 

AndinaBrazil is prohibited from assigning, transferring, or otherwise encumbering theFemsa distribution agreement or any interest therein for the benefit of thirdparties without prior written consent from Femsa. Femsa may terminate the Femsadistribution agreement immediately in the event that Andina Brazil(i) declares bankruptcy, is made a party to bankruptcy proceedings or isplaced under judicial administration, (ii) is dissolved or liquidated orits assets are nationalized, expropriated, attached or intervened,(iii) undergoes a change of business or of control, (iv) ceases to bea franchisee of TCCC or (v) causes a material breach of the Femsadistribution agreement. In addition, Femsa may terminate the Femsa distributionagreement one year after delivery of notice that Andina Brazil is not complyingwith the terms thereof. Andina Brazil may terminate the Femsa distributionagreement in the event of a material breach thereof by Femsa.

 

**3. PET Packaging**

 

**Overview and Background**

 

Weproduce PET bottles in both returnable and non-returnable formats. As areturnable packaging material, PET has advantages compared to glass because itis lightweight, difficult to break, transparent and easily recyclable. Onaverage, returnable PET bottles can be used up to 12 times. Non-returnable PETbottles also are produced in various sizes and are used by a variety of softdrink producers and, in Chile, by producers of edible oil products, wine andpersonal hygiene products In 2009, the Edasa Packaging Division was one of thelargest manufacturers of PET products in Argentina. In 2009 Andina Brazilpurchased 90% of its PET preforms from Brasalpla, 10% from Amcor.

 

*Sales*. In 2009, the EdasaPackaging Division had net sales of Ch$18,811 million with sales to Edasa SoftDrinks Division amounting to Ch$10,038 million and to Rio de Janeiro Refrescosamounted to Ch$1,237 million. The Edasa Packaging Division also sold PETbottles to third parties accounting for approximately Ch$7,536 million.

 

*Competition*. We are suppliers ofreturnable and non returnable PET bottles for Coca-Cola bottlers in Argentinaand Chile. According to the pre-existing agreements between TCCC and the otherCoca-Cola bottlers within South America, we must obtain the consent andassistance of TCCC to expand our sales of returnable PET bottles to saidbottlers.

 

In Chile, we do not have anyprincipal competitors in the non—returnable PET bottles market for oils, winesand personal hygiene. There are a few producers of non returnable PET bottlesin Chile who are significantly smaller than CMF. Plasco S.A., the secondChilean manufacturer of non returnable PET bottles, does not compete with usbecause it is the exclusive supplier of PET bottles for ECUSA. (The ChileanPepsi bottler).

 

InArgentina, we compete principally with Alpla S.A. and Amcor. The EdasaPackaging Division is the supplier of returnable PET bottles to all Coca-Colabottlers in Argentina.

 

Variousbottle manufacturers produce returnable PET bottles in Chile and other SouthAmerican countries for competitors of The Coca-Cola Company, and numerousmanufacturers in various countries produce non-returnable PET bottles forbeverages and other products.

 

**4. Patents and Licenses**

 

TheCompany has entered into Bottler Agreements with TCCC by which it has thelicense to produce and distribute Coca-Cola brand products within its operatingfranchise territories in Chile, Brazil and Argentina. The Company’s operationsare highly dependent on maintaining and renewing the Bottler Agreements whichprovide for the production and distribution of Coca-Cola brand products.

 

**Bottler Agreements**

 

TheBottler Agreements are international standard contracts TCCC enters into withbottlers outside the United States for the sale of concentrates and beveragebasis for certain Coca-Cola soft drinks and non-soft drink beverages.

 

Bottler Agreements are renewable upon request by thebottler and at the sole discretion of TCCC. We cannot assure you that theBottler Agreements will be renewed upon their expiration, and even if they arerenewed.

 

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TheBottler Agreements provide that we will purchase our entire requirement ofconcentrates and beverage basis for Coca-Cola soft drinks and other Coca-Colabeverages from The Coca-Cola Company and other authorized suppliers. Althoughunder the Bottler Agreements TCCC, in its sole discretion, may set the price ofconcentrates and beverage basis, among other terms, we set the price ofproducts sold to retailers at our discretion, subject only to certain pricerestraints.

 

Weare the sole producer of Coca-Cola soft drinks and other Coca-Cola beverages inour franchise territories. Although this right is not exclusive, TCCC has neverauthorized any other entity to produce or distribute Coca-Cola soft drinks orother Coca-Cola beverages in such territories, although we cannot assure youthat in the future it will not do so. In the case of post-mix soft drinks, theBottler Agreements explicitly establish such non-exclusive rights.

 

TheBottler Agreements include an acknowledgment by us that TCCC is the sole ownerof the trademarks that identify the Coca-Cola soft drinks and other Coca-Colabeverages and of any secret formula used in concentrates.

 

Alldistribution must be in authorized containers. TCCC has the right to approve,at its sole discretion, any and all kinds of packages and containers forbeverages, including their size, shape and any of their attributes. TCCC hasthe authority at its sole discretion to redesign or discontinue any package ofany of the Coca-Cola products, subject to certain limitations, so long asCoca-Cola soft drinks and other Coca-Cola beverages are not all discontinued atthe same time. We are prohibited from producing or handling any other beverageproducts, other than those of TCCC or other products or packages that wouldimitate, infringe or cause confusion with the products, trade dress, containersor trademarks of TCCC, or from acquiring or holding an interest in a party thatengages in such activities. The Bottler Agreements also impose restrictionsconcerning the use of certain trademarks, authorized containers, packaging andlabeling of TCCC and prohibit bottlers from distributing Coca-Cola soft drinksor other Coca-Cola beverages outside their designated territories.

 

TheBottler Agreements require us to maintain adequate production and distributionfacilities; inventories of bottles, caps, boxes, cartons and other exteriorpackaging or materials; to undertake adequate quality control measuresprescribed by TCCC; to develop, stimulate, and fully satisfy the demand forCoca-Cola soft drinks and other Coca-Cola beverages and to use all approvedmeans, and spend such funds on advertising and other forms of marketing, as maybe reasonably required to meet that objective; and to maintain such soundfinancial capacity as may be reasonably necessary to assure performance by usand our affiliates of our obligations to TCCC. All Bottler Agreements requireus annually to submit our business plans for such franchise territories toTCCC, including without limitation, marketing, management and promotional andadvertising plans for the following year.

 

TCCChas no obligation to contribute to our expenditures derived from advertisingand marketing, but it may, at its discretion, contribute to such expendituresand undertake independent advertising and marketing activities, as well ascooperative advertising and sales promotion that would require our cooperationand support. In each of the franchise territories, TCCC has been contributingapproximately 50% of advertising and marketing expenses, but no assurances canbe given that equivalent contributions will be made in the future.

 

Eachbottler is prohibited from, directly or indirectly, assigning, transferring orpledging its Bottler Agreement, or any interest therein, whether voluntarily,involuntarily or by operation of law, without the consent of TCCC, and eachBottler Agreement is subject to termination by TCCC in the event of default byus. Moreover, the bottler may not undergo a material change of ownership orcontrol without the consent of TCCC.

 

TCCCmay terminate a Bottler Agreement immediately, by written notice to the bottler,in the event that, inter alia, (i) the bottler suspends payments tocreditors, declares bankruptcy, is declared bankrupt, is expropriated ornationalized, is liquidated, dissolved, changes its legal structure, or pledgesor mortgages its assets; (ii) the bottler does not comply withinstructions and standards established by TCCC relating to the production ofits authorized soft drink products; (iii) the bottler ceases to becontrolled by its controlling shareholders; or (iv) the terms of theBottler Agreement come to violate applicable law.

 

Eitherparty to any Bottler Agreement may, with 60 days’ notice thereof to the otherparty, terminate the Bottler Agreement in the event of non-compliance by theother party with the terms thereof so long as the party in non-compliance hasnot remedied such non-compliance during this period. In addition, if a bottlerdoes not wish to pay the required price for concentrate for any Coca-Colaproducts, it must notify TCCC within 30 days of receipt of The Coca-Cola Company’snew prices. In the case of any Coca-Cola soft drink or other Coca-Colabeverages other than Coca-Cola concentrate, the franchise regarding suchproduct shall be deemed automatically canceled three months after TCCC ‘sreceipt of the bottler’s notice of refusal. In the case of Coca-Colaconcentrate, the Bottler Agreements shall be deemed terminated three monthsafter TCCC ́s

 

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receiptof the bottler’s notice of refusal. TCCC may also terminate the BottlerAgreements if the bottler or any individual or legal entity that controls, ownsa majority share in or directly or indirectly influences the management of thebottler, engages in the production of any non-Coca-Cola beverage, whetherthrough direct ownership of such operations or through control oradministration thereof, provided that, upon request, the bottler shall be givensix months to remedy such situation.

 

*Chile Bottler Agreements*:  (i)the Bottler Agreement entered into betweenAndina and TCCC celebrated on January 1, 2008 for a 5-year term until December31, 2012; (ii) on December 22, 2005, Vital S.A. and The Coca-Cola Companyentered into a Juice Bottler Agreement by which The Coca-Cola Companyauthorized Vital S.A. to produce, prepare and bottle in packaging previouslyapproved by TCCC the following brands: Andina Frut Andina Nectar, Kapo, Nestea,Fruitopia and Powerade.  The Agreementwill expire on December 31, 2015, and sets forth that Andina, and the other twoChilean Coca-Cola bottlers, Embonor and Polar, have the right to purchaseproducts from Vital S.A. as well as produce, package, and sell these productsat their respective production facilities; (iii) on December 22, 2005, VitalAguas S.A. and TCCC entered into a Water Manufacturing and Packaging Agreementfor the preparation and packaging of beverages that will be in effect untilDecember 31, 2015, regarding the brands Vital, Chanqueahue, Vital deChanqueahue, Benedictino, Dasani and Aquarius.

 

*Brazil-Bottler Agreement*: the Bottler Agreementbetween Andina Brazil and TCCC will expire on October 4, 2013.

 

*Argentina —Bottler Agreement: (i)* the Bottler Agreement,between Edasa and TCCCwhich will expire in February of 2012; and (ii) withrespect to the Argentine territory the Juice and Water Bottler Agreement iscurrently being negotiated.

 

**PET Agreements**

 

OnJune 29, 2001, we and Cristalerías de Chile S.A. signed a series ofcontracts forming a joint venture for the development of a PET productionfacility in Chile through the formation of Envases CMF S.A. We contributed theassets necessary to further the development of the joint venture. Oursubsidiary Andina Inversiones Societarias S.A. holds a 50% stake in the jointventure while Cristalerías de Chile S.A. retains the other 50% interest.

 

**5.         Regulation**

 

**General**

 

Weare subject to the full range of government regulations generally applicable tocompanies engaged in business in our franchise territories, including but notlimited to labor, social security, public health, consumer protection,environmental, sanitation, employee safety, securities and anti-trust laws.Currently, no material legal or administrative proceedings are pending againstus with respect to any regulatory matter in any of our franchise territoriesexcept those listed as such in “Item 8. Financial Information—LegalProceedings.” We believe, to the best of our knowledge that we are incompliance in all material respects with applicable statutory andadministrative regulations relating to our business in each of our franchiseterritories.

 

*Chile*. There are no speciallicenses or permits required to manufacture and distribute soft drinks andjuices in the Chilean territory. Food and beverage producers in Chile, however,must obtain authorization from (and their activities are subject to supervisionby) the Chilean Environmental Protection Services (*Servicio Sanitario Metropolitano del Ambiente*), whichinspects production facilities and takes liquid samples for analysis on aregular basis. Our permit from the Chilean Environmental Protection Authoritywas obtained on January 8, 1992 and is in effect indefinitely. Inaddition, production and distribution of mineral water is subject to specialregulations such that mineral water may be drawn only from sources designatedfor such purpose by presidential decree. Certification of compliance with suchdecree is provided by the National Health Service, the Undersecretary’s Officeof the Ministry of Health (*Servicio de SaludMetropolitano del Ambiente*). Our mineral water production facilitieshave received the required certification.

 

*Brazil*. Labor laws, in addition tomandating employee benefits, include regulations to ensure sanitary and safeworking conditions in our production facilities located in Brazil. Food andbeverage producers in Brazil must register their products with and receive aten-year permit from the Ministry of Agriculture and Provisioning and theMinistry of Health, which oversees diet products.. Our permits from saidMinistries are valid and in force for a term of ten years for each product weproduce. Although we cannot assure you that they will be renewed, we have notexperienced any material difficulties in renewing our permits in the past nordo we expect to experience any difficulties in the future. The Ministries donot regularly inspect facilities but they do send inspectors to investigate anycomplaints it receives.

 

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*Argentina*. While most laws applicableto Edasa are enforced at the federal level, some, such as sanitary andenvironmental regulations, are primarily enforced by provincial and municipalgovernments. There are no licenses or permits required for the manufacture ordistribution of soft drinks in the Argentine territory. However, our productionfacilities are subject to registration with federal and provincial authoritiesand to supervision by municipal health agencies, which certify compliance withapplicable laws.

 

**Environmental Matters**

 

Itis our policy to conduct environmentally sound operations on a basis consistentwith applicable laws and with criteria established by TCCC. Although regulationof matters relating to the protection of the environment is not aswell-developed in the franchise territories as in the United States and otherindustrialized countries, we expect that additional laws and regulations may beenacted in the future with respect to environmental matters that may imposeadditional restrictions on us which could materially or adversely affect ourresults of operations in the future. There are no material legal oradministrative proceedings pending against us in any of the franchiseterritories with respect to environmental matters, and we believe that, to thebest of our knowledge, we are in compliance in all material respects with allenvironmental regulations applicable to us.

 

*Chile.* The Chilean government hasseveral regulations governing environmental matters relating to our operations.For instance, Law 3,133 regulates discharge of residual industrial waste, andthe Sanitary Code contains provisions relating to liquid and solid wastedisposal, basic environmental conditions in the workplace, and the protectionof water for human consumption. In 1993, the Chilean government publishedregulations that updated the provisions of Law 3,133. These regulations placelimits on the disposal of harmful substances which may be hazardous to waterused in irrigation or water for consumption by people or animals without priorauthorization from the Ministry of Public Works and a favorable determinationfrom the Superintendence of Sanitary Services. The regulations also mandategovernmental approval of any systems to treat or discharge liquid industrialwaste (regulated by Supreme Decree 90 for discharges to open courses and bySupreme Decree 609 for discharges to sewage collectors). In 1996, we installeda liquid industrial waste treatment plant to comply with the Chilean liquidwaste emissions standards, in effect since 1998. As of May of 2006, thefirst stages of liquid industrial waste treatment are done at our facilitiesand then it is completed at La Farfana. Currently there is an outsourcingagreement with the company Ecoriles for the treatment of liquid industrialwaste.

 

Law19,300, passed in March 1994, addresses general environmental concernsthat may be applicable to our activities and which, if applicable, wouldrequire us to hire independent experts to conduct environmental impact studiesor declarations of any future projects or activities that could be impacted bythe regulations of Law 19,300. This Law creates the National Commission on theEnvironment, which is supported by regional commissions to superviseenvironmental impact studies and declarations for all new projects, to enforcethe regulations of Law 19,300 and to grant discretionary power to regulators.There can be no assurance that future legislative regulatory developments willnot impose further restrictions that would be material to our operations inChile. We believe that, to the best of our knowledge we are in compliance withall material aspects of the Chilean environmental regulations.

 

In 2006 TCCC issued itsaudit regarding Certifications of Quality, Security and Environment Systemsknown as PHASE 3, and we have become the first production facility in Chile toreceive this certification with the maximum qualifications.

 

During2005, our production facility in Chile, became the first plant in Latin Americato achieve the four Quality System Certifications, Food Safety and QualityManagement System (HACCP-Hazard Analysis and Critical Control Point),Environment (ISO 14001:2004), Security and Occupational Health (OHSAS18001:1999) and Quality (ISO 9001:2000). In September of 2007, thesecertifications were extended for another 3 years.

 

Thedistribution centers also count with the following certifications:  Food Safety and Quality Management System (HACCP)since 2007 and Security and Occupational Health OHSAS 18001:2008) since June 2009,both valid for a period of 3 years.

 

In2003, the production facilities of Rengo and Vital were certified under the *Codex Alimentarius* and the Chilean regulation2861:2004 for their production processes. These certifications were renewed in2006. As of December 31, 2009 these production facilities held thefollowing certifications: (i) Food Safety and Quality Management (HACCP); (ii) Quality

 

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Management(ISO 9001); (iii) Environment Management (ISO 14001); and (iv) Securityand Occupational Health (ISO 18000).

 

*Brazil*. Our Brazilian operationsare subject to several environmental laws, none of which currently imposesubstantial restrictions on us. The Brazilian Constitution establishes thebroad guidelines for the new treatment of environmental concerns, dedicating anentire chapter (Chapter VI, Article 225) to the protection of theenvironment, along with several other articles related to the environmental lawand urban law. Environmental issues are regulated at the federal, state andmunicipal levels.  The BrazilianConstitution empowers the public authorities to develop regulations designed topreserve and restore the environment and to control industrial processes thataffect human life. Violations of these regulations are subject to criminal,civil and administrative penalties.

 

Inaddition, Law No. 6,938 of 1981, known as the Brazilian EnvironmentalPolicy, introduced an entirely different environmental regime by which noenvironmental damage is exempt from coverage. The legislation is based on theidea that even a polluting waste tolerated under the established standardscould cause environmental damage, and therefore subjects the party causing suchdamage to payment of an indemnity. Moreover, as mentioned above, activitiesdamaging to the environment lead to criminal and administrative penalties,provided for in Law 9,605 of 1998 or the Environmental Crimes Act.

 

Numerousgovernmental bodies have jurisdiction over environmental matters. At thefederal level, the *Ministério do MeioAmbiente* (Brazilian Ministry of Environment) and the *Conselho Nacional do Meio-Ambiente* orCONAMA dictate environmental policy, including, without limitation, initiatingenvironmental improvement projects, establishing a system of fines andadministrative penalties and reaching agreements on environmental matters withoffending industries. The *Instituto Brasileiro do Meio Ambiente e dos RecursosNaturais Renováveis* or IBAMA enforces environmental regulations setby CONAMA. In addition, various federal authorities have jurisdiction over specificindustrial sectors, but none of these currently affect us. Finally, variousstate and local authorities regulate environmental matters in the Brazilianterritory including the *Fundação Estadual deEngenharia do Meio-Ambiente* or FEEMA, the principal environmentalauthority in Rio de Janeiro and the *InstitutoEstadual de Medio Ambiente e Recursos Hídricos* or IEMA, theprincipal environmental authority in Espírito Santo. FEEMA and IEMAperiodically inspect industrial sites and test liquid waste for contamination.We believe to the best of our knowledge that we are in compliance in allmaterial respects with the standards established by all the governmentalauthorities applicable to our operations in Brazil. We cannot assure you,however, that additional regulations will not be enacted in the future, andthat such restrictions would not have a material adverse effect on our resultsor operations.

 

*Argentina*. The ArgentineConstitution, as amended in 1994, allows any individual who believes a thirdparty may be damaging the environment to initiate an action against it. No suchaction has ever been instituted against us, but we cannot assure you that anaction will not be brought in the future. Though provincial governments haveprimary regulatory authority over environmental matters, municipal and federalauthorities are also competent to enact decrees and laws on environmentalissues. Thus, municipalities are competent on local environmental matters, suchas waste management, while the federal government regulates inter-provinceenvironmental issues, such as transport of hazardous waste or environmentalmatters covered by international treaties.

 

In2002, the National Congress approved federal Law No. 25,612, *Gestión Integral de Residuos Industriales y de Actividadesde Servicios (*Integral Management of Industrial Residues and ServiceActivities*)*and LawNo. 25,675, *Ley General del Ambiente**(*General Environmental Law) establishingminimum guidelines for the protection of the sustainable environmentalmanagement and the protection of biodiversity, applicable throughout Argentina.The law establishes the purposes, principles and instruments of the nationalenvironmental policy, the concept of “minimum guidelines,” the judicialcompetence and the rules governing environmental education andinformation, citizens’ participation and self-management, among otherprovisions.

 

Provincialgovernments within the Argentine territory have enacted laws establishing aframework for the preservation of the environment.  Provincial laws that are applicable toindustrial facilities at EDASA, among others are Law No. 7,343 of theProvince of Córdoba, and Law No. 11,459 of the Province of Buenos Aires.These laws contain principles on environmental policy and management, as wellas rules on environmental impact assessment. They also give certainagencies competence in environmental issues.

 

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Almostall provinces as well as many municipalities have established rules regardingthe use of water, the sewage system and the disposal of liquids into undergroundflows of water or rivers. There are currently no claims pending against us onthis matter. The violation of these rules usually results in fines.

 

DuringOctober of 2009, the National Award for Quality Foundation that promotesexcellence in the development of processes and products in that country,granted us the 2009 National Award for Quality, which was handed by thepresident of Argentina, Cristina Fernandez de Kirchner.

 

**C.****                    ****Organizational Structure**

 

Thefollowing table presents information relating to the main activity of oursubsidiaries and our ownership interest in them as of December 31, 2009.

 
| **Subsidiary**                        | ** ** | **Activity**                                                                                                                                        | ** ** | **Country of  Incorporation** | ** ** | **Percentage  Ownership** |
|---------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------------|
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Embotelladora Andina Chile S.A.       |       | Manufacture,  bottle, distribute, and commercialize non-alcoholic beverages.                                                                        |       | Chile                         |       | 99.90                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Vital  S.A.                           |       | Manufacture,  distribute, and commercialize all kinds of food products, juices, and  beverages.                                                     |       | Chile                         |       | 99.99                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Vital  Aguas S.A.                     |       | Manufacture,  distribute, and commercialize all kinds of waters and beverages in general.                                                           |       | Chile                         |       | 56.50                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Servicios  Multivending Ltda.         |       | Commercialize  products through equipment and vending machines.                                                                                     |       | Chile                         |       | 99.99                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Transportes  Andina Refrescos Ltda.   |       | Provide  administration services and management of domestic and foreign ground  transportation.                                                     |       | Chile                         |       | 99.99                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Envases  CMF S.A.                     |       | Manufacture,  acquire and commercialize all types of containers and packaging; and provide  bottling services.                                      |       | Chile                         |       | 50.00                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Envases  Central S.A.                 |       | Manufacture  and packaging of all kinds of beverages, and commercialize all kinds of  packaging.                                                    |       | Chile                         |       | 49.91                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Andina  Bottling Investments S.A.     |       | Manufacture,  bottle and commercialize beverages and food in general. Invest in other  companies.                                                   |       | Chile                         |       | 99.90                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Andina  Bottling Investments Dos S.A. |       | Carryout  exclusively foreign permanent investments or lease all kinds of real estate.                                                              |       | Chile                         |       | 99.90                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Andina Inversiones Societarias S.A.   |       | Invest  in all types of companies and commercialize food products in general.                                                                       |       | Chile                         |       | 99.99                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Rio de Janeiro Refrescos Ltda.        |       | Manufacture  and commercialize beverages in general, powdered juices and other related  semi-processed products.                                    |       | Brazil                        |       | 99.99                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Mais Indústria de Alimentos S.A. |       | Manufacture,  bottle and commercialize beverages and food in general. Invest in other  companies.                                                   |       | Brazil                        |       | 6.16                      |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Sucos  del Valle do Brasil Ltda.      |       | Manufacture,  bottle and commercialize beverages and food in general. Invest in other  companies.                                                   |       | Brazil                        |       | 6.16                      |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Kaik  Participações Ltda.   |       | Invest  in other companies with own resources.                                                                                                      |       | Brazil                        |       | 11.32                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Embotelladora del Atlántico S.A. |       | Manufacture,  bottle, distribute, and commercialize non-alcoholic beverages. Design,  produce, and commercialize plastic products mainly packaging. |       | Argentina                     |       | 99.98                     |
|                                  |       |                                                                                                                                                |       |                          |       |                      |
| Abisa  Corp.                          |       | Invest  in financial instruments.                                                                                                                   |       | British Virgin Islands   |       | 99.99                     |

 

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Thefollowing chart presents in summary form the Company’s direct and indirectownership participations in subsidiaries and affiliates:

 

 

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**D.****           ****Property,Plants and Equipment**

 

Wemaintain production plants in each of the principal population centers thatcomprise the franchise territories. In addition, we maintain distributioncenters and administrative offices in each of the franchise territories. Thefollowing table sets forth in square meters, our principal properties, andfacilities in each of the franchise territories:

 
| ** **                                | ** ** | ** **                                                               | ** ** | **Surface**              | ** ** |
|-------------------------------------------|------------|--------------------------------------------------------------------------|------------|--------------------------|------------|
| **Properties and Facilities**   | ** ** | **Main Use**                                                        | ** ** | **(Square Meters)** | ** ** |
| ** **                                |       |                                                                     |       |                     |       |
| **Chile**                                 |       |                                                                     |       |                     |       |
| **Embotelladora  Andina S.A.**            |       |                                                                     |       |                     |       |
| Metropolitan Region                       |       | Offices / Production of Soft Drinks / Distribution  Centers / Warehouses |       | 494,386                  |       |
| Rancagua                                  |       | Warehouses                                                               |       | 25,920                   |       |
| San Antonio                               |       | Warehouses                                                               |       | 19,809                   |       |
|                                      |       |                                                                     |       |                     |       |
| **Vital  S.A.**                           |       |                                                                     |       |                     |       |
| Metropolitan Region                       |       | Offices / Production of Juices                                           |       | 40,000                   |       |
|                                      |       |                                                                     |       |                     |       |
| **Vital  Aguas S.A.**                     |       |                                                                     |       |                     |       |
| Rengo                                     |       | Production of Waters                                                     |       | 12,375                   |       |
|                                      |       |                                                                     |       |                     |       |
| **Envases  CMF S.A.**                     |       |                                                                     |       |                     |       |
| Metropolitan Region                       |       | Offices / Production of PET bottles and preforms                         |       | 74,001                   |       |
|                                      |       |                                                                     |       |                     |       |
| **Envases  Central S.A.**                 |       |                                                                     |       |                     |       |
| Metropolitan Region                       |       | Offices / Production of Soft Drinks                                      |       | 51,906                   |       |
|                                      |       |                                                                     |       |                     |       |
| **Brazil**                                |       |                                                                     |       |                     |       |
| **Rio de Janeiro Refrescos Ltda.**        |       |                                                                     |       |                     |       |
| Jacarepaguá                          |       | Offices / Production of Soft Drinks / Distribution  Centers / Warehouses |       | 248,375                  |       |
| Itambi                                    |       | Warehouses                                                               |       | 131,420                  |       |
| Vitória                              |       | Offices / Production of Soft Drinks / Warehouses                         |       | 93,320                   |       |
| Nova Iguaçu                          |       | Warehouses                                                               |       | 79,958                   |       |
| Bangu                                     |       | Warehouses                                                               |       | 44,614                   |       |
| Campos                                    |       | Warehouses                                                               |       | 24,200                   |       |
| Cachoeira do Itapemirim                   |       | Warehouses                                                               |       | 8,000                    |       |
| Cabo Frio                                 |       | Warehouses                                                               |       | 1,985                    |       |
|                                      |       |                                                                     |       |                     |       |
| **Argentina**                             |       |                                                                     |       |                     |       |
| **Embotelladora del Atlántico S.A.** |       |                                                                     |       |                     |       |
| Córdoba                              |       | Offices / Production of Soft Drinks / Distribution  Centers / Warehouses |       | 923,360                  |       |
| Santo Tomé                           |       | Offices / Warehouses                                                     |       | 89,774                   |       |
| San Juan                                  |       | Offices / Warehouses                                                     |       | 48,036                   |       |
| Mendoza                                   |       | Offices / Warehouses                                                     |       | 41,579                   |       |
| Rosario                                   |       | Offices / Warehouses                                                     |       | 28,070                   |       |
| Río IV                               |       | Offices / Warehouses                                                     |       | 7,482                    |       |
| San Luis                                  |       | Offices / Warehouses                                                     |       | 6,069                    |       |
| Buenos Aires                              |       | Production of PET bottles and preforms                                   |       | 27,043                   |       |

 

Wehave full ownership of our properties and they are not subject to materialencumbrances.

 

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**Capacity byLine of Business**

 

Setforth below is certain information concerning the installed capacity andapproximate average utilization of our production facilities, by line ofbusiness.

 
| ** **                               | ** ** | **Year Ended December 31,**       | ** ** |
|------------------------------------------|------------|----------------------------------------|------------|
| ** **                               | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **Annual  Total  Installed  Capacity** | ** ** | **Average  Capacity  Utilization  (%)** | ** ** | **Capacity  Utilization  During  Peak  Month  (%)** | ** ** | **Annual  Total  Installed  Capacity** | ** ** | **Average  Capacity  Utilization  (%)** | ** ** | **Capacity  Utilization  During  Peak  Month  (%)** | ** ** |
|                                     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Coca-Cola soft drinks (millions of UCs): |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Chile                                    |       | 157                                    |       | 75 |   | 86 |   | 157 |   | 71 |   | 82 |   |
| Brazil                                   |       | 222                                    |       | 77 |   | 100 |   | 209 |   | 80 |   | 94 |   |
| Argentina                                |       | 141                                    |       | 86 |   | 97 |   | 141 |   | 85 |   | 95 |   |
| Other beverages (millions of UCs)        |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Chile                                    |       | 49                                     |       | 64 |   | 83 |   | 49 |   | 65 |   | 77 |   |
| Argentina                                |       | 2                                      |       | 21 |   | 31 |   | — |   | — |   | — |   |
| PET packaging (millions of bottles)      |       | 639                                    |       | 91 |   | 100 |   | 639 |   | 94 |   | 100 |   |

 

Totalinstalled annual production capacity assumes production of the mix of productsand containers produced in 2009.

 

In2009, we continued to modernize and renovate our manufacturing facilities inorder to maximize efficiency and productivity; we also made significantimprovements to our auxiliary services and complementary processes such aswater treatment plants and effluent treatment stations.  At present, we estimate we have the capacityin each of the franchise territories to meet consumer demand for each productformat. Because bottling is a seasonal business with significantly higherdemand during the South American summer and because soft drinks are perishable,it is necessary for bottlers to carry significant over-capacity in order tomeet the substantially greater seasonal demand. We assure the quality of ourproducts through worldwide class practices and procedures maintaining qualitycontrol laboratories and structures in each production facility where rawmaterials are tested and where we analyze samples of our products.

 

Asof December 31, 2009, we had total installed annual production capacity,including soft drinks, fruit juices, and water, of 571 million unit cases.Our primary facilities include:

 

·                          throughEmbotelladora Andina, in the Chilean territory, one soft drink production facility with eight production lines withtotal installed annual capacity of 157 million unit cases (27.5% of our totalinstalled annual capacity);

·                          through VitalS.A. in the Chilean territory, one fruit juice production facility, with sixproduction lines, with total installed annual capacity of 21 million unitcases (3.7% of our total installed annual capacity);

·                          through VitalAguas S.A. in the Chilean territory, one mineral water production facility,with four production lines, with total installed annual capacity of28 million unit cases (4.8% of our total installed annual capacity);

·                          through Rio deJaneiro Refrescos in the Brazilian territory, two soft drink productionfacilities with eleven production lines with total installed annual capacity of222 million unit cases (38.9% of our total installed annual capacity); and

·                          throughEmbotelladora del Atlántico in the Argentine territory, one soft drinkproduction facility with seven production lines with a total installed annualcapacity of 141 million unit cases (24.7% of our total installed annualcapacity); and one production facility for bottles and preforms that covers theneeds of the Coca-Cola system in that country and one facility for theproduction of juices with one production line that covers the needs of ourfranchise with a total installed annual capacity of 2.4 million unit cases(0.4% of our total installed annual capacity)

 

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**ITEM 4A.****                    ****UNRESOLVED SECURITIES AND EXCHANGE COMMISSION STAFF COMMENTS**

 

**Not Applicable.**

 

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

 

**Basis of Presentation**

 

Thefollowing discussion should be read in conjunction with and is qualified in itsentirety by reference to the Consolidated Financial Statements, including thenotes thereto, included in Item 18. We prepare our financial statements inaccordance with Chilean GAAP, which differs in certain important respects fromU.S. GAAP. Note 30 of the notes to the Consolidated Financial Statementsprovides a description of the principal differences between Chilean GAAP andU.S. GAAP and a reconciliation to U.S. GAAP of net income and totalshareholders’ equity.

 

ChileanGAAP requires that financial statements recognize the effects of inflation.Accordingly, all of our financial information, unless otherwise indicated, hasbeen restated to eliminate the distorting effects of changes in the purchasingpower of the Chilean peso on non-monetary assets and liabilities andshareholders’ equity, such that all such information is presented in comparablemonetary terms. The general price-level gain or loss reflected in the incomestatement indicates the effect of inflation on our net holdings of monetary assetsand liabilities during a period of inflation. Assets and liabilities areconsidered “monetary” for purposes of general price-level accounting if theiramounts are fixed by contract or otherwise in terms of number of currencyunits, regardless of changes in specific prices or in the general price level.Examples of “monetary” assets and liabilities include accounts receivable,accounts payable and cash.

 

Incomereported on a U.S. GAAP basis differs from that reported in accordance withChilean GAAP principally due to differences in property, plant and equipment,accounting for deferred income taxes, acquisition through the issuance ofshares, difference in accounting for investments in related companies anddifferent goodwill amounts, difference in accounting for translation adjustmentof foreign investments, difference in joint venture accounting, and differencesin amortization periods for goodwill. The effect of inflation accounting underChilean GAAP has not been reversed in the reconciliation to U.S. GAAP. See Note30 of the notes to the Consolidated Financial Statements.

 

**Factors Affecting Comparability**

 

During2009, there were no changes in the application of Chilean GAAP as compared tothe previous year that could materially affect the comparability of thefinancial statements.

 

**Critical Accounting Estimates**

 

*Discussion of critical accounting estimates*

 

Inthe ordinary course of business, we have made a number of estimates andassumptions relating to the reporting of our results of operations and financialposition in the preparation of financial statements in conformity with ChileanGAAP and U.S. GAAP (with respect to the reconciliation of net income andshareholders’ equity and additional disclosures required by U.S. GAAP). Wecannot assure you that actual results will not differ from those estimates. Webelieve that the following discussion addresses our most critical accountingpolicies, which are those that are most important to the portrayal of ourfinancial condition and results of operations and require management’s mostdifficult, subjective and complex judgments, often as a result of the need tomake estimates and assumptions about the effect of matters that are inherentlyuncertain. For a more detailed discussion of accounting policies significant toour operations, please see Note 1 to our Consolidated Financial Statements.

 

*Allowance for doubtful accounts*

 

Weevaluate the collectability of our trade accounts receivable based on a numberof factors. In circumstances where we are aware of a specific customer’sinability to meet its financial obligations to us, a specific reserve for baddebts is estimated and recorded which reduces the recognized receivable to theestimated amount we believe will ultimately be collected. In addition to specificidentification of potential bad customer debts, bad debt charges are recordedbased on, among other factors, our recent loss history and an overallassessment of past due trade accounts receivable outstanding. As ofDecember 31, 2009, our accounts receivable balance was Ch$78,869 million,net of allowances for doubtful accounts of 

 

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Ch$1,689million. Historically, on a consolidated basis, doubtful accounts have averagedless than 1% of consolidated net sales.

 

*Property, plant and equipment*

 

Property,plant and equipment (excluding the technical reappraisal that occurred in 1979which was eliminated in the reconciliation to U.S. GAAP) is recorded at costplus price-level restatements and is depreciated on a straight-line basis overthe estimated useful lives of such assets. Changes in circumstances such astechnological advances, changes to our business model or changes in our capitalstrategy could result in the actual useful lives differing from our estimates.In those cases where we determine that the useful life of property, plant andequipment should be shortened, we depreciate the net book value in excess of theestimated salvage value over its revised remaining useful life. Factors such aschanges in the planned use of manufacturing equipment, vending equipment,transportation equipment or software could result in shortened useful lives. Wereview long-lived assets for impairment whenever events or changes incircumstances indicate that the carrying amount of any such asset may not berecoverable. The estimate of future cash flow is based upon, among otherthings, certain assumptions about expected future operating performance. Ourestimates of undiscounted cash flows may differ from actual cash flows due to,among other things, technological changes, economic conditions and changes toour business model or changes in operating performance. If the sum of the projectedundiscounted cash flows (excluding interest) is less than the carrying value ofthe asset, the asset will be written down to its estimated fair value. Freecash flows in Brazil and Argentina discounted at a rate of 12% resulted in ahigher result than the amount for the corresponding assets (including goodwill)of the Company’s Brazilian and Argentine subsidiaries.

 

*Goodwill and other intangible assets*

 

Goodwilland other intangible assets are recorded at cost plus price-level restatementsand are amortized, principally on a straight-line basis, over the estimatedfuture periods benefited (not exceeding 20 years). Intangible assets consistprimarily of bottling and distribution rights in specific territories. Goodwilland other intangible assets are periodically reviewed for impairment wheneverevents or changes occur that indicate the carrying value of the business orassets to which they relate may not be recoverable. As such events or changesoccur, management estimates the future cash flows expected to result from theuse and, if applicable, the eventual disposition of the assets and relatedgoodwill. The key variables which management must estimate include salesvolume, prices, marketing expenses and other economic factors. Significantmanagement judgment is involved in estimating these variables, and they includeinherent uncertainties; however, the assumptions used are consistent with ourinternal planning. Therefore, management periodically evaluates and updates theestimates based on the conditions that influence these variables. If suchassets are considered impaired, they are written down to fair value asappropriate. In 2001, we adopted the provisions of ASC 350 “Goodwill and OtherIntangible Assets,” for the purposes of U.S. GAAP reporting. We performed theimpairment tests of our goodwill and concluded that no impairment charge wasnecessary.

 

*Liability for deposits for bottles and cases*

 

Wehave a liability for deposits received for bottles and cases provided to ourcustomers and distributors. The liability represents the deposit value that wemay be required to remit upon receipt from the customer or distributor of thebottles and cases, in good condition, along with the original invoice. Theliability is not subject to price level restatements as per current agreementswith customers and distributors. We estimate the liability for deposits basedon an periodic inventory of bottles sold to customers and distributors,estimates of bottles in circulation and a weighted average historical depositvalue per bottle or case. Additionally, because the amount of bottles and caseshas generally increased over time, the liability is presented as a long-termliability. Significant management judgment is involved in estimating the numberof bottles in circulation, the deposit value that could be subject toredemption and the timing of disbursements related to this liability.

 

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**A.****           ****OperatingResults**

 

**Summary of Operations**

 

Thefollowing table sets forth, for the periods indicated, the net sales andoperating income for the Company’s operations in Chile, Brazil and Argentina,respectively, expressed in each case in millions of Chilean pesos withpurchasing power as of December 31, 2009, and as a percentage ofconsolidated net sales or operating income, as the case may be:

 
| ** **                     | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                     | ** ** | **MCh$**                         | ** ** | **%** | ** ** | **MCh$** | ** ** | **%** | ** ** | **MCh$** | ** ** | **%** | ** ** |
| **Net  sales:**                |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Chile                          |       | 272,344                          |       | 36.6 | % | 269,153 |   | 32.5 | % | 260,302 |   | 38.4 | % |
| Brazil                         |       | 311,901                          |       | 42.0 |   | 362,205 |   | 43.7 |   | 287,266 |   | 42.4 |   |
| Argentina                      |       | 160,108                          |       | 21.5 |   | 200,042 |   | 24.2 |   | 133,286 |   | 19.7 |   |
| Inter-country  eliminations(1) |       | (1,237                           | )          | (0.2 | ) | (3,587 | ) | (0.4 | ) | (3,447 | ) | (0.5 | ) |
| **Total**                      | ** ** | **743,116**                      | ** ** | **100** | **%** | **827,813** | ** ** | **100** | **%** | **677,407** | ** ** | **100** | **%** |
| **Operating  income:**         |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Chile                          |       | 55,570                           |       | 42.7 | % | 56,605 |   | 41.8 | % | 60,760 |   | 49.4 | % |
| Brazil                         |       | 56,988                           |       | 43.8 |   | 60,030 |   | 44.3 |   | 51,086 |   | 41.6 |   |
| Argentina                      |       | 21,437                           |       | 16.5 |   | 21,644 |   | 16.0 |   | 13,856 |   | 11.3 |   |
| Corporate expenses(2)          |       | (3,934                           | )          | (3.0 | ) | (2,792 | ) | (2.1 | ) | (2,821 | ) | (2.3 | ) |
| **Total**                      | ** ** | **130,061**                      | ** ** | **100** | **%** | **135,487** | ** ** | **100** | **%** | **122,881** | ** ** | **100** | **%** |

 

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*(1)**                    **Eliminationsrepresent intercompany sales.*

*(2)**                    **Correspondsto corporate expenses that are not distributable in the operations.*

 

 

Thefollowing table sets forth, for the periods indicated, the net sales andoperating income contributed by each of our business segments, expressed ineach case in millions of Chilean pesos with purchasing power as ofDecember 31, 2009, and as a percentage of consolidated net sales oroperating income, as the case may be:

 
| ** **            | ** ** | **Year ended December 31,** | ** ** |
|-----------------------|------------|----------------------------------|------------|
| ** **            | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| ** **            | ** ** | **MCh$**                         | ** ** | **%** | ** ** | **MCh$** | ** ** | **%** | ** ** | **MCh$** | ** ** | **%** | ** ** |
| **Net sales:**        | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Soft  drinks          |       | 646,899                          |       | 87,1 | % | 725,115 |   | 87.6 | % | 595,069 |   | 87,8 | % |
| Other  beverages(1)   |       | 89,031                           |       | 12,0 |   | 93,206 |   | 11.3 |   | 75,556 |   | 11,2 |   |
| Packaging             |       | 7,186                            |       | 0,9 |   | 9,492 |   | 1.1 |   | 6,782 |   | 1,0 |   |
| **Total**             | ** ** | **743,116**                      | ** ** | **100** | **%** | **827,813** | ** ** | **100** | **%** | **677,407** | ** ** | **100** | **%** |
| **Operating income:** |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Soft  drinks          |       | 117,841                          |       | 90,6 | % | 124,684 |   | 92.0 | % | 113,844 |   | 92,6 | % |
| Other  beverages(1)   |       | 9,120                            |       | 7,0 |   | 8,383 |   | 6.2 |   | 7,209 |   | 5,9 |   |
| Packaging             |       | 3,100                            |       | 2,4 |   | 2,420 |   | 1.8 |   | 1,828 |   | 1,5 |   |
| **Total**             | ** ** | **130,061**                      | ** ** | **100** | **%** | **135,487** | ** ** | **100** | **%** | **122,881** | ** ** | **100** | **%** |

 

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*(1)**               **Includes,in Chile, waters and juices; in Brazil, beer, water, energy drinks, Nesteaproducts and fruit flavored juices; and in Argentina fruit flavored waters andjuices.*

 

Thefollowing table sets forth, for the periods indicated, information derived fromour consolidated income statements, expressed in millions of Chilean pesos withpurchasing power as of December 31, 2009:

 
| ** **                            | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------|------------|----------------------------------|------------|
| ** **                            | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                            | ** ** | **MCh$**                         | ** ** | **%** | ** ** | **MCh$** | ** ** | **%** | ** ** | **MCh$** | ** ** | **%** | ** ** |
| **Net sales**                         | ** ** | **743,116**                      | ** ** | **100** | **%** | **827,813** | ** ** | **100** | **%** | **677,407** | ** ** | **100** | **%** |
| Cost of sales                         |       | (413,356                         | )          | (55,6 | ) | (459,825 | ) | (55.5 | ) | (373,927 | ) | (55.2 | ) |
| Gross profit                          |       | 329,760                          |       | 44,4 |   | 367,988 |   | 44.5 |   | 303,480 |   | 44.8 |   |
| Administrative and selling expenses   |       | (199,699                         | )          | (26,9 | ) | (232,501 | ) | (28.1 | ) | (180,599 | ) | (26.7 | ) |
| **Operating income**                  | ** ** | **130,061**                      | ** ** | **17,5** | ** ** | **135,487** | ** ** | **16.4** | ** ** | **122,881** | ** ** | **18.1** | ** ** |
| Non-operating income (expenses), net  |       | (10,775                          | )          | (1,5 | ) | (18,180 | ) | (2.2 | ) | (7,425 | ) | (1.1 | ) |
| Income taxes, minority interest (net) |       | (32,368                          | )          | (4.4 | ) | (24,652 | ) | (3.0 | ) | (28,635 | ) | (4.2 | ) |
| **Net income**                        | ** ** | **86,918**                       | ** ** | **11.7** | ** ** | **92,655** | ** ** | **11.2** | **%** | **86,821** | ** ** | **12.8** | **%** |

 

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**Results of Operations for the Years Ended December 31,2009 and 2008**

** **
| ** **                              | ** ** | **Chile**                | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **Total(1)** | ** ** |
|-----------------------------------------|------------|--------------------------|------------|------------|------------|---------------|------------|--------------|------------|
| ** **                              | ** ** | **2009**                 | ** ** | **2008**   | ** ** | **2009**      | ** ** | **2008**     | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **(in millions of Ch$)** | ** ** |
| **Net sales**                           |       | 272,344                  |       | 269,153    |       | 311,901       |       | 362,205      |       | 160,108 |   | 200,042 |   | 743,116 |   | 827,813 |   |
| Cost of sales                           |       | (155,270                 | )          | (152,158   | )          | (170,241      | )          | (192,892     | )          | (89,082 | ) | (118,362 | ) | (413,356 | ) | (459,825 | ) |
| Gross profit                            |       | 117,074                  |       | 116,995    |       | 141,660       |       | 169,313      |       | 71,026 |   | 81,680 |   | 329,760 |   | 367,988 |   |
| Administrative and selling  expenses(2) |       | (61,504                  | )          | (60,390    | )          | (84,672       | )          | (109,283     | )          | (49,589 | ) | (60,036 | ) | (195,765 | ) | (229,709 | ) |
| Corporate expenses                      |       |                     |       |       |       |          |       |         |       |   |   |   |   | (3,934 | ) | (2,792 | ) |
| **Operating  income**                   |       | 55,570                   |       | 56,605     |       | 56,988        |       | 60,030       |       | 21,437 |   | 21,644 | ** ** | **130,061** | ** ** | **135,487** | ** ** |

 

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*(1)**              **Totaldoes not equal the sum of all the franchise territories due to inter-countryeliminations.*

*(2)**              **Themajority of corporate expenses were distributed in the operations.*

 

**Net Sales**

 

ConsolidatedSales Volume amounted to 458.6 million unit cases in 2009, an increase of 2.6%.Soft Drinks grew 2.0%, while the other categories of, Juices, Waters, and Beertogether increased by 9.5%. Particularly, the Juices segment recorded asignificant 12.6% increase. Net Sales amounted to Ch$743,116 million, a 10.2%decrease mainly explained by the effect upon translation of figures from Braziland Argentina, more than offsetting the consolidated increase in volumes andincreased prices in the three countries. Net sales of Coca-Cola soft drinksrepresented 87.1% of total Consolidated Net Sales.

 

In Chile, SalesVolume amounted to 152.4 million unit cases a 1.1% growth. This growth was aresult of increased soft drink volumes (+0.4%) as well as an increase in theJuices and Waters segment (+4.9%). Net Sales amounted to Ch$272,344 million, a1.2% improvement, driven by higher volumes and prices. In year 2009,our average volume market share in the soft drink market in Chile increased to68.6% reflecting that we maintain a strong competitive position. Our averagevalue market share was 71.7% during 2009 compared to 71.0% in 2008.

 

Softdrink net sales in Chile amounted to Ch$224,864 million during 2009,representing a 2.2% increase regarding the previous year, principally explainedby a 0.4% increase of volumes and by an increase of the average income per unitcase . Net sales of fruit juices and waters in Chile was Ch$47,480 million in2009, showing an increase of 8.0% from 2008. This growth was led by a 4.9%increase of sales volume of these segments and the average income per unitcase.

 

In Brazil, Sales Volumeamounted to 185.3 million unit cases, a 6.4% increase driven by Soft drinks(+6.2%) and the Juices, Waters and Beer segment (+10.8%). Net Sales reachedCh$311,901 million (-13.9%) due to the effect upon translation of figures inaddition to higher volumes and price adjustments above local inflation. TheBrazilian real devalued 9% on average. With respect to the end of periodclosing exchange rate of the Chilean peso it devalued 27%, resulting in anegative accounting impact over income and a positive impact over costs andexpenses upon translation of figures for consolidation, in the end, having anegative impact over results.****In year 2009,our average volume market share in the soft drink market in Brazil increased to57.5% reflecting that we maintain a strong competitive position. Our averagevalue market share was 67.6% during 2009 compared to 66.9% in 2008.

 

Softdrink net sales in Brazil amounted to Ch$275,311 million during 2009,representing a 14.5% decrease regarding the previous year, principallyexplained by the effect upon translation of figures which more than offsetincreased volumes and price adjustments made in this segment.  On the other hand, the Company’s beer, watersand juices operations in Brazil generated net sales in 2009 of Ch$36,590million, representing a 9.3% decrease from 2008.

 

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In Argentina, Sales Volumefor the Full Year ended December 31, 2009 reached 120.9 million unitcases, a decrease of 0.9%. mainly explained by a moderate private consumptionobserved in the Argentine economy in all sectors.  NetSales reached Ch$160,108 million (-20.0%). This decrease is mainly explained bythe effect upon translation of figures which more than offset price adjustmentsabove local inflation of our costs. The Argentine peso devalued 18% onaverage with respect to the U.S. Dollar; and 32% with respect to the end ofperiod closing exchange rate of the Chilean peso resulting in a negativeaccounting impact over income and a positive impact over costs and expensesupon translation of figures for consolidation, in the end, having a negativeimpact over results. In year 2009, our average volume market share inthe soft drink market in Argentina increased to 53.0% reflecting that wemaintain a strong competitive position. Our average value market share was61.2% during 2009 compared to 60.1% in 2008.

 

Softdrink net sales in Argentina amounted to Ch$146,724 million during 2009,representing a 20.0% decrease regarding the previous year, principallyexplained by the effect upon translation of figures which more than offsetincreased volumes in this segment. Net sales of PET packaging and juices inArgentina were Ch$13,384 million in 2009, representing a decrease of 20.1%compared to 2008 resutling from the same reasons given for the decrease in softdrinks net sales.

 

***Cost of Sales***

 

Costof sales were Ch$413,356 million in 2009, representing 55.6% of net sales,compared to Ch$459,825 million, or 55.5% of net sales in 2008. The increase incost of sales as a percentage of net sales in 2009 was principally due to (i) significantincreases in the cost of sugar for Chile and Brazil; (ii) depreciation ofthe Argentine peso, affecting our U.S.-dollar denominated costs; (iii) increasedconcentrate costs in the three countries resulting from higher prices and inChile due to the incidence factor; and (iv) increased labor costs inArgentina.  All of which was almostcompletely offset by lower PET resin prices in the three countries and theappreciation of the currencies in Chile and Brazil, which resulted in apositive impact of U.S.-dollar denominated costs.

 

In Chile, Cost of Sales perunit case increased 4.3% due to the significant increase in the price of sugarand the average devaluation of the Chilean peso during the period (fromCh$522.5 average en 2008 to Ch$559.5 average in 2009). All of which waspartially offset by lower PET resin prices. In Brazil, Cost of Sales per unitcase increased 14.1% mainly explained by: (i) the significant increase inthe price of sugar, (ii) increased concentrate prices (given priceadjustments), and (iii) the effect upon translation of figures.  All of which was partially offset by lowerPET resin prices and the average revaluation of the Brazilian real during thequarter. In Argentina, Cost of Sales per unit casedecreased 24.0%, mainly explained by the effect upon translation of figures andlower sugar and PET resin prices; all of which was partially offset by: (i) increasedconcentrate costs (due to higher prices), (ii) increased labor costs, and (iii) theeffect of U.S. dollar denominated raw materials due to the devaluation of theArgentine peso during the period.

 

Forthe Company’s Chilean operations, the percentage representing cost of salesregarding net sales was 57.0% for the year 2009 and 56.5% for the year 2008.For the Company’s Brazilean operations, Cost of Sales represented 54.6% for2009 and 53.3% of net sales for 2008. For the Company’s Argentine Operations,cost of sales represented 55.6% during 2009 and 59.2% of net sales in 2008.

 

***Gross Profit***

 

Dueto the aforementioned, gross profit in 2009 decreased by 10.4%, reachingCh$329,760 million, or 44.4% of net sales, compared to Ch$367,988 million, or44.5% of net sales in 2008.

 

***Administrative and Selling Expenses***

 

Sellingand administrative expenses amounted to Ch$199,699 million in 2009, thisrepresented 26.9% of net sales for 2009 and a 14.1% decrease with respect tothe Ch$232,501 million in 2008, that represented 28.1% of net sales for thatyear. SG&A decreased by the effect upon translation of figures of ouroperations in Brazil and Argentina, and the adjustment of freight fees inChile.

 

Asa percentage of net sales, the Company’s Chilean operations recorded sellingand administrative expenses of 22.6% in 2009 compared with 22.4% in 2008.Selling and administrative expenses in our Brazilian operations were 27.1% in2009 compared with 30.2% in 2008 and the selling and administrative expenses inour Argentine operations were 31.0% in 2009 compared with 30.0% in 2008.

 

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***Operating Income***

 

Asa consequence of the aforementioned, operating income increased 4.0% in 2009,amounting to Ch$130,061 million, or 17.5% of net sales, compared to Ch$135,487million, or 16.4% of net sales in 2008.

 

***Non-operating Income (Expense), Net***

 

Thefollowing table sets forth, for the periods indicated, the items ofnon-operating income (expense), net:

 
| ** **                                       | ** ** | **As of December 31,** | ** **  |
|--------------------------------------------------|------------|-----------------------------|-------------|
| ** **                                       | ** ** | **2009**                    | ** **  | **2008** | ** ** |
| ** **                                       | ** ** | **MCh$**                    | ** **  | **MCh$** | ** ** |
| Financial income                                 |       | $                           | 5,419       |   | $ | 11,611 |   |
| Share of income from affiliated companies        |       | 1,853                       |        | 1,836 |   |
| Other non-operating income                       |       | 9,594                       |        | 6,204 |   |
| Amortization of goodwill                         |       | (6,094                      | )           | (7,437 | ) |
| Financial expenses                               |       | (7,897                      | )           | (26,942 | ) |
| Other non-operating expenses                     |       | (5,332                      | )           | (16,054 | ) |
| Price-level restatement and exchange gain (loss) |       | (8,318                      | )           | 12,602 |   |
|                                             |       |                        |        |   |   |
| **Non-operating income (expense),  net**         | ** ** | **$**                       | **(10,775** | **)** | **$** | **(18,180** | **)** |

 

Non-Operating Results totaled a loss of (Ch$10,755) million, whichcompares positively to a higher loss of (Ch$18,180) million recorded during2008. This decreased loss in the non-operating result line is best explainedby: (i) Financial Expense/Income (Net): Impacted by a positive variation resulting from losses in financialhedging agreements that took place during 2008. This was offset by the exchangerate difference; and (ii) Other Non-Operating Income/Expenses: Resulted ina lower loss compared to the previous period explained by reversals againstearnings from the conversion adjustment reserve realized during 2008, becauseof dividends received from foreign subsidiaries and other one-off effects.

 

***Income Taxes***

 

Incometaxes in 2009 increased 31.2% to Ch$32,366 million compared to Ch$24,667million in 2008. The increase is principally explained by: Deferred tax incomeresulting from higher future income tax due to the restatement of liabilitiesin US Dollars in Brazil.  The negativeeffect results from positive higher exchange rate differences charged to futureincome tax as a result of the appreciation of the Brazilian *real* during 2009.

 

***Net Income***

 

Asa result of the aforementioned, net income in 2009 was Ch$86,918 million,representing 11.7% of net sales and a decrease of 6.2% compared to net incomeof Ch$92,655 million in 2008.

 

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**Results of Operations for the Years Ended December 31,2008 and 2007**

 

Thefollowing table sets forth, for the periods indicated, the net sales andoperating income contributed by each of our business segments, expressed ineach case in millions of Chilean pesos with purchasing power as ofDecember 31, 2009:

** **
| ** **                              | ** ** | **Chile**                | ** ** | **Brazil**  | ** ** | **Argentina** | ** ** | **Total(1)** | ** ** |
|-----------------------------------------|------------|--------------------------|------------|-------------|------------|---------------|------------|--------------|------------|
| ** **                              | ** ** | **2008**                 | ** ** | **2007**    | ** ** | **2008**      | ** ** | **2007**     | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(in millions of Ch$)** | ** ** |
| Net sales                               | ** ** | **269,153**              | ** ** | **260,302** | ** ** | **362,205**   | ** ** | **287,266**  | ** ** | **200,042** | ** ** | **133,287** | ** ** | **827,813** | ** ** | **677,407** | ** ** |
| Cost of sales                           |       | (152,158                 | )          | (144,738    | )          | (192,892      | )          | (151,841     | )          | (118,362 | ) | (80,796 | ) | (459,825 | ) | (373,927 | ) |
| Gross profit                            |       | 116,995                  |       | 115,564     |       | 169,313       |       | 135,425      |       | 81,680 |   | 52,491 |   | 367,988 |   | 303,480 |   |
| Administrative and selling  expenses(2) |       | (60,390                  | )          | (54,804     | )          | (109,283      | )          | (84,340      | )          | (60,036 | ) | (38,634 | ) | (229,709 | ) | (177,778 | ) |
| Corporate expenses                      |       |                     |       |        |       |          |       |         |       |   |   |   |   | (2,792 | ) | (2,821 | ) |
| Operating income                        | ** ** | **56,605**               | ** ** | **60,760**  | ** ** | **60,030**    | ** ** | **51,085**   | ** ** | **21,644** | ** ** | **13,857** | ** ** | **135,487** | ** ** | **122,881** | ** ** |

 

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*(1)**              **Thetotal does not equal the sum of all the franchise territories due tointer-country eliminations.*

*(2)**              **Themajority of corporate expenses were distributed in the operations.*

 

***Net Sales***

 

Ourconsolidated net sales in 2008 were Ch$827,813 million, representing a 22.2%improvement over the Ch$677,407 million recorded in 2007. Resulting from highervolumes, price adjustments in the three countries where we operate and in thecase of Brazil and Argentina, a favorable exchange rate upon translation offigures. Consolidated Sales Volume amounted to 454.5 million unit cases,reflecting a 3.0% growth. Soft Drinks increased 2.2%, while the othercategories of, Juices, Waters and Beer together increased by 11.4%, driven byseveral launchings during the year. Net sales of Coca-Cola soft drinksrepresented 87.6% of total Consolidated Net Sales, reflecting a decreasecompared to the year 2007.

 

In Chile, total net sales amounted to Ch$269,153million in 2008, which shows a 3.4% increase when comparing to 2007,  as a result of higher volumes and offset by a1.3% decrease in real terms of the average income per unit case (pricesincreased less than the inflation recorded for the period.  Sales Volume amounted to 158.5 million unitcases, a 4.8% growth compared to the Full Year ended December 31,2007.  This growth was a result ofincreased soft drink volumes (+3.0.%) as well as an increase in the Juices andWaters segment (+13.0%).   In addition tothe volume contributed by the water brand Benedictino, launched in February,and by the energy drink BURN, launched in May, the Company also launched, FantaZero, seeking to modernize the brand, Nestea Green Tea, Fanta Limón and DasaniAnti-Ox during the last quarter.  In year2008, our average volume market share in the soft drink market in Chileremained stable at 67.4 reflecting that we maintain a strong competitiveposition. Our average value market share was 71% during 2008 compared to 70.6%in 2007.

 

Softdrink net sales in Chile amounted to Ch$219,959 million during 2008,representing a 1.9% increase regarding the previous year, principally explainedby a 3.0% increase of volumes and offset by the decrease of the average incomeper unit case . Net sales of fruit juices and waters in Chile was Ch$49,194million in 2008, showing an increase of 10.5% from 2007. This growth was led bya 13.0% increase of sales volume of these segments.

 

InBrazil, net sales in 2008 reached Ch$362,205 million, 26.1% higher than in2007. This increase is principally explained by the price adjustments and afavorable exchange rate upon translation of figures. The increase of soft drinknet sales per unit case was 26.6%. The 6.5% average appreciation of theBrazilian real had a positive impact upon the translation of figures, which waspartially offset by the 0.4% appreciation of the Chilean peso end of periodexchange rate. Net sale of Coca-Cola soft drinks in Brazil were Ch$321,856million, representing a 24.6% increase compared to 2007.  Sales Volume amounted to 174.0 million unitcases, remaining stable compared to 2007, strongly affected by the contractionin consumer demand and heavier rain in the territories within our franchisethan those recorded during 2007.

 

Onthe other hand, the Company’s beer, waters and juices operations in Brazilgenerated net sales in 2008 of Ch$40,349 million, representing a 39.4% increasefrom 2007.

 

InArgentina, net sales in 2008 were Ch$200,042 million, representing a 50.1%increase from 2007. This increase is principally explained by higher salesvolume of 5.8% and price adjustments during the period, and by the effect upontranslation of figures. Sales volume of Coca-Cola soft drinks in 2008 grew 5.8%from 2007, amounting to 120.2 million unit 

 

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cases of soft drinks sold, driven by theincrease in salaries and private consumption observed during the period alongwith launchings of *Cepita Light*and *Cepita 100% Jugo de Naranja* that tookplace during August of 2008.

 

Netsales of PET packaging in Argentina were Ch$13,077 million in 2008,representing an increase of 27.8% compared to 2007.

 

***Cost of Sales***

 

Costof sales were Ch$459,825 million in 2008, representing 55.5% of net sales,compared to Ch$373,927 million, or 55.2% of net sales in 2007. The increase incost of sales as a percentage of net sales in 2008 was principally due to (i) increasedconcentrate costs in the Brazilian and Argentine franchises resulting fromhigher prices and in Chile due to the incidence factor; (ii) increasedlabor costs in Chile and Argentina; and (iii) increased depreciation inthe three franchises.  All of which waspartially offset by a lower price for sugar in Chile and Brazil resulting fromnegotiations with the suppliers. In Chile cost of sales per unit case remainedstable.  In Brazil, cost of sales perunit case increased 27.5%, mainly due to the effect upon translation of figures,increased depreciation and an increase in the price of certain rawmaterials.  All of these factors werepartially offset by the lower price of sugar and a 6.5% average appreciation ofthe Brazilian *real* during theyear, resulting in a positive impact over the costs of U.S. dollar-denominatedraw materials.  In Argentina, cost ofsales per unit case increased 38.4% mainly explained by increased costs ofconcentrate (as a result of price increases), sugar and PET resin, higher laborcosts and the effect upon translation of figures.

 

Forour Chilean operations, cost of sales represented 56.5% of Chilean net salesfor 2008 and 55.6% for 2007. For our Brazilian operations, cost of salesrepresented 53.3% of Brazilian net sales in 2008, compared to 52.9% in 2007.For the Argentine operations, cost of sales represented 59.2% of Argentine netsales in 2008, compared to 60.6% in 2007.

 

***Gross Profit***

 

Dueto the aforementioned, gross profit in 2008 increased by 21.3%, reachingCh$367,988  million, or 44.5% of netsales, compared to Ch$303,480 million, or 44.8% of net sales in 2007.

 

***Administrative and Selling Expenses***

 

Sellingand administrative expenses amounted to Ch$232,501 million in 2008, thisrepresented 28.1% of net sales for 2008 and a 28.7% growth with respect to theCh$180,599 million in 2007, that represented 26.7% of net sales for that year.SG&A increased as a result of higher volumes, a one-time effect over laborcosts and increased freight fees, which rose due to higher labor costs and fuelprices as well as road blockages in Argentina due the agricultural workers’strike. In addition these expenses were impacted by the effect upon translationof figures of our operations in Brazil and Argentina, and increased advertisinginvestments in our Argentine operation.

 

Asa percentage of net sales, the Company’s Chilean operations recorded sellingand administrative expenses of 22.4% in 2008 compared to 21.1% in 2007. Sellingand administrative expenses in our Brazilian operations were 30.2% in 2008compared with 29.4% in 2007 and the selling and administrative expenses in ourArgentine operations were 30.0% in 2008 compared with 29.0% in 2007.

 

InChile, selling and administrative expenses in 2008 increased by 10.2%, inBrazil 29.6%, and in Argentina 55.4% from 2007. These higher selling andadministrative expenses are, in general terms, explained by increases infreight distribution expenses as a result of greater fuel prices and highervolumes. Higher selling and administrative expenses in Argentina were also dueto increases in wages due to government decrees and strong pressures from laborunions. Higher selling and administrative expenses in Brazil and Argentina werealso impacted by the figure conversion effect, given the higher averageappreciation of the real and Argentine peso over the end of period Chileanpeso.

 

***Operating Income***

 

Asa consequence of the aforementioned, operating income increased 10.3% in 2008,amounting to Ch$135,487 million, or 16.4% of net sales, compared to Ch$122,881million, or 18.1% of net sales in 2007.

 

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***Non-operating Income (Expense), Net***

 

Thefollowing table sets forth, for the periods indicated, the items ofnon-operating income (expense), net:

 
| ** **                                       | ** ** | **As of December 31,** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|
| ** **                                       | ** ** | **2008**                    | ** ** | **2007** | ** ** |
| ** **                                       | ** ** | **MCh$**                    | ** ** | **MCh$** | ** ** |
| Financial income                                 |       | 11,611                      |       | 24,402 |   |
| Share of income from affiliated companies        |       | 1,836                       |       | 794 |   |
| Other non-operating income                       |       | 6,204                       |       | 13,069 |   |
| Amortization of goodwill                         |       | (7,437                      | )          | (6,919 | ) |
| Financial expenses                               |       | (26,942                     | )          | (13,237 | ) |
| Other non-operating expenses                     |       | (16,054                     | )          | (10,092 | ) |
| Price-level restatement and exchange gain (loss) |       | 12,602                      |       | (15,443 | ) |
|                                             |       |                        |       |   |   |
| Non-operating income (expense), net              |       | (18,180                     | )          | (7,426 | ) |

 

Non-operatingincome (expense), net, was a loss of Ch$18,180 million in 2008, compared to aloss of Ch$7,426 million in 2007, representing a decrease of 144.8% in 2008compared to 2007. This increased loss in the non-operating result line is bestexplained by:

 

·                  Financial Expense:  Strongly affected by a negative variationbasically resulting from losses in hedging operations (a 28.1% devaluation ofthe Chilean peso during 2008 compared to the 6.7% revaluation recorded during2007.)

·                  Price Level Restatement: Resulted in profitscompared to a loss during 2007, mainly due to a higher exchange rate over ourU.S. dollar asset position compensating the previously mentioned factor.

·                  Other Non-Operating Income/Expenses:  Resulted in a higher loss compared to theprevious period given that provisions were reversed and taxes were recoveredduring 2007, which did not occur during 2008.

 

***Income Taxes***

 

Incometaxes in 2008 decreased 13.7% to Ch$24,667 million compared to Ch$28,589million in 2007. The decrease is principally explained by: Deferred tax incomeresulting from lower future income tax due to the restatement of liabilities inUS Dollars in Brazil.  The positiveeffect results from higher exchange rate differences charged to future incometax as a result of the devaluation of the Brazilian *real*during 2008.

 

***Net Income***

 

Asa result of the aforementioned, net income in 2008 was Ch$92,655 million,representing 11.3% of net sales and an increase of 6.7% compared to net incomeof Ch$86,821 million in 2007.

 

**Impact of Inflation**

 

UnderChilean GAAP, we are required to restate non-monetary assets and liabilities,UF- and foreign currency-denominated assets and liabilities, shareholders’equity and income and expense accounts, to reflect the effect of variations inthe purchasing power of the Chilean peso. However, Chilean peso-denominatedmonetary assets and liabilities are not restated, so inflation has the adverseeffect of diminishing the purchasing power of a company’s monetary assets,which are not price-level indexed, and has the positive effect of reducing thereal value of monetary liabilities. See Note 1(c) of the notes to theConsolidated Financial Statements.

 

Non-monetaryassets and liabilities, shareholders’ equity and income and expense accountsare generally restated using the Chilean consumer price index, based on the “priormonth rule” in which inflation adjustments are based on the consumer priceindex at the end of the month preceding the period end. Monetary assets andliabilities in UF and foreign currency are restated at period-end value of UFand exchange rates, respectively.

 

Price-levelrestatement can have a significant effect on our net income. Price-levelrestatement for any period will primarily depend on the amount of local andforeign currency- denominated monetary assets and liabilities and the effect ofinflation and the foreign exchange rate on such assets and liabilities. Periodsof both moderate inflation and depreciation of 

 

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theChilean peso against the U.S. dollar will tend to result in a modest amount ofprice-level restatement. Conversely, the real appreciation of the Chilean pesogenerally leads to a high amount of price-level restatement. Given theunpredictable nature of the foreign exchange markets and, to a lesser extent,inflation, there can be no assurance that price-level restatement will continueto be an insignificant component of net income or that it will not result inincome statement expense in the future.

 

Duringthe third quarter of 1998, Technical Bulletin N° 64 which required toaccount all investments outside Chile in U.S. dollars. This methodology has aneffect on results for the period and requires that the exchange rate differencebe recorded in a sub-account of shareholders’ equity reserve.

 

Thefollowing table sets forth, for the periods indicated, variations among theconsumer price index, UF and U.S. dollar:

 
| ** **                     | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------|------------|--------------------------------------------|------------|
| ** **                     | ** ** | **2009**                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
|                           |       |                                       |       |   |   |   |   |
| Consumer price index variation |       | (2.3                                       | )%         | 8.9 | % | 7.4 | % |
| UF variation                   |       | (2.4                                       | )%         | 9.3 | % | 7.0 | % |
| U.S. dollar variation          |       | (20.3                                      | )%         | 28.1 | % | (6.7 | )% |

 

Theeffects of price-level restatement are summarized below:
| ** **                                        | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------------------|------------|----------------------------------|------------|
| ** **                                        | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                        | ** ** | **MCh$**                         | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| Shareholders’ equity                         |       | 7,860                            |       | (20,220 | ) | (16,830 | ) |
| Liabilities                                       |       | 2,023                            |       | (8,917 | ) | (10,476 | ) |
| Property, plant and  equipment                    |       | (2,367                           | )          | 8,823 |   | 6,511 |   |
| Other assets                                      |       | (6,934                           | )          | 21,146 |   | 18,207 |   |
| Balance sheet adjustments                         |       | 582                              |       | 832 |   | (2,588 | ) |
| Income statement  adjustments                     |       | (36                              | )          | (2,874 | ) | (2,246 | ) |
| Foreign exchange (loss)  gain                     |       | (8,864                           | )          | 14,644 |   | (10,609 | ) |
| Price-level restatement  and exchange (loss) gain |       | (8,318                           | )          | 12,602 |   | (15,443 | ) |

 

**Impact of Foreign Currency Fluctuations**

 

InChile we had losses of Ch$8,864 million in 2009 due to the appreciation of theChilean peso, compared to a positive impact of foreign currency fluctuations in2008 in the amount of approximately Ch$14,644 million, due to our net assetposition in U.S. dollars amounting to a total of approximately US$86 million.In Argentina and Brazil we recognized earnings amounting in the aggregate toCh$5,372 million in 2009 and losses amounting to Ch$4,011 million in 2008.These resulted from currency conversion undertaken in our financial statementsas of December 31, 2009 and 2008, in accordance with the methodology setforth in Technical Bulletin No. 64 issued by the Chilean Institute ofAccountants, which are reflected on our consolidated statements of income inother non-operating income.

 

Weuse hedge agreements, including cross-currency swaps and forwards, to protectagainst foreign currency risk. In 2007, 2008 and 2009 these agreementspartially offset the effects of the variation of the Chilean peso exchangerate, whose results are recorded in financial income or expense in theconsolidated statements of income. For further information about theinstruments we use to protect against foreign currency risk, see “Item 11.Quantitative and Qualitative Disclosures about Market Risk—Foreign CurrencyRisk.”

 

**Impact of Governmental Policies**

 

Ourbusiness is dependent upon the economic conditions prevailing in our countriesof operation. Various governmental economic, fiscal, monetary and politicalpolicies, such as those related to inflation or foreign exchange, may affectthese economic conditions, and in turn may impact our business. Thesegovernment policies may also affect investments by our shareholders.

 

Fora discussion of political factors and governmental, economic, fiscal andmonetary policies that could materially affect investments by U.S. shareholdersas well as our operations, please refer to “Item 3. Key Information—RiskFactors” and “Item 10. Additional Information”.

 

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**B.****           ****Liquidityand Capital Resources**

 

***Capital Resources, Treasury andFunding Policies***

 

Ourprincipal source of financing comes from our operations which historically havebeen  sufficient. Cash generation isdesignated to finance working capital and capital expenditure requirements.Cash surplus has been utilized to pay dividends. The main sources to financefuture strategic and geographic expansion plans include (i) public equityofferings; (ii) borrowings from commercial banks, both internationally andin the local markets where we have operations; and (iii) debt offerings inthe Chilean and foreign capital markets.

 

Thereare no restrictions to transfer funds among our operating subsidiaries.We havetransferred funds from Argentina to Chile through capital reductions.  During 2007, 2008 and 2009 we receiveddividends from our subsidiaries in Argentina and Brazil, and we also expect toreceive them in 2010.

 

Ourmanagement believes that, through these sources, we have sufficient financialresources available to maintain our current operations and provide for ourcurrent capital expenditure and working capital requirements, scheduled debtpayments, interest and income tax payments and dividends to shareholders. Theamount and frequency of future dividends to our shareholders will be determinedby the General Shareholders’ Meeting upon the proposal of our board ofdirectors in light of our earnings and financial condition at such time, and wecannot assure you that dividends will be declared in the future, except for theminimum 30% of annual profits required by Chilean law.

 

Ourboard of directors has been empowered by our shareholders to define ourfinancing and investment policies. Our bylaws do not define a strict financingstructure, nor do they limit the types of investments we may make.Traditionally, we have preferred to use our own resources to finance ourinvestments.

 

Ourfinancing policy is that each subsidiary should finance its own operations.From this perspective, each subsidiary’s management must focus on cashgeneration and should establish clear targets for operating income, capitalexpenditures and levels of working capital. These targets are reviewed on amonthly basis to ensure that their objectives are met. Should increasedfinancing needs arise, either as a result of a cash deficit or to takeadvantage of market opportunities, our policy is to prefer local financing toallow for natural hedging. If local financing conditions are not acceptable,because of costs or other constraints, Andina will provide financing.

 

Ourcash surplus policy is that Andina invests any cash surplus in a portfolio ofinvestment grade securities until such time as our board of directors makes afinal decision as to the disposition of the surplus.

 

Derivativeinstruments are utilized only for business purposes, and never for speculativepurposes. Forward currency contracts are used to cover the risk of localcurrency devaluation relative to the U.S. dollar in an amount approximatelyequal to our budgeted purchases of U.S. dollar-denominated raw materials.Depending on market conditions, instead of forward currency contracts, fromtime to time we prefer to utilize our cash surplus to purchase raw materials inadvance to obtain better prices and a fixed exchange rate.

 

***Investing Activities***

 

Additionsto property, plants and equipment during 2009 totaled Ch$49,763 million.Capital expenditures during 2009 were funded with cash flows from operations.

 

AtDecember 31, 2009, we had no material commitments for the purchase ofcapital assets other than those related to normal replacement of equipment. Ourmanagement anticipates that additions to property, plant and equipment in 2010will be in the range of US$170 million and plans to fund such additions throughcash flows from operations.

 

Webelieve that cash flow generated by operations, cash balances, available linesof credit, including lines of credit from suppliers, and borrowings from thirdparties, are currently sufficient to meet our working capital, debt service andcapital expenditure requirements.

 

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***Financing Activities***

 

Asof December 31, 2009, we had Ch$132,686 million invested in time depositsand other short-term investments.  As ofthat date, we had available short-term credit lines in an amount equivalent toCh$76,259 million. The aggregate unused portion of such lines of credit at thatdate was equivalent to Ch$75,448 million.

 

Ourunused sources of liquidity include 14 lines of credit. In Chile, we had theequivalent of Ch$12,404 million in credit available from three separate lines.In Brazil, we had the equivalent of Ch$44,104 million in credit available withsix lines. In Argentina, we had the equivalent of Ch$19,750 million in creditavailable with five lines.

 

***Liabilities***

 

Forthe period ending December 31, 2009, our total liabilities, excludingminority interest, were Ch$248,664 million, representing a 3.2% decreasecompared to December 31, 2008. The decrease in total liabilities resultedprincipally from a reduction in short and long-term bond debt and bankborrowings, partially offset by higher accounts payable withholdings, anddeferred income taxes. As of December 31, 2009, our long term liabilitiesincluded (i) long-term bank debt of Ch$201 million, (ii) long-termbond debt of Ch$73,484 million, (iii) long-term accounts payable  of Ch$7 million, a (iv) long term notesand accounts payable to related companies of Ch$2,566 million, (v) longterm deferred taxes of Ch$18,487 million, and (vi) other long-term accruedliabilities and provisions of Ch$26,636 million, for a total of Ch$121,380million of long-term liabilities in 2009 compared to total long-termliabilities of Ch$119,115 million as of December 31, 2008.

 

Ourshort term liabilities, as of December 31, 2009 included(i) short-term bank debt of Ch$373 million, (ii) current portion oflong-term bank liabilities of Ch$242 million, (iii) current portion oflong-term bond debt of Ch$3,118 million, (iv) trade accounts payable ofCh$63,211 million, (v) notes payable to related companies of Ch$13,758million, and (vi) other short-term liabilities, principally provisions,withholdings and income tax payable, for Ch$46,582 million, for a total ofCh$127,284 million of short-term liabilities in 2009 compared to totalshort-term liabilities of Ch$130,355 million as of December 31, 2008.

 

Asof December 31, 2009, our bond liabilities had a weighted average interestrate of 6.50% while our bank liabilities had a weighted average interest rateof 9.37%.

 

**Summary of Significant Debt Instruments**

 

Thefollowing is a brief summary of our significant long-term indebtednessoutstanding as of December 31, 2009:

*Unsecured Notes*. On October 1, 1997 weentered into an indenture pursuant to which we issued three series of bonds.One of which expired during in 2007.  Theindenture imposes certain restrictions on liens, sale andleaseback transactions, assets sales and subsidiary indebtedness andcertain conditions in the event of merger or consolidation.

 

Thetwo series of bonds issued in 1997 under this indenture are the following:

·                  US$100 millionof 7.625% Unsecured Notes due 2027; and

·                  US$100 millionof 7.875% Unsecured Notes due 2097.

 

TheCompany has repurchased, through our subsidiary Abisa Corp., for cash at parvalue the notes outstanding and the following notes were tendered:

·                  US$100 millionof the 7.625% Unsecured Notes due 2027; and

·                  US$100 millionof the 7.875% Notes due 2097.

 

During2001, Andina completed a local bond placement in the Chilean capital markets oftwo series of bonds, one of which expired during 2008. The outstanding seriesas of December 31, 2009 is the following :

·                  UF3.7 million series of bonds due 2026, with annual interest rate overinflation of 6.50

 

Thebond issue and placement in the Chilean market is subject to the followingrestrictions:

·                  Andina mustmaintain a leverage ratio, defined as total debt/consolidated equity, of lessthan 1.20%. For purposes of calculating the leverage ratio, total debt includes(i) short-term bank liabilities, (ii) the current portion oflong-term bank liabilities, (iii) short-term liabilities and promissorynotes, (iv) the current portion of bonds payable, (v) long-

 

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termbank liabilities, and (vi) long-term bonds payable. Consolidated equitymeans total shareholders’ equity plus minority interest.

·                  Andina mustmaintain consolidated assets free of any pledge, mortgage or other encumbrancesfor an amount equal to at least 1.30 times the consolidated liabilities thatare not guaranteed by the investee.

·                  Andina may notlease, sell, assign or dispose of the franchise territory in Chile.

·                  Andina may notlease, sell, deliver or dispose of its franchise territory in Argentina or Brazil,as long as either territory represents more than 40% of Andina’s consolidatedoperating cash flows.

 

**C.****                    ****Research and development, patents and licenses**

 

Giventhe nature of the business and the support provided by TCCC  as franchisor to its bottlers, the Company’sresearch and development expenses are not meaningful. For more information onpatents and licenses, see “Patents and Licenses”.

 

**D.****                    ****Trend Information**

 

Ourresults will likely continue to be influenced by changes in the level ofconsumer demand in the countries in which we operate, resulting fromgovernmental economic measures that are or may be implemented in the future.Additionally, principal raw materials used in the production of soft drinks,such as sugar and resin, may experience price increases in the future. Suchprice increases may affect our results if we are unable to pass the costincreases on to the sales price of our products due to depressed consumerdemand and/or heightened competition.

 

Increasedcompetition from low-price brands is another factor that could limit ourability to grow, and thus negatively affect our results.

 

Finally,exchange rate fluctuations, in particular the potential devaluations relativeto the U.S. dollar of local currencies in the countries in which we operate,may adversely affect our results because of the impact on the cost of U.S.dollar-denominated raw materials and the conversion of monetary assets.

 

**E.****                      ****Off-Balance Sheet Arrangements**

 

Wedo not have any off-balance sheet arrangements.

 

**E.****             ****ContractualObligations**

 

Thefollowing table summarizes our contractual obligations and commercialcommitments as of December 31, 2009:

 
| ** **                            | ** ** | ** **                                                                                             | ** ** | **Payments Due by Period** | ** ** |
|---------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                            | ** ** | ** **                                                                                             | ** ** | **Years**                  | ** ** |
| ** **                            | ** ** | **Total**                                                                                              | ** ** | **Less than  1 Year** | ** ** | **1-3  Years** | ** ** | **3-5  Years** | ** ** | **More than  5 Years** | ** ** |
| ** **                            | ** ** | **(in millions of constant Ch$ as of December 31, 2009)** | ** ** |
| ** **                            | ** ** | **MCh$**                                                                                               | ** ** | **MCh$**                   | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| Long-term debt(1)                     |       | 378                                                                                                    |       | 378                        |       | — |   | — |   | — |   |
| Short-term debt                       |       | 485                                                                                                    |       | 267                        |       | 218 |   | — |   | — |   |
| Bonds payable(2)                      |       | 124,467                                                                                                |       | 7,543                      |       | 15,087 |   | 15,087 |   | 86,750 |   |
| Operating lease  obligations          |       | 2,121                                                                                                  |       | 2,121                      |       | — |   | — |   | — |   |
| Purchase obligations                  |       | 6,193                                                                                                  |       | 5,349                      |       | 844 |   | — |   | — |   |
| Other short and long term obligations |       | 4,957                                                                                                  |       | 2,704                      |       | 2,253 |   | — |   | — |   |
|                                  |       |                                                                                                   |       |                       |       |   |   |   |   |   |   |
| **Total contractual obligations**     |       | 138,601                                                                                                |       | 18,362                     |       | 18,402 |   | 15,087 |   | 86,750 |   |

 

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*(1) See Notes 15(b) and 16 of the Notes to the ConsolidatedFinancial Statements for additional information.*

*(2) See Note 17 of the Notes to the Consolidated FinancialStatements for additional information.*

 

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Thefollowing table presents future expirations for the remaining long termliabilities. These expirations have been made based on accounting estimatesbecause the liabilities do not have specific dates of future payment asallowance for severance indemnities, contingencies, deferred taxes andliabilities for container guarantees are included.

 
| ** **                                                           | ** ** | ** **                                                                               | ** ** | **Maturity**       | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                           | ** ** | ** **                                                                               | ** ** | **Years**          | ** ** |
| ** **                                                           | ** ** | **Total**                                                                                | ** ** | **1-3 Years** | ** ** | **3-5 Years** | ** ** | **More than  5 Years** | ** ** |
| ** **                                                           | ** ** | **(in million constant Ch$ as of December 31, 2009)** | ** ** |
| ** **                                                           | ** ** | **MCh$**                                                                                 | ** ** | **MCh$**           | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| Provisions                                                           |       | 13,260                                                                                   |       | 5,386              |       | — |   | 7,874 |   |
| Deferred taxes                                                       |       | 22,629                                                                                   |       | 18,487             |       | — |   | 4,142 |   |
| Other long-term liabilities                                          |       | 9,698                                                                                    |       | 6,972              |       | 909 |   | 1,818 |   |
|                                                                 |       |                                                                                     |       |               |       |   |   |   |   |
| Total long-term liabilities not included in  contractual obligations |       | $                                                                                        | 45,587     |               | $          | 30,845 |   | $ | 909 |   | $ | 13,833 |   |
|                                                                      |            |                                                                                          |            |                    |            |  |  |  |  |  |  |  |  |

 

**U.S. GAAP Reconciliation**

 

Theprincipal differences between Chilean GAAP and U.S. GAAP as they relate to usare (i) inflation accounting under Chilean GAAP, which has not been reversedin the reconciliation to U.S. GAAP, (ii) the revaluation and depreciationof certain property, plant and equipment on the basis of a technical appraisal,(iii) different goodwill amounts and differences in amortization forgoodwill, (iv) the treatment of mandatory minimum dividends,(v) difference in accounting for investments in related companies andjoint ventures, (vi) the accounting for deferred income taxes,(vii) the treatment of investment securities, (viii) the accountingfor the translation adjustment of foreign investments and translation offinancial statements of non-Chilean operations; (ix) the accounting forderivative instruments, and (x) the reversal of impairment loss on fixedassets and the respective depreciation which is still in effect under ChileanGAAP. Note 30 of the notes to the Consolidated Financial Statements provides adescription of the principal differences between Chilean GAAP and U.S. GAAP asthey relate to us and a reconciliation to U.S. GAAP of net income and shareholders’equity.

 

Netincome after reconciliation to U.S. GAAP was Ch$4,270 million higher in 2007,Ch$7,503 million higher in 2008, and Ch$6,758 million higher in 2009, in eachcase than net income as reported under Chilean GAAP for each respective year.See Note 30(o) of the notes to the Consolidated Financial Statements.Under Chilean GAAP, shareholders’ equity at December 31, 2008, wasCh$338,285 million, compared to Ch$359,495 million under U.S. GAAP,representing a difference of 6.3%. Under Chilean GAAP, shareholders’ equity asof December 31, 2009 was Ch$336,579 million, compared to Ch$364,881million under U.S. GAAP, representing a difference of 8.4%.

 

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

 

**A.****           ****Directorsand Senior Management**

 

Pursuantto Chilean law, we are managed by a group of executive officers under thesupervision of our board of directors. The Company’s operations in Chile,Brazil, and Argentina report to the Corporate Office.

 

**PrincipalOfficers**

 

Thefollowing table includes information regarding our senior executives as of December 31,2009:

 
| **Name**                | ** ** | **Title**                              | ** ** | **Biography**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-------------------------|------------|----------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **              | ** ** | ** **                             | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Jaime  García      |       | Chief  Executive Officer               |       | Joined  the Company in 1977, as head of the research-studies department. In 1978, he  was appointed general manager of Embotelladora Talca (today part of Embonor  S.A.). In 1979, he was appointed general manager of Embotelladora Concepción  (today part of Embonor S.A.). In 1983, he became financial manager of Andina,  a position he held until 1987, when he was appointed general manager of ISASA  (a subsidiary of Andina). In 1990, he was appointed general manager of  Andina, a position he held until 1993, when he became our chief executive  officer. 

Date  of birth: November 24, 1953                                                                                                                                        |
|                    |       |                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Renato  Ramírez    |       | Chief  Operating Officer               |       | Joined  the Company in 1979, as general manager of Chilean soft drink operations. He  began working as head of the budget and costs department and, in 1980was  appointed planning assistant manager. From January 1988 to  August 1990, he was the commercial manager of Embotelladora Williamson  Balfour. From September 1990 to October 1992, he served as  marketing manager for Compañía de Teléfonos de Chile. In August 1993, he  returned to Andina as commercial manager, a position he held until 1997. In  March of 1998, he became general manager of the Chilean Soft Drink Operation,  until March 2009 when he was appointed as Chief Operating Officer. 

Date  of birth: July 27, 1952 |
|                    |       |                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Michael  Cooper         |       | Vice  Presidente, Business Development |       | Joined  the Company in 2000, as chief operating officer. In 1989, he was appointed  chief executive officer of Inchcape Coca-Cola bottling operations, with  businesses in Chile, Peru and Russia. In 1999, Embonor S.A. bought Inchcape  Chilean and Peruvian bottling operations and he became chief executive  officer of the consolidated entity. In March 2009 he was appointed Vice  President of Business Development at Andina’s Corporate Office. 

Date  of birth: May 15, 1948                                                                                                                                                                                                                                                        |
|                    |       |                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Osvaldo  Garay.         |       | Chief  Financial Officer               |       | Joined  the Company in 1997, as controller of Andina. He was appointed as our chief  financial officer on October 31, 2002. Prior to joining Andina, he held  a similar position with Grupo Claro. 

Date  of birth: April 20, 1948                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                    |       |                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Jaime  Cohen            |       | Chief  Legal Officer                   |       | Joined  the Company in 2008, as chief legal officer. Prior to joining Andina, he held  similar position at Socovesa S.A. since 2004. Prior to that he formed part of  the legal division of Citibank since the year 2000. He also was an attorney  at the law offices of Cruzat, Ortuzar & Mackenna, Baker &  McKenzie from 1996 until 1999. He began his professional career in 1993 as  lawyer at Banco de A. Edwards. 

Date  of birth: October 14, 1967                                                                                                                                                                                                                                                                              |
|                    |       |                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Raúl  Ramírez |       | Chief  Technical Officer               |       | Joined  the Company in 1969 as deputy manager of operations from August 1969  until August 1995. In 1995, he was promoted to corporate manager of  engineering, a position he held until December 1996. In  January 1997, he was transferred to our operations in Argentina as  technical manager until July 2000. Since 2000 until the present date he  holds the position of chief technical officer. 

Date  of birth: July 24, 1944                                                                                                                                                                                                                                                                                           |

 

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| **Name**                 | ** ** | **Title**                                               | ** ** | **Biography**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                     |       |                                                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Pablo  Court             |       | Chief  Human Resources and CSR Officer                  |       | Joined  the Company in 2008 as Chief Human Resources and CSR Officer . Prior to  joining Andina he was strategic planning and human resources corporate  officer at Indura S.A. from 1998. Before that he was the human resources  manager of Watt’s Alimentos S.A. (from 1993-2007); human resources manager of  Pesquera San José S.A. (from 1989 — 1993); and human resources manager of  Compañía Minera Disputada Las Condes (1986-1989). He did business consulting  since 1980. 

Date  of birth: September 22, 1956                                                                                                                                                                                                                                               |
|                     |       |                                                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| German  Garib            |       | Chief  Information Officer                              |       | Joined  the Company in 1998, as chief information officer. Prior to Andina, he was  the marketing manager of IBM Chile. 

Date  of birth: August 28, 1961                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                     |       |                                                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Abel  Bouchon            |       | General  Manager of Chilean Soft Drink Operation        |       | Joined  the Company in March 2009. Previously he worked for LAN during 13 years  where he served as general manager of the international business from 2008  until March 2009; from 1998 until 2007, he served as commercial manager  for the passenger business unit and manager of the international business  unit; he started working at LAN in 1996 as manager of the domestic business  unit. Prior to LAN, he worked for Booz, Allen & Hamilton, Inc.  in Buenos Aires, Argentina, where he did his MBA summer internship as an  associate in 1993, and then was appointed project manager from 1994 until  1995. He began his professional career in 1990 as an associate at The Chase  Manhattan Bank where he worked until 1992. 

Date  of birth : May 23, 1968 |
|                     |       |                                                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Ricardo  Gehrke          |       | General Manager ofRio de Janeiro Refrescos Ltda.        |       | Joined  the company in January 2008. He began his professional career in 1981 at  Esso Brasileira de Petróleo working in several areas, such as Finance,  Planning, Sales, Supply, Transportation and Distribution. In 1995 he was  appointed as Senior Counsel of European Affiliates of Exxon Company  International. In 1996 he returned to Esso Brasileira de Petróleo and held  several positions: Senior Counsel, Better Practices of Retail Operations,  Director of Retail Sales and also as President and Director of Fuels until  2004. From 2004 until 2007 he worked at the Gerdau Group as Chief Executive  Officer of Aços Longos Brasil and Member of the Executive Committee. 

Date  of Birth: July 6, 1957                                                   |
|                     |       |                                                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Alejandro  A. Feuereisen |       | General Manager ofEmbotelladora del Atlántico S.A. |       | Joined  the company in 1993. In August of 1998 he was appointed General Manager  of EDASA. From September 1995 to July 1998, he served as the  commercial manager of Embotelladora del Atlántico S.A. From 1993 to 1995, he  was a sales manager at Andina and, from 1981 to 1992, an officer at Citibank,  Santiago de Chile. During the last three years of his tenure at Citibank, he  was vice president of the International Financial Institutions Group. From  1977 to 1980, he served as financial analyst at Leasing Andino S.A., a  subsidiary of Banco de Chile. 

Date  of birth: May 19, 1953                                                                                                                                                                     |
|                     |       |                                                    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Cesar  Vargas            |       | General  Manager of Vital S.A. and Vital Aguas S.A.     |       | Joined  the Company in 1978. Mr. Vargas began working as project engineer and  head of electric maintenance. In 1985, he was appointed head of the juice  division plant of Industrial Sud Andina S.A. in Santiago, a former subsidiary  of Andina, where he was subsequently promoted to deputy production manager of  the juice and mineral water division. In 1992, Vital S.A. was created and he  was appointed operations manager, a position that he held until 1998, when he  was appointed general manager. 

Date  of birth: May 26, 1957                                                                                                                                                                                                                                            |

 

**Boardof Directors**

 

Inaccordance with our bylaws, the board of directors must consist of sevenregular directors and seven alternate directors. Each director is assigned aspecific alternate director. The directors may or may not be shareholders andare elected for a term of three years subject to indefinite re-election. In thecase of Series A shares, it is necessary to have 14.29% of the totalshares represented in a shareholders’ meeting in order to elect one directorassuming there is 100% shareholder vote participation. In the case of series Bshares, it is necessary to have a total of 50.1% of the total sharesrepresented in a shareholders’ meeting to elect a director if it is alsoassumed that there is 100% shareholder vote participation. All members 

 

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ofthe board of directors are nominated and elected every three years by andduring the ordinary annual shareholders’ meeting. Cumulative voting is permittedfor the election of directors.

 

Inthe event of a vacancy, the designated alternate director fills the vacancy forthe remaining period of the director’s term. If the alternate director isunable or unwilling to serve, the board of directors may appoint a replacementto fill the vacancy, and the entire board of directors must be elected orre-elected at the next regularly scheduled shareholders’ meeting.

 

Themajority shareholders’ agreement for the election of directors is contained inInversiones Freire S.A.’s Shareholder Agreement and further explained onItem 7 “Major Shareholders and Related Companies”. In addition, pursuantto the terms and conditions of the Deposit Agreement, if no instructions arereceived by The Bank of New York Mellon, as depositary, it shall give adiscretionary proxy to a person designated by the chairman of the board ofdirectors of Embotelladora Andina with respect to the shares or other depositedsecurities that represent the ADRs.

 

Asof December 31, 2009, our board of directors consisted of the followingdirectors and alternate directors:

 
| **Name**                                 | ** ** | **Title**                                | ** ** | **Information**                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------------------------------|------------|------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                               | ** ** | ** **                               | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                  |
| Juan  Claro                              |       | Chairman  of the Board of Directors      |       | Has  been a member of the board of directors since April 2004.

Principal  occupation: Entrepreneur

Other  directorships: Pesquera Friosur, Melón S.A., , Antofagasta Minerals S.A.,  Antofagasta PLC, Empresas CMPC S.A.,

Red Televisa Chilevisión S.A., Entel Chile S.A.,  Energía Andina y Energía Coyanco.

Date  of birth: November 7, 1950                            |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| Gonzalo  Said (1)                        |       | Vice  Chairman of the Board of Directors |       | Has  been a member of the board of directors since April 1993.

Principal  occupation: General manager and director of Newport Ltda.

Other  directorships: BBVA Administradora General de Fondos S.A., Inmobiliaria  Don Aurelio Ltda., Telemercados Europa S.A. and Club Deportivo Palestino  S.A.D.P.

Date  of birth: October 16, 1964                                                   |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| José  Antonio Garcés, Jr. |       | Director                                 |       | Has  been a member of the board of directors since April 1992.

Principal  occupation: General manager of Inversiones San Andrés Ltda.

Other  directorships: Banvida S.A.; Inmobiliaria FFV S.A., Fundación Paternitas,  Viña Montes, Viña Garcés Silva Ltda., and USEC.

Date  of birth: March 1, 1966                                                                 |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| Arturo  Majlis                           |       | Director                                 |       | Has  been a member of the board of directors since April 1997.

Principal  occupation: Principal partner of the law offices of Grasty, Quintana, Majlis  y Compañía

Other directorships: Asesorías e Inversiones Til  Til S.A.; Asesorias e Inversiones MJS Ltda., Banchile Seguros de Vida and  Mathiesen Group.

Date  of birth: April 7, 1962                                  |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| Salvador  Said (1)                       |       | Director                                 |       | Has  been a member of the board of directors since April 1992.

Principal  occupation: Director of Said Holding Group

Other  directorships: Isapre Cruz Blanca S.A., Club Deportivo Palestino S.A.D.P., Parque  Arauco S.A , Edelpa S.A.,BBVA Administradora General de Fondos Mutuos, BBVA  Sociedad de Leasing Inmobiliario S.A., Endeavour Chile,

Date  of birth: September 16, 1964

  |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| Brian  J.Smith                           |       | Director                                 |       | Has  been a member of the board of directors since April 2009.

Principal occupation: President Coca-Cola de  Mexico

Other  directorships: Coca-Cola Embonor S.A.

Date  of birth: December 10, 1955                                                                                                                                                                                             |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| Heriberto  Urzúa (2)                |       | Director                                 |       | Has  been a member of the board of directors since April 2006.

Principal  occupation: Company directorships

Other  directorships: Agrícola Ariztía S.A.,

Inversiones Alsacia S.A., Hortifrut S.A.  Promoplan y Otros S.A., RELSA S.A., Forus S.A., La Polar S.A., Trefilados  Gerdau, Aceros Otero and Armacero S.A.

Date  of birth: November 28, 1962                              |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| Ernesto  Bertelsen                       |       | Alternate  Director to Juan Claro        |       | Has  been a member of the board of directors since April 2005.

Principal  occupation: Company directorships

Other  directorships: Banco BBVA and Factorline S.A.

Date  of birth: March 18, 1945                                                                                                                                                                                                |
|                                     |       |                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                        |
| José  María Eyzaguirre         |       | Alternate  Director to Gonzalo Said      |       | Has  been a member of the board of directors since April 2006.

Principal  occupation: Lawyer, Partner at Estudio Claro y Cia.

Date  of birth: May 22, 1962                                                                                                                                                                                                                                      |

 

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| **Name**                    | ** ** | **Title**                                                      | ** ** | **Information**                                                                                                                                                                                                                                                                                                                                                                              |
|-----------------------------|------------|----------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |       |                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                         |
| Cristian  Alliende          |       | Alternate  Director to Arturo Majlis                           |       | Has  been a member of the board of directors since April 2009.

Principal  occupation: General manager of Inmobiliaria Aconcagua S.A.

Other  directorships: Mar Adentro

Date  of birth: July 20, 1964                                                                                                                                                                            |
|                        |       |                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                         |
| Patricio  Parodi            |       | Alternate  Director to José Antonio Garcés, Jr. |       | Has  been a member of the board of directors since April 2005.

Principal  occupation: General manager Consorcio Financiero S.A. and subsidiaries

Other  directorships: Banmédica S.A.;, Help S.A.; Clínica Dávila S.A.; Sociedad  Punta del Cobre S.A.; Pacífico V Región S.A.; Maderas Condor S.A., and  Invernova S.A

Date  of birth: April 28, 1963 |
|                        |       |                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                         |
| José  Domingo Eluchans |       | Alternate  Director to Salvador Said                           |       | Has  been a member of the board of directors since April 2005.

Principal  occupation: Partner at José Domingo Eluchans Asesorías Limitada

Other  directorships: Banco BBVA and Envases del Pacífico S.A.

Date  of birth: August 6, 1953                                                                                                                          |
|                        |       |                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                         |
| Jorge  Hurtado              |       | Alternate  Director to Brian J. Smith                          |       | Has  been a member of the board of directors since January 2004.

Principal  occupation: Directing Partner of Agrícola y Comercial Yerbas Buenas S.A.

Other  directorships: CMPC Tissue S.A.; Vendomática S.A.; Trabajando.com Chile S.A.,  Adviser

Drilling  S.A., and Proemsa S.A.,

Date  of birth: March 25, 1946                                                  |
|                        |       |                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                         |
| Gonzalo  Parot (2)          |       | Alternate  Director to Heriberto Urzúa                    |       | Has  been a member of the board of directors since April 2009.

Principal  occupation: Director and consultant

Date  of birth: September 14, 1952                                                                                                                                                                                                                                 |

 

----

*(1)**               **SalvadorSaid is the cousin of Gonzalo Said .*

*(2)**               **Independentfrom controlling shareholder pursuant to Article 50 bis, paragraph 6 ofthe Chilean Public Company Law N° 18,045.*

 

**B.    Compensation**

 

**Compensationof Principal Officers**

 

TheCompany does not have any incentive plans other than salaries. The compensationsystem is a mixed one, composed by a base salary and participation, which arein accordance with each market and the competitive conditions of each one. ForGeneral Managers it also considers use of cash flow versus the budget andmarket share versus the established goals. Amounts are different depending oneach officer, position and/or responsibility, but it is applicable to all ofthe Company. For the year ended December 31, 2009, compensation paid outto the principal officers of Embotelladora Andina S.A. amounted to Ch$4,422million (Ch$3,949 million in 2008).   Ofthe Ch$4,422 million paid to the main officers of Embotelladora Andina S.A.,the variable portion was 43% and for the period ended December 31, 2008 ofthe Ch$3,949 million paid to the main officers of Embotelladora Andina S.A.,the variable portion was 47%. Severance payments to former managers or formerprincipal officers for the period ended December 31, 2009 amounted toCh$153.9 million.

 

Wedo not make available to the public information as to the compensation of ourexecutive officers on an individual basis, as disclosure of such information isnot required under Chilean law.

 

**Compensationof Directors**

 

Directorsand alternate directors receive an annual fee for attendance to meetings of theboard of directors and committees. The amounts paid to each director andalternate director for attendance at board meetings varies in accordance withthe position held and the period of time during which such position is held.Total compensation paid to each director or alternate director during 2009,which was approved by our shareholders, was as follows:

 
| ** **                                   | ** ** | **Directors’** | ** ** | **Executive** | ** ** | **Directors’** | ** ** | **(SOX) Audit** | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|---------------------|------------|---------------|------------|---------------------|------------|-----------------|------------|------------|------------|
| ** **                                   | ** ** | **Compensation**    | ** ** | **Committee** | ** ** | **Committee**       | ** ** | **Committee**   | ** ** | **Total**  | ** ** |
| ** **                                   | ** ** | **ThCh$**           | ** ** | **ThCh$**     | ** ** | **ThCh$**           | ** ** | **ThCh$**       | ** ** | **ThCh$**  | ** ** |
|                                         |       |                |       |          |       |                |       |            |       |       |       |
| Juan Claro González                     |       | 48,727              |       | 48,727        |       | 2,514               |       | 2,514           |       | 102,482    |       |
| Gonzalo Said Handal                          |       | 48,727              |       | 48,727        |       | —              |       | —          |       | 97,455     |       |
| José Antonio Garcés Silva (Junior) |       | 48,727              |       | 48,727        |       | —              |       | —          |       | 97,455     |       |

 

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| ** **                                               | ** ** | **Directors’** | ** ** | **Executive** | ** ** | **Directors’** | ** ** | **(SOX) Audit** | ** ** | ** **  | ** ** |
|----------------------------------------------------------|------------|---------------------|------------|---------------|------------|---------------------|------------|-----------------|------------|-------------|------------|
| ** **                                               | ** ** | **Compensation**    | ** ** | **Committee** | ** ** | **Committee**       | ** ** | **Committee**   | ** ** | **Total**   | ** ** |
| ** **                                               | ** ** | **ThCh$**           | ** ** | **ThCh$**     | ** ** | **ThCh$**           | ** ** | **ThCh$**       | ** ** | **ThCh$**   | ** ** |
| Arturo Majlis Albala                                     |       | 48,727              |       | 48,727        |       | —              |       | —          |       | 97,455      |       |
| Salvador Said Somavía                               |       | 48,727              |       | 48,727        |       | 3,776               |       | 3,776           |       | 105,006     |       |
| Brian J. Smith                                           |       | 36,578              |       | —        |       | —              |       | —          |       | 36,578      |       |
| Heriberto Francisco Urzúa  Sánchez             |       | 48,727              |       | —        |       | 4,606               |       | 4,606           |       | 57,940      |       |
| Ernesto Bertelsen Repetto                                |       | 19,491              |       | —        |       | —              |       | —          |       | 19,491      |       |
| José María Eyzaguirre  Baeza                   |       | 19,491              |       | —        |       | —              |       | —          |       | 19,491      |       |
| Patricio Parodi Gil                                      |       | 19,491              |       | —        |       | —              |       | —          |       | 19,491      |       |
| Cristián Alliende  Arriagada                        |       | 14,631              |       | —        |       | —              |       | —          |       | 14,631      |       |
| José Domingo Eluchans  Urenda                       |       | 19,491              |       | —        |       | —              |       | —          |       | 19,491      |       |
| Jorge Hurtado Garretón                              |       | 19,491              |       | —        |       | —              |       | —          |       | 19,491      |       |
| Gonzalo Parot Palma                                      |       | 14,631              |       | —        |       | —              |       | —          |       | 14,631      |       |
| José Miguel Barros Van  Hövell Tot Westerflier |       | 4,860               |       | —        |       | —              |       | —          |       | 4,860       |       |
| Pedro Arturo Vicente  Molina                             |       | 4,860               |       | —        |       | —              |       | —          |       | 4,860       |       |
| James Robert Quincey  Blakstad                           |       | 12,149              |       | —        |       | —              |       | —          |       | 12,149      |       |
|                                                     |       |                |       |          |       |                |       |            |       |        |       |
| **Total  Gross Amounts**                                 | ** ** | **477,528**         | ** ** | **243,637**   | ** ** | **10,896**          | ** ** | **10,896**      | ** ** | **742,956** | ** ** |

 

Forthe year that ended on December 31, 2009, the aggregate amount ofcompensation we paid to all directors and executive officers as a group wasCh$5,165 million of which Ch$4,422 million was paid to our executive officers.We do not disclose to our shareholders or otherwise make available to thepublic information as to the compensation of our executive officers on anindividual basis. We do not maintain any pension or retirement programs for ourdirectors or executive officers. See “—Employees.”

 

**C.****           ****Board Practices**

 

Ourboard of directors has regularly scheduled meetings at least once a month, andextraordinary meetings are convened when called by the chairman or whenrequested by one or more directors. The quorum for a meeting of the board ofdirectors is established by the presence of an absolute majority of its regulardirectors, without taking alternate directors into consideration, unlessregular directors are absent. Resolutions are passed by the affirmative vote ofan absolute majority of those directors present at the meeting, with thechairman determining the outcome of any tie vote.

 

**ExecutiveCommittee**

 

AnExecutive Committee that proposes Company policies and is comprised by thefollowing Directors counsels the Company’s Board of Directors: Mr. ArturoMajlis Albala, Mr. José Antonio Garcés Silva (junior), Mr. GonzaloSaid Handal and Mr. Salvador Said Somavía, who were elected during theExtraordinary Board Session N°1031 held April 14, 2009. It is alsocomprised by the Chairman of the Board, Mr. Juan Claro González and by theChief Executive Officer, Mr. Jaime García Rioseco, who participate by ownright. This committee meets permanently throughout the year and normally holdsone or two monthly sessions.

 

**Directors’Committee**

 

Inaccordance with the requirements of Article 50 bis of Chilean Company LawN°18,046 in addition to Law N°19,705, and for the purpose of self regulationand to strengthen companies by incorporating more supervision over management’sactivities, during the year 2001 a Directors’ Committee was created.

 

Inaccordance with the Shareholders’ Meeting held April 14, 2009 andExtraordinary Board Session N°1031 held April 14, 2009 the followingDirectors were elected as members of this Committee: Mr. Juan ClaroGonzález, Mr. Salvador Said Somavía and Mr. Heriberto UrzúaSánchez.  Should any of the members beunable to attend a Committee session, their respective alternates will be:  Mr. Ernesto Bertelsen Repetto, Mr. JoséDomingo Eluchans Urenda and Mr. Gonzalo Parot Palma, respectively.

 

Theduties developed by this Committee during 2009, following the same categorization of faculties and responsibilitiesestablished by Article 50 bis of Company Law N°18,046 were thefollowing:

 

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·                  To examine the reports of external auditors and accountinspectors, accordingly, of the balance sheets and other financialstatements, presented by the administrators or liquidators of the Companyto the shareholders, and to take a position on such reports beforethey are presented to shareholders for their approval.

In 2009, these matters were addressed duringSessions: N°69 on January 27; N°71 on March 31; N°72 on April 28;N°75 on July 28; N°78 on October 27; and N°79 on November 24.

 

·                  To propose the External Auditors and Private Rating Agencies tothe Board of Directors that will then be submitted to the Shareholders’Meeting. In the event of disagreements with the Committee, the Board ofDirectors may make its own proposals and both will be submitted to theShareholders’ Meeting.

This matter was addressed during Session N°71 on March 31,2009.

 

·                  Examine information regarding the operations referred to by Articles 44and 89 and report on these operations. For detailed information regarding theseoperations, please refer to the table on Note N°7 of the Consolidated FinancialStatements included in the annual report.

In 2009, these matters were addressed duringSessions: N°70 on February 26; N°71 on March 31; N°76 on August 25;N°77 on September 29; N°78 on October 27; N°79 on November 24;and N°80 on December 22.

 

·                  Examine salary and compensation plans for Managers and PrincipalOfficers.

This matter was addressed during Session N°80 on December 22,2009.

 

·                  All other matters required by company bylaws or that may be required bythe Shareholders’ Meeting or by the Board of Directors. The following matterswere addressed during 2009:

 

·                  Review anonymous reports: In 2009 during Sessions: N°69 on January 27;N°70 on February 26; N°71 on March 31; N°72 on April 28; N°73 onMay 26; N°74 on June 30; N°75 on July 28: N°76 on August 25;N°77 on September 29; N°78 on October 27; N°79 on November 24;and N°80 on December 22.

·                  Review and approve 2008 Annual Report: Session N°71 on March 31.

·                  Review and approve 2008 20F: Session N°74 on June 30.

·                  Review contingencies:  SessionN°80 on December 22.

·                  2009 Operating Budget Directors’ Committee:  Session N°71 on March 31.

·                  Chair, Composition and Internal Regulations of the Audit Committeepursuant to the Sarbanes Oxley Act: Session N°74 on June 30.

·                  2009 Integrated Audit Plan and Limited Review: Session N°75 on July 28.

·                  Review fees for advisories on labor and tax matters in EDASA: SessionN°69 on January 27.

·                  Appoint Chairman and organize committees for the year 2009: SessionN°72 on April 28.

·                  Fulfill Rule 404 of the Sarbanes-Oxley Act: Session N°74 on June 30.

 

**Sarbanes-OxleyAudit Committee**

 

Inaccordance with NYSE and SEC requirements regarding compliance with theSarbanes-Oxley Act, the Board of Directors established the first AuditCommittee on July 26, 2005. This Audit Committee is renewed every year. Mr. JuanClaro, Salvador Said, and Heriberto Urzúa were elected as members of thisCommittee during a Special Board Session N° 1,031 on April 14, 2009.

 

DuringBoard Session N°1,034 on June 30, 2009, the Board accepted the resignationof Mr. Juan Claro González as Chairman of the Committee, because he nolonger complied with the requirements of the Sarbanes-Oxley Act to beconsidered as an independent director of this Committee. Consequently, theAudit Committee Charter was modified in order to adapt to the new criteriaestablished by the SEC in terms of composition and quorum and its final text iscontained in the Minutes of Board Session N°1,034. The members of thiscommittee are Mr. Juan Claro González, Mr. Salvador Said Somavía, andMr. Heriberto Urzúa Sánchez. It was determined that Mr. HeribertoUrzúa Sánchez complies with the independence standards set forth in theSarbanes-Oxley Act, SEC and NYSE regulations. Mr. Heriberto Urzúa Sánchezhas been appointed by the Board of Directors as the financial expert inaccordance with the definitions of the listing standards of the NYSE and theSarbanes-Oxley Act.

 

Theresolutions, agreements, and organization of the Audit Committee are governedby the rules relating to the Company’s Board Meetings and Directors’Committee. Since its creation, the sessions of the Audit Committee have been 

 

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heldwith the Directors’ Committee, since some of the functions are very similar andthe members of both of these Committees are the same.

 

The Audit Committee Charterdefines the duties and responsibilities of this Committee. The Audit Committeeis responsible for analyzing financial statements; supporting the financialsupervision and rendering of accounts; ensuring management’s development ofreliable internal controls; ensuring compliance by the audit department andexternal auditors with their respective roles; and reviewing auditingpractices. The main expenses incurred by this Committee have been thoseresulting from counseling in the implementation of the new IFRS regulations.During 2009 these expenses amounted to Ch$71.2 million

 

**D.****           ****Employees**

 

OnDecember 31, 2009, we had 5,880 employees, including 1,639 in Chile, 2,524in Brazil, and 1,717 in Argentina. Of these employees, 310 were temporaryemployees in Chile and 254 in Argentina. During the South American summer, itis customary for us to increase the number of employees in order to meet peakdemand.

 

OnDecember 31, 2009, 911, 333, and 1,158 of our employees in Chile, Braziland Argentina, respectively, were members of unions.

 

Thefollowing table represents a breakdown of our employees for the years endedDecember 31, 2009, 2008 and 2007:

 
| ** **                    | ** ** | **2009**  | ** ** |
|-------------------------------|------------|-----------|------------|
| ** **                    | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **                    | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** |
| Executives                    |       | 41        |       | 0 |   | 41 |   | 69 |   | 1 |   | 68 |   | 75 |   | 0 |   | 75 |   |
| Technicians and professionals |       | 684       |       | 320 |   | 364 |   | 558 |   | 47 |   | 511 |   | 326 |   | 4 |   | 322 |   |
| Workers                       |       | 638       |       | 591 |   | 47 |   | 1,897 |   | 285 |   | 1,612 |   | 1,062 |   | 906 |   | 156 |   |
| Temporary workers             |       | 310       |       | 0 |   | 310 |   | 0 |   | 0 |   | 0 |   | 254 |   | 248 |   | 6 |   |
|                          |       |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |       | 1,673     |       | 911 |   | 762 |   | 2,524 |   | 333 |   | 2,191 |   | 1,717 |   | 1,158 |   | 559 |   |

 
| ** **                    | ** ** | **2008**  | ** ** |
|-------------------------------|------------|-----------|------------|
| ** **                    | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **                    | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** |
| Executives                    |       | 38        |       | 0 |   | 38 |   | 69 |   | 0 |   | 69 |   | 72 |   | 0 |   | 72 |   |
| Technicians and professionals |       | 451       |       | 162 |   | 289 |   | 1,106 |   | 95 |   | 1,011 |   | 330 |   | 0 |   | 330 |   |
| Workers                       |       | 653       |       | 564 |   | 89 |   | 840 |   | 156 |   | 684 |   | 1,025 |   | 830 |   | 195 |   |
| Temporary workers             |       | 401       |       | 0 |   | 401 |   | 0 |   | 0 |   | 0 |   | 240 |   | 218 |   | 22 |   |
|                          |       |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |       | 1,543     |       | 726 |   | 817 |   | 2,015 |   | 251 |   | 1,764 |   | 1,667 |   | 1,048 |   | 619 |   |

 
| ** **                    | ** ** | **200****7** | ** ** |
|-------------------------------|------------|--------------|------------|
| ** **                    | ** ** | **Chile**    | ** ** | **Brazil** | ** ** | **Argentina** | ** ** |
| ** **                    | ** ** | **Total**    | ** ** | **Union** | ** ** | **Non-Union** | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-Union** | ** ** | **Total** | ** ** | **Union** | ** ** | **Non-  Union** | ** ** |
| Executives                    |       | 35           |       | 0 |   | 35 |   | 77 |   | 0 |   | 77 |   | 69 |   | 0 |   | 69 |   |
| Technicians and professionals |       | 399          |       | 178 |   | 221 |   | 1,136 |   | 93 |   | 1,043 |   | 317 |   | 0 |   | 317 |   |
| Workers                       |       | 538          |       | 456 |   | 82 |   | 803 |   | 197 |   | 606 |   | 961 |   | 765 |   | 196 |   |
| Temporary workers             |       | 273          |       | 0 |   | 273 |   | 0 |   | 0 |   | 0 |   | 305 |   | 285 |   | 20 |   |
|                          |       |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                         |       | 1,245        |       | 634 |   | 611 |   | 2,016 |   | 290 |   | 1,726 |   | 1,652 |   | 1,050 |   | 602 |   |

 

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Managementbelieves that is has good relations with its employees.

 

InChile we make provisions for severance indemnities in accordance with ourcollective bargaining agreements and labor legislations, in the amount of onemonth’s salary for every year of employment subject to certain restrictions. Inaddition, we complement our employees’ contribution to our health insurancesystem, thus decreasing health costs for the employees’ families. Employees arerequired to contribute funds for financing pension funds, which are mainlymanaged by private entities.

 

InChile, 63.6% of employees are members of labor unions. The following collectivebargaining agreements are in effect as of December 31, 2009: (i) withLabor Union N°2, that mainly represents personnel from the areas of management,logistics, and operations specialists from June 1, 2007 to June 1,2011; (ii) on June 1, 2009 Labor Union N°1 that mainly represents employeesfrom the Bottling area, pursuant to Article 360 of the Chilean Work Code,chose to continue with the previous bargaining agreement under the same terms(except for salary restatements according to inflation ) for a period of 18months. Said agreement had been signed after a 20-day legal strike thataffected 223 workers; (iii) with Labor Union N°3, that mainly representssales force employees, from July 1, 2006 to July 31, 2011; (iv) withanother group of employees from the sales force, from August 1, 2009 to July 31,2011; (v) with TAR’s Labor Union, that mainly represents employees fromthe distribution area, from July 1, 2008 to June 30, 2012; (vi) withthe employees from the Distribution Centers in Puente Alto, Maipú and SanAntonio, from 2008 to July 31, 2010 and with the employees of theDistribution Center in Rancagua to August 30, 2010; (vii) withemployees from the *picking* area ofVenecia and Carlos Valdovinos from January 1, 2009 to February 28,2011 and with employees from the *picking* area ofRenca from March 1, 2009 to July 31, 2011.

 

InBrazil, 22% of employees are members of labor unions. Collective bargainingagreements are negotiated on an industry-wide basis, although companies cannegotiate special terms for their affiliates that apply to all employees ineach jurisdiction where companies have a plant. Collective bargainingagreements are generally binding for one year. With respect to Andina Brazil,there are six collective bargaining agreements currently in force. Fouragreements for employees in the State of Rio de Janeiro; (i) the SoftDrink Industry Employees’ Union agreement from July 1, 2009  to June 30, 2010; (ii) the SalesForce Union agreement from October 1, 2009 to September 30, 2010;(iii) the “Stack Machine” Operator Union agreement from May 1, 2009to April 30, 2010; (iv)  the Driver and Helper of the LagosRegion Union agreement from May 1, 2009 through April 30, 2010.   Two agreements for employees in the State ofEspírito Santo: (i) the Nourishment Union agreement from July 1, 2009to June 30, 2010; (ii)  the Sales Force Union agreement fromDecember 1, 2009 to November 30, 2011. These agreements do notrequire us to increase wages on a collective basis. Selected increases weregranted, however, mainly in the manufacturing area. We provide benefits to ouremployees according to the relevant legislation and to the collectivebargaining agreements. Andina Brazil experienced its most recent work stoppages inJanuary and October 1990, for eight days in each instance.

 

InArgentina, 67.4% of EDASA’’s employees are parties to collective bargainingagreements and are represented by local workers’ unions associated with anational federation of unions. The Argentine Chamber of Non-Alcoholic Beveragesof the Argentine Republic (*Cámara Argentinade Industria de Bebidas sin Alcohol de la República Argentina* (the “Chamber”)and the Argentine Workers Federation of Carbonated Water (*Federación Argentina de Trabajadores de AguasGaseosas)*(the “Federation”) are parties to a collective bargainingagreement that began July 29, 2008. On November 5, 2009, the Chamberand the Federation entered into a new collective bargaining agreementestablishing new salaries, new non salary benefits, a new labor category, newfigures for company contributions, contributions and a new complementaryregulation on company contributions.

 

Argentinelaw requires severance payments upon dismissal without cause in an amount atleast equal to an average of one-month’s wages for each year of employment or afraction thereof if employed longer than three months. Severance payments aresubject to maximum and minimum amounts fixed by legislations and jurisprudenceof the Justice Supreme Court of Argentina.

 

Atthe end of 2008 Congress sanctioned Law N° 26,425 by which beginning 2009,private pension funds were eliminated instructing that all employee contributions must be destined to thegovernment social security system,  Mostof the health system in the Argentine territory is run by the unions throughcontributions from union and non-union employees.

 

Asof December 31, 2008, Edasa had no pension fund liabilities. Employeescontributed during 2009, on the basis of automatic withholding, to either theprivately administered retirement funds or to the government social securitysystem.

 

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**E.             ShareOwnership of Directors, Members of the Directors’ Committee and SeniorExecutives**

 

Thefollowing table sets forth the amount and percentage of our shares beneficiallyowned by our directors, members of the Directors’ Committee and seniorexecutives as of December 31, 2009.

 
| ** **                                    | ** ** | **Series A** | ** ** | **Series B** | ** ** |
|-----------------------------------------------|------------|-------------------|------------|-------------------|------------|
| ** **                                    | ** ** | **Beneficial**    | ** ** | **%**             | ** ** | **Direct** | ** ** | **%** | ** ** | **Indirect** | ** ** | **%** | ** ** | **Beneficial** | ** ** | **%** | ** ** | **Direct** | ** ** | **%** | ** ** | **Indirect** | ** ** | **%** | ** ** |
| **Shareholder**                               | ** ** | **Owner**         | ** ** | **Class**         | ** ** | **Owner** | ** ** | **Class** | ** ** | **Owner** | ** ** | **Class** | ** ** | **Owner** | ** ** | **Class** | ** ** | **Owner** | ** ** | **Class** | ** ** | **Owner** | ** ** | **Class** | ** ** |
| José Antonio Garcés Silva  (junior) |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 4,538,839 |   | 1.1940 | % |
| Arturo Majlis Albala                          |       | —            |       | —            |       | — |   | — |   | 2,150 |   | 0.0006 |   | — |   | — |   | 5,220 |   | 0.0014 |   | — |   | — |   |
| Salvador Said Somavía                    |       | —            |       | —            |       | — |   | — |   | 1,000 |   | 0.0003 |   | — |   | — |   | — |   | — |   | 1,000 |   | 0.0003 |   |
| Gonzalo Said Handal                           |       | 50,001,651        |       | 13.1536           |       | — |   | — |   | — |   | — |   | 11,761,462 |   | 3.094 |   | — |   | — |   | 4,241,565 |   | 1.1158 |   |

 

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

 

**A.****           ****Major Shareholders**

 

Thefollowing table sets forth certain information concerning beneficial ownershipof our capital stock at December 31, 2009, with respect to the principalshareholders known to us who maintain at least a 5% beneficial ownership in ourshares and with respect to all of our directors and executive officers as agroup:

 
| ** **                                               | ** ** | **Series A** | ** ** | **Series B** | ** ** |
|----------------------------------------------------------|------------|-------------------|------------|-------------------|------------|
| **Shareholder**                                          | ** ** | **Shares**        | ** ** | **% Class**  | ** ** | **Shares** | ** ** | **% Class** | ** ** |
| ** **                                               | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Controlling Shareholders (1)                             |       | 200,006,603       |       | 52.61             |       | 161,269,184 |   | 42.42 |   |
| The Bank of New York Mellon(2)                           |       | 10,076,838        |       | 2.65              |       | 50,452,716 |   | 13.27 |   |
| The Coca-Cola Company, directly or through  subsidiaries |       | 41,962,864        |       | 11.04             |       | 41,962,864 |   | 11.04 |   |
| AFPs as a group (Chilean pension funds)                  |       | 71,954,954        |       | 18.93             |       | 23,893,852 |   | 6.29 |   |
| Principal foreign mutual funds as a group                |       | 6,845,765         |       | 1.80              |       | 7,657,204 |   | 2.01 |   |
| Executive officers as a group                            |       | 165,474           |       | 0.04              |       | 180,474 |   | 0.05 |   |
| Directors as a group(3)                                  |       | 50,004,801        |       | 13.15             |       | 20,702,943 |   | 5.45 |   |

 

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*(1)**               **ControllingShareholders is comprised by: Inversiones Freire Ltda., Inversiones FreireDos Ltda., Mr. José Antonio Garcés Silva (senior), Mr. José SaidSaffie,MSr.**AlbertoHurtado Fuenzalida, the estate of Mr. Jaime Said Demaría, InversionesNueva Sofía Ltda., Inversiones S.H. Seis Ltda., Inversiones MarAdentro Ltda., Inversiones HB S.A, Inversiones Caburga S.A., andInversiones Ledimor Chile Ltda. **Formore information on the Controlling Shareholders please refer to page 74of the Company’s 2009 Annual Report available on the Company’s website: www.embotelladoraandina.com.*

*(2)**               **Actingas depositary for the ADRs.*

*(3)**               **Representsshares to which Mr. Gonzalo Said Handal, Mr. José Antonio GarcésSilva (junior), Mr. Salvador Said Somavía and Mr. Arturo MajlisAlbala would claim direct and indirect.*

 

TheControlling Shareholders act pursuant to an agreement among partners, datedMay 29, 1992 that sets forth that no member of said group may, dispose ofhis pro rata portion of his shares of stock, unless in accordance with thepreviously mentioned Agreement.

 

Inconnection with TCCC’s investment in Andina, the Coca-Cola shareholders and theControlling Shareholders entered into a Shareholders’ Agreement datedSeptember 2, 1996 (the “Shareholders’ Agreement”), providing for certainrestrictions on the transfer of shares of Andina’s capital stock by theCoca-Cola Shareholders and the Controlling Shareholders. Specifically, theControlling Shareholders are restricted from transferring its Series Ashares without the prior authorization of TCCC . The Shareholders’ Agreementalso provides for certain corporate governance matters, including the right ofthe Coca-Cola shareholders to elect one regular and one alternate member of ourboard of directors so long as TCCC and its subsidiaries collectively own, inaggregate, at least 4% of the Series A shares. In addition, in relatedagreements, the Controlling Shareholders granted TCCC an option, exercisableupon the occurrence of certain changes in the beneficial ownership of Freire(majority shareholder of the Controlling Shareholders), to acquire 100% , ofthe Series A shares held by Freire at a price and in accordance withprocedures established in such agreements.

 

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AnAgreement dated September 5, 1996, entered into by the ControllingShareholders, the Company and other parties establishes that none of theshareholders, party to the Agreement, may transfer Series A shares of theCompany they hold unless it involves:

 

·                          Transfers towholly-owned subsidiaries of any Controlling Shareholder, provided that anyshares transferred to such entities remain subject to the provisions of theAgreement;

·                          Acceptance by amember of the Controlling Shareholders party to the Agreement of a bona fideoffer from a third party to purchase some or all of the shares held by suchshareholder, so long as the member of the Controlling Shareholder first offerssuch shares for sale, on the same terms and conditions as those proposed to besold to the third-party purchaser and to the other shareholder party to theAgreement; and

·                          A proposal by ashareholder party to the Agreement to sell its shares in a public offering orin a brokers’ transaction, so long as it first offers such shares to the othershareholders party to the Agreement at the price proposed in the public salenotice.

** **

**B.****           ****RelatedParty Transactions**

 

Inthe ordinary course of our business, we engage in a variety of transactionswith certain of our affiliates and related parties. Financial informationconcerning these transactions is set forth in Note 6(c) to our ConsolidatedFinancial Statements and were carried out under the following conditions: (i) theywere previously approved by the Company’s Board of Directors, with theabstainment of the director involved in the corresponding case; (ii) thepurpose of these transactions was to contribute to the Company’s interest; and (iii) theywere consistent to the prevailing market price, terms and conditions at thetime of their aproval . Our Directors’ Committee is charged with evaluatingtransactions with related parties that exceed UF20,000 and to report on thesetransactions to the full board of directors. See “Item 6. Directors, SeniorManagement and Employees—Directors’ Committee.”

 

Ourmanagement believes, to the best of its knowledge, it has complied, in allmaterial respects with the Chilean Public Company law regarding to thetransactions with related parties in full force and effect at December 31,2009.  There can be no assurance,however, that these regulations will not be modified in the future.

 

**C.****           ****Interestsof Experts and Counsel**

 

**Not applicable.**

 

**ITEM 8.  FINANCIALINFORMATION**

 

**A.****           ****ConsolidatedStatements and Other Financial Information**

 

See“Item 18 —Financial Statements” for our Consolidated Financial Statements filedas part of this annual report.

 

**Contingencies**

 

Weare party to certain legal proceedings that have arisen during the normalcourse of business, and we believe none of them are likely to have a materialadverse effect on our financial condition. In accordance with accountingprinciples, the provisions regarding legal proceedings must be recorded if saidprocedures are reasonably probable to be resolved against the Company.

 

Thefollowing table represents accounting provisions made as of December 31,2009 and 2008, for potential loss contingencies stemming from labor, tax,commercial and other litigation faced by our Company:

 
| ** ** | ** ** | **For the period ended December 31,** | ** ** |
|------------|------------|--------------------------------------------|------------|
| ** ** | ** ** | **2009**                                   | ** ** | **2008** | ** ** |
| ** ** | ** ** | **ThCh$**                                  | ** ** | **ThCh$** | ** ** |
| Chile      |       | 6,834                                      |       | 7,862 |   |
| Brazil     |       | 3,255,782                                  |       | 1,084,276 |   |
| Argentina  |       | 1,029,938                                  |       | 1,555,481 |   |

 

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**Dividend Policy**

 

Pursuantto Chilean law, we must distribute cash dividends equal to at least 30% of ourannual net income, calculated in accordance with Chilean GAAP, unless otherwiseprovided for by a unanimous vote of the Series A shareholders. If there isno net income in a given year, we are not legally required to distributedividends from retained earnings. At the annual meeting of shareholders held inApril 2009, the shareholders authorized the board of directors todistribute, at its discretion, interim dividends during July and October 2009and January 2010. During 2007, 2008, and 2009, the respective shareholders’meetings approved additional dividend payments to be paid from retainedearnings fund in light of significant cash generation. There can be noassurance that these additional dividend payments will be available in thefuture.

 

Thefollowing table sets forth the nominal amount in Chilean pesos of dividendsdeclared and paid per share each year and the U.S. dollar amounts paid to ADRholders, on each of the respective payment dates:

 
| ** ** | ** ** | ** **              | ** ** | ** **                                                                   | ** ** | **Series A**                 | ** ** | **Series B**    | ** ** |
|------------|------------|-------------------------|------------|------------------------------------------------------------------------------|------------|-----------------------------------|------------|----------------------|------------|
| **Year**   | ** ** | **Date Dividend  Paid** | ** ** | **Fiscal year with respect  to  which dividend was declared** | ** ** | **Ch$ per share  (nominal)** | ** ** | **US$ per ADR** | ** ** | **Ch$ per share  (nominal)** | ** ** | **US$ per ADR** | ** ** |
| 2010       |       | 28-Jan                  |       | 2009                                                                         |       | 7.00                              |       | 0,01344              |       | 7.70 |   | 0,01479 |   |
|       |       | 28-Apr                  |       | 2009                                                                         |       | 11.70                             |       | 0,02239              |       | 12.87 |   | 0,02472 |   |
|       |       | 18-May                  |       | Retained Earnings                                                            |       | 50.00                             |       | 0,09283              |       | 55.00 |   | 0,10212 |   |
| 2009       |       | 22-Jan                  |       | 2008                                                                         |       | 7.00                              |       | 0,01125              |       | 7.70 |   | 0,01237 |   |
|       |       | 30-Apr                  |       | 2008                                                                         |       | 14.13                             |       | 0,02401              |       | 15.54 |   | 0,02641 |   |
|       |       | 28-May                  |       | Retained Earnings                                                            |       | 43.00                             |       | 0,07603              |       | 47.30 |   | 0,08363 |   |
|       |       | 30-Jul                  |       | 2009                                                                         |       | 7.00                              |       | 0,01288              |       | 7.70 |   | 0,01417 |   |
|       |       | 28-Oct                  |       | 2009                                                                         |       | 7.00                              |       | 0,01314              |       | 7.70 |   | 0,01445 |   |
| 2008       |       | 24-Jan                  |       | 2007                                                                         |       | 7.00                              |       | 0,01485              |       | 7.70 |   | 0,01633 |   |
|       |       | 24-Apr                  |       | 2007                                                                         |       | 9.13                              |       | 0,02036              |       | 10.04 |   | 0,02239 |   |
|       |       | 14-May                  |       | Retained Earnings                                                            |       | 60.00                             |       | 0,12806              |       | 66.00 |   | 0,14087 |   |
|       |       | 31-Jul                  |       | 2008                                                                         |       | 7.00                              |       | 0,01382              |       | 7.70 |   | 0,01520 |   |
|       |       | 23-Oct                  |       | 2008                                                                         |       | 7.00                              |       | 0,01075              |       | 7.70 |   | 0,01182 |   |
| 2007       |       | 31-Jan                  |       | 2006                                                                         |       | 5.60                              |       | 0,01028              |       | 6.16 |   | 0,01131 |   |
|       |       | 26-Apr                  |       | 2006                                                                         |       | 11.12                             |       | 0.02108              |       | 12.23 |   | 0,02319 |   |
|       |       | 5-Jul                   |       | Retained Earnings                                                            |       | 65.19                             |       | 0,12442              |       | 71.71 |   | 0,13686 |   |
|       |       | 26-Jul                  |       | 2007                                                                         |       | 7.00                              |       | 0,01337              |       | 7.70 |   | 0,01470 |   |
|       |       | 24-Oct                  |       | 2007                                                                         |       | 7.00                              |       | 0,01387              |       | 7.70 |   | 0,01526 |   |

 

**B.****           ****SignificantChanges since the Annual Financial Statements**

 

**Not applicable.**

 

**ITEM 9.****                             ****THE OFFER AND LISTING**

 

**A.****           ****Offerand Listing Details**

 

Sharesof Andina’s common stock trade in Chile on the *Bolsade Comercio de Santiago*, the *Bolsade Valores Electrónica* and the *Bolsade Valores de Valparaíso*. Also shares of Andina’s common stock havetraded in the United States on the New York Stock Exchange (“NYSE”) sinceJuly 14, 1994 in the form of ADRs, which represent six shares of commonstock. The Depositary for the ADRs is The Bank of New York Mellon.

 

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Thetable below shows the high and low daily closing prices of the common stock inChilean pesos and the trading volume of the common stock on the Santiago StockExchange for the periods indicated. It also shows the high and low dailyclosing prices of the ADRs and the volume traded in the NYSE.

 
| ** **       | ** ** | **Share Volume**   | ** ** | **Ch$ per Share** | ** ** |
|------------------|------------|--------------------|------------|------------------------|------------|
| ** **       | ** ** | **(in thousands)** | ** ** | **Series A**      | ** ** | **Series B** | ** ** |
| ** **       | ** ** | **Series A**  | ** ** | **Series B**      | ** ** | **High** | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2005             |       | 56,477             |       | 127,049                |       | 1,400 |   | 1,050 |   | 1,505 |   | 1,100 |   |
| 2006             |       | 93,092             |       | 150,791                |       | 1,400 |   | 1,080 |   | 1,530 |   | 1,190 |   |
| 2007             |       | 81,787             |       | 242,133                |       | 1,750 |   | 1,300 |   | 1,930 |   | 1,420 |   |
| 2008             |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| 1st Quarter      |       | 12,798             |       | 33,078                 |       | 1,412 |   | 1,040 |   | 1,529 |   | 1,165 |   |
| 2nd Quarter      |       | 29,284             |       | 52,739                 |       | 1,426 |   | 1,180 |   | 1,581 |   | 1,273 |   |
| 3rd Quarter      |       | 25,204             |       | 27,820                 |       | 1,403 |   | 1,180 |   | 1,539 |   | 1,262 |   |
| 4th Quarter      |       | 8,798              |       | 33,507                 |       | 1,255 |   | 919 |   | 1,456 |   | 1,164 |   |
| 2009             |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| 1st Quarter      |       | 4,082              |       | 14,605                 |       | 1,229 |   | 1,088 |   | 1,480 |   | 1,262 |   |
| 2nd Quarter      |       | 49,126             |       | 45,853                 |       | 1,349 |   | 1,088 |   | 1,590 |   | 1,262 |   |
| 3rd Quarter      |       | 2,892              |       | 38,233                 |       | 1,410 |   | 1,275 |   | 1,664 |   | 1,496 |   |
| 4th Quarter      |       | 7,547              |       | 26,785                 |       | 1,440 |   | 1,290 |   | 1,740 |   | 1,520 |   |
| Last six months: |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| Dec-09           |       | 4,539              |       | 8,614                  |       | 1,440 |   | 1,295 |   | 1,740 |   | 1,550 |   |
| Jan-10           |       | 3,458              |       | 10,935                 |       | 1,475 |   | 1,440 |   | 1,800 |   | 1,737 |   |
| Feb-10           |       | 1,708              |       | 4,052                  |       | 1,460 |   | 1,380 |   | 1,800 |   | 1,720 |   |
| Mar-10           |       | 5,620              |       | 5,299                  |       | 1,510 |   | 1,351 |   | 1,820 |   | 1,700 |   |
| Apr-10           |       | 2,544              |       | 7,499                  |       | 1,570 |   | 1,500 |   | 1,892 |   | 1,760 |   |
| May-10           |       | 5,402              |       | 12,018                 |       | 1,581 |   | 1,490 |   | 1,880 |   | 1,770 |   |

 
| ** **       | ** ** | **ADR Volume**     | ** ** | **US$ per Share** | ** ** |
|------------------|------------|--------------------|------------|------------------------|------------|
| ** **       | ** ** | **(in thousands)** | ** ** | **Series A**      | ** ** | **Series B** | ** ** |
| ** **       | ** ** | **Series A**  | ** ** | **Series B**      | ** ** | **High** | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2005             |       | 3,091              |       | 4,990                  |       | 15.70 |   | 11.50 |   | 17.00 |   | 12.15 |   |
| 2006             |       | 1,781              |       | 4,745                  |       | 16.02 |   | 11.52 |   | 17.46 |   | 13.00 |   |
| 2007             |       | 5,080              |       | 6,346                  |       | 20.75 |   | 13.66 |   | 22.55 |   | 14.54 |   |
| 2008             |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| 1st Quarter      |       | 662                |       | 1,277                  |       | 19.25 |   | 14.06 |   | 20.39 |   | 15.83 |   |
| 2nd Quarter      |       | 478                |       | 1,443                  |       | 20.10 |   | 13.45 |   | 21.79 |   | 14.91 |   |
| 3rd Quarter      |       | 509                |       | 1,636                  |       | 16.72 |   | 12.71 |   | 18.48 |   | 14.26 |   |
| 4th Quarter      |       | 915                |       | 1,103                  |       | 13.5 |   | 8.41 |   | 15.02 |   | 10.53 |   |
| 2009             |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| 1st Quarter      |       | 360                |       | 642                    |       | 12.70 |   | 10.26 |   | 15.71 |   | 12.36 |   |
| 2nd Quarter      |       | 171                |       | 1,180                  |       | 15.15 |   | 11.87 |   | 17.40 |   | 13.91 |   |
| 3rd Quarter      |       | 265                |       | 3,041                  |       | 15.70 |   | 14.15 |   | 18.50 |   | 16.90 |   |
| 4th Quarter      |       | 511                |       | 1,503                  |       | 17.19 |   | 15.00 |   | 17.19 |   | 17.96 |   |
| Last six months: |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| Dec-09           |       | 161                |       | 448                    |       | 17.19 |   | 15.40 |   | 20.58 |   | 18.80 |   |
| Jan-10           |       | 123                |       | 595                    |       | 18.30 |   | 15.95 |   | 21.73 |   | 20.00 |   |
| Feb-10           |       | 150                |       | 491                    |       | 16.91 |   | 15.79 |   | 20.82 |   | 19.34 |   |
| Mar-10           |       | 401                |       | 884                    |       | 17.35 |   | 15.65 |   | 21.11 |   | 19.53 |   |
| Apr-10           |       | 236                |       | 265                    |       | 17.99 |   | 17.35 |   | 22.06 |   | 20.42 |   |
| May-10           |       | 171                |       | 293                    |       | 17.50 |   | 16.40 |   | 21.57 |   | 18.53 |   |

 

*Source:Bloomberg*

 

Thetotal number of registered ADR holders Andina had at December 2009 was 35(22 in the Series A ADRs and 13 in the Series B ADRs). AtDecember 31, 2009, the ADRs represented 9.6% of the total number of ourissued and outstanding shares. On December 31, 2009, the closing price forthe Series A shares on the Santiago Stock Exchange was Ch$1,440 per share(US$16.82 per Series A ADR), and Ch$1,737 for the Series B shares(US$20.49 per Series B ADR). At December 31, 2009, there were1,728,439.  Series A ADRs(equivalent to 10,370,634 Series A shares) and 10,373,838 Series BADRs (equivalent to 62,243,028 Series B shares).

 

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Tradingactivity on the Santiago Stock Exchange is on average substantially less thanthat on the principal national securities exchanges in the United States. Weestimate that for the year ended December 31, 2009, Andina’s shares weretraded on the Santiago Stock Exchange on an average of approximately 83.2% and100% of such trading days, for Series A and Series B sharesrespectively.

 

Otherthan as previously discussed in “Item 7-Major Shareholders” we are not aware ofany other existing contracts or documents that impose material limitations orqualifications on the rights of shareholders of our listed securities. 

 

**The Yankee Bonds**

 

Our7 5/8% Notes due 2027 and 7 7/8% Notes due 2097 are not listed on any stockexchange or other regulated market. Trading in these notes takes placeprimarily in the over-the counter market and, accordingly, we are not able toobtain reliable information on trading in these notes.

 

**Debt Securities**

 

TheCentral Bank is responsible, *inter alia*,for Chile’s monetary policies and exchange controls. The Central Bank hasauthorized Chilean issuers to offer bonds in Chile and abroad under the termsof Chapter XIV of the Compendium of Foreign Exchange Regulations (*Compendio de Normas de Cambios Internacionales*or CFER). The following paragraphs summarize some of the Central Bank rules oninternational bond issuances. This summary does not intend to be complete andthose interested in a full description should refer to Chapter XIV of the CFER.

 

EffectiveApril 19, 2001 the CFER greatly simplified the procedure to registercapital contributions, investments and foreign loans, including bondsissuances.  Payments or remittances offunds, to or from Chile, in connection with credits granted abroad should bemade through the Formal Exchange Market, which is composed by the maincommercial banks that operate in Chile. When foreign currency resulting fromloans or bonds is made available to the beneficiary in the country, theintervening bank should issue the pertinent “Form” and request certaininformation from the debtor and creditor, as applicable, pursuant to ChapterXIV.

 

Paymentsor remittances of foreign currency as capital, interest, adjustments, profitsand other benefits originating in the transactions regulated under Chapter XIVmust be reported to the Central Bank as follows: (i) if the foreigncurrency represents a remittance made from Chile, the intervening FormalExchange Market bank should issue the above form; (ii) the issuer orborrower should inform the Central Bank, within the first 10 days of the monthfollowing the date of the transaction, if the foreign currency used to make thepertinent payments originates from credit transactions for which the foreigncurrency has been used directly abroad or if the corresponding paymentobligation is fulfilled abroad using funds other than those indicated inChapter XIV.

 

Anychange in the terms of the transaction must be reported to the Central Bankwithin 10 days after formalization. This requirement applies, among others, tothe substitution of the debtor or creditor, total or partial assignments ofcredits or rights and the modification of the financial terms of the respectivecredit regarding investments or capital contributions.

 

Exchangerule amendments dated April 2001 established that transactionsrecorded prior to April 19, 2001 will continue to be governed by the rules inforce at the time they were recorded, but that the parties may choose to applythe new regulations.

 

Theseprocedures also apply to foreign loans obtained through the placement ofconvertible bonds, in which case the issuer shall report to the Central Bankany increase or decrease in their registered amount as a result of theconversion of convertible bonds denominated and payable in Chilean pesos, forother convertible bonds denominated and payable in foreign currency or shares,as applicable, acquired by foreign investors with proceeds that had enteredChile under the terms of Chapter XIV.

 

Accordingto Chapter XIV, the Central Bank established that credits relating to acts,agreements or contracts which create a direct obligation of payment orremittance of foreign currency abroad by persons domiciled or residing inChile, that exceed on an individual basis the sum of US$100,000 or theequivalent in other foreign currencies, absent any special rule in theCFER, shall be reported to the Chilean Central Bank by the obligor eitherdirectly or through a Formal Exchange Market entity using the forms containedin the CFER, within 10 days from formalization.

 

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InFebruary 1999, after obtaining the requisite authorization from theCentral Bank, we issued bonds in the international markets, subject to theexchange regulations in effect at that time. The main difference between theexchange regime applicable to our bond issuances and those currently in effect,is that in the case of our bond issuances the Central Banks warrants the accessto currency markets. However, the regime applicable to our bond issuance hasless flexibility as far as the procedures to carry out payments or remittancesto bond holders.

 

Wecannot give any assurance that the Central Bank will not impose futurerestrictions applicable to the holders of debt securities, nor can we make anyevaluation of the duration or impact of such restrictions, if imposed.

 

**B.****           ****Markets.**

 

SeeItem 9. The Offer and Listing — A. Offer and Listing Details.

 

**ITEM 10.****                                             ****ADDITIONAL INFORMATION**

 

**A.****           ****ShareCapital**

 

**Not applicable.**

 

**B.****           ****Memorandumand Articles of Association**

 

Our By-Laws (“*Estatutos*”) are hererby incorporated by reference from theCompany’s annual report on Form 20-F for the fiscal year ended December 31,1996, also available on our website www.embotelladoraandina.com.

 

**C.****           ****MaterialContracts**

 

During2009, Edasa entered into the following materially significant agreements:construction of the new juice plant; leasing of processing equipment andfilling lines for the juice plant; supply of natural gas; supply of power; andpurchase and sale agreement of a blow molding machinery system for PETbottles.

 

OnDecember 16, 2008 Andina Brazil entered into a Cession Agreement withRecofarma (a company from the Coca-Cola group in Brazil) along with the otherCoca-Cola Bottlers and Jugos del Valle S.A.P.I. de C.V. (México) for the totalshares of Holdfab Particapacoes Ltda. of the Sucos del Valle Brasil Ltda.Company (Sucos del Valle) whereby the Coca-Cola bottlers now hold a 50%ownership interest of this company.  Withthis joint venture Andina Brazil now holds a total ownership interest of 6.164%of capital share of the Sucos Mais + Sucos del Valle joint venture.  By this Cession Agreement, Sucos del Vallewill produce and supply on an exclusive basis to all Coca-Cola bottlers so thatthey in turn can commercialize the products in their respective territories.

 

Pursuantto a Joint Venture Agreement or JV dated October 4, 2007 Andina Brazil andall Coca-Cola bottlers in Brazil entered into a joint venture to exploit theBrazilian juice market, through the incorporation of a company called “MaisIndustria de Alimentos S.A.” or “Sucos Mais”. Sucos Mais was structured asfollows: 50% of its capital was subscribed by the 18 Coca-Cola bottlers inBrazil and 50% by the company representing Coca-Cola in the country (called “RecofarmaIndustria do Amazonas Ltda.”).  AndinaBrazil holds an interest of 7.35% in the capital of Sucos Mais.  By this JV, Sucos Mais will produce allMinute Maid Mais products, as well as Kapo, Nestea and Burn (non-carbonated,expet waters) and supply on an exclusive basis to all Coca-Cola bottlers sothat they in turn can commercialize the products in their respectiveterritories.

 

In Chile, on December 22, 2005, Andina, Vital, Coca-Cola EmbonorS.A. or Embonor and Embotelladoras Coca-Cola Polar S.A. or Polar entered intoan agreement to carry out the production and bottling of products in thebusiness categories of Water, Juices and Non-Carbonated Beverages, licensed byThe Coca-Cola Company in Chile:  (i) inthe category of Water,Andina, Embonor (through its subsidiary, EmbonorS.A.) and Polar have an interest of 56.5%, 26.4% and 17.1%, respectively, inVital Aguas S.A., conducting the business of the processing, productionand bottling of the *Vital de Chanqueahue*Mineral Water and other waters, according to the terms of the contracts andauthorizations agreed upon by Vital Aguas S.A. and TCCC; and (ii) in thecategory of Juices and Non-carbonated Beverages, contracts were signed wherebyEmbonor and Polar have become the holders of the rights to acquire productsfrom Vital S.A. under the Coca-Cola 

 

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brands,according to the terms of the contracts agreed upon by each bottler andTCCC.  The right to purchase theseproducts from Vital S.A. are at the prices and under the conditions applicableto volumes and maximum periods determined by the parties that will last, in allcases, until December 31, 2015. In addition, Andina, Vital, Embonor andPolar have agreed to the respective contracts and authorizations with TCCC toproduce, bottle and sell these products at their respective plants.

 

**D.****           ****ExchangeControls**

 

**Foreign Investment and Exchange Controls in Chile**

 

TheCentral Bank is responsible, among other matters, for setting monetary policiesand exchange controls in Chile. As of April 19, 2001, the Chilean CentralBank (“CCB”) eliminated prior foreign exchange controls, imposed certainreporting requirements and determined that certain operations be conductedthrough the Formal Exchange Market (“FEM”). The main purpose of theseamendments, as declared by the Central Bank, is to facilitate the flow ofcapital into Chile and outside the country and to foster foreign investment.

 

Equityinvestments in Chile (including investments in stock) by non-resident personsor entities must comply with some of the existing exchange controlrestrictions. Foreign investments may be registered with the Foreign InvestmentCommittee (*Comité de Inversiones Extranjeras*)in accordance with Law N° 600 of 1974 and amendments or with the Central Bankin accordance with Chapter XIV of the Compendium of Foreign ExchangeRegulations (*Compendio de Normas de CambiosInternacionales* or CFER) of the Central Bank. In the case of DecreeLaw N° 600, foreign investors execute a foreign investment agreement withChile, thus guaranteeing access to the FEM. However, investors under Decree Law N° 600 will only be able to repatriatecapital one-year after the investment. Earnings can be remitted abroad at anytime. In the case of CFER, capital as well as earnings can be repatriated atany time, without an agreement with the Central Bank.

 

During2001 the CCB eliminated certain exchange controls.  For instance, it revoked Chapter XXVI of theCFER, which regulated the issuance and placement of ADRs by Chileancorporations. Pursuant to the new rules, the Central Bank’s approval is nolonger a pre-condition for ADR issuances or foreign investment contracts withthe CCB. ADR issuances are now regarded as an ordinary foreign investment, andthe only requirements are that the CCB be informed of the transaction, byfulfilling the rules of Chapter XIV of the CFER, that mainly establishesthat the monies come in or leave the country exclusively through the FormalExchange Market, if the recipient of the investment decides to enter theforeign currency to the country or if it carries out payments or remittancesfrom Chile.

 

Notwithstandingthese changes, exchange transactions authorized prior to April 19, 2001remained subject to the rules in force as of the date of suchtransactions.  The new exchange regimedid not affect Chapter XXVI of the CFER and the Foreign InvestmentContract - FIC between Andina, the Central Bank and The Bank of New York Mellon(as depositary of the shares represented by ADRs).  Notwithstanding the previous, the parties tothe FIC may choose to adopt the norms imposed by the CCB, resigning to those ofthe FIC, and which has been the option we have taken until his date. The FIC isthe agreement by which access to the FEM is given to the depositary and ADRholders.  The FIC adopted thedispositions of Chapter XXVI and was celebrated pursuant to Article 47 ofthe Constitutional Organic Act of the CCB.

 

UnderChapter XXVI of the CFER, if the funds to purchase the common shares underlyingthe ADRs are brought into Chile, the depositary must deliver, on behalf offoreign investors, an annex providing information on the transaction to theFormal Exchange Market entity involved, together with a letter instructing suchentity to deliver the foreign currency or the equivalency in pesos, on orbefore the date the foreign currency is brought or is to be brought into Chile.

 

Repatriationof amounts received with respect to deposited common shares or common shareswithdrawn from deposits on surrender of ADRs (including amounts received ascash dividends and proceeds from the sale in Chile of the underlying commonshares and any rights arising there from) need be made through the FEM. The FEMentity intervening in the repatriation must provide certain information to theCCB on the following banking business day.

 

UnderChapter XXVI and the FIC, the CCB agreed to grant to the depositary, on behalfof ADR holders, and to any investor not residing nor domiciled in Chile whoacquire shares or replace ADRs for common stock, which we refer to as theWithdrawn Shares, FEM access to convert Chilean pesos into U.S. dollars and toremit those dollars outside Chile including amounts received as: (i) cashdividends; (ii) proceeds from the sale in Chile of Withdrawn Shares; (iii) proceedsfrom the sale in Chile of preemptive rights to subscribe for additional shares;(iv) proceeds from the liquidation, merger or consolidation of Andina; (v) proceedsresulting from capital decreases or earnings or liquidations; and (vi) otherdistributions, including those in respect of any re-capitalization resultingfrom holding shares, ADRs or by Withdrawn Shares.

 

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Theguarantee of FEM access under the FIC will extend to the participants of theADR offering if the following requirements are met: (i) that the funds topurchase the shares underlying the ADRs are brought into Chile and convertedinto Chilean pesos through the FEM; (ii) that the purchase of theunderlying shares is made on a Chilean stock exchange; and (iii) thatwithin five business days from the conversion of the funds into Chilean pesos,the CCB is informed that the funds converted were used to purchase theunderlying shares, if those funds are not invested in shares within thatperiod, it can access the FEM to reacquire foreign currency, provided that therequest is submitted to the CCB within seven banking business days of theinitial conversion into pesos.

 

ChapterXXVI provides that FEM access in connection with dividend payments isconditioned to our certifying to the CCB that a dividend payment has been madeand that any applicable tax has been withheld. Chapter XXVI also provides thatFEM access in connection with the sale of Withdrawn Shares, or distributionthereon, is conditioned upon receipt by the CCB (i) a certificate by thedepositary or custodian, as the case may be, that the shares have beenwithdrawn in exchange for delivery of the appropriate ADRs, and (ii) awaiver of the benefits of the FIC with respect to ADRs (except in connectionwith the proposed sale of the shares) until the Withdrawn Shares arere-deposited.

 

FEMaccess under any of the circumstances described above is not automatic.Pursuant to Chapter XXVI, such access needs the BCC’s approval on a requestsubmitted to that end through a banking institution established in Chile. TheFIC provides that if the BCC has not acted upon the request within sevenbanking days, the request is deemed to have been granted.

 

Undercurrent Chilean law, the BCC cannot unilaterally change the FIC. The ChileanCourts (although not binding on future judicial decisions) also haveestablished that the FIC cannot be annulled by future legislative changes. Noassurance can be given, however, that additional Chilean restrictionsapplicable to the holders of ADRs, to the disposition of underlying shares, orto the repatriation of proceeds from their disposition, will not be imposed inthe future; nor can there be any assessment of the duration or impact of anyrestrictions that might be imposed. If for whatever reason, including changesin the FIC or Chilean law, the Depositary is prevented from converting Chileanpesos into U.S. dollars; the investors shall receive dividends or otherpayments in Chilean pesos, which shall subject the investors to exchange rate risks.It cannot be assured that the CFER, as amended, or any other exchangeregulation will not be amended in the future, or that if new regulations areenacted that they shall have no material bearing on Andina or the ADR holders.

 

Noassurance can be given that Andina will be able to purchase U.S. dollars in thelocal exchange market at any time in the future, nor that any such purchasewill be for the amounts necessary to pay any sum due under any of its capitalor debt instruments. Likewise, it is not possible to guarantee that changes tothe regulations of the CCB or other legislative changes relating to exchangecontrols will not restrict nor impair Andina’s ability to purchase U.S. dollarsin order to make payment on its debt instruments.

 

**E.****             ****Taxation**

 

**Tax Considerations Relating to Equity Securities**

 

***Chilean Tax Considerations***

 

Thefollowing discussion summarizes the material Chilean income tax consequences ofan investment in Andina’s stock or ADRs by an individual who is not domiciledor resident in Chile or a legal entity that is not organized under the laws ofChile and does not have a permanent establishment 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 *Servicio de Impuestos Internos* (theChilean Internal Revenue Service or “SII”) and other applicable regulations andrulings that are subject to change without notice. The discussion is notintended as a tax advice to any particular investor, which can be rendered onlyin light of that investor’s particular tax situation. Each investor orpotential investor is encouraged to seek independent tax advice with respect toconsequences of investing in Andina’s stock or the ADRs.

 

UnderChilean law, all matters regarding taxation such as tax rates (including taxrates applicable to foreign investors), the computation of taxable income forChilean purposes, the manner in which Chilean taxes are imposed and collected,and others thereof, may only be imposed or amended by a law enacted byCongress. In addition, the SII is empowered to issue rulings and regulations ofeither general or specific application, and to interpret the provisions ofChilean tax law. Chilean tax may not be assessed retroactively againsttaxpayers who act in good faith relying on such rulings, regulations and 

 

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interpretations,but the SII may change said rulings, regulations and interpretationsprospectively. There is no income tax treaty in force between Chile and theUnited States.

 

*Cash Dividends and Other Distributions*

 

Dividendswe pay with respect to the shares of stock held by a foreign holder will besubject to Chilean withholding tax at a rate of 35% (the “Withholding Tax”).The tax paid by the Company on profits from which the dividends are paid (the “FirstCategory Tax”), imposed at a rate of 17%, will be credited against the WithholdingTax. The credit will increase the base upon which the Withholding Tax isimposed. Consequently, dividends that are attributable to current profits willbe subject to an effective dividend withholding tax rate of 21.7%, calculatedas follows:

 
| ** **                                                                                 | ** ** | **Ch$** | ** ** |
|--------------------------------------------------------------------------------------------|------------|---------|------------|
|                                                                                       |       |    |       |
| Company taxable income                                                                     |       | 100.0   |       |
| First Category Tax (17.0% of Ch$100)                                                       |       | (17.0   | )          |
| Net distributable income                                                                   |       | 83.0    |       |
|                                                                                       |       |    |       |
| Dividend distributed                                                                       |       | 83.0    |       |
|                                                                                       |       |    |       |
| Withholding Tax (35% of the sum of Ch$83.0  dividend plus Ch$17.0 First Category Tax paid) |       | (35.0   | )          |
| Credit for First Category Tax                                                              |       | 17.0    |       |
|                                                                                       |       |    |       |
| Net additional tax withheld                                                                |       | (18.0   | )          |
| Net dividend received                                                                      |       | 65.0    |       |
|                                                                                       |       |    |       |
| Effective dividend withholding rate (18.0/83.0)                                            |       | 21.7    | %          |

 

Forpurposes of determining the amount of First Category Tax we pay on profits fromwhich the dividends are paid, dividends are attributed to our oldest retainedprofits.

 

Dividenddistributions made in property will be subject to the same Chilean tax rules ascash dividends. Our stock dividends are not subject to Chilean taxation.

 

*Capital Gains*

 

Gainsrecognized from the sale or exchange of ADRs by a foreign holder outside Chilewill not be subject to Chilean taxation. Gains recognized on a sale or exchangeof shares of stock will be subject to both the First Category Tax and the WithholdingTax (the former being credited against the latter) if either: (i) theforeign holder has held the shares of common stock for less than one year,(ii) the foreign holder acquired and disposed of the shares of commonstock in the ordinary course of its business or as an habitual trader ofshares; or (iii) the foreign holder transfers shares of common stock to arelated person, as defined by Chilean tax law. In all other cases, gain on thedisposition of shares of common stock will be subject only to the FirstCategory Tax, currently imposed at a rate of 17%, except if it is for sharesresulting from an exchange of ADRs for shares (flow back) in which case, theChilean Internal Revenue Service pursuant to Oficio 1,705 dated May 15,2006 has interpreted that said shares may benefit from article 18 ter if theADRs were acquired through a stock broker or by any other circumstancestipulated by that norm.

 

Thetax basis of shares of common stock received in exchange for ADRs will bedetermined in accordance with the valuation procedure set forth in the depositagreement, which values shares of common stock at the highest reported salesprice at which they trade on the Santiago Stock Exchange on the date of thewithdrawal of the shares of common stock from the depositary. Consequently, theconversion of ADRs into shares of common stock, and the immediate sale of theshares for the value established under the deposit agreement, will not generatea capital gain subject to taxation in Chile. However, in the case where thesale of the shares is made on a day that is different than the date in whichthe exchange is recorded, capital gain subject to taxation in Chile may begenerated. In connection thereto, on October 1, 1999 the Chilean InternalRevenue Service issued Ruling No. 3708 whereby it allowed Chilean issuersof ADRs to amend the deposit agreements to which they 

 

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areparties in order to include a clause that states that, in the case that theexchanged shares are sold by the ADRs’ holders on a Chilean Stock Exchangeeither on the same day in which the exchange is recorded or within the twobusiness days prior to such date, the acquisition price of such exchangedshares shall be the price registered in the invoice issued by the stock brokerthat participated in the sale transaction. Consequently, should this amendmentbe included in the deposit agreement, the capital gain that may be generated ifthe exchange date is different than the date in which the shares received inexchange for ADRs were sold, will not be subject to taxation. We reiterate thatif a contributor in good faith adopts Oficio 1,705, then the excess value willnot be subject to taxation in Chile.

 

Thedistribution and exercise of preemptive rights relating to the shares of commonstock will not be subject to Chilean taxation. Any gain on the sale orassignment of preemptive rights relating to the shares of common stock will besubject to both the First Category Tax and the Withholding Tax (the formerbeing credited against the latter).

 

*Other Chilean Taxes*

 

NoChilean inheritance, gift or succession taxes apply to the transfer ordisposition of the ADRs by a foreign holder, but such taxes generally willapply to the transfer at death or by gift of shares of common stock by aforeign holder. No Chilean stamp, issue, registration or similar taxes orduties apply to foreign holders of ADRs or shares of common stock.

 

*Withholding Tax Certificates*

 

Uponrequest, we will provide to foreign holders appropriate documentationevidencing the payment of Chilean withholding taxes.

 

***United States Tax ConsiderationsRelating toADRs or Shares of Common Stock***

 

Thefollowing discussion summarizes certain U.S. federal income tax consequences ofan investment in ADRs or shares of common stock. This discussion is based uponU.S. federal income tax laws presently in force. The discussion is not a fulldescription of all tax considerations that may be relevant to a decision topurchase ADRs or shares of common stock. In particular, the discussion isdirected only to U.S. holders (as defined below) that hold ADRs or shares ofcommon stock as capital assets, and it does not address the tax treatment ofholders that are subject to special tax rules under the Internal RevenueCode of 1986 as amended (the “Code”), such as financial institutions, regulatedinvestment companies, real estate investment trusts, investors in pass-throughentities, dealers in securities or currencies, traders in securities that electto use a mark-to-market method of accounting for their securities holdings,insurance companies, tax-exempt entities, persons holding ADRs or shares ofcommon stock as part of a hedging, integrated, conversion or constructive saletransaction or a straddle, holders of 10% or more of our voting shares, personsliable for alternative minimum tax or persons whose “functional currency” isnot the U.S. dollar. Furthermore, the discussion below is based upon theprovisions of the Code and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked ormodified so as to result in U.S. federal income tax consequences different fromthose discussed below. In addition, the discussion below assumes that theDeposit Agreement, and all other related agreements, will be performed inaccordance with their terms. If a partnership holds our ADRs or shares ofcommon stock, the tax treatment of a partner will generally depend upon thestatus of the partner and the activities of the partnership. Partners in apartnership holding ADRs or shares of common stock should consult their taxadvisors. This summary does not contain a detailed description of all theUnited States federal income tax consequences to a holder in light of itsparticular circumstances and does not address the effects of any state, localor non-United States tax laws. **Prospectivepurchasers should consult their tax advisors about the federal, state, localand foreign tax consequences to them of the purchase, ownership and dispositionof ADRs or shares of common stock.**

 

Asused herein, the term “U.S. holder” means a holder of ADRs or shares of commonstock that is (i) an individual U.S. citizen or resident, (ii) acorporation (or any other entity treated as a corporation for U.S. federalincome tax purposes) created or organized in or under the laws of the UnitedStates, any state thereof or the District of Columbia, (iii) an estate theincome of which is subject to U.S. federal income taxation regardless of itssource or (iv) a trust that: (a) is subject to the primarysupervision of a court within the United States and with respect to which oneor more U.S. persons have the authority to control all substantial decisions ofthe trust or (b) has a valid election in effect under applicable U.S.Treasury regulations to be treated as a U.S. person.

 

Ifthe obligations contemplated by the deposit agreement are performed in accordancewith its terms, ADR holders generally will be treated for U.S. federal incometax purposes as the owners of the shares of common stock represented by thoseADRs. Deposits or withdrawals of shares of common stock by U.S. holders inexchange for ADRs will not result in the realization of gain or loss for U.S.federal income tax purposes. The U.S. Treasury has expressed concerns thatintermediaries 

 

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inthe chain of ownership bewtween the holder of an ADR and the issuer of thesecurity underlying the ADR may be taking actions that are inconsistent withthe claiming of foreign tax credits for U.S. holders of ADRs. Such actionswould also be inconsistent with the claiming of the reduced rate of tax,described below, applicable to dividends received by certain non-corporateholders. Accordingly, the analysis of the creditability of Chilean taxes andthe availability of the reduced tax rate for dividends received by certainnon-corporate holders, each described below, could be affected by actions takenby that intermediaries in the chain of ownership bewtween the holder of an ADRand the Company.

 

*Cash Dividends and Other Distributions*

 

Cashdividends (including the amount of any Chilean taxes withheld) paid to U.S.holders with respect to the ADRs or shares of common stock generally will betreated as dividend income to such U.S. holders, to the extent paid out ofcurrent or accumulated earnings and profits, as determined under U.S. federalincome tax principles. Such income will be includable in the gross income of aU.S. holder as ordinary income on the day received by the Depositary, in thecase of ADRs, or by the U.S. holder, in the case of shares of common stock. Thedividends will not be eligible for the dividends received deduction allowed tocorporations under the Code. With respect to non-corporate U.S. holders,certain dividends received before January 1, 2011 from a qualified foreigncorporation may be subject to reduced rates of taxation. A foreign corporationis treated as a qualified foreign corporation with respect to dividendsreceived from that corporation on shares (or ADRs backed by such shares) thatare readily tradable on an established securities market in the United States.U.S. Treasury Department guidance indicates that our ADRs (which are listed onthe New York Stock Exchange), but not our shares of common stock, are readilytradable on an established securities market in the United States. Thus, we donot believe that dividends that we pay on our shares of our common stock thatare not backed by ADRs currently meet the conditions required for these reducedtax rates. There can be no assurance that our ADRs will be considered readilytradable on an established securities market in later years. Non-corporateholders that do not meet a minimum holding period requirement during which theyare not protected from the risk of loss or that elect to treat the dividendincome as “investment income” pursuant to section 163(d)(4) of the Codewill not be eligible for the reduced rates of taxation regardless of our statusas a qualified foreign corporation. In addition, the rate reduction will notapply to dividends if the recipient of a dividend is obligated to make relatedpayments with respect to positions in substantially similar or relatedproperty. This disallowance applies even if the minimum holding period has beenmet. Non-corporate U.S. holders should consult their own tax advisors regardingthe application of these rules given their particular circumstances.

 

Dividendspaid in Chilean pesos will be includable in income in a U.S. dollar amountbased on the exchange rate in effect on the day of receipt by the Depositary,in the case of ADRs, or by the U.S. holder in the case of shares of commonstock, regardless of whether the Chilean pesos are converted into U.S. dollars.If the Chilean pesos received as dividends are not converted into U.S. dollarson the date of receipt, a U.S. holder will have a basis in the Chilean pesosequal to their U.S. dollar value on the date of receipt. Any gain or lossrealized on a subsequent conversion or other disposition of the Chilean pesoswill be treated as U.S. source ordinary income or loss, regardless of whetherthe pesos are converted into U.S. dollars.

 

TheChilean Withholding Tax (net of any credit for the First Category Tax) paid byor for the account of any U.S. holder may be eligible, subject to generallyapplicable limitations and conditions, for credit against the U.S. holder’sfederal income tax liability. For purposes of calculating the foreign taxcredit, dividends paid with respect to the ADRs or shares of common stockgenerally will be foreign source income and will generally constitute passivecategory income. Further, in certain circumstances, a U.S. holder that(i) has held ADRs or shares of common stock for less than a specifiedminimum period during which it is not protected from risk of loss or (ii) isobligated to make payments related to the dividends, will not be allowed aforeign tax credit for foreign taxes imposed on dividends paid on ADRs orshares of common stock. The rules governing the foreign tax credit arecomplex. Investors are urged to consult their tax advisors regarding theavailability of the foreign tax credit under their particular circumstances.

 

Distributionsto U.S. holders of additional shares of common stock or preemptive rights withrespect to shares of common stock that are made as part of a pro ratadistribution to all shareholders of the Company generally should not be subjectto U.S. federal income tax.

 

Tothe extent that the amount of any distribution exceeds our current andaccumulated earnings and profits for a taxable year, as determined under U.S.federal income tax principles, the distribution will first be treated as atax-free return of capital, causing a reduction in the adjusted basis of theADRs or shares of common stock (thereby increasing the amount of gain, or decreasingthe amount of loss, to be recognized by the investor on a subsequentdisposition of the ADRs or shares of common stock), and the balance in excessof adjusted basis will be taxed as capital gain recognized on a sale orexchange. Consequently, such distributions in excess of our current andaccumulated earnings and profits generally would not give rise 

 

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toforeign source income and a U.S. holder generally would not be able to use theforeign tax credit arising from any Chilean withholding tax imposed on suchdistributions unless such credit can be applied (subject to applicablelimitations) against U.S. taxes due on other foreign source income in theappropriate category for foreign tax credit purposes. However, we do not expectto keep earnings and profits in accordance with U.S. federal income taxprinciples. Therefore, a U.S. holder should expect that a distribution willgenerally be treated as a dividend (as discussed above).

 

Wedo not believe that we are, for U.S. federal income tax purposes, a passiveforeign investment company (a “PFIC”), and expect to continue our operations insuch a manner that we will not be a PFIC. If, however, we are or become a PFIC,U.S. holders could be subject to additional U.S. federal income taxes on gainrecognized with respect to the ADRs or shares of common stock and on certaindistributions, plus an interest charge on certain taxes treated as having beendeferred by the U.S. holder under the PFIC rules of the U.S. federalincome tax laws.

 

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

 

*Capital Gains*

 

U.S.holders that hold ADRs or shares of common stock as capital assets willrecognize capital gain or loss for federal income tax purposes on the sale orother disposition of such ADRs or shares (or preemptive rights with respect tosuch shares) held by the U.S. holder or the Depositary. Capital gains ofindividuals derived with respect to capital assets held for more than one yearare eligible for reduced rates of taxation. The deductibility of capital lossesis subject to limitations. Any gain or loss recognized by a U.S. holdergenerally will be treated as U.S. source gain or loss. Consequently, in thecase of a disposition of shares of common stock (which, unlike a disposition ofADRs, may be taxable in Chile), the U.S. holder may not be able to use theforeign tax credit for Chilean tax imposed on the gain unless it can apply(subject to applicable limitations) the credit against tax due on other incomefrom foreign sources.

 

*Estate and Gift Taxation*

 

Asdiscussed above under “Chilean Tax Considerations — Other Chilean Taxes,” thereare no Chilean inheritance, gift or succession taxes applicable to the transferor disposition of ADRs by a foreign holder, but such taxes generally will applyto the transfer at death or by gift of shares of common stock by a foreignholder. The amount of any inheritance tax paid to Chile may be eligible forcredit against the amount of U.S. federal estate tax imposed on the estate of aU.S. holder. U.S. holders should consult their personal tax advisors todetermine whether and to what extent they may be entitled to such credit. TheChilean gift tax generally will not be treated as a creditable foreign tax forU.S. tax purposes.

 

*Information Reporting and Backup Withholding*

 

Ingeneral, information reporting requirements will apply to dividends in respectof ADRs or the shares of common stock or the proceeds received on the sale,exchange, or redemption of the ADRs or the shares of common stock paid withinthe United States (and in certain cases, outside of the United States) to U.S.holders other than certain exempt recipients. A backup withholding tax mayapply to such payments if the U.S. holder fails to provide an accurate taxpayeridentification number or certification of other exempt status or fails toreport interest and dividends required to be shown on its federal income taxreturns. The amount of any backup withholding from a payment to a U.S. holderwill be allowed as a refund or a credit against the U.S. holder’s U.S. federalincome tax liability, provided the required information is furnished to theInternal Revenue Service.

 

**Tax Considerations Relating to Debt Securities**

 

***General***

 

InOctober 1997, we issued US$100 million of 7.625% Unsecured Notes due 2027and US$100 million of 7.875% Unsecured Notes due 2097 (together the “DebtSecurities”). The following is a summary of certain Chilean tax and U.S.federal income tax considerations relating to the purchase, ownership anddisposition of Debt Securities. The summary does not purport to be acomprehensive description of all tax considerations that may be relevant to adecision to purchase Debt Securities. This summary does not describe any taxconsequences arising under the laws of any state, locality or taxingjurisdiction other than the United States and Chile.

 

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Thissummary is based on the tax laws of Chile and the United States as in effect onthe date hereof, as well as regulations, rulings and decisions of Chile and theUnited States available on or before such date and now in effect. All of theforegoing is subject to change, which change could apply retroactively andcould affect the continued validity of this summary.

 

Thereis currently no tax treaty between the United States and Chile.

 

***Chilean Tax Considerations***

 

The following is a generalsummary of the material consequences under Chilean tax law, as currently ineffect, of an investment in the Debt Securities made by a Foreign Holder. Theterm “Foreign Holder” means: (i) an individual, who is not a resident inChile (for purposes of Chilean taxation, an individual is resident in Chile ifhe or she has resided in Chile for more than six months in one calendar year,or a total of more than six months in two consecutive fiscal years); or(ii) a legal entity that is not organized under the laws of Chile, unlessthe Debt Securities are assigned to a branch or an agent, representative orpermanent establishment of such entity in Chile.

 

Under Chile’s Income TaxLaw, payments of interest made in respect of the Debt Securities to a ForeignHolder will generally be subject to a Chilean withholding tax (the “ChileanInterest Withholding Tax”) currently assessed at a rate of 4.0%. If the DebtSecurities are issued through our offshore branch, payment to Foreign Holdersof Debt Securities by such branch generally will not be subject to the Chileanwithholding tax.

 

Chile’s Income Tax Lawprovides that any capital gains realized on the sale or other disposition by aForeign Holder of the Debt Securities generally will not be subject to anyChilean income taxes provided that such sale or other disposition occursoutside of Chile (except that any premium payable on redemption of the DebtSecurities will be treated as interest and subject to the Chilean InterestWithholding Tax, as described above).

 

A Foreign Holder will not beliable for gift, inheritance or similar taxes with respect to its holdingsunless the securities held by a foreign holder:

 

·      are located in Chile at the time of suchForeign Holder’s death, or

 

·      if they are located outside of Chile, theywere purchased or acquired with funds derived from Chilean source income,

 

Theinitial issuance of the Debt Securities by a foreign entity (be they a companyor a branch) is generally not subject to stamp taxes in Chile. If stamp taxesapply, a foreign or Chilean holder will not be liable for Chilean stamp,registration or similar taxes because these would be payable by the Company.

 

***United States Tax ConsiderationsRelating to Debt Securities***

 

Thefollowing summary describes certain U.S. federal income tax consequences of theownership of Debt Securities by U.S. holders (as defined below) as of the datehereof. Except where noted, it deals only with Debt Securities held as capitalassets and does not deal with special situations, such as those of dealers insecurities or currencies, financial institutions, insurance companies,regulated investment companies, real estate investment trusts, tax-exemptentities, investors in pass-through entities, persons holding the DebtSecurities as a part of a hedging, integrated, conversion or constructive saletransaction or a straddle, traders in securities that elect to use amark-to-market method of accounting for their securities holdings, personsliable for the alternative minimum tax or holders of Debt Securities whose “functionalcurrency” is not the U.S. dollar. Furthermore, the discussion below is basedupon the provisions of the Code, and regulations, rulings and judicialdecisions there under as of the date hereof, and such authorities may berepealed, revoked or modified so as to result in U.S. federal income taxconsequences different from those discussed below. If a partnership holds ourDebt Securities, the tax treatment of a partner will generally depend upon thestatus of the partner and the activities of the partnership. Partners in apartnership holding our Debt Securities should consult their tax advisors.

 

**Persons considering the purchase, ownership ordisposition of the Debt Securities should consult their own tax advisorsconcerning the federal income tax consequences in light of their particularsituations as well as any consequences arising under the laws of any othertaxing jurisdiction.**

 

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Asused herein, a “U.S. holder” of the Debt Securities means a holder of the DebtSecurities that is (i) an individual U.S. citizen or resident, (ii) acorporation (or any other entity treated as a corporation for U.S. federal incometax purposes) created or organized in or under the laws of the United States,any state thereof or the District of Columbia, (iii) an estate the incomeof which is subject to U.S. federal income taxation regardless of its source or(iv) a trust that (a)  is subject to the primary supervision of acourt within the United States and with respect to which one or more U.S.persons have the authority to control all substantial decision of the trust or (b) hasa valid election in effect under applicable U.S. Treasury regulations to betreated as a U.S. person.

 

*Payments of Interest*

 

Intereston the Debt Securities will generally be taxable to a U.S. holder as ordinaryincome at the time it is paid or accrued in accordance with the U.S. holder’smethod of accounting for tax purposes. In addition to interest on the DebtSecurities, a U.S. holder will be required to include in income any additionalamounts and any tax withheld from interest payments notwithstanding that suchwithheld tax is not in fact received by such U.S. holder. A U.S. holder may beentitled to deduct or credit such tax, subject to applicable limitations in theCode, including that the election to deduct or credit foreign taxes applies toall of the U.S. holder’s foreign taxes for a particular year. Interest income,including Chilean taxes withheld there from and additional amounts on the DebtSecurities, generally will constitute foreign source income and generally willbe considered passive category income, which is treated separately from othertypes of income in computing the foreign tax credit that may be allowable toU.S. holders under U.S. federal tax laws. A U.S. holder will generally bedenied a foreign tax credit for Chilean taxes imposed with respect to the DebtSecurities where such a holder does not meet a minimum holding periodrequirement during which the holder is not protected from risk of loss.

 

Therules governing the foreign tax credit are complex. We urge investors toconsult their tax advisors regarding the availability of the foreign tax creditunder their particular circumstances.

 

*Market Discount*

 

Ifa U.S. holder purchases a Debt Security for an amount that is less than itsprincipal amount, the amount of the difference will be treated as “marketdiscount” for U.S. federal income tax purposes, unless that difference is lessthan a specified de minimis amount. Under the market discount rules, the U.S.holder will be required to treat any principal payment on, or any gain on thesale, exchange, retirement or other disposition of, a Debt Security as ordinaryincome to the extent of the market discount that the U.S. holder has notpreviously included in income and is treated as having accrued on the DebtSecurity at the time of its payment or disposition.

 

Inaddition, the U.S. holder may be required to defer, until the maturity of theDebt Security or its earlier disposition in a taxable transaction, thededuction of all or a portion of the interest expense on any indebtednessattributable to the Debt Security. A U.S. holder may elect, on a bond-by-bondbasis, to deduct the deferred interest expense in a tax year prior to the yearof disposition. U.S. holders should consult their own tax advisors beforemaking this election.

 

Anymarket discount will be considered to accrue ratably during the period from thedate of acquisition to the maturity date of the Debt Security, unless the U.S.holder elects to accrue on a constant interest method. A U.S. holder may electto include market discount in income currently as it accrues, on either aratable or constant interest method, in which case the rule describedabove regarding deferral of interest deductions will not apply.

* *

*Amortizable Bond Premium*

 

AU.S. holder that purchases a Debt Security for an amount in excess of itsprincipal amount will be considered to have purchased the Debt Security at a “premium.”The U.S. holder may elect to amortize the premium over the remaining term ofthe Debt Security on a constant yield method as an offset to interest whenincludible in income under the holder’s regular accounting method. If the U.S.holder does not elect to amortize bond premium, that premium will decrease thegain or increase the loss the holder would otherwise recognize on dispositionof the Debt Security.

 

*Sale, Exchange and Retirement of Debt Securities*

 

Uponthe sale, exchange, retirement or other disposition of the Debt Securities, aU.S. holder will recognize gain or loss equal to the difference between theamount realized upon the sale, exchange, retirement or other disposition (lessany accrued interest, which will be taxable as such if not previously includedin income) and the U.S. holder’s adjusted tax basis in the Debt Securities. AU.S. holder’s tax basis in the Debt Securities generally will be the U.S.holder’s cost therefore, increased 

 

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bymarket discount previously included in income, and reduced by any amortizedpremium. Except as described above with respect to market discount, gain orloss realized by a U.S. holder on the sale, exchange, retirement or otherdisposition of the Debt Securities will generally be capital gain or loss. Gainor loss realized by a U.S. holder on the sale, exchange, retirement or otherdisposition of the Debt Securities will generally be treated as U.S. sourcegain or loss. Consequently, a U.S. holder may not be able to claim a credit forany Chilean tax imposed on the sale, exchange, retirement or other dispositionof the Debt Securities due to limitations on the foreign tax credit under theCode. Capital gains of individuals derived with respect to capital assets heldfor more than one year are eligible for reduced rates of taxation. Thedeductibility of capital losses is subject to limitations.

 

*Information Reporting and Backup Withholding*

 

Ingeneral, information reporting requirements will apply to certain payments ofprincipal and interest on the Debt Securities and to the proceeds of the saleof the Debt Securities made to U.S. holders other than certain exemptrecipients. A backup withholding tax will apply to such payments if the U.S.holder fails to provide its taxpayer identification number or a certificationof exempt status, or, in the case of interest payments, fails either to reportin full dividend and interest income or to make certain certifications.

 

Anyamounts withheld under the backup withholding rules will be allowed as arefund or a credit against the U.S. holder’s U.S. federal income tax liabilityprovided the required information is furnished to the Internal Revenue Service.

 

***Special Tax Considerations Relatingto the 2097 Debentures***

 

Asa result of the 2097 Debentures’ 100 year term, it is not certain whether suchDebentures will be treated as debt or as equity for U.S. federal income taxpurposes. We have taken the position that the 2097 Debentures constitute debtfor financial reporting and U.S. federal income tax purposes. Our position,however, is not binding on the Internal Revenue Service. Althoughclassification of the 2097 Debentures as equity generally would notsignificantly affect a U.S. holder’s taxable income resulting from aninvestment in the 2097 Debentures, the discussion that follows also brieflydescribes certain U.S. federal income tax consequences that would arise if the2097 Debentures were not treated as debt for U.S. federal income tax purposes.

 

Ifthe 2097 Debentures are treated as equity for U.S. federal income tax purposes,the potential differences in the U.S. federal income tax treatment to U.S.holders of the 2097 Debentures that would result include (i) paymentsdenominated as interest on the 2097 Debentures (including additional amounts)would be reclassified as dividends to the extent paid out of the current oraccumulated earnings and profits of the Company (as determined using U.S.federal income tax principles) and (ii) U.S. holders would be required toreport such payment amounts as ordinary income when actually or constructivelyreceived (instead of accruing such amounts as interest, even if such U.S.holders are accrual method taxpayers). To the extent any such payments exceedsuch earnings and profits, they would be treated as a return of capital orcapital gain (although, as we do not expect to keep earnings and profits inaccordance with U.S. federal income tax principles. U.S. holders should expectthat such payments will generally be treated as dividends). Amounts treated asdividends will not be eligible for the dividends received deduction generallyallowed U.S. corporations. In addition, because our 2097 Debentures are notreadily tradable on an established securities market in the United States, wedo not believe that any amounts treated as dividends currently meet theconditions required for the reduced tax rates that apply to qualified dividendincome received by non-corporate U.S. holders. **Persons considering the purchase, ownership or disposition of the 2097Debentures should consult their own tax advisors concerning additionalpotential tax consequences, including those arising upon a sale, exchange orredemption of the 2097 Debentures, which could result from the treatment of the2097 Debentures as equity for U.S. federal income tax purposes.**

 

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**F.****             ****Dividendsand Paying Agents**

 

Not applicable.

 

**G.****           ****Statementby Experts**

 

Not applicable.

 

**H.****           ****Documentson Display**

 

Weare subject to the informational reporting requirements of the U.S. SecuritiesExchange Act of 1934, as amended, which requires that we file periodic reportsand other information with the SEC. As a foreign private issuer, we file annualreports on Form 20-F as opposed to Form 10-K. We do not file quarterlyreports on Form 10-Q but furnish quarterly reports and reports in relationto material events on Form 6-K. As a foreign private issuer, we are exemptfrom the rules under the U.S. Securities Exchange Act of 1934, as amended,prescribing the furnishing and content of proxy statements and short-swingprofit disclosure and liability.

 

Youmay read and copy all or any portion of the annual report or other informationin our files in the SEC’s public reference room at 100 F Street, N.E.,Washington, D.C. 20549. You can also access these documents through the SEC’swebsite at www.sec.gov or from our corporate websitewww.embotelladoraandina.com or request a hard copy to kor@koandina.com.  You can also request copies of thesedocuments upon payment of a duplicating fee, by writing to the SEC. Please callthe SEC at 1-800-SEC-0330 for further information on the operation of thepublic reference rooms. In addition, reports and other information concerningus may be inspected at the offices of the New York Stock Exchange, Inc.,20 Broad Street, New York, New York 10005, on which our ADRs are listed.

 

Wealso file reports with the Chilean *Superintendencia deValores y Seguros*. You may read and copy any materials filed withthe SVS directly from its website www.svs.cl of from our corporate websitewww.embotelladoraandina.com or request a hard copy to kor@koandina.com. Thedocuments referred to in this annual report can be inspected at El Golf 40Oficina 401, Las Condes, Santiago, Chile.

 

**I.****                ****SubsidiaryInformation**

 

Notapplicable.

 

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

 

Marketrisk generally represents the risk that losses may occur in the values offinancial instruments as a result of movements in interest rates, foreigncurrency exchange rates and commodity prices. We are exposed to changes infinancial market conditions in the normal course of our business due to our useof certain financial instruments as well as transacting in various foreigncurrencies and translation of our foreign subsidiaries’ financial statementsinto the Chilean peso.

 

**Interest Rate Risk**

 

Ourprimary interest rate exposures relate to U.S. dollar denominated and UFlong-term fixed rate bond liabilities and other long-term variable and fixedrate bank liabilities. We also invest in certain medium-term bond securitiesthat bear a fixed interest rate. We monitor our exposure to interest ratefluctuations regularly depending on market conditions.

 

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Thefollowing table provides information about our long-term debt and bondinvestments that are sensitive to changes in market interest rates as ofDecember 31, 2009.

 
| ** **                       | ** ** | **Expected Maturity Date** | ** ** | **Estimated Fair  Market Value** | ** ** |
|----------------------------------|------------|----------------------------|------------|--------------------------------------------|------------|
| ** **                       | ** ** | **2010**                   | ** ** | **2011**                                   | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Total** | ** ** |
| ** **                       | ** ** | **MCh$**                   | ** ** | **MCh$**                                   | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| **Interest Earning Assets**      | ** ** | ** **                 |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Time deposits and credit links   |       | 96,378                     |       | 0                                          |       | 0 |   | 0 |   | 0 |   | 0 |   | 96,378 |   | 96,378 |   |
| Weighted average interest rate   |       | 2,28                       | %          |                                       |       |   |   |   |   |   |   |   |   | 2.28 | % |   |   |
| **Interest Bearing Liabilities** |       |                       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                   |       | 3,118                      |       | 2,888                                      |       | 3,075 |   | 3,275 |   | 3,488 |   | 60,758 |   | 76,602 |   | 85,083 |   |
| Fixed Rate                       |       | 6.50                       | %          | 6.50                                       | %          | 6.50 | % | 6.50 | % | 6.50 | % | 6.50 | % | 6.50 | % |   |   |
| Bank liabilities                 |       | 373                        |       | 0                                          |       | 0 |   | 0 |   | 0 |   | 0 |   | 373 |   | 373 |   |
| Weighted average interest rate   |       | 10.44                      | %          |                                       |       |   |   |   |   |   |   |   |   | 10.44 | % |   |   |
| Variable Rate                    |       |                       |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank liabilities                 |       | 242                        |       | 171                                        |       | 30 |   |   |   |   |   |   |   | 443 |   | 443 |   |
| Weighted average interest rate   |       | 10.51                      | %          | 10.58                                      | %          | 10.26 | % |   |   |   |   |   |   | 10.51 | % |   |   |

 

**Foreign Currency Risk**

 

AtDecember 31, 2009, the Company does not have long-term interest bearingdebt subject to exchange rate fluctuations between the Chilean peso and theU.S. dollar. The company maintains cash, short term deposits and money marketmutual funds in U.S. dollars amounting to Ch$6,322 million at December 31,2009

 

Thefollowing table summarizes the financial instruments denominated in US dollarswe held as of December 31, 2009.

 
| ** **                | ** ** | **Expected Maturity Date** | ** ** | **Estimated Fair** | ** ** |
|---------------------------|------------|----------------------------|------------|-------------------------|------------|
| **Assets**                | ** ** | **2010**                   | ** ** | **2011**                | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Market Value** | ** ** |
| ** **                | ** ** | **MCh$**                   | ** ** | **MCh$**                | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** | **MCh$** | ** ** |
| US$ denominated:     |       |                       |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                      |       | 84                         |       | 0                       |       | 0 |   | 0 |   | 0 |   | 0 |   | 84 |   | 84 |   |
| Money market mutual funds |       | 6,238                      |       | 0                       |       | 0 |   | 0 |   | 0 |   | 0 |   | 6,238 |   | 6,238 |   |

 

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

 

Not applicable.

 

**ITEM 12.D.3.****                       ****AMERICAN DEPOSITARY RECEIPITS**

 

TheBank of New York Mellon serves as the depositary for our ADRs. ADR holders arerequired to pay various fees to the depositary, and the depositary may refuseto provide any service for which a fee is assessed until the applicable fee hasbeen paid.

 

ADRholders are required to pay the depositary amounts in respect of expensesincurred by the depositary or its agents on behalf of ADR holders, includingexpenses arising from compliance with applicable law, taxes or othergovernmental charges, or conversion of foreign currency into U.S. dollars. Thedepositary may decide in its sole discretion to seek payment by either billingholders or by deducting the fee from one or more cash dividends or other cashdistributions.

 

ADRholders are also required to pay additional fees for certain services providedby the depositary, as set forth in the table below.

 
| **Depositary service**                                                           | ** ** | **Fee payable by ADR holders**                                         |
|----------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|
| Issuance  and delivery of ADRs, including in connection with share distributions |       | Up  to US$ 5.00 per 100 ADSs (or portion thereof)                 |
| Withdrawal  of shares underlying ADRs                                            |       | Up  to US$ 5.00 per 100 ADSs (or portion thereof)                 |
| Registration  for the transfer of shares                                         |       | Registration  or transfer fees that may from time to time be in effect |
| Cash  distribution fees                                                          |       | US$ 0.02 or less per ADS                                          |

 

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Inaddition, holders may be required to pay a fee for the distribution or sale ofsecurities. Such fee (which may be deducted from such proceeds) would be for anamount equal to the lesser of (1) the fee for the issuance of ADRs thatwould be charged as if the securities were treated as deposited shares and (2) theamount of such proceeds.

 

**12.D.4****           ****DIRECT AND INDIRECT PAYMENTS BY THE DEPOSITARY**

 

**Fees Incurred in Past Annual Period**

 

From January 1, 2009 to December 31, 2009,the Company received from the depositary $US$144,795 for continuing annual stock exchange listingfees, standard out-of-pocket maintenance costs for the ADRs (consisting of theexpenses of postage and envelopes for mailing annual and interim financialreports, printing and distributing dividend checks, electronic filing of U.S.Federal tax information, mailing required tax forms, stationery, postage,facsimile, and telephone calls), any applicable performance indicators relatingto the ADR facility, underwriting fees and legal fees.

 

**Fees to be Paid in the Future**

 

The Bank of New York Mellon, as depositary, hasagreed to reimburse the Company for expenses they incur that are related toestablishment and maintenance expenses of the ADR program. The depositary hasagreed to reimburse the Company for its continuing annual stock exchangelisting fees. The depositary has also agreed to pay the standard out-of-pocketmaintenance costs for the ADRs, which consist of the expenses of postage andenvelopes for mailing annual and interim financial reports, printing anddistributing dividend checks, electronic filing of U.S. Federal taxinformation, mailing required tax forms, stationery, postage, facsimile, and telephonecalls. It has also agreed to reimburse the Company annually for certaininvestor relationship programs or special investor relations promotionalactivities. In certain instances, the depositary has agreed to provideadditional payments to the Company based on any applicable performanceindicators relating to the ADR facility. There are limits on the amount ofexpenses for which the depositary will reimburse the Company, but the amount ofreimbursement available to the Company is not necessarily tied to the amount offees the depositary collects from investors.

 

The depositary collects its fees for delivery andsurrender of ADRs directly from investors depositing shares or surrenderingADRs for the purpose of withdrawal or from intermediaries acting for them. Thedepositary collects fees for making distributions to investors by deductingthose fees from the amounts distributed or by selling a portion ofdistributable property to pay the fees. The depositary may collect its annualfee for depositary services by deduction from cash distributions or by directlybilling investors or by charging the book-entry system accounts of participantsacting for them. The depositary may generally refuse to provide fee-attractingservices until its fees for those services are paid.

 

**PART II**

 

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

 

Not applicable.

 

**ITEM 14.****                      ****MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OFPROCEEDS**

 

The information requested by this item has beenpreviously provided in the annual report for the year 2004. See “Item 4.Information on the Company—Part A. History and Development of the Company.”

 

**ITEM 15.****                      ****CONTROLS AND PROCEDURES**

 

*Evaluation of disclosure controls and procedures*.

 

Underthe supervision and with the participation of our management, including ourChief Executive Officer, Chief Financial Officer and Controller, we haveevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures as of December 31, 2009. Based on that evaluation,our Chief Executive Officer, Chief Financial Officer and Controller haveconcluded that these controls and procedures are effective to ensure thatinformation required to be disclosed 

 

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inthe reports that we file or submit under the Securities Exchange Act of 1934,as amended, is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms, and that such informationis accumulated and communicated to management as appropriate to allow timelydecisions regarding required disclosure.

 

*Management’s Annual Report on Internal Control overFinancial Reporting.*

 

Companymanagement is responsible for establishing and maintaining adequate internalcontrol over financial reporting. Internal control over financialreporting is defined in Rule 13a-15(f) or 15d-15(f) promulgatedunder the Securities Exchange Act of 1934, as amended, as a processdesigned by, or under the supervision of, the Company’s Chief ExecutiveOfficer, Chief Financial Officer and Controller and effected by theCompany’s Board of Directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordancewith generally accepted accounting principles and includes those policiesand procedures that: (i) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactionsand dispositions of the assets of the Company; (ii) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the Companyare being made only in accordance with authorizations of management anddirectors of the Company; and (iii)                                                 providereasonable assurance regarding prevention or timely detection of unauthorizedacquisitions, use or disposition of the Company’s assets that could have amaterial effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Projections of any evaluation ofeffectiveness as to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.

 

TheCompany’s management assessed the effectiveness of the Company’s internalcontrol over financial reporting as of December 31, 2009. In makingthis assessment, the Company’s management used the criteria set forth bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control-Integrated Framework. Based on our assessment, managementconcluded that, as of December 31, 2009, the Company’s internalcontrol over financial reporting was effective based on those criteria.

 

Theeffectiveness of the Company’s internal control over financial reporting as ofDecember 31, 2009 has been audited by the Company’s registered independentaccounting firm, which opinion is stated in their report, included herein.

 

*Changes in Internal Controls over FinancialRreporting.*

 

Therewere no changes in our internal control over financial reporting during theyear ended December 31, 2009 that materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

 

**ITEM 16A.****             ****AUDITCOMMITTEE FINANCIAL EXPERT**

 

Ourboard of directors has determined that Mr. Heriberto Urzúa Sánchez is ourAudit Committee Financial Expert as defined in the instructions toItem 16A of Form 20-F. Our board of directors has also determinedthat Mr. Heriberto Urzúa Sánchez is an Independent Director as defined inSection 303A.02 of the NYSE’s Listed Company Manual.

 

**ITEM 16B.****             **** CODEOF ETHICS**

 

Wehave adopted a Code of Business Conduct that constitutes a code of ethics forour employees. This Code applies to our Chief Executive Officer and all seniorfinancial officers of our Company, including the Chief Financial Officer,controller, or any other persons performing similar functions, as well as toall other officers and employees of the Company. Our Code of Business Conductis available on our website www.embotelladoraandina.com.If we make any substantive amendment to the Code or grant any waivers,including any implicit waiver, from a provision of the Code, we will disclosethe nature of such amendment or waiver on the above mentioned website through a6-K form.

 

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**ITEM 16C.****             **** PRINCIPALACCOUNTANT FEES AND SERVICES**

 

***Fees Paid To Independent PublicAccountants***

 

Thefollowing table sets forth, for each of the years indicated, the kinds of feespaid to our external auditors and the percentage of each of the fees out of thetotal amount paid to them.

 
| ** **            | ** ** | **Year Ended December 31,** | ** ** |
|-----------------------|------------|-----------------------------|------------|
| ** **            | ** ** | **2009**                    | ** ** | **2008** | ** ** |
| **Services rendered** | ** ** | **Fees  MCh$**              | ** ** | **% of Total  Fees** | ** ** | **Fees  MCh$** | ** ** | **% of Total  Fees** | ** ** |
| Audit fees(1)         |       | 577                         |       | 98 | % | 556 |   | 98 | % |
| Audit-related fees(2) |       | 3                           |       | 1 | % | 5 |   | 1 | % |
| Tax fees(3)           |       | 5                           |       | 1 | % | 3 |   | 1 | % |
| Total                 |       | 585                         |       | 100 | % | 564 |   | 100 | % |

 

----

*(1)**               **Auditfees consist of services that would normally be provided in connection withstatutory and regulatory filings or engagements, including services thatgenerally only the independent accountant can reasonably provide.*

*(2)**               **Audit-relatedfees relate to assurance and associated services that traditionally areperformed by the independent accountant, including: attest services that arenot required by statute or regulation; accounting consultation and audits inconnection with mergers, acquisitions and divestitures; employee benefit plansaudits; and consultation concerning financial accounting and reportingstandards.*

*(3)**               **Taxfees relate to services performed by the tax division for tax compliance,planning, and advice.*

 

***Directors’ Committee and AuditCommittee Pre-Approval Policies and Procedures***

 

Wehave adopted pre-approval policies and procedures under which all audit andnon-audit services provided by our external auditors must be pre-approved byour Director’s Committee and Audit Committee and then it is discussed andapproved by these committees during its meetings, which take place at leastfour times a year. Once the proposed service is approved, our subsidiaries orwe formalize the engagement of services. In addition, the members of our boardof directors are briefed on matters discussed by the different committees ofour board of directors.

 

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

 

TheCompany’s Audit Committee is comprised of Salvador Said Somavía, HeribertoUrzúa Sánchez, and Juan Claro González. Salvador Said Somavía was ratified asmember of the Company’s Audit Committee at a Special Board Session held April 14,2009, in accordance with the report on form 6K filed with the SEC on June 30,2009.

 

TheCompany discloses that, with respect to the current membership of Mr. SalvadorSaid on the Company’s Audit Committee, it has relied on the exemption from theindependence requirements provided by Rule 10A-3(b)(1)(iv)(D) of theSecurities and Exchange Act of 1934, as amended . Pursuant to said rule, adirector who is either an affiliate or a representative of an affiliate of thelisted company may serve as a member of the audit committee to the extent thedirector is not a voting member or chairperson of the audit committee and tothe extent that neither the director nor the affiliate the director representsis an executive officer of the listed company.

 

Mr. SalvadorSaid meets, for the duration of his membership, the requirements of Rule 10A-3(b)(1)(iv)(D) becausehe (i) is a representative of the controlling shareholder of the Company, InversionesFreire Ltda.; (ii) has an observer-only status on the audit committee ofthe Company; and (iii) is not an officer of the Company.

 

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Mr. Juan Claro is exempt from the independence requirementspursuant to the terms of Rule 10A-3(b)(1)(iv)(D), since (i) Mr. JuanClaro participates in an Andina affiliate; (ii) neither Mr. JuanClaro nor the Andina affiliate is an officer of the company; and (iii) Mr. JuanClaro has only an observer status and is non-voting member of the auditcommittee.

 

TheCompany’s reliance on the exemption provided by Rule 10A-3of the ExchangeAct, with respect to Mr. Salvador Said and Mr. Juan Claro, would notmaterially adversely affect the ability of the audit committee of the Companyto act independently.

 

DuringBoard Session N°1,034 on June 30, 2009, the Board accepted the resignationof Mr. Juan Claro González as Chairman of the Committee, because he nolonger complied with the requirements to be considered as an independentdirector of this Committee. Consequently, the following was approved:  (i) amend the Charter (*Reglamento Interno*) of the AuditCommittee, in order to permit it to operate with only one independent member,as allowed for foreign private issuers under U.S. federal laws and regulations;(ii) ratify Mr. Heriberto Urzúa, Mr. Juan Claro and Mr. SalvadorSaid as members of the Audit Committee; appointing Mr. Heriberto Urzúa asChariman, who also complies with NYSE’s independence standards. Only Mr.,Heriberto Urzúa will have full voting powers in the Audit Committee. Mr. JuanClaro and Mr. Salvador Said have been appointed members of this Committeeand will have an observer-only status without being company officers; and (iii) ratifyMr. Heriberto Urzúa as Andina’s Audit Committee Financial Expert.

 

**ITEM 16E.****               **** PURCHASERS OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATEDPURCHASERS**

 

During2009, no issuer or affiliated parties made purchases pursuant to publiclyannounced plans or programs or not pursuant to such plans.

 

**ITEM 16F.  CHANGE IN REGISTRANT’SCERTIFYING ACCOUNTANT**

 

**Previous independent registeredpublic accounting firm**

 

On April 14, 2009, Andina dismissed PricewaterhouseCoopersConsultores Auditores y Compañía Limitada as its independent registered publicaccounting firm. Andina’s board of directors participated in and approved thedecision to change its independent registered public accounting firm.

 

The reports of PricewaterhouseCoopers Consultores Auditores y CompañíaLimitada on the financial statements for the past two fiscal years contained noadverse opinion or disclaimer of opinion and were not qualified or modified asto uncertainty, audit scope or accounting principle.

 

During the two most recent fiscal years and through April 14,2009, there have been no disagreements with PricewaterhouseCoopers ConsultoresAuditores y Compañía Limitada on any matter of accounting principles orpractices, financial statement disclosure, or auditing scope or procedure,which disagreements if not resolved to the satisfaction ofPricewaterhouseCoopers Consultores Auditores y Compañía Limitada would havecaused them to make reference thereto in their reports on the financialstatements for such years.

 

During the two most recent fiscal years and through April 14,2009, there have been no reportable events (as defined in Item 304(a)(1)(v) ofRegulation S-K).

 

Andina requested that PricewaterhouseCoopers Consultores Auditores yCompañía Limitada furnish it with a letter addressed to the SEC, dated June 25,2010, stating whether it agrees or not with the above statements. See Exhibit 8.2filed herewith.

 

**New independent registered public accounting firm**

 

Andina engaged Ernst & Young Auditores Independentes publicaccountants as its new independent registered public accounting firm as of April 14,2009. During the two most recent fiscal years and through April 14, 2009,Andina has not consulted with Ernst & Young regarding either (i) theapplication of accounting principles to a specified transaction, eithercompleted or proposed; or the type of audit opinion that might be rendered onAndina’s financial statements, and neither a written report was provided toAndina or oral advice was provided that Ernst & Young concluded was animportant factor considered by Andina in reaching a decision as to theaccounting, auditing or financial reporting issue; or (ii) any matter thatwas either the subject of a disagreement, as that term is defined in Item304(a)(1)(iv) of Regulation S-K and the 

 

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relatedinstructions to Item 304 of Regulation S-K, or a reportable event, as that termis defined in Item 304(a)(I)(v) of Regulation S-K.

 

**ITEM 16G. CORPORATE GOVERNANCE**

 

**NYSE and Chilean Corporate Governance Requirements**

 

Inaccordance with Section 303A.11 of the NYSE’s Listed Company Manual, thefollowing table sets forth significant differences between Chilean corporategovernance practices and those corporate governance practices followed bydomestic corporations under NYSE listing standards. Significant ways in whichour corporate governance practices differ from those followed by U.S. companiesunder NYSE listing standards are also publicly available on our website at www.embotelladoraandina.com.

 
| **ITEM**                                      | ** ** | **NYSE REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                            | ** ** | **CHILEAN LAW REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 303A.01  Independence                         |       | Members  of the Board of Directors must be independent in their majority.                                                                                                                                                                                                                                                                                                                                                                        |       | There  is no legal obligation to have a Board of Directors composed mainly of  independent members. In addition, according to section 303A regarding  Controlled Companies, the requirements of 303A do not apply to our Company.                                                                                                                                                                                                                                                                                                         |
|                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 303A.02  Test of Independence                 |       | Members  of the Board of Directors must meet the Test of Independence.                                                                                                                                                                                                                                                                                                                                                                           |       | No  similar legal obligation exists under Chilean law. However, as of  December 31, 2009, Chilean law defines a director as independent if he  is elected by votes of shareholders who are not controlling shareholders or  otherwise related to controlling shareholders.                                                                                                                                                                                                                                                           |
|                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 303A.03  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. The Non-Management  Director does not exist under Chilean law. Directors, however, are required  to convene in legally established meetings to resolve matters required by  Chilean Corporation Law.                                                                                                                 |
|                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 303A.04  Corporate Governance Committee       |       | Listed  companies must have a Nominating/Corporate Governance Committee composed  entirely of independent directors and must have a written charter addressing  certain matters.                                                                                                                                                                                                                                                                 |       | There  is no similar legal obligation under Chilean law.. Andina has a Directors’  Committee whose functions are set by Chilean Corporation Law. In addition,  section 303 A regarding Controlled Companies does not apply to our Company                                                                                                                                                                                                                                                                                            |
|                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 303A.05  Compensation Committee               |       | Listed  companies must have a Compensation Committee composed entirely of independent  directors, and must have a written charter addressing certain matters.                                                                                                                                                                                                                                                                                    |       | There  is no similar legal obligation under Chilean law. In accordance with Chilean  law, the above-mentioned Directors’ Committee is in charge of reviewing  management compensation. In addition, section 303 A regarding Controlled  Companies does not apply to our Company.                                                                                                                                                                                                                                                     |
|                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 303A.06  Audit Committee                      |       | Listed  companies must have an Audit Committee that satisfies the requirements of  Rule 10A-3 under the Exchange Act.

The  Audit Committee must have a minimum of three members. In addition to any  requirement of Rule 10A-3(b)(1), all Audit Committee members must  satisfy the requirements for independence set out in Section 303 A.02.  The Audit Committee must have a written charter addressing certain matters. |       | No  similar legal obligation exists under Chilean law. However, in accordance  with the Chilean Public Companies Law 18,046, public companies that have a  net worth of more than 1.5 million UFs must have a Directors’ Committee,  formed by three members who are in their majority independent of the  controller. Andina designated an Audit Committee in accordance with  Rule 10 A.3.The functions of this committee are described under “Item 6.  Directors, Senior Management and Employees-Board Practices” |

 

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| **ITEM**                                     | ** ** | **NYSE REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **CHILEAN LAW REQUIREMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.07  Internal Audit Function             |       | Listed  companies must maintain an Internal Audit Function to provide management and  the Audit Committee with ongoing assessments of the company’s risk management  processes and systems of internal control. A listed company may choose to  outsource this function to a third party service provider other than its  independent auditor.                                                                                                                                                                                                                                                                                                                                                                                                                                          |       | There  is no similar obligation under Chilean law. Chilean law requires that  companies must have both account inspectors and external auditors. However,  Andina has an Internal Auditor who reports to the Audit Committee.                                                                                                                                                                                                                                                                                                                                       |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.08  Voting on Compensation Plans        |       | Shareholders  must have the opportunity to vote on the creation or amendment of  compensation plans regarding board members, executives and employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | There  is no similar oblgation under Chilean law, with the exception of Directors’  compensation which annually approved during the General Shareholders’  Meeting.                                                                                                                                                                                                                                                                                                                                                                                       |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.09  Corporate Governance                |       | Listed  companies must adopt and disclose Corporate Governance Practices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       | Chilean  Law does not require the adoption of Corporate Governance Practices because  they have been established by Chilean Corporate Law.                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.10  Code of Ethics and Business Conduct |       | A  company must adopt a Code of Business Conduct for its directors, officers and  employees. Such company must 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 regulate the  company and its relations with personnel. Such regulations must contain,  among other things, regulations related to ethics and good behavior.  Notwithstanding the above, a company may create internal codes of conduct,  provided they do not require or prohibit behavior that contravenes Chilean  law. In 1996, Andina created a Code of Business Conduct that applies to the  entire Company. |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.11  Summary of Differences              |       | 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 as applicable to U.S. domestic listed  companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |       | No  similar obligation exists under Chilean law. However, Andina has posted this  information on its website www.embotelladoraandina.com                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.12  CEO Certification                   |       | Each  listed company CEO must certify to the NYSE each year that he or she is not  aware of any violation by the company of NYSE corporate governance listing  standards. Each listed company CEO must promptly notify the NYSE in  writing after any executive officer of the listed company becomes aware of  any material non-compliance with any of the applicable provisions of  Section 303 A. Each listed company must submit an executed Written  Affirmation annually to the NYSE. In addition, each listed company must  submit an interim Written Affirmation each time a change occurs to the Board  of Directors or any of the committees subject to Section 303 A. The annual  and interim Written Affirmations must be in the form specified by the NYSE. |       | 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.                                                                                                 |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 303A.13  Public Reprimand                    |       | The  NYSE may issue a Public Reprimand letter to any listed company, regardless of  the type of security listed or country of incorporation if it determines the  company has violated a NYSE listing standard.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       | No  similar obligation exists under Chilean law, with the exception of sanctions  imposed by the Chilean Superintendence of Securities (SVS)                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 307  Company Website                         |       | Listed  Companies must have a company website which is accessible from the United  States. The website must contain its all NYSE requirements including tose  referring to Corporate Governance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       | No  similar obligation exists under Chilean law as of December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

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**PART III**

 

**ITEM 17.****                       ****FINANCIAL STATEMENTS**

 

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

 

**ITEM 18.****                       ****FINANCIAL STATEMENTS**

 

Thefollowing financial statements, together with the report of independentregistered accounting firm, are filed as part of this Annual Report:

 
| ** **                                                                                                                                        | **Page** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                              |     |
| Index to Consolidated  Financial Statements                                                                                                       |     |
| Report of Independent  Registered Public Accounting Firm                                                                                          | F-2      |
| Consolidated Balance Sheets at  December 31, 2009 and 2008                                                                                   | F-6      |
| Consolidated Statements of  Income for the years ended December 31, 2009, 2008 and 2007                                                      | F-8      |
| Consolidated Statements of  Cash Flows for the years ended December 31, 2009, 2008 and 2007                                                  | F-9      |
| Notes to  the Consolidated Financial Statements at December 31, 2009 and 2008 and  for the years ended December 31, 2009, 2008 and 2007 | F-11     |

 

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**ITEM 19.****                                             ****EXHIBITS**

 

Theexhibits filed with or incorporated by reference in this annual report arelisted in the exhibit index below.

 

**EXHIBIT INDEX**

 
| **Item** | ** ** | **Description**                                                                                                                                                                                                                                                                        |
|----------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |       |                                                                                                                                                                                                                                                                                   |
| 1.1      |       | English  translation of our Bylaws (filed with the U.S. Securities and Exchange  Commission in our annual report on Form 20-F for the fiscal year ended  December 31, 1996 and incorporated herein by reference, also available  on our website www.embotelladoraandina.com) |
|     |       |                                                                                                                                                                                                                                                                                   |
| 8.1      |       | List  of our subsidiaries (filed herewith).                                                                                                                                                                                                                                            |
|     |       |                                                                                                                                                                                                                                                                                   |
| 8.2      |       | Letter  addressed to sec re: dismissal of previous auditors (filed herewith).                                                                                                                                                                                                          |
|     |       |                                                                                                                                                                                                                                                                                   |
| 12.1     |       | Certification  of Jaime Garcia, Chief Executive Officer, pursuant to  Rule 13-a14(a) (17 CFR 240.13a-12(a)) or  Rule 15d-14(a) (17 CFR 240.15d-14(a)) (filed herewith).                                                                                            |
|     |       |                                                                                                                                                                                                                                                                                   |
| 12.2     |       | Certification  of Osvaldo Garay, Chief Financial Officer pursuant to  Rule 13-a14(a) (17 CFR 240.13a-12(a)) or  Rule 15d-14(a) (17 CFR 240.15d-14(a)) (filed herewith).                                                                                            |
|     |       |                                                                                                                                                                                                                                                                                   |
| 13.1     |       | Certification  of Jaime Garcia, Chief Financial Officer, pursuant to 18 U.S.C. Chapter 63,  Section 1350, (filed herewith).                                                                                                                                                       |
|     |       |                                                                                                                                                                                                                                                                                   |
| 13.2     |       | Certification  of Osvaldo Garay, Chief Financial Officer, pursuant to 18 U.S.C. Chapter 63,  Section 1350, (filed herewith).                                                                                                                                                      |

 

80

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**SIGNATURE**

 

Pursuantto 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-Fand has duly caused this Annual Report on Form 20-F to be signed on itsbehalf by the undersigned, thereunto duly authorized, in the city of Santiago,Chile on June 30, 2010.

 
|   | EMBOTELLADORA  ANDINA S.A. |
|--------|----------------------------|
|   | (ANDINA  BOTTLING COMPANY) |
|   |                       |
|   | /s/ Osvaldo  Garay    |
|   | Osvaldo  Garay             |
|   | Chief  Financial Officer   |

Date: June 30,2010

 

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EMBOTELLADORAANDINA S.A. AND SUBSIDIARIES

 

Consolidated financial statements

 

Asof December 31, 2009 and 2008 and for each of the three years in theperiod ended December 31, 2009

 

CONTENTS

 

| Report  of Independent Registered Public Accounting Firm |   |
|----------------------------------------------------------|--------|
| Consolidated  Balance Sheets                             |   |
| Consolidated  Statements of Income                       |   |
| Consolidated  Statements of Cash Flows                   |   |
| Notes  to the Consolidated Financial Statements          |   |

 
| Ch$     | - | Chilean pesos                                                              |
|--------------|---|----------------------------------------------------------------------------|
| ThCh$   | - | Thousands of Chilean pesos                                                 |
| US$     | - | United States dollars                                                      |
| ThUS$   | - | Thousands of United States  dollars                                        |
| UF      | - | Unidades de Fomento  (Chilean government inflation-indexed monetary units) |
| A$      | - | Argentine pesos                                                            |
| R$      | - | Brazilian reals                                                            |
| €  | - | Euros                                                                      |

 

F-1

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Table ofContents

 

**Report ofIndependent Registered Public Accounting Firm**

 

To the Board of Directorsand Shareholders of Embotelladora Andina S.A. and subsidiaries:

 

We have audited theaccompanying consolidated balance sheets of Embotelladora Andina S.A. andsubsidiaries as of December 31, 2009, and the related consolidatedstatements of income and cash flows for the year then ended. These financialstatements are the responsibility of the Company ́s management. Ourresponsibility is to express an opinion on these financial statements based onour audit.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basisfor our opinion.

 

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Embotelladora Andina S.A. andsubsidiaries at December 31, 2009, and the consolidated results of theiroperations and their cash flows for the year then ended in conformity withaccounting principles generally accepted in Chile, which differ in certainrespects from accounting principles generally accepted in the United States ofAmerica (see Note 30 to the consolidated financial statements).

 

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), Embotelladora Andina S.A. and subsidiaries’ internal controlover financial reporting as of December 31, 2009, based on the criteriaestablished in the Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our reportdated June 29, 2010 expressed an unqualified opinion thereon.

 

 
| ERNST &  YOUNG LTDA. |  |
|-------------------------------|--|

 

 

Santiago, Chile

June 29, 2010

 

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Table of Contents

 

**Report ofIndependent Registered Public Accounting Firm**

 

To the Board of Directorsand Shareholders of Embotelladora Andina S.A. and subsidiaries:

 

We have auditedEmbotelladora Andina S.A. and subsidiaries’ internal control over financial reportingas of December 31, 2009, based on criteria established in InternalControl—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (the COSO criteria). EmbotelladoraAndina S.A. and subsidiaries’ management is responsible for maintainingeffective internal control over financial reporting, and for its assessment ofthe effectiveness of internal control over financial reporting included in theaccompanying Annual Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinionon the company’s internal control over financial reporting based on our audit.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, testing and evaluating thedesign and operating effectiveness of the internal control based on theassessed risk, and performing such other procedures as we considered necessaryin the circumstances. We believe that our audit provides a reasonable basis forour opinion.

 

A company’s internal controlover financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposal of thecompany’s assets that could have a material effect on the financial statements.

 

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

 

In our opinion,Embotelladora Andina S.A. and subsidiaries maintained, in all materialrespects, effective internal control over financial reporting as of December 31,2009, based on the COSO criteria.

 

F-3

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Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheets ofEmbotelladora Andina S.A. and subsidiaries as of December 31, 2009 and therelated consolidated statements of income and cash flows for the year thenended and our report dated June 29, 2010 expressed an unqualified opinion thereon.

 

 
|                          |  |
|-------------------------------|--|
| ERNST &  YOUNG LTDA. |

 

 

Santiago, Chile

June 29,2010

 

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Table ofContents

 

Report of Independent Registered Public AccountingFirm

 

Tothe Board of Directors and Shareholders of Embotelladora Andina S.A.

 

Inour opinion, the consolidated balance sheet as of December 31, 2008 andthe related consolidated statements of income and of cash flows for each of thetwo years in the period ended December 31, 2008 present fairly, in allmaterial respects, the financial position of Embotelladora Andina S.A. and itssubsidiaries at December 31, 2008, and the results of their operations andtheir cash flows for each of the two years in the period ended December 31,2008, in conformity with accounting principles generally accepted in Chile.These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audits.  We conducted our audits of these statementsin accordance with the standards of the Public Company Accounting OversightBoard (United States) and auditing standards generally accepted in Chile.  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluatingthe overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America (“U.S.GAAP”). Information relating to the nature and effect of such differences ispresented in Note 30 to the consolidated financial statements.

 

 
| /s/PricewaterhouseCoopers |   |
|---------------------------|--------|
|                      |   |
|                      |   |
| Santiago,  Chile          |   |
| June 30,  2009       |   |

 

(Exceptas to the price-level restatement described in Note 1 c), for which the date inJune 29, 2010)

 

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Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(Restatedfor general price-level changes and expressed in

thousandsof constant Chilean pesos of December 31, 2009)

 
| ** **                                              | ** ** | ** ** | ** ** | **At December 31,** | ** **   |
|---------------------------------------------------------|------------|------------|------------|---------------------|--------------|
| **ASSETS**                                              | ** ** | **Note**   | ** ** | **2009**            | ** **   | **2008** | ** ** |
| ** **                                              | ** ** | ** ** | ** ** | ** **          | **ThCh$**    | ** ** | **ThCh$** | ** ** |
| CURRENT ASSETS                                          |       |       |       |                |         |   |   |   |
| Cash                                                    |       |       |       |                | 20,217,244   |   | 20,761,350 |   |
| Time deposits                                           |       |       | 3          |                | 96,377,995   |   | 79,841,887 |   |
| Marketable securities                                   |       |       | 4          |                | 18,541,092   |   | 25,676,642 |   |
| Trade accounts receivable (net)                         |       |       | 5          |                | 53,698,650   |   | 45,675,913 |   |
| Notes receivable (net)                                  |       |       | 5          |                | 13,975,488   |   | 13,791,974 |   |
| Other receivables (net)                                 |       |       | 5          |                | 11,194,554   |   | 12,951,620 |   |
| Accounts receivable from related companies              |       |       | 6  a)      |                | 1,051,015    |   | 2,875,209 |   |
| Inventories (net)                                       |       |       | 7          |                | 36,222,020   |   | 30,509,121 |   |
| Recoverable taxes                                       |       |       |       |                | 4,254,255    |   | 5,847,628 |   |
| Prepaid expenses                                        |       |       |       |                | 2,793,157    |   | 2,379,857 |   |
| Deferred income taxes                                   |       |       | 8  b)      |                | 2,573,818    |   | 3,553,365 |   |
| Other current assets                                    |       |       | 9          |                | 10,076,161   |   | 6,777,138 |   |
| Total current assets                                    |       |       |       |                | 270,975,449  |   | 250,641,704 |   |
|                                                    |       |       |       |                |         |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                           |       |       | 10         |                |         |   |   |   |
| Land                                                    |       |       |       |                | 18,356,668   |   | 19,958,341 |   |
| Buildings and improvements                              |       |       |       |                | 113,806,749  |   | 122,489,875 |   |
| Machinery and equipment                                 |       |       |       |                | 270,383,074  |   | 292,803,494 |   |
| Other property, plant and equipment                     |       |       |       |                | 261,202,767  |   | 275,698,453 |   |
| Technical reappraisal of property, plant and  equipment |       |       |       |                | 2,349,325    |   | 2,349,325 |   |
| Less: Accumulated depreciation                          |       |       |       |                | (461,601,328 | ) | (491,330,969 | ) |
| Total property, plant and equipment                     |       |       |       |                | 204,497,255  |   | 221,968,519 |   |
|                                                    |       |       |       |                |         |   |   |   |
| OTHER ASSETS                                            |       |       |       |                |         |   |   |   |
| Investments in unconsolidated affiliates                |       |       | 11         |                | 31,165,243   |   | 28,850,593 |   |
| Investments in other companies                          |       |       |       |                | 134,650      |   | 127,856 |   |
| Goodwill (net)                                          |       |       | 12         |                | 46,093,855   |   | 63,767,882 |   |
| Long-term receivables                                   |       |       |       |                | 5,819,796    |   | 19,405 |   |
| Accounts receivable from related companies              |       |       | 6  a)      |                | 37,869       |   | 33,920 |   |
| Intangibles (net)                                       |       |       |       |                | 477,231      |   | 160,018 |   |
| Long-term investments and other long-term assets        |       |       | 13         |                | 26,051,144   |   | 23,518,657 |   |
| Total other assets                                      |       |       |       |                | 109,779,788  |   | 116,478,331 |   |
| Total assets                                            |       |       |       |                | 585,252,492  |   | 589,088,554 |   |

 

The accompanying Notes 1 to 30 are an integral part of theseconsolidated financial statements.

 

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EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(Restatedfor general price-level changes and expressed in

thousandsof constant Chilean pesos of December 31, 2009)

 
| **LIABILITIES,  NON-CONTROLLING INTERST**       | ** ** | ** ** | ** ** | **At December 31,** | ** **  |
|-------------------------------------------------|------------|------------|------------|---------------------|-------------|
| **AND  SHAREHOLDERS’ EQUITY**              | ** ** | **Note**   | ** ** | **2009**            | ** **  | **2008** | ** ** |
| ** **                                      | ** ** | ** ** | ** ** | ** **          | **ThCh$**   | ** ** | **ThCh$** | ** ** |
| CURRENT LIABILITIES                             |       |       |       |                |        |   |   |   |
| Short-term bank borrowings                      |       |       | 14  a)     |                | 373,178     |   | 5,685,778 |   |
| Current portion of long-term bank borrowings    |       |       | 14  b)     |                | 242,259     |   | 221,205 |   |
| Current portion of bonds payable                |       |       | 16         |                | 3,117,629   |   | 2,694,306 |   |
| Dividends payable                               |       |       |       |                | 5,800,444   |   | 5,624,230 |   |
| Trade accounts payable                          |       |       |       |                | 63,211,417  |   | 62,706,819 |   |
| Other creditors                                 |       |       |       |                | 5,495,421   |   | 4,627,586 |   |
| Amounts payable to related companies            |       |       | 6  b)      |                | 13,758,172  |   | 17,008,332 |   |
| Other accrued liabilities                       |       |       | 17         |                | 3,323,356   |   | 3,698,203 |   |
| Withholdings                                    |       |       |       |                | 26,536,006  |   | 22,977,776 |   |
| Income taxes payable                            |       |       |       |                | 5,421,349   |   | 3,846,513 |   |
| Unearned income                                 |       |       |       |                | 4,316       |   | 28,778 |   |
| Other current liabilities                       |       |       |       |                | —      |   | 1,215,139 |   |
| Total current liabilities                       |       |       |       |                | 127,283,547 |   | 130,334,665 |   |
|                                            |       |       |       |                |        |   |   |   |
| LONG-TERM LIABILITIES                           |       |       |       |                |        |   |   |   |
| Long-term bank borrowings                       |       |       | 15         |                | 200,572     |   | 403,943 |   |
| Bonds payable                                   |       |       | 16         |                | 73,484,258  |   | 75,268,046 |   |
| Other creditors                                 |       |       |       |                | 6,720       |   | 53,750 |   |
| Amounts payable to related companies            |       |       | 6  b)      |                | 2,565,767   |   | 3,065,189 |   |
| Other accrued liabilities                       |       |       | 17         |                | 15,368,396  |   | 16,376,924 |   |
| Deferred income taxes                           |       |       | 8  b)      |                | 18,487,127  |   | 11,237,644 |   |
| Other long-term liabilities                     |       |       | 19         |                | 11,267,167  |   | 12,709,517 |   |
| Total long-term liabilities                     |       |       |       |                | 121,380,007 |   | 119,115,013 |   |
|                                            |       |       |       |                |        |   |   |   |
| NON-CONTROLLING INTEREST                        |       |       | 20         |                | 10,432      |   | 1,353,991 |   |
|                                            |       |       |       |                |        |   |   |   |
| COMMITMENTS AND CONTINGENCIES                   |       |       | 26         |                |        |   |   |   |
|                                            |       |       |       |                |        |   |   |   |
| SHAREHOLDERS’ EQUITY                       |       |       | 21         |                |        |   |   |   |
| Paid-in capital                                 |       |       |       |                | 230,892,178 |   | 230,892,178 |   |
| Other reserves                                  |       |       |       |                | (17,510,850 | ) | 8,846,885 |   |
| Retained earnings from prior years              |       |       |       |                | 53,076,427  |   | 22,668,115 |   |
| Net income for the year                         |       |       |       |                | 86,918,333  |   | 92,654,730 |   |
| Interim dividends                               |       |       |       |                | (16,797,582 | ) | (16,777,023 | ) |
| Total shareholders’ equity                 |       |       |       |                | 336,578,506 |   | 338,284,885 |   |
| Total liabilities and shareholders’ equity |       |       |       |                | 585,252,492 |   | 589,088,554 |   |

 

The accompanying Notes 1 to 30 are an integral part of theseconsolidated financial statements.

 

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EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OFINCOME

 

(Restatedfor general price-level changes and expressed in

thousandsof constant Chilean pesos of December 31, 2009)

 
| ** **                                                     | ** ** | ** ** | ** ** | **For the years ended December 31,** | ** **   |
|----------------------------------------------------------------|------------|------------|------------|--------------------------------------|--------------|
| ** **                                                     | ** ** | **Note**   | ** ** | **2009**                             | ** **   | **2008** | ** ** | **2007** | ** ** |
| ** **                                                     | ** ** | ** ** | ** ** | ** **                           | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| OPERATING INCOME                                               |       |       |       |                                 |         |   |   |   |   |   |
| Net sales                                                      |       |       |       |                                 | 743,115,988  |   | 827,813,333 |   | 677,407,204 |   |
| Cost of sales                                                  |       |       |       |                                 | (413,356,479 | ) | (459,825,712 | ) | (373,928,129 | ) |
|                                                           |       |       |       |                                 |         |   |   |   |   |   |
| Gross profit                                                   |       |       |       |                                 | 329,759,509  |   | 367,987,621 |   | 303,479,075 |   |
| Administrative and selling expenses                            |       |       |       |                                 | (199,698,228 | ) | (232,500,582 | ) | (180,598,523 | ) |
| Operating income                                               |       |       |       |                                 | 130,061,281  |   | 135,487,039 |   | 122,880,552 |   |
|                                                           |       |       |       |                                 |         |   |   |   |   |   |
| NON-OPERATING INCOME AND EXPENSE                               |       |       |       |                                 |         |   |   |   |   |   |
| Financial income                                               |       |       |       |                                 | 5,418,767    |   | 11,610,902 |   | 24,401,932 |   |
| Share of gain from unconsolidated affiliates                   |       |       | 11         |                                 | 1,853,268    |   | 1,836,001 |   | 794,390 |   |
| Other non-operating income                                     |       |       | 22         |                                 | 9,593,979    |   | 6,203,890 |   | 13,068,702 |   |
| Amortization of goodwill                                       |       |       | 12         |                                 | (6,094,120   | ) | (7,437,058 | ) | (6,918,538 | ) |
| Financial expense                                              |       |       |       |                                 | (7,897,359   | ) | (26,942,249 | ) | (13,237,436 | ) |
| Other non-operating expense                                    |       |       | 22         |                                 | (5,331,956   | ) | (16,054,060 | ) | (10,091,903 | ) |
| Price-level restatement                                        |       |       |       |                                 | 546,494      |   | (2,041,425 | ) | (4,833,588 | ) |
| Exchange gains (losses), net                                   |       |       |       |                                 | (8,864,168   | ) | 14,643,894 |   | (10,609,106 | ) |
| Non-operating expense                                          |       |       |       |                                 | (10,775,095  | ) | (18,180,105 | ) | (7,425,547 | ) |
| Income before income tax expense and  non-controlling interest |       |       | 8  d)      |                                 | 119,286,186  |   | 117,306,934 |   | 115,455,005 |   |
| Income tax expense                                             |       |       | 8  c)      |                                 | (32,365,904  | ) | (24,667,369 | ) | (28,588,833 | ) |
| Income before non-controlling interest                         |       |       |       |                                 | 86,920,282   |   | 92,639,565 |   | 86,866,172 |   |
| Income attributable non-controlling interest                   |       |       | 20         |                                 | (1,949       | ) | 15,165 |   | (45,538 | ) |
| Net income                                                     |       |       |       |                                 | 86,918,333   |   | 92,654,730 |   | 86,820,634 |   |

 

The accompanying Notes 1 to 30 are an integral part of theseconsolidated financial statements.

 

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Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Restatedfor general price-level changes and expressed in

thousandsof constant Chilean pesos of December 31, 2009

 
| ** **                                                         | ** ** | **For the years ended December 31,** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                         | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                         | ** ** | **ThCh$**                            | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES                               |       |                                 |       |   |   |   |   |
| Collection of trade receivables                                    |       | 1,030,740,956                        |       | 1,163,214,669 |   | 916,870,157 |   |
| Financial income received                                          |       | 915,827                              |       | 32,188,274 |   | 22,283,860 |   |
| Dividends and other distributions received                         |       | 1,987,500                            |       | 2,550,459 |   | 3,522,415 |   |
| Collection of other receivables                                    |       | 85,804                               |       | 80,606 |   | 62,282 |   |
| Payments to suppliers and personnel                                |       | (752,954,479                         | )          | (837,893,529 | ) | (641,465,599 | ) |
| Interest paid                                                      |       | (8,719,041                           | )          | (22,028,886 | ) | (18,511,293 | ) |
| Income tax payments                                                |       | (25,639,527                          | )          | (29,867,230 | ) | (22,702,222 | ) |
| VAT and other similar items paid                                   |       | (124,365,400                         | )          | (152,578,123 | ) | (114,150,097 | ) |
| Net cash provided by operating activities                          |       | 122,051,640                          |       | 155,666,240 |   | 145,909,503 |   |
|                                                               |       |                                 |       |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                               |       |                                 |       |   |   |   |   |
| Borrowings from banks                                              |       | 18,076,402                           |       | 81,947,387 |   | 55,961,643 |   |
| Dividends paid                                                     |       | (62,146,430                          | )          | (71,815,191 | ) | (83,358,413 | ) |
| Payments of loans                                                  |       | (22,143,823                          | )          | (80,850,885 | ) | (54,610,975 | ) |
| Repayments of bonds                                                |       | (1,317,843                           | )          | (6,750,420 | ) | (14,532,646 | ) |
| Net cash used in financing activities                              |       | (67,531,694                          | )          | (77,469,109 | ) | (96,540,391 | ) |
|                                                               |       |                                 |       |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                               |       |                                 |       |   |   |   |   |
| Proceeds from sales of property, plant and  equipment              |       | 434,848                              |       | 740,224 |   | 742,985 |   |
| Proceeds from sales of other investments                           |       | 239,381                              |       | 1,035,856 |   | 115,257,824 |   |
| Additions to property, plant and equipment                         |       | (49,762,563                          | )          | (65,531,687 | ) | (59,607,381 | ) |
| Permanent investments                                              |       | (904,924                             | )          | (1,495,503 | ) | (3,885,237 | ) |
| Purchases of other investments                                     |       | (21,904,527                          | )          | (7,311,988 | ) | (19,051,637 | ) |
| Acquisition interest  in Embotelladora del Sur S.A.                |       | —                               |       | (1,113,762 | ) | — |   |
| Other loans to related companies                                   |       | (238,665                             | )          | — |   | — |   |
| Other investments disbursements                                    |       | —                               |       | (53,003 | ) | — |   |
| Net cash provided by investing activities                          |       | (72,136,450                          | )          | (73,729,863 | ) | 33,456,554 |   |
|                                                               |       |                                 |       |   |   |   |   |
| Net cash flows from operating, financing and  investing activities |       | (17,616,504                          | )          | 4,467,268 |   | 82,825,666 |   |
| PRICE — LEVEL RESTATEMENT OF CASH AND CASH  EQUIVALENTS       |       | 3,814,675                            |       | (7,321,182 | ) | (1,196,452 | ) |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS              |       | (13,801,829                          | )          | (2,853,914 | ) | 81,629,214 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                     |       | 126,246,838                          |       | 129,133,793 |   | 47,504,579 |   |
| CASH AND CASH EQUIVALENTS AT END OF YEAR                           |       | 112,445,009                          |       | 126,279,879 |   | 129,133,793 |   |

 

The accompanying Notes 1 to 30 are an integral part of theseconsolidated financial statements.

 

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Table of Contents

 

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Restatedfor general price-level changes and expressed in

thousandsof constant Chilean pesos of December 31, 2009)

 
| ** **                                                                             | ** ** | **For the years ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                             | ** ** | **2009**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                             | ** ** | **ThCh$**                            | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| RECONCILIATION BETWEEN NET INCOME AND NET CASH  FLOWS PROVIDED BY OPERATING ACTIVITIES |       |                                 |       |   |   |   |   |
| Net income                                                                             |       | 86,918,333                           |       | 92,654,730 |   | 86,820,634 |   |
| Income on sales of assets:                                                             |       |                                 |       |   |   |   |   |
| Loss (gain) on sale of property, plant and  equipment                                  |       | (296,775                             | )          | (268,438 | ) | 156,084 |   |
| Loss on divesture of Cican S.A.                                                        |       | —                               |       | — |   | 91,020 |   |
| Loss (gain) on sale of other assets                                                    |       | (702                                 | )          | (23,048 | ) | 90,160 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:     |       |                                 |       |   |   |   |   |
| Depreciation                                                                           |       | 30,852,043                           |       | 37,182,068 |   | 31,012,069 |   |
| Amortization of intangibles                                                            |       | 14,500                               |       | 343,478 |   | 252,156 |   |
| Write-offs and provisions                                                              |       | 3,150,736                            |       | 918,408 |   | 1,158,323 |   |
| Share of gain from unconsolidated affiliates                                           |       | (1,853,268                           | )          | (1,836,001 | ) | (794,390 | ) |
| Amortization of goodwill                                                               |       | 6,094,120                            |       | 7,437,058 |   | 6,918,538 |   |
| Price-level restatement                                                                |       | (546,494                             | )          | 2,041,425 |   | 4,833,588 |   |
| Exchange gains (losses), net                                                           |       | 8,864,168                            |       | (14,643,894 | ) | 10,609,106 |   |
| Other credits to income that do not represent cash  flows                              |       | (5,371,504                           | )          | — |   | (3,223,066 | ) |
| Other charges to income that do not represent cash  flows                              |       | 61,305                               |       | 6,400,059 |   | 3,809,236 |   |
| (Increase) decrease in operating assets:                                               |       |                                 |       |   |   |   |   |
| Trade accounts receivable                                                              |       | 5,755,529                            |       | 14,032,609 |   | (297,960 | ) |
| Inventories                                                                            |       | (10,035,573                          | )          | 1,088,332 |   | (5,752,488 | ) |
| Other assets                                                                           |       | (6,129,333                           | )          | 20,240,260 |   | (28,665,254 | ) |
| Increase (decrease) in operating liabilities:                                          |       |                                 |       |   |   |   |   |
| Accounts payable related to operating income                                           |       | (3,692,906                           | )          | (30,251,535 | ) | 3,141,889 |   |
| Interest payable                                                                       |       | (3,082,694                           | )          | 29,850,549 |   | 9,936,961 |   |
| Income taxes payable                                                                   |       | 6,505,766                            |       | (16,062,574 | ) | 12,216,665 |   |
| Other accounts payable related to non-operating  income                                |       | (2,548,066                           | )          | (1,664,063 | ) | 7,508,662 |   |
| VAT and other similar items                                                            |       | 7,390,506                            |       | 8,241,982 |   | 6,042,032 |   |
| Income attributable to non-controlling interest                                        |       | 1,949                                |       | (15,165 | ) | 45,538 |   |
| Net cash provided by operating activities                                              |       | 122,051,640                          |       | 155,666,240 |   | 145,909,503 |   |

 

The accompanying Notes 1 to 30 are an integral part of theseconsolidated financial statements.

 

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**EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES**

 

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

 

AT DECEMBER 31, 2009 AND 2008

 

NOTE1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

EmbotelladoraAndina S.A. is registered under No. 00124 in the Securities Registry andis subject to the regulations of the Chilean Superintendency of Securities andInsurance Companies (the “SVS”).

 

Theprimary activity of Embotelladora Andina S.A. (“Andina”, and together with itssubsidiaries, the “Company”) is the production and sale of Coca-Cola productsand other beverages. The Company has bottling operations in Santiago SanAntonio and Rancagua, Chile and, through its subsidiaries, in Rio de Janeiro,Espíritu Santo and Nova Iguaçu, Brazil, and Mendoza, Córdoba, and Rosario,Argentina. The Company holds franchises from The Coca-Cola Company coveringeach of its Chilean, Brazilian and Argentine operations. The franchises for theChilean Territories, Argentine Territories and for the Brazilian Territoriesexpire in 2012. All these franchises may be extended at the option of TheCoca-Cola Company. Such franchises are expected to be renewed upon expiration.

 

Accountingpolicies

 

*a) Presentation*

 

Theconsolidated financial statements of the Company have been prepared inaccordance with accounting principles generally accepted in Chile (“ChileanGAAP”) and regulations established by the SVS.

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, revenues andexpenses and disclosures of contingent liabilities. Management makes its bestestimate of the ultimate outcome for these items based on historical trends andother information available when the financial statements are prepared. Changesin estimates are recognized in accordance with the accounting rules forthe estimate, which is typically in the period when new information becomesavailable to management. Areas where the nature of the estimate makes itreasonably possible that actual results could materially differ from amountsestimated include: the carrying value of property, plant and equipment, theadequacy of the allowance for doubtful accounts, the carrying value of goodwilland investments in unconsolidated affiliates, the determination of theliability for deposits for bottles and containers and the valuation of deferredincome tax assets.

 

TheCompany has issued its audited statutory consolidated financial statements inSpanish and in conformity with Chilean GAAP, which include certain notes andadditional information required by the SVS for statutory purposes. Managementbelieves that these additional notes and information are not essential for thecomplete understanding of the consolidated financial statements andaccordingly, these notes and additional information have been excluded from theaccompanying consolidated financial statements.

 

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*b) Consolidation*

 

Theaccompanying financial statements reflect the consolidated results ofoperations of Andina and its subsidiaries. All significant intercompanytransactions have been eliminated on consolidation. The Company consolidatesthe financial statements of the companies in which it controls a majority ofvoting shares or has the ability, direct or indirect, to direct the managementand policies of the company.

 

*c) Price-level restatement*

 

Thefinancial statements, which are expressed in Chilean pesos, have been restatedto reflect the effects of variations in the purchasing power of the Chileanpeso during each year. For this purpose and in conformity with current Chileanregulations, non-monetary assets and liabilities and equity accounts have beenrestated by charges or credits to income. Furthermore, the income and expenseaccounts have been restated in terms of year-end constant pesos. In accordancewith Chilean tax regulations and accounting practices, the restatements werecalculated based on the official Chilean Consumer Price Index published by theNational Institute of Statistics (the “CPI”), applied one month in arrears,which was 7.4%, 8.9% and -2.3% for the years ended November 30, 2007, 2008and 2009, respectively. This index is considered by the business community, theaccounting profession and the Chilean government to be the index which mostclosely complies with the technical requirement to reflect the variation in thegeneral level of prices in the country and, consequently, is widely used forfinancial reporting purposes in Chile. The above-mentioned price-levelrestatements do not purport to present appraisal or replacement values and areonly intended to restate all non-monetary financial statement components interms of local currency of a single purchasing power and to include in the netresult for each year the gain or loss in purchasing power arising from theholding of assets and liabilities exposed to the effects of inflation.

 

Assets and liabilities that are denominated ininflation-indexed monetary units are stated at year-end values. The principalinflation-indexed monetary unit used in Chile is the UF that changes daily toreflect the changes in the CPI. Values for the UF are as follows (historicalpesos per UF):

 
| ** **                | ** ** | **December 31,** | ** ** |
|---------------------------|------------|------------------|------------|
| ** **                | ** ** | **2009**         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                | ** ** | **Ch$**          | ** ** | **Ch$** | ** ** | **Ch$** | ** ** |
| Unidades de Fomento  (UF) |       | 20,942.88        |       | 21,452.57 |   | 19,622.66 |   |

 

All amounts in the financial statements and notes areexpressed in Chilean pesos of December 31, 2009 purchasing power, unlessotherwise stated. For comparative purposes, the 2007 and 2008 financialstatements, and the amounts disclosed in the related footnotes, have beenrestated in terms of Chilean pesos of December 31, 2009 purchasing power.This updating does not change the prior year’s statements or information in anyway except to update the amounts to Chilean pesos of similar purchasing power.

 

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Table of Contents

 

*d) Assets and liabilitiesdenominated in foreign currencies*

 

Assets and liabilities denominated in foreigncurrencies were translated into Chilean pesos at the exchange rates reported bythe Central Bank of Chile as follows:

 
| ** **                  | ** ** | **December 31,** | ** ** |
|-----------------------------|------------|------------------|------------|
| ** **                  | ** ** | **2009**         | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                  | ** ** | **Ch$**          | ** ** | **Ch$** | ** ** | **Ch$** | ** ** |
| United States dollars (US$) |       | 507.10           |       | 636.45 |   | 496.89 |   |
| Argentine pesos (A$)        |       | 133.45           |       | 184.32 |   | 157.79 |   |
| Brazilian Real (R$)         |       | 291.24           |       | 272.34 |   | 280.52 |   |
| Euros (€)              |       | 726.82           |       | 898.81 |   | 730.94 |   |

 

*e) Time deposits and marketablesecurities*

 

Time deposits are shown at cost plus accrued interest,which approximates market value. Marketable securities include money marketfunds which are stated at market value based on year-end quoted values andbonds are valued at the lesser of restated cost plus accrued interest andmarket value.

 

*f) Allowance for doubtful accounts*

 

The allowance for doubtful accounts consists of aprovision determined on the basis of the aging of accounts receivable andadditional allowances for specific customers where collection is doubtful. Inthe opinion of the Company’s management, the allowances are reasonable and thenet balances are recoverable.

* *

*g) Inventories*

 

Inventories are stated at purchase and/or productioncost, adjusted for price-level restatements and are computed pursuant to theaverage cost method. Provisions are made for obsolescence on the basis ofturnover of raw materials and finished products. The stated values ofinventories do not exceed their estimated net realizable value.

 

*h) Recoverable taxes*

 

Recoverabletaxes represent a net receivable related to value-added taxes on purchases andsales and prepayments based on anticipated income tax.

 

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*i) Income taxes and deferred income taxes*

 

EffectiveJanuary 1, 2000, the effects of deferred income taxes arising fromtemporary differences between the basis of assets and liabilities for tax andfinancial statement purposes are recorded in accordance with TechnicalBulletins Nos. 60, 68 and 69 of the Chilean Institute of Accountants andCircular No. 1,466 of the SVS. The effects of deferred income taxes at January 1,2000 that were not previously recorded, were recognized, in accordance with thetransitional provision provided by Technical Bulletin No. 60, againstasset or liability accounts (“complementary accounts”) and were recorded tooffset the effects of the deferred tax assets and liabilities not recordedprior to January 1, 2000. Complementary accounts are amortized to incomeover the estimated average reversal periods corresponding to underlyingtemporary differences to which the deferred tax asset or liability related.

 

Deferredincome tax assets are reduced by a valuation allowance if, based on the weightof available evidence, some portion or all of the deferred income tax assetswill not be realized.

 

*j) Property, plant and equipment and depreciation*

 

Property,plant and equipment are carried at cost plus price-level restatements lessaccumulated depreciation.  Expendituresfor significant improvements, or replacement parts, which extend the usefullife of an asset for more than one year are capitalized, while maintenance andrepair costs are charged to operations as incurred. Gains and losses arisingfrom normal retirement and disposal of property, plant and equipment arereflected in other non-operating income or expense in the consolidatedstatements of income.

 

Containersin the Company’s possession at plants and warehouses, as well as bottles andplastic containers held by third parties, are stated at cost plus price-levelrestatements, net of depreciation. Broken bottles or spoiled containers atwarehouses or plants are expensed in each accounting period.

 

Softwarecurrently in use mainly corresponds to computer packages purchased from thirdparties which are capitalized and amortized over a maximum period of fouryears.

 

During1979, the SVS authorized a technical appraisal of certain property, plant andequipment, which is included in technical reappraisal of property, plant and equipmentin the consolidated balance sheets.

 

Depreciationexpense was determined using the straight-line method, based on the estimateduseful lives of the assets, which are as follows:

 
| ** **                 | ** ** | **Years** | ** ** |
|----------------------------|------------|-----------|------------|
| Buildings and improvements |       | 25-60     |       |
| Machinery and equipment    |       | 10        |       |
| Containers                 |       | 2-5       |       |
| Other                      |       | 1-10      |       |

 

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*k)Deposits for containers*

 

TheCompany records a liability for cash guarantees received from customers forcontainers delivered with the purchase of its products.  These guarantees are not adjusted forprice-level restatements.  If a customerdid not return the containers in a five-year period as from the invoice date, theCompany may cash the deposit partially or in all with no further proceeding,the effect of which is recognized in the consolidated statements of income.

 

Consideringthat the number of new containers in circulation during a year is historicallygreater than the number of containers returned by clients in that same period,the liability for cash guarantees received, amounting to ThCh$ 8,932,492and ThCh$ 9,869,901 as of December 31, 2009 and 2008, respectively,is presented under Other long-term liabilities in the balance sheet.

 

*l) Investments in unconsolidatedaffiliates*

 

Investments in companies in which the Company’sownership interest exceeds 20% but is less than 50% are accounted for using theequity method.  The Company’sproportionate share in net income and loss of unconsolidated affiliates isrecognized in other non-operating income or expense in the consolidatedstatements of income, after eliminating any unrealized profits or losses fromtransactions between related companies.

 

Investments in which the Company’s ownership interestis below 20% are accounted for at cost plus price-level restatements, exceptfor subsidiaries in which the Company has significant influence which are alsoaccounted for using the equity method.

* *

*m) Long-term investments*

 

Long-term investments mainly include investments inbonds and time deposits which are recorded at cost plus accrued interest.

* *

*n) Goodwill*

 

Until December 31, 2003, the Company classifiedthe cost in excess of book value of the net assets of companies acquired inpurchase transactions as goodwill. Effective January 1, 2004, TechnicalBulletin No. 72 requires the determination of goodwill and negativegoodwill based on the fair value of the acquired company. Goodwill generated on acquisitions is amortized on a straight-line basisover 20 years. The Company evaluates the recoverability of goodwill on aperiodic basis.

 

*o) Bonds payable*

 

Bondspayable includes placement of Yankee Bonds in the US markets and placement ofbonds in UF in Chile, which are carried at par value. The purchase discounts,the difference in the par value and the proceeds received, are included inother long-term assets in the consolidated balance sheets. This asset isamortized using the straight-line method over the term of the respectiveobligations.

 

Theissuance and placement costs of bonds are shown in other current assets andother long-term assets in the consolidated balance sheets and are beingamortized on a straight-line basis over the life of the respective instruments.Costs include legal fees, reports on risk classification, printing, andcommissions on issuance and are presented net of accumulated amortization.

 

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*p) Staff severance indemnities and retention plan*

 

TheCompany has recorded a liability for long-term severance indemnities inaccordance with the collective bargaining agreements entered into with itsemployees in Chile. The indemnity is payable to employees at the rate of onefull month’s salary for every year of service with the Company. This liabilityis shown at the present value of the projected benefits, considering theimpacts of inflation, discounted at a rate of 4%. The benefit accrued as of theend of the year considers the average future service period for all employeescovered by such agreements. The staff severance indemnities are included inshort-term and long-term Other accrued liabilities in the consolidated balancesheets. Beginning in 2005 the Company also maintains a separate managementretention plan which entitles certain selected executives to receive a fixedlump sum payment on a pre-determined date upon completion of service.  The resulting obligation under the provisionsof this plan is shown under Other accrued liabilities in the consolidatedbalance sheets.

* *

*q)Sales recognition*

 

TheCompany records sales revenue based on the physical delivery of finishedproducts to its customers, in accordance with Technical Bulletin No. 70issued by the Chilean Institute of Accountants.

 

Valueadded taxes collected from customers and remitted to governmental authoritiesare accounted for on a net basis and therefore are excluded from revenues inthe consolidated statements of income.

* *

*r)Franchise incentives*

 

TheCoca-Cola Company, in its sole discretion, provides the Company with variousbenefits and incentives, including advertising and promotional support. Theamounts received from The Coca-Cola Company for such support are includedwithin the captions that compose operating income, depending on the nature ofthe support given.

* *

*s) Derivative transactions*

 

Derivativefinancial instruments are accounted for in accordance with Technical Bulletin No. 57of the Chilean Institute of Accountants (“TB 57”). Under TB 57 all derivativefinancial instruments are recognized on the balance sheet at their fair value.In addition, TB 57 requires that derivative financial instruments be classifiedas hedging instruments and non-hedging (investment) instruments.

 

Hedginginstruments are accounted for as follows:

 

Hedgesof recognized assets, liabilities or firm commitments — Futures contracts forthe sale of sugar to hedge changes in the fair value of purchase commitments:

 

Thedifference resulting from the changes in the fair value of the hedged item andthe derivative instrument should be accounted for as follows:

 

·                  If the net effect is a loss,it should be recognized in the statement of income in the period of change.

·                  If the net effect is a gain,it should be deferred and recognized in the income statement when the contractis settled.

 

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Hedgesof forecasted transactions — Foreign-currency forward exchange contracts andcross-currency swap agreements to hedge foreign exchange risk on forecasted cashflows in US dollars:

 

Thederivative instrument is stated at its fair value on the consolidated balancesheets and any change in the fair value of the derivative instrument isrecognized on the balance sheets as an unrealized gain or loss (Other liabilitiesor Other assets, respectively). When the contract is settled, the unrealizedgain or loss on the instrument is recognized as a financial income or expensein the consolidated statements of income.

 

Non-hedging(investment) instruments are presented at their fair value, with changes infair value reflected in earnings in the period in which the change in fairvalue occurs.

 

*t)   Raw materials purchasecommitments*

 

Probablelosses arising from fixed-price purchase commitments of raw materials arerecognized in the consolidated statements of income at their fair value.

 

*u)   Translation of financialstatements in foreign currencies*

 

TheCompany’s investments in subsidiaries located in Argentina and Brazil arerecorded in accordance with Technical Bulletin No. 64 of the ChileanInstitute of Accountants. Under this pronouncement, the financial statements offoreign subsidiaries, which operate in countries that are exposed tosignificant risks, restrictions or inflation/currency fluctuations must firstbe remeasured into U.S. dollars and then translated into Chilean pesos at theyear-end exchange rate of the Chilean peso to the U.S. dollar. As a result, noeffect is given to price-level restatements based on inflation in thosecountries and the U.S. dollar is considered to be the functional currency ofthese operations. Accordingly, the financial statements of these subsidiariesare prepared in accordance with Chilean GAAP, excluding the application ofmonetary correction, and then remeasured into U.S. dollars as follows:

 

·                  monetary assets and liabilities are translated at the closing exchange ratefor the period;

·                  all other assets and liabilities and shareholders’ equity are translated athistorical rates of exchange;

·                  income and expense accounts are translated at average rates during theperiod; and

·                  the resulting exchange adjustments are included in the results ofstatements of income.

 

Theresulting foreign currency amounts are then translated to Chilean pesos at theclosing exchange rate at the balance sheet date. The difference between theinvestments’ equity value arising from the financial statements remeasured asexplained above and the net equity value at the beginning of the year restatedby Chilean inflation, plus the proportional share of the investments’ income(or loss) for the year, is recorded as a “Cumulative Translation Adjustment” inshareholders’ equity in the consolidated balance sheets.

 

*v)    Cash flows*

 

Forpurposes of the consolidated statement of cash flows, in accordance withTechnical Bulletin No. 50 of the Chilean Institute of Accountants andCircular No. 1,501 of the Superintendencia de Valores y Seguros (ChileanSuperintendency of Securities and Insurance) the Company has considered cashequivalents to be investments in fixed-income, money market funds, timedeposits and securities purchased under agreements to resell, maturing within90 days.

 

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Cashflows from operating activities include all business-related cash flows as wellas interest paid, financial income and, in general, all cash flows not definedas from financing or investing activities. The operating concept used in thisstatement is broader than that in the consolidated statements of income.

 

NOTE2 - CHANGES IN ACCOUNTING PRINCIPLES

 

Thereare no changes in the application of generally accepted accounting principlesin Chile in relation to the previous year which could significantly affect thecomparability of these financial statements.

 

NOTE3 - TIME DEPOSITS

 

Timedeposits at each year-end consisted of the following:

 
| ** **                | ** ** | **At December 31,** | ** ** |
|---------------------------|------------|--------------------------|------------|
| ** **                | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Local currency deposits   |       | 86,024,684               |       | 66,380,681 |   |
| Foreign currency deposits |       | 10,353,311               |       | 13,461,206 |   |
| Total                     |       | 96,377,995               |       | 79,841,887 |   |

 

NOTE4 - MARKETABLE SECURITIES

 

Marketablesecurities at each year-end consisted of the followings:

 
| ** **        | ** ** | **At December 31,** | ** ** |
|-------------------|------------|--------------------------|------------|
| ** **        | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **        | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Mutual funds      |       | 16,061,717               |       | 15,581,679 |   |
| Investments funds |       | 2,479,375                |       | 10,094,963 |   |
| Total             |       | 18,541,092               |       | 25,676,642 |   |

 

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NOTE 5 - RECEIVABLES

 

Ofthe portfolio of receivables at December 31, 2009 98.9% corresponded tothe softdrinks and other beverage business and 1.1% to the containerbusiness.  Details of receivables are asfollows:

 
| ** **                               | ** ** | **At December 31,** | ** ** |
|------------------------------------------|------------|--------------------------|------------|
| ** **                               | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Trade accounts receivable                |       | 54,674,879               |       | 46,584,566 |   |
| Allowance for doubtful accounts          |       | (976,229                 | )          | (908,653 | ) |
| Subtotal trade accounts receivable (net) |       | 53,698,650               |       | 45,675,913 |   |
| Notes receivable                         |       | 14,494,834               |       | 14,256,100 |   |
| Allowance for doubtful accounts          |       | (519,346                 | )          | (464,126 | ) |
| Subtotal notes receivable (net)          |       | 13,975,488               |       | 13,791,974 |   |
| Other receivables                        |       | 11,387,967               |       | 13,102,942 |   |
| Allowance for doubtful accounts          |       | (193,413                 | )          | (151,322 | ) |
| Subtotal other receivables               |       | 11,194,554               |       | 12,951,620 |   |
| Total receivables                        |       | 80,557,680               |       | 73,943,608 |   |
| Total allowance for doubtful accounts    |       | (1,688,988               | )          | (1,524,101 | ) |
| Total net receivables                    |       | 78,868,692               |       | 72,419,507 |   |

 

Notesreceivable consisted primarily of post-dated checks for the purchases ofgoods.  Other receivables consistedprimarily of advance payments made to suppliers and amounts due from employees.

 

Grossbalances outstanding for 90 days or less were ThCh$ 78,284,984 andThCh$ 72,239,661 at December 31, 2009 and 2008, respectively. Grossbalances outstanding for more than 90 days were ThCh$ 2,272,696 andThCh$ 1,703,947 at December 31, 2009 and 2008, respectively.

 

TheCompany’s bad debt expense totaled ThCh$ 367,460 in 2009, ThCh$ 395,501 in2008 and ThCh$ 338,578 in 2007.

 

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NOTE 6 - AMOUNTS ANDTRANSACTIONS WITH RELATED COMPANIES

 

Amountspayable and receivable with related companies correspond to transactions madeon market terms.  These balances aregenerally due within approximately 45 days.

 

a)     Amounts receivable

 
| ** **                          | ** ** | ** **       | ** ** | **At December 31,** | ** ** |
|-------------------------------------|------------|------------------|------------|--------------------------|------------|
| ** **                          | ** ** | ** **       | ** ** | **Short – term**    | ** ** | **Long – term** | ** ** |
| **Company**                         | ** ** | **Transaction**  | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                          | ** ** | ** **       | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Embonor S.A.                        |       | Sale of products |       | 559,884                  |       | 2,103,383 |   | — |   | — |   |
| Embotelladora Coca  Cola Polar S.A. |       | Sale of products |       | 444,063                  |       | 771,826 |   | — |   | — |   |
| Embotelladora Iquique  S.A.         |       | Sale of products |       | 47,068                   |       | — |   | — |   | — |   |
| Coca Cola de Chile  S.A.            |       | Advertising      |       | —                   |       | — |   | 37,869 |   | 33,920 |   |
| Total                               |       |             |       | 1,051,015                |       | 2,875,209 |   | 37,869 |   | 33,920 |   |

 

b)    Amounts payable

 
| ** **                              | ** ** | ** **                                        | ** ** | **At December 31,** | ** ** |
|-----------------------------------------|------------|---------------------------------------------------|------------|--------------------------|------------|
| ** **                              | ** ** | ** **                                        | ** ** | **Short – term**    | ** ** | **Long – term** | ** ** |
| **Company**                             | ** ** | **Transaction**                                   | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                    |       |                                              |       | **ThCh$**                |       | **ThCh$** |   | **ThCh$** |   | **ThCh$** |   |
| Coca Cola de Chile  S.A.                |       | Advertising                                       |       | 5,367,733                |       | 6,215,061 |   | — |   | — |   |
| Recofarma  Industrias do Amazonas Ltda. |       | Purchase  of concentrate                          |       | 3,914,755                |       | 4,075,374 |   | — |   | — |   |
| Envases CMF S.A.                        |       | Purchase  of raw materials                        |       | 1,153,607                |       | 3,562,566 |   | — |   | — |   |
| SPBR S.R.L.                             |       | Purchase  of concentrate                          |       | 1,716,164                |       | 1,920,906 |   | — |   | — |   |
| Envases Central  S.A.                   |       | Raw  materials and finished products transactions |       | 632,281                  |       | 1,060,409 |   | — |   | — |   |
| Envases del Pacífico  S.A.         |       | Purchase  of raw materials                        |       | 59,831                   |       | 174,016 |   | — |   | — |   |
| Vital Aguas S.A.                        |       | Finished  products purchases                      |       | 913,801                  |       | — |   | — |   | — |   |
| Embonor S.A.                            |       | Unearned  income from sale commitments (1)        |       | —                   |       | — |   | 2,047,047 |   | 2,438,505 |   |
| Embotelladora Coca  Cola Polar S.A.     |       | Unearned  income from sale commitments (1)        |       | —                   |       | — |   | 518,720 |   | 626,684 |   |
| Total                                   |       |                                              |       | 13,758,172               |       | 17,008,332 |   | 2,565,767 |   | 3,065,189 |   |

 

----

(1)          Corresponds to unearnedincome from sale commitments of Vital S.A.’s products to Embonor S.A. andEmbotelladora Coca Cola Polar S.A., which will be realized along with futuredeliveries.

 

F-20

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Table of Contents

 

c)              Transactions with relatedcompanies, exceeding ThCh$ 200,000, were as follows:

 
| ** **                                | ** ** | ** **           | ** ** | ** **                            | ** ** | **2009**   | ** ** | **2008**                       | ** ** | **2007**   | ** ** |
|-------------------------------------------|------------|----------------------|------------|---------------------------------------|------------|------------|------------|--------------------------------|------------|------------|------------|
| **Company**                               | ** ** | **Relation**         | ** ** | **Transaction**                       | ** ** | **Amount** | ** ** | **(Charge)  Credit to income** | ** ** | **Amount** | ** ** | **(Charge)  Credit to  income** | ** ** | **Amount** | ** ** | **(Charge)  Credit to  income** | ** ** |
| ** **                                | ** ** | ** **           | ** ** | ** **                            | ** ** | **ThCh$**  | ** ** | **ThCh$**                      | ** ** | **ThCh$**  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Coca-Cola de Chile S.A.                   |       | Shareholder          |       | Concentrate  purchases                |       | 79,166,075 |       | —                         |       | 54,890,291 |       |   |   | 52,482,770 |   | — |   |
|                                      |       |                 |       | Payment  of advertising participation |       | 5,734,098  |       | (5,734,098                     | )          | 3,021,897  |       | (3,021,897 | ) | 4,394,977 |   | (4,394,977 | ) |
|                                      |       |                 |       | Sales  of advertisement               |       | 3,627,587  |       | —                         |       | 1,701,238  |       | — |   | 3,777,403 |   | — |   |
|                                      |       |                 |       | Other  sales                          |       | 1,036,370  |       | —                         |       | 2,553,039  |       | — |   | 1,957,136 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Recofarma Industrias doAmazonas Ltda.     |       | Shareholder  related |       | Concentrate  purchases                |       | 56,859,868 |       | —                         |       | 72,425,640 |       | — |   | 58,346,009 |   | — |   |
|                                      |       |                 |       | Payment  of advertising participation |       | 11,333,220 |       | (11,333,220                    | )          | 8,146,573  |       | (8,146,573 | ) | 3,520,513 |   | (3,520,513 | ) |
|                                      |       |                 |       | Reimbursement  and other purchases    |       | 2,118,745  |       | 2,118,745                      |       | 1,564,091  |       | 1,564,091 |   | 551,470 |   | 551,470 |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| SPBR  S.R.L.                              |       | Shareholder          |       | Concentrate  purchases                |       | 35,498,256 |       | —                         |       | 35,218,858 |       | — |   | 28,849,453 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Envases  Central S.A.                     |       | Equity  investee     |       | Finished  product purchases           |       | 18,361,212 |       | —                         |       | 16,496,288 |       | — |   | 17,945,416 |   | — |   |
|                                      |       |                 |       | Sales  of raw materials and supplies  |       | 2,432,955  |       | 344,596                        |       | 1,506,992  |       | 258,296 |   | 1,784,330 |   | 42,376 |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Envases  CMF S.A.                         |       | Equity  investee     |       | Purchase  of containers               |       | 9,693,910  |       | —                         |       | 15,806,860 |       | — |   | 17,152,905 |   | — |   |
|                                      |       |                 |       | Sale  of finished products            |       | —     |       | —                         |       | —     |       | — |   | 230,180 |   | — |   |
|                                      |       |                 |       | Dividend  payment                     |       | 2,000,000  |       | —                         |       | 2,637,900  |       | — |   | 3,415,289 |   | — |   |
|                                      |       |                 |       | Purchase  of machinery and equipment  |       | —     |       | —                         |       | 735,712    |       | — |   | — |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Iansagro S.A.                             |       | Director  in common  |       | Purchase  of sugar                    |       | 6,506,542  |       |                           |       | 19,679,729 |       | — |   | 18,697,186 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Coca Cola Embonor S.A.                    |       | Shareholder  related |       | Sale  of finished products            |       | 6,887,687  |       | 1,861,866                      |       | 9,702,504  |       | 2,162,925 |   | 9,268,754 |   | 2,122,515 |   |
|                                      |       |                 |       | Purchases  of finished products       |       | 707,819    |       | —                         |       | 295,995    |       | — |   | 297,917 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Embotelladora Coca ColaPolar S.A.         |       | Shareholder  related |       | Sale  of products                     |       | 4,199,630  |       | 779,541                        |       | 5,468,736  |       | 633,931 |   | 5,494,202 |   | 1,102,201 |   |
|                                      |       |                 |       | Purchase  of finished products        |       | 60,722     |       | —                         |       | —     |       | — |   | — |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Vendomática  S.A.                    |       | Director  related    |       | Sale  of finished products            |       | 1,639,692  |       | 557,495                        |       | 1,533,668  |       | 460,101 |   | 1,556,133 |   | 466,840 |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Cican  S.A.                               |       | Shareholder  related |       | Purchases  of finished products       |       | —     |       | —                         |       | —     |       | — |   | 1,549,493 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Envases del Pacífico S.A.            |       | Director  in common  |       | Purchase  of raw materials            |       | 496,303    |       | —                         |       | 552,576    |       | — |   | 240,396 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| BBVA AdministradoraGeneral de Fondos S.A. |       | Director  related    |       | Investments  in mutual funds          |       | 43,045,413 |       | —                         |       | 15,211,317 |       | — |   | 47,357,485 |   | — |   |
|                                      |       |                 |       | Redemption  of mutual funds           |       | 40,176,629 |       | 124,832                        |       | 15,211,317 |       | — |   | 49,305,115 |   | — |   |
|                                      |       |                 |       |                                  |       |       |       |                           |       |       |       |   |   |   |   |   |   |
| Vital  Aguas S.A.                         |       | Equity  investee     |       | Purchases  of finished products       |       | 5,415,866  |       | —                         |       | —     |       | — |   | — |   | — |   |

 

F-21

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Table of Contents

 

d)    Other transactions

 

Withinthe normal course of operations, the Company entered into an agreement in 2009with IANSAGRO S.A., for the future supply of sugar at a fixed price for 48,000tons of sugar to cover the Company’s needs. This agreement will expire during2010.

 

Atthe same time, and in order to maintain a variable price of sugar, the Companysigned an agreement in the London Stock Exchange for the future sale of sugarfor the same amounts (tons) and expiring on the same date as the agreementsmentioned in the previous paragraph, thereby these operations have beenmatched.

 

Bothoperations have been considered as a single operation that seeks to maintain avariable price for sugar, and therefore they have not been considered as aderivative operation.

 

NOTE 7 - INVENTORIES

 

Inventoriesat each year-end consisted of the following:

 
| ** **               | ** ** | **At December 31,** | ** ** |
|--------------------------|------------|--------------------------|------------|
| ** **               | ** ** | ** **               | ** ** | **2009** | ** ** | ** ** | ** ** | ** ** | ** ** | **2008** | ** ** | ** ** | ** ** |
| ** **               | ** ** | **Gross********value**   | ** ** | **Obsolescence********provision** | ** ** | **Net********value** | ** ** | **Gross********value** | ** ** | **Obsolescence****provision** | ** ** | **Net********value** | ** ** |
| ** **               | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Raw materials            |       | 20,800,029               |       | (150,881 | ) | 20,649,148 |   | 15,334,996 |   | (287,780 | ) | 15,047,216 |   |
| Finished products        |       | 14,467,913               |       | (39,563 | ) | 14,428,350 |   | 12,858,584 |   | (184,460 | ) | 12,674,124 |   |
| Products in process      |       | 779,744                  |       | — |   | 779,744 |   | 1,493,592 |   | — |   | 1,493,592 |   |
| Raw materials in transit |       | 364,778                  |       | — |   | 364,778 |   | 1,294,189 |   | — |   | 1,294,189 |   |
| Total                    |       | 36,412,464               |       | (190,444 | ) | 36,222,020 |   | 30,981,361 |   | (472,240 | ) | 30,509,121 |   |

 

F-22

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Table of Contents

 

NOTE8 - INCOME TAXES AND DEFERRED INCOME TAXES

 

a)      General:

 

AtDecember 31, 2009 and 2008, the Company has no accumulated taxable profitswith shareholders credit.

 

b)      Deferred income taxes ateach year-end were as follows:

 
| ** **                                     | ** ** | **December 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                                     | ** ** | **Assets**                 | ** ** | **Liabilities**            | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **                                     | ** ** | **Short- term**            | ** ** | **Long-term**              | ** ** | **Short- term** | ** ** | **Long-term** | ** ** | **Short- term** | ** ** | **Long-term** | ** ** | **Short- term** | ** ** | **Long-term** | ** ** |
| ** **                                     | ** ** | **ThCh$**                  | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Temporary Differences                          |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance  for doubtful accounts               |       | 108,120                    |       | 94,194                     |       | — |   | — |   | 276,138 |   | 104,910 |   | — |   | — |   |
| Vacation  accrual                              |       | 224,837                    |       | —                     |       | — |   | — |   | 222,918 |   | — |   | — |   | — |   |
| Production  expenses                           |       | 18,518                     |       | —                     |       | — |   | — |   | 14,109 |   | — |   | — |   | — |   |
| Depreciation  of property, plant and equipment |       | —                     |       | —                     |       | 182,251 |   | 6,601,258 |   | — |   | — |   | 224,361 |   | 6,309,691 |   |
| Staff  severance indemnities                   |       | 71,685                     |       | —                     |       | 5,232 |   | 29,806 |   | 76,570 |   | — |   | 13,018 |   | 140,811 |   |
| Provision  for assets write-off                |       | 152,166                    |       | 612,677                    |       | — |   | — |   | 253,329 |   | 560,124 |   | — |   | 82,140 |   |
| Provision  for labor and commercial lawsuits   |       | —                     |       | 1,400,491                  |       | — |   | — |   | — |   | 1,455,083 |   | — |   | — |   |
| Tax  loss carryforwards                        |       | —                     |       | 1,821                      |       | — |   | — |   | 1,603,116 |   | — |   | — |   | — |   |
| Local  bond issue expenses                     |       | —                     |       | —                     |       | — |   | 83,436 |   | — |   | — |   | — |   | 86,978 |   |
| Contingency  provision                         |       | —                     |       | 240,134                    |       | — |   | — |   | — |   | 320,623 |   | — |   | — |   |
| Income  participation provision                |       | 1,118,706                  |       | —                     |       | — |   | — |   | 598,489 |   | — |   | — |   | — |   |
| Exchange  rate difference                      |       | —                     |       | —                     |       | — |   | 13,309,062 |   | — |   | — |   | — |   | 8,116,717 |   |
| Temporary  difference fiscal incentives-Brazil |       | —                     |       | —                     |       | — |   | 2,683,002 |   | — |   | — |   | — |   | 923,238 |   |
| Unrealized  earnings                           |       | —                     |       | 200,786                    |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Other                                          |       | 1,069,012                  |       | 494,080                    |       | 1,743 |   | 54,154 |   | 746,260 |   | 363,145 |   | 185 |   | — |   |
|                                           |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Others                                         |       |                       |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Complementary  accounts, net of Amortization   |       | —                     |       | —                     |       | — |   | (1,229,408 | ) | — |   | — |   | — |   | (1,618,046 | ) |
| Total                                          |       | 2,763,044                  |       | 3,044,183                  |       | 189,226 |   | 21,531,310 |   | 3,790,929 |   | 2,803,885 |   | 237,564 |   | 14,041,529 |   |

 

F-23

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Table of Contents

 

Short-termdeferred tax assets are presented net of short-term deferred taxliabilities.  Long-term deferred taxliabilities are presented net of long-term deferred tax assets.

 

c)     Income tax expense for eachyear was as follows:

 
| ** **                                                                      | ** ** | **For the year ended December 31,** | ** ** |
|---------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                      | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                      | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Current income tax expense                                                      |       | (25,202,316                              | )          | (23,544,570 | ) | (25,061,042 | ) |
| Tax expense adjustment (previous period)                                        |       | (32,148                                  | )          | 464,364 |   | 397,819 |   |
| Deferred income tax expense over assets or  liabilities                         |       | (7,369,187                               | )          | (362,206 | ) | (3,003,300 | ) |
| Amortization of deferred income tax asset and  liability complementary accounts |       | (383,809                                 | )          | (416,913 | ) | (1,127,788 | ) |
| Other                                                                           |       | 621,556                                  |       | (808,044 | ) | 205,478 |   |
| Total                                                                           |       | (32,365,904                              | )          | (24,667,369 | ) | (28,588,833 | ) |

 

d)             Total income (loss) beforeincome taxes and non-controlling interest arising from the different geographicsources is as follows:

 
| **Year  ended  December 31,** | ** ** | **Chilean  and others** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **The Company  (consolidated)** | ** ** |
|------------------------------------|------------|-------------------------|------------|------------|------------|---------------|------------|---------------------------------|------------|
| ** **                         | ** ** | **ThCh$**               | ** ** | **ThCh$**  | ** ** | **ThCh$**     | ** ** | **ThCh$**                       | ** ** |
| 2009                               |       | 45,244,073              |       | 57,058,824 |       | 16,983,289    |       | 119,286,186                     |       |
| 2008                               |       | 56,087,494              |       | 44,257,949 |       | 16,961,491    |       | 117,306,934                     |       |
| 2007                               |       | 58,242,469              |       | 47,291,080 |       | 9,921,456     |       | 115,455,005                     |       |

 

NOTE9 - OTHER CURRENT ASSETS

 

Othercurrent assets at each year-end consisted of the following:

 
| ** **                                 | ** ** | **At December 31,** | ** ** |
|--------------------------------------------|------------|--------------------------|------------|
| ** **                                 | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                                 | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Supplies                                   |       | 5,815,661                |       | 5,135,592 |   |
| Forward agreement over existing items      |       | —                   |       | 1,015,925 |   |
| Wells Fargo Investments funds (restricted) |       | 3,180,618                |       | — |   |
| Other                                      |       | 1,079,882                |       | 625,621 |   |
| Total                                      |       | 10,076,161               |       | 6,777,138 |   |

 

F-24

----

Table of Contents

 

NOTE10 - PROPERTY, PLANT AND EQUIPMENT

 

Property,plant and equipment consists principally of land, buildings, improvements andmachinery and equipment. Machinery and equipment includes production lines andsupporting equipment, sugar processing and liquefying equipment, transportationmachinery, and computer equipment. The Company has purchased insurance to coverits fixed assets and inventories.  Theseassets are distributed as follows:

 
| Chile     | : | Santiago,  Puente Alto, Maipú, Renca, Rancagua, San Antonio and Rengo                      |
|-----------|---|-------------------------------------------------------------------------------------------------|
| Argentina | : | Buenos  Aires, Mendoza, Córdoba, and Rosario                                               |
| Brazil    | : | Rio  de Janeiro, Niteroi, Campos, Cabo Frio, Nova Iguazú, Espíritu Santo and  Vitoria |

 

During2009 and 2008, the Company and its subsidiaries adjusted property, plant andequipment that management deemed to remain inactive for an indefinite amount oftime, to their estimated realization value. The resulting write-downs were recorded as Other non-operating expense,as follows:

 
| ** **                                                                                   | ** ** | **2009**  | ** ** | **2008**  | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
| ** **                                                                                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Blowing plant and utilities implementations that  will not be used (Machinery and equipment) |       | —    |       | 928,811   |       |
| Others (Other property, plant and equipment)                                                 |       | 100,000   |       | 179,984   |       |
| Total                                                                                        |       | 100,000   |       | 1,108,795 |       |

 

a)             Principal components of property,plant and equipment at each year-end are as follows:

 
| ** **                                              | ** ** | **Balances at December 31, 2009** | ** ** | **Balances at December 31, 2008** | ** ** |
|---------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| ** **                                              | ** ** | **Assets**                             | ** ** | **Accumulated********depreciation**    | ** ** | **Net property,********plant and********equipment** | ** ** | **Assets** | ** ** | **Accumulated********Depreciation** | ** ** | **Net property,********plant and********equipment** | ** ** |
| ** **                                              | ** ** | **ThCh$**                              | ** ** | **ThCh$**                              | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Land                                                    |       | 18,356,668                             |       | —                                 |       | 18,356,668 |   | 19,958,341 |   | — |   | 19,958,341 |   |
| Buildings and improvements                              |       | 113,806,749                            |       | (45,445,276                            | )          | 68,361,473 |   | 122,489,875 |   | (47,512,143 | ) | 74,977,732 |   |
| Machinery and equipment                                 |       | 270,383,074                            |       | (203,547,919                           | )          | 66,835,155 |   | 292,803,494 |   | (225,341,168 | ) | 67,462,326 |   |
| Other property, plant and equipment                     |       | 261,202,767                            |       | (211,883,222                           | )          | 49,319,545 |   | 275,698,453 |   | (217,762,453 | ) | 57,936,000 |   |
| Technical reappraisal of property, plant and  equipment |       | 2,349,325                              |       | (724,911                               | )          | 1,624,414 |   | 2,349,325 |   | (715,205 | ) | 1,634,120 |   |
| Total                                                   |       | 666,098,583                            |       | (461,601,328                           | )          | 204,497,255 |   | 713,299,488 |   | (491,330,969 | ) | 221,968,519 |   |

 

F-25

----

Table of Contents

 

b)   Other property, plant andequipment at each year-end are as follows:

 
| ** **                                 | ** ** | **At December 31,** | ** ** |
|--------------------------------------------|------------|--------------------------|------------|
| ** **                                 | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                                 | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Containers                                 |       | 158,774,796              |       | 161,491,393 |   |
| Refrigeration equipment and other assets   |       | 61,432,739               |       | 67,379,374 |   |
| Furniture and tools                        |       | 8,816,782                |       | 9,543,523 |   |
| Other                                      |       | 32,178,450               |       | 37,284,163 |   |
| Total other property,  plant and equipment |       | 261,202,767              |       | 275,698,453 |   |

 

c)             Technicalreappraisal of property, plant and equipment at each year-end was as follows:

 
| ** **                 | ** ** | **Balances at December 31, 2009** | ** ** | **Balances at December 31, 2008** | ** ** |
|----------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| ** **                 | ** ** | **Assets**                             | ** ** | **Accumulated********depreciation**    | ** ** | **Net property,********plant and********equipment** | ** ** | **Assets** | ** ** | **Accumulated********depreciation** | ** ** | **Net property,********plant and********equipment** | ** ** |
| ** **                 | ** ** | **ThCh$**                              | ** ** | **ThCh$**                              | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Land                       |       | 1,569,096                              |       | —                                 |       | 1,569,096 |   | 1,569,096 |   | — |   | 1,569,096 |   |
| Buildings and improvements |       | 219,673                                |       | (164,356                               | )          | 55,317 |   | 219,673 |   | (159,667 | ) | 60,006 |   |
| Machinery and equipment    |       | 560,556                                |       | (560,555                               | )          | 1 |   | 560,556 |   | (555,538 | ) | 5,018 |   |
| Total                      |       | 2,349,325                              |       | (724,911                               | )          | 1,624,414 |   | 2,349,325 |   | (715,205 | ) | 1,634,120 |   |

 

d)            Depreciation chargesfor the period amounted to ThCh$ 30,852,043 (ThCh$ 37,182,068 andThCh$ 31,012,069 in 2008 and 2007, respectively) of which ThCh$ 20,757,724(ThCh$ 27,297,542 and ThCh$ 22,844,984 in 2008 and 2007,respectively) are included under Cost of sales and ThCh$ 10,094,319(ThCh$ 9,884,526 and ThCh$8,167,085 in 2008 and 2007, respectively) underAdministrative and selling expenses in the income statement.

 

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NOTE11 - INVESTMENT IN UNCONSOLIDATED AFFILATES

 

Investments in related companies and the related direct participationin equity and unrealized results at each year-end were as follows:

 
| ** **                  | ** ** | ** **  | ** ** | **Functional** | ** ** | **Ownership(*)  Interest** | ** ** | **Accrued income** | ** ** | **Participation in Equity** | ** ** | **Unrealized losses** | ** ** | **Book value of  investment** | ** ** |
|-----------------------------|------------|-------------|------------|----------------|------------|----------------------------|------------|--------------------|------------|-----------------------------|------------|-----------------------|------------|-------------------------------|------------|
| **Company**                 | ** ** | **Country** | ** ** | **Currency**   | ** ** | **2009**                   | ** ** | **2008**           | ** ** | **2009**                    | ** ** | **2008**              | ** ** | **2007**                      | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                  | ** ** | ** **  | ** ** | ** **     | ** ** | **%**                      | ** ** | **%**              | ** ** | **ThCh$**                   | ** ** | **ThCh$**             | ** ** | **ThCh$**                     | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Envases CMF S.A.            |       | Chile       |       | Chilean  pesos |       | 50.00                      |       | 50.00              |       | 286,453                     |       | 1,156,368             |       | 870,914                       |       | 18,615,088 |   | 19,503,584 |   | (956,099 | ) | (1,039,239 | ) | 17,658,989 |   | 18,464,345 |   |
| Holdfab Participacoes Ltda. |       | Brazil      |       | US  dollars    |       | 12.33                      |       | 14.73              |       | 1,012,084                   |       | 542,635               |       | 108,533                       |       | 6,862,491 |   | 6,914,415 |   | — |   | — |   | 6,862,491 |   | 6,914,415 |   |
| Envases Central S.A.        |       | Chile       |       | Chilean  pesos |       | 49.91                      |       | 49.91              |       | 297,017                     |       | 213,003               |       | 885                           |       | 3,067,674 |   | 2,759,579 |   | (257,100 | ) | (257,100 | ) | 2,810,574 |   | 2,502,479 |   |
| Kaik Participacoes Ltda.    |       | Brazil      |       | US  dollars    |       | 11.32                      |       | 11.32              |       | 92,358                      |       | (76,005               | )          | 109,630                       |       | 1,190,965 |   | 969,354 |   | — |   | — |   | 1,190,965 |   | 969,354 |   |
| Cican S.A.                  |       | Argentina   |       | US  dollars    |       | —                     |       | —             |       | —                      |       | —                |       | (295,572                      | )          | — |   | — |   | — |   | — |   | — |   | — |   |
| Vital Aguas S.A.            |       | Chile       |       | Chilean  Pesos |       | 56.50                      |       | 56.50              |       | 165,356                     |       | —                |       | —                        |       | 2,642,224 |   | — |   | — |   | — |   | 2,642,224 |   | — |   |
| Total                       |       |        |       |           |       |                       |       |               |       | **1,853,268**               |       | **1,836,001**         |       | **794,390**                   |       | **32,378,442** |   | **30,146,932** |   | **(1,213,199** | **)** | **(1,296,339** | **)** | **31,165,243** |   | **28,850,593** | ** ** |

 

----

(*)         Corresponds to the number ofshares and rights of Andina over the total shares and rights in each of thecompanies.  This percentage equals thevoting right in each entity, where there are no preferential shares.

 

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1              The main changes that occurred inthe reported periods are the following:

 

·                      During an Extraordinary Shareholders’ Meeting held during April 2009,Vital Aguas S.A. decided to carry out a capital increase in the amount ofThCh$1,274,284 through the issuance of 5,000 shares of which EmbotelladoraAndina S.A. subscribed and paid 2,825 shares equal to ThCh$720,690

 

·                      On March 23, 2009, RJR Investments Corp. was dissolved. Subsidiary Riode Janeiro Refrescos Ltda. held 100% ownership interest in said corporation.

 

·                  On February 12,2009 our subsidiary in Brazil Rio de Janeiro Refrescos Ltda., met the capitalincrease agreed upon by Holdfab Participacoes Ltda., in which it holds anownership interest of 14.732%, by payment of the amount of ThCh$184,234.

 

·                  In June 2008,Embotelladora Andina S.A. acquired a 48% ownership interest in Embotelladorasdel Sur S.A. for ThCh$736,248. Subsequent to the acquisition, EmbotelladoraAndina S.A. made a capital contribution in the amount of ThCh$377,513.

 

Theamounts disbursed by Embotelladora Andina S.A. in the acquisition of andcapital contribution to Embotelladoras del Sur S.A., were originally recordedas an intangible since the final purpose was not the acquisition of the companybut the acquisition of the distribution’s rights of the water segment ́s products that were previously marketed byEmbotelladoras del Sur S.A.

 

Asof December 31, 2008, due to the difficulty to measure the future cashflows generated by the distribution of the “Benedictino” brand’s water andbecause the property of this brand belongs to the Coca-Cola Company, alldisbursements made in Embotelladoras del Sur S.A. were recorded against OtherNon-Operating Expense.

 

·                  In November 2007, the Company ́s subsidiary Embotelladora del Atlantico S.A. sold its 15.20% ownership interest in CicanS.A. to Femsa at ThCh$722,958. This sale resulted in a loss of ThCh$91,020which was recorded in the Income Statement under other non-operating expenses.

 

·                  The equity investee CentralliRefrigerante S.A., Brazil, has negative shareholders ́ equity, which isprovisioned in the corresponding equity proportion. Ownership is 25%. As ofDecember 31, 2009 and 2008, such provision amounted to ThCh$ 168,586and ThCh$ 147,714, respectively, and is included under Other long-termliabilities.

 

·                  The investmentin Envases Central S.A. is presented net of unrealized income generated inDecember 1996 related to the sale of the property located in Renca. Totalunrealized income amounted to ThCh$ 257,100 and will be recognized upon thesale of the land to a third party.

 

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·                  The investment in Envases CMF S.A. ispresented net of unrealized income of ThCh$956,099 originated in June 2001from the purchase of machinery and equipment from the Company’s subsidiaryEnvases Multipack S.A.   Unrealizedincome is recognized in earnings over the remaining useful life of the assetssold to Envases CMF S.A.  In 2009 and2008, the Company realized ThCh$ 83,140 each year for this concept.

 

·                  The equity gainrecognized from the investment in Envases CMF S.A. is presented net ofunrealized income related to the sale of bottles from Envases CMF S.A. toAndina.  As of December 31, 2009this amounts to ThCh$ 908,189 (ThCh$ 1,107,146 and ThCh$ 1,123,924 as of December 31,2008 and 2007, respectively).

 

·                  During 2009,Envases CMF S.A. distributed dividends to Andina amounting toThCh$ 2,000,000 (ThCh$ 2,637,900 during 2007).

 

·                  During 2007, KaikParticipacoes Ltda. distributed dividends to Refrescos amounting toThCh$ 792,023.

 

·                  Unrealizedincome corresponds to transactions between subsidiaries and/or the ParentCompany that have been deducted or added to the category of the originatingasset with the following effect on income of the subsidiaries:

 

Vital Aguas S.A. (purchase of property, plant andequipment): ThCh$(12,299) in 2009.

 

Envases Central S.A. (purchase of finished products):ThCh$(11,078) in 2009 (ThCh$(1,951) in 2008)

 

2                  No liabilities have been designated ashedging instruments for investments abroad.

 

3                  Income likely to be remitted by subsidiariesabroad amounts to US$360 million.

 

4                  The investment in Kaik Partipacoes Ltda.(Brazil), where the Company holds an indirect ownership of 11.32%, has beenaccounted for under the equity method, as described in Note 1 l), since theCompany has the right to designate a director.

 

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NOTE 12 - GOODWILL

 

Goodwillat each year-end and the corresponding amortization for each year were asfollows:

 
| ** **                             | ** ** | **At December 31,**          | ** ** |
|----------------------------------------|------------|-----------------------------------|------------|
| ** **                             | ** ** | **2009**                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                             | ** ** | **Amortization  during the year** | ** ** | **Goodwill  balance** | ** ** | **Amortization  during the year** | ** ** | **Goodwill  balance** | ** ** | **Amortization  during the year** | ** ** | **Goodwill  balance** | ** ** |
| ** **                             | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Rio de Janeiro  Refrescos Ltda.        |       | 3,437,386                         |       | 29,447,916 |   | 4,179,341 |   | 40,098,729 |   | 3,576,885 |   | 37,818,426 |   |
| Embotelladora del  Atlántico S.A. |       | 2,656,734                         |       | 16,645,939 |   | 3,257,717 |   | 23,669,153 |   | 2,769,727 |   | 22,893,369 |   |
| Vital S.A.                             |       | —                            |       | — |   | — |   | — |   | 571,926 |   | — |   |
| Total                                  |       | 6,094,120                         |       | 46,093,855 |   | 7,437,058 |   | 63,767,882 |   | 6,918,538 |   | 60,711,795 |   |

 

Accumulated amortization of goodwill wasThCh$ 127,540,379 and ThCh$ 121,446,259 at December 31, 2009and 2008, respectively.

 

NOTE 13 - OTHER LONG-TERM ASSETS

 

Otherlong-term assets at each year-end were as follows:

 
| ** **                                     | ** ** | **At December 31,** | ** ** |
|------------------------------------------------|------------|--------------------------|------------|
| ** **                                     | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                                     | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Judicial deposits (Brazil)                     |       | 11,359,520               |       | 7,868,001 |   |
| Transfer fiscal credit (Brazil)                |       | 6,149,540                |       | 5,417,717 |   |
| Prepaid expenses                               |       | 2,608,855                |       | 2,797,878 |   |
| Bond issuance expense and par value difference |       | 2,643,296                |       | 3,227,290 |   |
| Spare parts                                    |       | 1,924,042                |       | 1,509,340 |   |
| Non-operating assets                           |       | 1,282,151                |       | 2,644,097 |   |
| Other                                          |       | 83,740                   |       | 54,334 |   |
| Total                                          |       | 26,051,144               |       | 23,518,657 |   |

 

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NOTE14 - SHORT-TERM BANK BORROWINGS

 

a)     Short-term bank borrowings were as follows:

 
| ** **                            | ** ** | **At December 31,**              | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|
| ** **                            | ** ** | **Currency or indexation adjustment** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Foreign currencies**                | ** ** | **Non-indexed Ch$** | ** ** | **Total** | ** ** |
| ** **                            | ** ** | **2009**                              | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **ThCh$**                             | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Banco Galicia                         |       | 129,455                               |       | 3,656,287 |   | — |   | — |   | 129,455 |   | 3,656,287 |   |
| Banco de Chile                        |       | —                                |       | — |   | — |   | 977 |   | — |   | 977 |   |
| Banco BBVA Frances.                   |       | —                                |       | 2,028,514 |   | — |   | — |   | — |   | 2,028,514 |   |
| Banco Nvo Santa Fe                    |       | 243,723                               |       | — |   | — |   | — |   | 243,723 |   | — |   |
| Total                                 |       | 373,178                               |       | 5,684,801 |   | — |   | 977 |   | 373,178 |   | 5,685,778 |   |
| Principal due                         |       | 368,194                               |       | 5,304,600 |   | — |   | 977 |   | 368,194 |   | 5,305,577 |   |
| Weighted average annual interest rate |       |                                  |       |   |   |   |   |   |   | 10.44 |   | 17.64 |   |

 

At December 31, 2009 and 2008, the Company had approximatelyCh$76,259 and Ch$106,792 million, respectively, available through short-termlines of credit.  The aggregateoutstanding amount of these lines of credit at December 31, 2009 and 2008was approximately Ch$811 million and Ch$7,332 million, respectively.

 

b)    Current portion of long-term bankborrowings:

 
| ** **                            | ** ** | **At December 31,**                | ** ** |
|---------------------------------------|------------|-----------------------------------------|------------|
| ** **                            | ** ** | **Currency or indexation  adjustment:** | ** ** |
| ** **                            | ** ** | **Foreign currencies**                  | ** ** |
| **Bank**                              | ** ** | **2009**                                | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **ThCh$**                               | ** ** | **ThCh$** | ** ** |
| Banco Alfa                            |       | 122,704                                 |       | 112,020 |   |
| Banco Votorantim                      |       | 119,555                                 |       | 109,185 |   |
| Total                                 |       | 242,259                                 |       | 221,205 |   |
| Principal due                         |       | 241,242                                 |       | 220,564 |   |
| Weighted average annual interest rate |       | 10.79                                   | %          | 10.51 | % |

 

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NOTE15 - LONG-TERM BANK BORROWINGS

 

Long— term bank borrowings were as follows:

 
| ** **        | ** ** | ** **   | ** ** | **At  December 31,** | ** ** |
|-------------------|------------|--------------|------------|---------------------------|------------|
| ** **        | ** ** | ** **   | ** ** | **Current  year-end**     | ** ** | **Prior  year-end** | ** ** |
| ** **        | ** ** | ** **   | ** ** | **Years to  maturity**    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Bank**          | ** ** | **Currency** | ** ** | **2011**                  | ** ** | **2012** | ** ** | **2013** | ** ** | **Total  long-term  at year-end** | ** ** | **Average  annual  interest  rate** | ** ** | **Total  long-term  at year-end** | ** ** | **Average  annual  interest  rate** | ** ** |
| ** **        | ** ** | ** **   | ** ** | **ThCh$**                 | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **%** | ** ** | **ThCh$** | ** ** | **%** | ** ** |
| Banco  Votorantim |       | R$           |       | 119,556                   |       | 29,889 |   | — |   | 149,445 |   | 9.40 |   | 244,941 |   | 9.86 |   |
| Banco  Alfa       |       | R$           |       | 51,127                    |       | — |   | — |   | 51,127 |   | 10.79 |   | 159,002 |   | 11.20 |   |
| Total             |       |         |       | 170,683                   |       | 29,889 |   | — |   | 200,572 |   |   |   | 403,943 |   |   |   |

 

NOTE 16 - BONDS PAYABLE

 

1    Details of bonds payable areas follows:

 
| **Instrument subscription or**        | ** ** | ** ** | ** ** | **Nominal** | ** ** | ** **   | ** ** | **Interest** | ** ** | ** **         | ** ** | **Interest** | ** ** | **Next  capital** | ** ** | **Par  value** | ** ** | **Placement  in Chile** | ** ** |
|---------------------------------------|------------|------------|------------|-------------|------------|--------------|------------|--------------|------------|--------------------|------------|--------------|------------|-------------------|------------|----------------|------------|-------------------------|------------|
| **identification number**             | ** ** | **Series** | ** ** | **value**   | ** ** | **Currency** | ** ** | **rate**     | ** ** | **Maturity  date** | ** ** | **paid**     | ** ** | **amortization**  | ** ** | **2009**       | ** ** | **2008**                | ** ** | **or abroad** | ** ** |
| ** **                            | ** ** | ** ** | ** ** | ** **  | ** ** | ** **   | ** ** | **%**        | ** ** | ** **         | ** ** | ** **   | ** ** | ** **        | ** ** | **ThCh$**      | ** ** | **ThCh$**               | ** ** | ** ** | ** ** |
| Current  portion of bonds payable     |       |       |       |        |       |         |       |         |       |               |       |         |       |              |       |           |       |                    |       |   |   |
| Register  254 SVS June 13, 2001  |       | B          |       | 3,638,2610  |       | UF           |       | 6.500        |       | June 1, 2026  |       | Half -yearly |       | Jun. 2010    |       | 3,117,629      |       | 2,694,306               |       | Chile |   |
| Total  current maturities             |       |       |       |        |       |         |       |         |       |               |       |         |       |              |       | 3,117,629      |       | 2,694,306               |       |   |   |
|                                  |       |       |       |        |       |         |       |         |       |               |       |         |       |              |       |           |       |                    |       |   |   |
| Long  - term portion of bonds payable |       |       |       |        |       |         |       |         |       |               |       |         |       |              |       |           |       |                    |       |   |   |
| Register  254 SVS June 13, 2001  |       | B          |       | 3,638,261   |       | UF           |       | 6.500        |       | June 1, 2026  |       | Half -yearly |       | Jun. 2010    |       | 73,484,258     |       | 75,268,046              |       | Chile |   |
| Total  long-term                      |       |       |       |        |       |         |       |         |       |               |       |         |       |              |       | 73,484,258     |       | 75,268,046              |       |   |   |

 

Accrued interest included in current portion ofbonds payable on the consolidated balance sheets amounted to ThCh$406,229 andThCh$ 413,456 at December 31, 2009 and 2008, respectively.

 

2    Scheduled maturities of thelong-term bonds payable at December 31, 2009 were as follows:

 
| ** **                          | ** ** | ** ** | ** ** | ** **            | ** ** | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** **      | ** ** |
|-------------------------------------|------------|------------|------------|-----------------------|------------|---------------|------------|------------|------------|------------|------------|----------------|------------|-----------------|------------|
| ** **                          | ** ** | ** ** | ** ** | ** **            | ** ** | ** **    | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | **Total**       | ** ** |
| ** **                          | ** ** | ** ** | ** ** | **Years to maturity** | ** ** | **long-term** | ** ** |
| ** **                          | ** ** | **Series** | ** ** | **2011**              | ** ** | **2012**      | ** ** | **2013**   | ** ** | **2014**   | ** ** | **Thereafter** | ** ** | **at year-end** | ** ** |
| ** **                          | ** ** | ** ** | ** ** | **ThCh$**             | ** ** | **ThCh$**     | ** ** | **ThCh$**  | ** ** | **ThCh$**  | ** ** | **ThCh$**      | ** ** | **ThCh$**       | ** ** |
| Register 254 SVS June 13, 2001 |       | B          |       | 2,887,641             |       | 3,075,339     |       | 3,275,234  |       | 3,488,124  |       | 60,757,920     |       | 73,484,258      |       |
| Total                               |       |       |       | 2,887,641             |       | 3,075,339     |       | 3,275,234  |       | 3,488,124  |       | 60,757,920     |       | 73,484,258      |       |

 

TheCompany’s restrictions regarding the issue of bonds are set forth in Note 26.

 

3      The risk classification of outstandingbonds is as follows:

 

Bondsissued in the US market:

 

A             :       Rating according to Fitch Ratings Ltd.

 

Bonds issued in the local market:

 

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AA+       :       Rating according to Fitch Chile Clasificadora de Riesgo Ltda.

AA         :       Rating according to Feller RateClasificadora de Riesgo Ltda.

 

4      Bond repurchases

 

During2000, 2001, 2002, 2007 and 2008, Embotelladora Andina S.A. repurchased bondsissued in the US market through its subsidiary Abisa Corp S.A. for a totalamount of US$350 million, of which US$200 million remain outstanding, which arepresented deducting the long-term liability from the bonds payable account.

 

5      Bondsissued by Rio de Janeiro Refrescos Ltda.

 

TheCompany’s subsidiary Refrescos issued bonds for US$ 75 million maturing in December 2012which requires semiannual interest payments. At December 31, 2008 and2007, those bonds are owned by the Company’s subsidiary Abisa Corp S.A.(formerly Pacific Sterling). Consequently, the related asset and liability have been eliminated onconsolidation.

 

NOTE 17 - OTHER ACCRUEDLIABILITIES

 

Otheraccrued liabilities at each year-end consisted of the following:

 
| ** **                                         | ** ** | **At December 31,** | ** ** |
|----------------------------------------------------|------------|--------------------------|------------|
| ** **                                         | ** ** | **Short — term**    | ** ** | **Long — term** | ** ** |
| ** **                                         | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                         | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Staff severance indemnities and (1) retention plan |       | 984,689                  |       | 771,723 |   | 9,006,580 |   | 8,204,888 |   |
| Contingency provisions                             |       | 38,878                   |       | 42,441 |   | 4,253,676 |   | 2,644,291 |   |
| Provision for Brazilian banking taxes (2)          |       | 2,299,789                |       | 2,884,039 |   | 2,108,140 |   | 5,527,745 |   |
| Total                                              |       | 3,323,356                |       | 3,698,203 |   | 15,368,396 |   | 16,376,924 |   |

 

----

(1)          As of December 31,2008, the Company modified the discount rate of the present value of accruedstaff benefits from 7% to 4% to adjust to current market conditions.  The impact of this change was a ThCh$932,639charge to income and was recorded under Other Non-Operating Expenses.

 

(2)          In 1999, theCompany’s subsidiary Rio Janeiro Refrescos Ltda. brought a tax lawsuit againstthe Brazilian Treasury for alleged unconstitutionality in the collection of thetax called CPMF (*Contribui**ção Provisória sobre Movimentação**Financeira*) on the debitsand credits to bank current accounts. While the subsidiary obtained aprovisional suspension of said payments from the Courts of Justice, thecorresponding tax obligation was still provisioned. In November 2006, theCourts of Justice ruled the constitutionality of the referred tax and Refrescoscame to an agreement with the Brazilian Treasury to divide payments in 60installments.

 

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NOTE18 - STAFF SEVERANCE INDEMNITIES AND RETENTION PLAN

 

Movementsin the provision for staff severance indemnities and retention plan were asfollows:

 
| ** **               | ** ** | **At December 31,** | ** ** |
|--------------------------|------------|--------------------------|------------|
| ** **               | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **               | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Beginning balance        |       | 9,179,042                |       | 6,969,788 |   | 6,626,265 |   |
| Provision for the period |       | 2,992,343                |       | 2,982,151 |   | 1,143,115 |   |
| Payments                 |       | (2,180,116               | )          | (975,328 | ) | (179,279 | ) |
| Ending balance           |       | 9,991,269                |       | 8,976,611 |   | 7,590,101 |   |

 

NOTE19 - OTHER LONG-TERM LIABILITIES

 

Otherlong — term liabilities at each year-end consisted of the following:

 
| ** **                          | ** ** | **At December 31,** | ** ** |
|-------------------------------------|------------|--------------------------|------------|
| ** **                          | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                          | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Deposits for containers             |       | 8,932,492                |       | 9,869,901 |   |
| Participation acquisition of assets |       | 1,546,904                |       | 2,003,659 |   |
| Advertising agreements              |       | 149,810                  |       | 271,398 |   |
| Other                               |       | 637,961                  |       | 564,559 |   |
| Total                               |       | 11,267,167               |       | 12,709,517 |   |

 

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NOTE20 — NON-CONTROLLING INTEREST

 

As of December 31, 2009, 2008 and 2007, non-controlling interestis comprised as follow:

 
| ** **                                                       | ** ** | **For the year ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                       | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                       | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Composition of non-controlling interest:                         |       |                                     |       |   |   |   |   |
|                                                             |       |                                     |       |   |   |   |   |
| Vital Aguas S.A.                                                 |       | —                                   |       | 1,342,632 |   | 1,359,809 |   |
| Embotelladora del  Atlántico S.A.                           |       | 10,409                                   |       | 11,338 |   | 9,635 |   |
| Andina Inversiones  Societarias S.A.                             |       | 23                                       |       | 21 |   | 17 |   |
| Total                                                            |       | 10,432                                   |       | 1,353,991 |   | 1,369,461 |   |
|                                                             |       |                                     |       |   |   |   |   |
| Composition of Income attributable to  non-controlling interest: |       |                                     |       |   |   |   |   |
|                                                             |       |                                     |       |   |   |   |   |
| Vital Aguas S.A.                                                 |       | —                                   |       | 17,178 |   | (44,733 | ) |
| Embotelladora del  Atlántico S.A.                           |       | (1,947                                   | )          | (2,009 | ) | (798 | ) |
| Andina Inversiones  Societarias S.A.                             |       | (2                                       | )          | (4 | ) | (7 | ) |
| Total.                                                           |       | (1,949                                   | )          | 15,165 |   | (45,538 | ) |

 

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Table of Contents

 

NOTE21 - SHAREHOLDERS’ EQUITY

 

a)              The movements inshareholders’ equity of the Company during each of the three years ended December 31,2009 were as follows:

 
| ** **                                                                                      | ** ** | **Paid-in  capital** | ** ** | **Other  reserves** | ** ** | **Retained  earnings  from  prior years** | ** ** | **Net income  for the  year** | ** ** | **Interim  dividends** | ** ** | **Total**   | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------------------|------------|---------------------|------------|-------------------------------------------|------------|-------------------------------|------------|------------------------|------------|-------------|------------|
| ** **                                                                                      | ** ** | **ThCh$**            | ** ** | **ThCh$**           | ** ** | **ThCh$**                                 | ** ** | **ThCh$**                     | ** ** | **ThCh$**              | ** ** | **ThCh$**   | ** ** |
| At January 1, 2007                                                                         |       | 202,060,999          |       | 1,750,274           |       | 10,005,032                                |       | 74,355,094                    |       | (13,438,065            | )          | 274,733,334 |       |
| Prior year income allocation                                                                    |       | —               |       | —              |       | 60,917,029                                |       | (74,355,094                   | )          | 13,438,065             |       | —      |       |
| Dividends paid                                                                                  |       | —               |       | —              |       | (60,917,378                               | )          | —                        |       | (16,764,054            | )          | (77,681,432 | )          |
| Price-level restatement of equity                                                               |       | 14,952,514           |       | 129,522             |       | 1,166,767                                 |       | —                        |       | (430,277               | )          | 15,818,526  |       |
| Cumulative translation adjustment of foreign  investments                                       |       | —               |       | (13,323,239         | )          | —                                    |       | —                        |       | —                 |       | (13,323,239 | )          |
| Net income for the year                                                                         |       | —               |       | —              |       | —                                    |       | 81,601,944                    |       | —                 |       | 81,601,944  |       |
| At December 31, 2007                                                                       |       | 217,013,513          |       | (11,443,443         | )          | 11,171,450                                |       | 81,601,944                    |       | (17,194,331            | )          | 281,149,133 |       |
|                                                                                            |       |                 |       |                |       |                                      |       |                          |       |                   |       |        |       |
| Balance at December 31, 2007 restated in  constant Chilean pesos of December 31, 2009 |       | 230,892,178          |       | (12,175,284         | )          | 11,885,902                                |       | 86,820,633                    |       | (18,293,960            | )          | 299,129,469 |       |
|                                                                                            |       |                 |       |                |       |                                      |       |                          |       |                   |       |        |       |
| At January 1, 2008                                                                         |       | 217,013,513          |       | (11,443,443         | )          | 11,171,450                                |       | 81,601,944                    |       | (17,194,331            | )          | 281,149,133 |       |
| Prior year income allocation                                                                    |       | —               |       | —              |       | 64,407,613                                |       | (81,601,944                   | )          | 17,194,331             |       | —      |       |
| Dividends paid                                                                                  |       | —               |       | —              |       | (55,185,668                               | )          | —                        |       | (16,764,054            | )          | (71,949,722 | )          |
| Price-level restatement of equity                                                               |       | 19,314,203           |       | (1,018,466          | )          | 2,808,355                                 |       | —                        |       | (407,925               | )          | 20,696,167  |       |
| Cumulative translation adjustment of foreign  investments                                       |       | —               |       | 21,517,062          |       | —                                    |       | —                        |       | —                 |       | 21,517,062  |       |
| Net income for the year                                                                         |       | —               |       | —              |       | —                                    |       | 94,835,957                    |       | —                 |       | 94,835,957  |       |
| At December 31, 2008                                                                       |       | 236,327,716          |       | 9,055,153           |       | 23,201,750                                |       | 94,835,957                    |       | (17,171,979            | )          | 346,248,597 |       |
|                                                                                            |       |                 |       |                |       |                                      |       |                          |       |                   |       |        |       |
| Balance at December 31, 2008 restated in  constant Chilean pesos of December 31, 2009 |       | 230,892,178          |       | 8,846,885           |       | 22,668,115                                |       | 92,654,730                    |       | (16,777,023            | )          | 338,284,885 |       |
|                                                                                            |       |                 |       |                |       |                                      |       |                          |       |                   |       |        |       |
| At January 1, 2009                                                                         |       | 236,327,716          |       | 9,055,153           |       | 23,201,750                                |       | 94,835,957                    |       | (17,171,979            | )          | 346,248,597 |       |
| Prior year income allocation                                                                    |       | —               |       | —              |       | 77,663,978                                |       | (94,835,957                   | )          | 17,171,979             |       | —      |       |
| Dividends paid                                                                                  |       | —               |       | —              |       | (45,606,209                               | )          | —                        |       | (16,764,054            | )          | (62,370,263 | )          |
| Price-level restatement of equity                                                               |       | (5,435,538           | )          | (208,269            | )          | (2,183,092                                | )          | —                        |       | (33,528                | )          | (7,860,427  | )          |
| Cumulative translation adjustment of foreign  investments                                       |       | —               |       | (26,357,734         | )          | —                                    |       | —                        |       | —                 |       | (26,357,734 | )          |
| Net income for the year                                                                         |       | —               |       | —              |       | —                                    |       | 86,918,333                    |       | —                 |       | 86,918,333  |       |
| At December 31, 2009                                                                       |       | 230,892,178          |       | (17,510,850         | )          | 53,076,427                                |       | 86,918,333                    |       | (16,797,582            | )          | 336,578,506 |       |

 

b)    Number of shares:

 
| **Series** | ** ** | **Subscribed  shares** | ** ** | **Paid-in  shares** | ** ** | **Shares with  voting  rights** | ** ** |
|------------|------------|------------------------|------------|---------------------|------------|---------------------------------|------------|
| A          |       | 380,137,271            |       | 380,137,271         |       | 380,137,271                     |       |
| B          |       | 380,137,271            |       | 380,137,271         |       | 380,137,271                     |       |

 

Thepreferential rights of each series of shares are as follows:

 

·                  Series A:    The right to elect 6 of the 7 directors andtheir respective alternates.

·                  Series B:     The right to receive 10% more of alldividend distributions than Series A shareholders and to elect 1 of the 7directors.

 

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c)              Capital:

 
| **Series** | ** ** | **Subscribed  capital** | ** ** | **Paid-in  capital** | ** ** |
|------------|------------|-------------------------|------------|----------------------|------------|
|       |       | **ThCh$**               | ** ** | **ThCh$**            | ** ** |
|       |       |                    |       |                 |       |
| A          |       | 115,446,089             |       | 115,446,089          |       |
| B          |       | 115,446,089             |       | 115,446,089          |       |
| Total      |       | 230,892,178             |       | 230,892,178          |       |

 

d)            Other reserves:

 

Otherreserves at each year-end were as follows:

 
| ** **                                                          | ** ** | **2009**    | ** ** | **2008**  | ** ** | **2007**    | ** ** |
|---------------------------------------------------------------------|------------|-------------|------------|-----------|------------|-------------|------------|
| ** **                                                          | ** ** | **ThCh$**   | ** ** | **ThCh$** | ** ** | **ThCh$**   | ** ** |
|                                                                |       |        |       |      |       |        |       |
| Reserve for cumulative translation adjustments (1)                  |       | (18,663,859 | )          | 7,693,875 |       | (13,328,295 | )          |
| Reserve for technical reappraisal of property,  plant and equipment |       | 68,854      |       | 69,414    |       | 71,591      |       |
| Other reserves                                                      |       | 1,084,155   |       | 1,083,596 |       | 1,081,420   |       |
| Total                                                               |       | (17,510,850 | )          | 8,846,885 |       | (12,175,284 | )          |

 

----

(1)          The reserve for cumulativetranslation adjustments complies with Technical Bulletin No. 64 of  the Chilean Institute of Accountants andOfficial letter No. 5,294 issued by the SVS.

 

Thecomposition of this reserve was as follows:

 
| **Subsidiary**                         | ** ** | **Balance at********January 1, 2009** | ** ** | **Foreign exchange********losses generated******** during the  year** | ** ** | **Release /********transfers of********reserve(*)** | ** ** | **Balance at********December 31,********2009** | ** ** |
|----------------------------------------|------------|--------------------------------------------|------------|----------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                             | ** ** | **ThCh$**                                  | ** ** | **ThCh$**                                                                  | ** ** | **ThCh$**                                           | ** ** | **ThCh$**                                           | ** ** |
|                                   |       |                                       |       |                                                                       |       |                                                |       |                                                |       |
| Rio de Janeiro  Refrescos Ltda         |       | 4,396,522                                  |       | (16,657,402                                                                | )          | 61,305                                              |       | (12,199,575                                         | )          |
| Embotelladora del  Atlántico S.A. |       | 3,297,353                                  |       | (9,761,637                                                                 | )          | —                                              |       | (6,464,284                                          | )          |
| Total                                  |       | 7,693,875                                  |       | (26,419,039                                                                | )          | 61,305                                              |       | (18,663,859                                         | )          |

 

----

(*)         During 2009, the Companyreceived dividend payments from its subsidiaries Rio de Janeiro Refrescos Ltda.and Embotelladora del Atlántico S.A. for ThCh$23,026,558 and ThCh$4,014,692respectively. The dividends distribution and the capital remittances triggereda pro-rata recognition in income of the cumulative translation reserve.

 
| **Subsidiary**                         | ** ** | **Balance at********January 1, 2008** | ** ** | **Foreign exchange********gains generated********during the year** | ** ** | **Release /********transfers of********reserve (*)** | ** ** | **Balance at********December 31,********2008** | ** ** |
|----------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                             | ** ** | **ThCh$**                                  | ** ** | **ThCh$**                                                          | ** ** | **ThCh$**                                            | ** ** | **ThCh$**                                           | ** ** |
|                                   |       |                                       |       |                                                               |       |                                                 |       |                                                |       |
| Rio de Janeiro  Refrescos Ltda         |       | (8,059,234                                 | )          | 12,330,990                                                         |       | 124,766                                              |       | 4,396,522                                           |       |
| Embotelladora del  Atlántico S.A. |       | (5,269,061                                 | )          | 6,292,354                                                          |       | 2,274,060                                            |       | 3,297,353                                           |       |
| Total                                  |       | (13,328,295                                | )          | 18,623,344                                                         |       | 2,398,826                                            |       | 7,693,875                                           |       |

 

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----

(*)         During 2008, the Companyreceived dividend payments from its subsidiaries Rio de Janeiro Refrescos Ltda.and Embotelladora del Atlántico S.A. for ThCh$37,148,256 and ThCh$7,760,919.The dividends distribution and the capital remittances triggered a pro-ratarecognition in income of the cumulative translation reserve.

 
| **Subsidiary**                         | ** ** | **Balance at********January 1, 2007** | ** ** | **Foreign exchange********losses generated********during the year** | ** ** | **Release /********transfers of********reserve(*)** | ** ** | **Balance at********December 31,********2007** | ** ** |
|----------------------------------------|------------|--------------------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                             | ** ** | **ThCh$**                                  | ** ** | **ThCh$**                                                           | ** ** | **ThCh$**                                           | ** ** | **ThCh$**                                           | ** ** |
|                                   |       |                                       |       |                                                                |       |                                                |       |                                                |       |
| Rio de Janeiro  Refrescos Ltda         |       | (894,227                                   | )          | (9,965,890                                                          | )          | 2,800,883                                           |       | (8,059,234                                          | )          |
| Embotelladora del  Atlántico S.A. |       | 1,741,231                                  |       | (8,014,836                                                          | )          | 1,004,544                                           |       | (5,269,061                                          | )          |
| Total                                  |       | 847,004                                    |       | (17,980,726                                                         | )          | 3,805,427                                           |       | (13,328,295                                         | )          |

 

----

(*)         During 2007, the Companyreceived dividend payments from its subsidiary Rio de Janeiro Refrescos Ltda.for ThCh$33,025,762. In 2007 it also received  capital remittances from Embotelladora del Atlántico S.A. forThCh$28,362,452. The dividends distribution and the capital remittancestriggered a pro-rata recognition in income of the cumulative translationreserve.

 

NOTE22 - OTHER NON-OPERATING INCOME AND EXPENSES

 

Other non-operating income during each year was as follows:

 
| ** **                                                           | ** ** | **For the year ended December 31,** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                           | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                           | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Prior period adjustment related to judicial  deposits (Brazil)       |       | 2,221,960                                |       | — |   | — |   |
| Re-estimation useful life prior years property,  plant and equipment |       | 894,893                                  |       | — |   | — |   |
| Tax recoveries - Pis Cofins                                          |       | —                                   |       | — |   | 1,459,635 |   |
| Recovery of prior year taxes                                         |       | —                                   |       | — |   | 2,886,265 |   |
| Reversal of impairment loss on fixed asset (2)                       |       | —                                   |       | 5,100,990 |   | 4,890,512 |   |
| Adjustments to guarantees received for containers                    |       | —                                   |       | — |   | 373,471 |   |
| Gain on sale of plant, property and equipment                        |       | 296,775                                  |       | 268,438 |   | — |   |
| Other income                                                         |       | 808,847                                  |       | 834,462 |   | 235,753 |   |
| Subtotal                                                             |       | 4,222,475                                |       | 6,203,890 |   | 9,845,636 |   |
| Translation adjustment (3)                                           |       | 5,371,504                                |       | — |   | 3,223,066 |   |
| Total                                                                |       | 9,593,979                                |       | 6,203,890 |   | 13,068,702 |   |

 

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Other non-operating expenses during each yearwere as follows:

 
| ** **                                                    | ** ** | **For the year ended December 31,** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                    | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                    | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                          |       |                                     |       |   |   |   |   |
| Bank taxes (4)                                                |       | (2,074,742                               | )          | (2,613,658 | ) | (3,139,082 | ) |
| Obsolescence and  write-offs of property, plant and equipment |       | (100,000                                 | )          | (1,108,795 | ) | (1,091,243 | ) |
| Write-off intangible Benedictino                              |       | —                                   |       | (1,113,761 | ) | — |   |
| Loss on sale of  property, plant and equipment                |       | —                                   |       | — |   | (156,084 | ) |
| Provision for labor, tax  and commercial lawsuits             |       | (770,762                                 | )          | (928,134 | ) | (748,043 | ) |
| Lawsuit fees                                                  |       | (283,323                                 | )          | (907,880 | ) | — |   |
| Cumulative translation reserve realized (5)                   |       | (61,305                                  | )          | (2,398,826 | ) | (3,809,236 | ) |
| Provision for equity  investee Centralli Refrigerantes S.A.   |       | (1,346                                   | )          | (111,015 | ) | — |   |
| One-time previous years territory taxes in Brazil             |       | —                                   |       | (396,295 | ) | — |   |
| Provision for staff  severance indemnities and retention plan |       | (276,008                                 | )          | (932,639 | ) | — |   |
| Donations                                                     |       | (175,000                                 | )          | (331,845 | ) |   |   |
| Other expenses                                                |       | (1,589,470                               | )          | (1,209,978 | ) | (1,148,215 | ) |
| Subtotal                                                      |       | (5,331,956                               | )          | (12,052,826 | ) | (10,091,903 | ) |
| Translation adjustment (3)                                    |       | —                                   |       | (4,001,234 | ) | — |   |
| Total                                                         |       | (5,331,956                               | )          | (16,054,060 | ) | (10,091,903 | ) |

 

----

(1)          The Company’s subsidiary Rio de Janeiro RefrescosLtda. contested in the courts the increase in the calculation basis of SocialIntegration Program — (“PIS”) and Social Contribution on Revenues (“COFINS”).The final sentence for this case was passed on November 6, 2006 by theSupreme Court of last resort and was favorable to the Company. Based on thisdecision, the Company reversed the provision recorded.

 

(2)          During2008 and 2007, the Company evaluated the estimated future cash flows expectedfrom its plants.  As a result of theevaluation, the Company concluded that a previous impairment provision on someof its plants was no longer required. Accordingly, such provision was reversed with effect in earnings.

 

(3)          Refers to the effects of the translation of thefinancial statements corresponding to investment in foreign companies(translation of local currency to US dollars), in accordance with TechnicalBulletin No. 64 issued by the Chilean Institute of Accountants, which arerecorded on the consolidated statements of income under Other non-operatingincome or expenses, as appropriate.

 

(4)          Relates to taxes charged in the normal course ofbusiness due to banking Accounts movements in our foreign subsidiaries and arenot related to the acquirement of financial resources.

 

(5)          During 2009, 2008 and 2007, the Company receiveddividend payments from its subsidiary Rio de Janeiro Refrescos Ltda. forThCh$23,026,558, ThCh$37,148,256, ThCh$, and ThCh$33,025,762 respectively. In2009 and 2008 it also received dividend payments for ThCh$4,014,692 andThCh$7,760,919  respectively. In 2007 italso received capital remittances from Embotelladora del Atlántico S.A. forThCh$28,362,452. The dividends distribution and the capital remittancestriggered a pro-rata recognition in income of the cumulative translationreserve.

 

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NOTE 23 - FOREIGN CURRENCY

 

At December 31, 2009 and 2008, the Companyhad the following assets and liabilities denominated or measured in U.S.dollars, Brazilian reals and Argentine pesos, which have been translated into Chileanpesos in accordance with Note 1 d) and 1 v):

 
| ** **                                | ** ** | **2009**           | ** ** | **2008**             | ** ** |
|-------------------------------------------|------------|--------------------|------------|----------------------|------------|
| **Assets**                                | ** ** | **US  dollars**    | ** ** | **Brazilian  reals** | ** ** | **Argentine  pesos** | ** ** | **Euros** | ** ** | **US  dollars** | ** ** | **Brazilian  reals** | ** ** | **Argentine  Pesos** | ** ** | **Euros** | ** ** |
| ** **                                | ** ** | **(in thousands)** | ** ** | **(in thousands)**   | ** ** |
| Cash                                      |       | 166                |       | 42,547               |       | 4,390 |   | — |   | 2,350 |   | 26,200 |   | 12,511 |   | — |   |
| Time deposits                             |       | —             |       | 35,494               |       | 121 |   | — |   | 21,102 |   | 112 |   | — |   | — |   |
| Marketable  securities (net)              |       | 12,301             |       | —               |       | — |   | — |   | 15,769 |   | 216 |   | — |   | — |   |
| Receivables (net)                         |       | 2,124              |       | 117,264              |       | 33,865 |   | — |   | 1,482 |   | 102,077 |   | 46,790 |   | — |   |
| Inventories                               |       | 2,451              |       | 39,516               |       | 118,411 |   | — |   | 1,954 |   | 45,302 |   | 47,939 |   | — |   |
| Other current  assets                     |       | 1,519              |       | 18,841               |       | 14,719 |   | — |   | 1,972 |   | 21,284 |   | 13,787 |   | — |   |
| Property, plant and  equipment            |       | 212,543            |       | —               |       | — |   | — |   | 194,617 |   | — |   | — |   | — |   |
| Investments in  unconsolidated affiliates |       | —             |       | 27,652               |       | — |   | — |   | — |   | 28,949 |   | — |   | — |   |
| Investments in  other companies           |       | 155                |       | —               |       | — |   | — |   | 113 |   | — |   | — |   | — |   |
| Goodwill (net)                            |       | 89,241             |       | —               |       | — |   | — |   | 100,193 |   | — |   | — |   | — |   |
| Other long-term  assets                   |       | 229                |       | 68,046               |       | 19,323 |   | — |   | 269 |   | 57,905 |   | 18,430 |   | — |   |
| Total assets                              |       | 320,729            |       | 349,360              |       | 190,829 |   | — |   | 339,821 |   | 282,045 |   | 139,457 |   | — |   |

 
| ** **                                         | ** ** | **2009**           | ** ** | **2008**             | ** ** |
|----------------------------------------------------|------------|--------------------|------------|----------------------|------------|
| **Liabilities**                                    | ** ** | **US  dollars**    | ** ** | **Brazilian  reals** | ** ** | **Argentine  pesos** | ** ** | **Euros** | ** ** | **US  dollars** | ** ** | **Brazilian  Reals** | ** ** | **Argentine  pesos** | ** ** | **Euros** | ** ** |
| ** **                                         | ** ** | **(in thousands)** | ** ** | **(in thousands)**   | ** ** |
| Obligations with  banks and financial institutions |       | —             |       | 1,521                |       | 2,796 |   | — |   | — |   | 9,744 |   | 19,837 |   | — |   |
| Accounts payable                                   |       | 2,267              |       | 98,161               |       | 95,669 |   | 66 |   | 5,769 |   | 86,411 |   | 87,837 |   | 12 |   |
| Other accrued  liabilities                         |       | —             |       | —               |       | — |   | — |   | — |   | 35,011 |   | 8,439 |   | — |   |
| Bonds payable                                      |       | —             |       | —               |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Provision                                          |       | —             |       | 26,314               |       | 7,718 |   | — |   | — |   | — |   | — |   | — |   |
| Other                                              |       | —             |       | 100,299              |       | 103,914 |   | — |   | — |   | 67,496 |   | 84,484 |   | — |   |
|                                               |       |               |       |                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                  |       | 2,267              |       | 226,295              |       | 210,097 |   | 66 |   | 5,769 |   | 198,662 |   | 200,597 |   | 12 |   |
| Total net assets (liabilities)                     |       | 318,462            |       | 123,065              |       | (19,268 | ) | (66 | ) | 334,052 |   | 83,383 |   | (61,140 | ) | (12 | ) |

 

NOTE24 - CONSOLIDATED STATEMENT OF CASH FLOWS

 

Forthe projection of future cash flows, there are no transactions or events toconsider which have not been revealed in these financial statements andaccompanying notes.

 

Thefollowing are investing and financing activities during the period that affectrecognized assets or liabilities but that do not result in cash receipts orcash payments:

 
| ** **                            | ** ** | **For the years ended December 31,** | ** ** |
|---------------------------------------|------------|-------------------------------------------|------------|
| ** **                            | ** ** | **2009**                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                            | ** ** | **ThCh$**                                 | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Investing activities:                 |       |                                      |       |   |   |   |   |
| Fixed assets additions                |       | 1,729,073                                 |       | 1,101,555 |   | 6,365,567 |   |
| Sale of property, plant and equipment |       | 21,802                                    |       | 20,170 |   | 3,207 |   |
|                                  |       |                                      |       |   |   |   |   |
| Financing activities:                 |       |                                      |       |   |   |   |   |
| Dividend payment                      |       | 5,588,018                                 |       | 5,459,494 |   | 5,945,389 |   |

 

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NOTE 25 - DERIVATIVE CONTRACTS

 

Forthe year ended December 31, 2009, the Company recorded net income fromderivative instruments of ThCh$ 700,708 as Financial income in the consolidatedstatements of income (net gain of ThCh$ 12,081,583 and ThCh$14,239,004 for theyear ended December 31, 2008 and 2007 respectively).

 

TheCompany had the following derivative contracts at December 31, 2009 (forpresentation purposes, individual contracts were summarized and allocated toeach quarter based on their maturities):

 
| ** **       | ** ** | ** **      | ** ** | ** **            | ** ** | **Net carrying** | ** ** | **Deferred**    | ** ** |
|------------------|------------|-----------------|------------|-----------------------|------------|------------------|------------|-----------------|------------|
| **Derivative**   | ** ** | **Maturity**    | ** ** | **Description**       | ** ** | **values**       | ** ** | **gain/(loss)** | ** ** |
| ** **       | ** ** | ** **      | ** ** | ** **            | ** ** | **ThCh$**        | ** ** | **ThCh$**       | ** ** |
| Forward contract |       | I  Quarter 2010 |       | Currency  exchange UF |       | 13,083           |       | 13,083          |       |
| Total            |       |            |       |                  |       | 13,083           |       | 13,083          |       |

 

Asof December 31, 2009, total notional amounts for derivative contractsoutstanding were:

 

Forwardcontracts:             UF143,115 (Sell)

 

TheCompany had the following derivative contracts at December 31, 2008 (forpresentation purposes, individual contracts were summarized and allocated toeach quarter bases on their maturities):

 
| ** **       | ** ** | ** **       | ** ** | ** **             | ** ** | **Net carrying** | ** ** | **Deferred**    | ** ** |
|------------------|------------|------------------|------------|------------------------|------------|------------------|------------|-----------------|------------|
| **Derivative**   | ** ** | **Maturity**     | ** ** | **Description**        | ** ** | **values**       | ** ** | **gain/(loss)** | ** ** |
| ** **       | ** ** | ** **       | ** ** | ** **             | ** ** | **ThCh$**        | ** ** | **ThCh$**       | ** ** |
| Forward contract |       | I  Quarter 2009  |       | Currency  exchange US$ |       | 1,015,925        |       | 175,959         |       |
| Futures contract |       | II  Quarter 2009 |       | Currency  exchange US$ |       | —           |       | (6,732          | )          |
| Total            |       |             |       |                   |       | 1,015,925        |       | 169,227         |       |

 

Asof December 31, 2008, total notional amounts for derivative contractsoutstanding were:

 

Forwardcontracts:             US$19,206,398 (Buy) and US$ 32,885,556 (Sell)

 

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NOTE 26 - COMMITMENTS AND CONTINGENCIES

 

a.                                       Litigation andother legal actions:

 

Thereare various judicial actions and other out-of-court claims pending against theCompany incidental to its business and operations. Management believes, basedon the opinion of its legal counsel, that none of these proceedings will have amaterial adverse effect on the Company’s financial position or result ofoperations.

 

1)              Embotelladoradel Atlántico S.A. faces labor and other lawsuits. Accounting provisions toback any probable loss contingency arising from these lawsuits, amounts toThCh$1,029,938 (ThCh$1,555,481 in 2008). In accordance with its legal counsel’sopinion, the Company deems improbable that contingencies without provisions mayaffect the results or equity of the Company.

 

2)              Rio de Janeiro Refrescos Ltda. faces labor, tax andother lawsuits. Accounting provisions to back any probable losscontingency arising from these lawsuits amount to ThCh$3,255,782(ThCh$1,084,276 in 2008). In accordance with its legal counsel’s opinion, theCompany deems improbable that contingencies without provisions may affect theresults or equity of the Company.

 

3)              EmbotelladoraAndina S.A. faces, labor, tax, commercial and other lawsuits.  Accounting provisions to back any probableloss contingency arising from these lawsuits amount to ThCh$6,834 (ThCh$7,862in 2008). In accordance with its legal counsel’s opinion, the Company deemsimprobable that contingencies without provisions may affect the results orequity of the Company.

 

b.              Restrictions

 

***The issue and placement of bondsin the US market of US$ 200 million imposes certain restrictions on liens, saleand leaseback transactions, assets sales and subsidiary indebtedness andcertain other conditions in the event of a merger or consolidation.***

 

***The bond issue and placement byAndina in the Chilean market in 2001 of UF 3,700,000 is subject to thefollowing restrictions:***

 

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·                  ***Andina must maintain a leverage ratio, defined as totaldebt/consolidated equity lower than 1.20. For purposes of calculating theleverage ratio, total debt includes; (i) short-term bank liabilities, (ii) thecurrent portion of long-term bank liabilities, (iii) short-termliabilities and promisory notes, (iv) the current portion of bondspayable, v) long-term bank liabilities, and (vi) long-term bondspayable.  Consolidated equity means totalshareholders’ equity plus non-controlling interest.***

 

·                  ***Andina must maintain consolidated assets free of any pledge, mortgageor other encumbrance for an amount equal to at least 1.30 times theconsolidated liabilities that are not guaranteed by the investee.***

 

·                  Andina mustretain and, in no way, sell, assign or dispose of, to a third party, thegeographical zone denominated “Region Metropolitana”, as a franchised territoryin Chile of The Coca-Cola Company, for the preparation, production, sale anddistribution of the products and brands in accordance with the BottlerAgreement with Andina, renewable from time to time.

 

·                  The Companymust retain and, in no way, sell, assign or dispose of to a third party, thefranchised territory in Argentina or Brazil by The Coca-Cola Company, for thepreparation, production, sale, and distribution of the products and brands ofThe Coca-Cola Company, as long as the referred territory represents more than40% of the Company’s consolidated operating cash flows.

 

AtDecember 31, 2009 and 2008 the Company was in compliance with theaforementioned covenants.

 

c.               Direct guarantees and restricted assets

 

Directguarantees and restricted assets at December 31, 2009 were as follows:

 
| ** **                   | ** ** | **Debtor**                            | ** ** | **Assets  involved** | ** ** | **Book**           | ** ** | **Balances  pending  payment  at year end** | ** ** | **Year of  expiration  December 31,** | ** ** |
|------------------------------|------------|---------------------------------------|------------|----------------------|------------|--------------------|------------|---------------------------------------------|------------|--------------------------------------------|------------|
| **Guarantee creditor**       | ** ** | **Name**                              | ** ** | **Relation**         | ** ** | **Guarantee**      | ** ** | **Type**                                    | ** ** | **Value**                                  | ** ** | **2009** | ** ** | **2008** | ** ** | **2010** | ** ** | **2011** | ** ** |
| ** **                   | ** ** | ** **                            | ** ** | ** **           | ** ** | ** **         | ** ** | ** **                                  | ** ** | **ThCh$**                                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                         |       |                                  |       |                 |       |               |       |                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| State of Rio de Janeiro      |       | Rio de Janeiro Refrescos Ltda.        |       | Subsidiary           |       | Mortgage           |       | Real estate property                        |       | 11,420,510                                 |       | 11,826,943 |   | 10,805,073 |   | — |   | — |   |
|                         |       |                                  |       |                 |       |               |       |                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| Poder  Judiciario            |       | Rio de Janeiro Refrescos Ltda.        |       | Subsidiary           |       | Judicial deposit   |       | Long-term asset                             |       | 14,791,035                                 |       | — |   | — |   | — |   | — |   |
|                         |       |                                  |       |                 |       |               |       |                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| Ezeiza  Customs              |       | Embotelladora del Atlántico S.A. |       | Subsidiary           |       | Guaranty insurance |       | Export of molds                             |       | 17,882                                     |       | — |   | — |   | — |   | — |   |
| Ezeiza  Customs              |       | Embotelladora del Atlántico S.A. |       | Subsidiary           |       | Guaranty insurance |       | Raw materials imports                       |       | 36,031                                     |       | — |   | — |   | — |   | — |   |
|                         |       |                                  |       |                 |       |               |       |                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| Aga  S.A.                    |       | Embotelladora Andina  S.A.            |       | Parent company       |       | Guarante receipt   |       | Agreement                                   |       | —                                     |       | 152,130 |   | — |   | — |   | 152,130 |   |
|                         |       |                                  |       |                 |       |               |       |                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| Serviu  Region Metropolitana |       | Embotelladora Andina  S.A.            |       | Parent company       |       | Guarante receipt   |       | Guarante receipt                            |       | —                                     |       | 2,727 |   | — |   | — |   | 2,727 |   |
|                         |       |                                  |       |                 |       |               |       |                                        |       |                                       |       |   |   |   |   |   |   |   |   |
| Escuela  Militar             |       | Embotelladora Andina  S.A.            |       | Parent company       |       | Guarante receipt   |       | Guarante receipt                            |       | —                                     |       | 1,525 |   | — |   | 1,525 |   | — |   |

 

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d.         Contractual obligations

 

Thefollowing table summarizes the contractual obligations and commercialcommitments as of December 31, 2009:

 
| ** **                                 | ** ** | **Payments due by period** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|------------|------------|
| ** **                                 | ** ** | **Maturity**               | ** ** | ** ** | ** ** |
| ** **                                 | ** ** | **2010**                   | ** ** | **2011**   | ** ** | **2012** | ** ** | **2013** | ** ** | **More than 4  years** | ** ** | **Total** | ** ** |
| ** **                                 | ** ** | **ThCh$**                  | ** ** | **ThCh$**  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Long-term debt                             |       | 242,259                    |       | 170,683    |       | 29,889 |   | — |   | — |   | 442,831 |   |
| Short-term debt                            |       | 373,178                    |       | —     |       | — |   | — |   | — |   | 373,178 |   |
| Bonds payable                              |       | 3,117,629                  |       | 2,887,641  |       | 3,075,339 |   | 3,275,234 |   | 64,246,044 |   | 76,601,887 |   |
| Brazilian banking taxes                    |       | 2,299,789                  |       | 2,108,140  |       | — |   | — |   | — |   | 4,407,929 |   |
| Subtotal-included in our balance sheet     |       | 6,032,855                  |       | 5,166,464  |       | 3,105,228 |   | 3,275,234 |   | 64,246,044 |   | 81,825,825 |   |
|                                       |       |                       |       |       |       |   |   |   |   |   |   |   |   |
| Operating lease obligations                |       | 2,120,975                  |       | 308,670    |       | 284,462 |   | 245,215 |   | 715,212 |   | 3,674,534 |   |
| Purchase obligations                       |       | 5,349,336                  |       | 843,934    |       | — |   | — |   | — |   | 6,193,270 |   |
| Others                                     |       | 4,859,113                  |       | 4,816,250  |       | 4,470,234 |   | 4,268,231 |   | 30,047,273 |   | 48,461,101 |   |
| Subtotal-not included in our Balance sheet |       | 12,329,424                 |       | 5,968,854  |       | 4,754,696 |   | 4,513,446 |   | 30,762,485 |   | 58,328,905 |   |
| Total contractual obligations              |       | 18,362,279                 |       | 11,135,318 |       | 7,859,924 |   | 7,788,680 |   | 95,008,529 |   | 140,154,730 |   |

 

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NOTE27 - GUARANTEES RECEIVED FROM THIRD PARTIES

 

Guaranteesreceived from third parties at December 31, 2009 were as follows:

 
| **Guarantor**                           | ** ** | **Type of Guarantee** | ** ** | **Amount** | ** ** | **Currency** | ** ** | **Transaction**                            |
|-----------------------------------------|------------|-----------------------|------------|------------|------------|--------------|------------|--------------------------------------------|
|                                    |       |                  |       |       |       |         |       |                                       |
| AGA S.A.                                |       | Receipt               |       | 600,000    |       | US$          |       | Supply  agreeement                         |
| Several Clients                         |       | Deposits              |       | 3,768,943  |       | US$          |       | Guarantee  over containers (bottles)       |
| Confab                                  |       | Mortgage              |       | 30,000,000 |       | US$          |       | Purchase of Rio de Janeiro Refrescos Ltda. |
| Russel W. Coffin                        |       | Letter  of credit     |       | 53,014,484 |       | US$          |       | Purchase  of Nitvitgov Refrigerantes S.A.  |
| Mac Coke  Distribuidora de Bebidas      |       | Mortgage              |       | 369,860    |       | US$          |       | Distributor  credit                        |
| Zulemar Comercio de Bebidas             |       | Mortgage              |       | 304,952    |       | US$          |       | Distributor  credit                        |
| Dist Real Cola                          |       | Mortgage              |       | 184,362    |       | US$          |       | Distributor  credit                        |
| Soc. Com. Champfer                      |       | Mortgage              |       | 832,759    |       | US$          |       | Distributor  credit                        |
| Motta Distribuidora de Bebidas          |       | Mortgage              |       | 1,263,496  |       | US$          |       | Distributor  credit                        |
| Franciscana Dist.                       |       | Mortgage              |       | 220,331    |       | US$          |       | Distributor  credit                        |
| Soberana de Carmo  Dist Beb             |       | Mortgage              |       | 149,495    |       | US$          |       | Distributor  credit                        |
| Aguiar Dist. de Bebidas                 |       | Mortgage              |       | 351,607    |       | US$          |       | Distributor  credit                        |
| Asxt Fluminense Dist. Bebidas           |       | Mortgage              |       | 321,617    |       | US$          |       | Distributor  credit                        |
| Trasporte Rigar  S.R.L.                 |       | Guarantee  insurance  |       | 131,579    |       | US$          |       | Supplier                                   |
| Siemens S.A.                            |       | Guarantee  insurance  |       | 64,763     |       | US$          |       | Supplier                                   |
| Catering Argentina S.A.                 |       | Guarantee  insurance  |       | 235,000    |       | US$          |       | Supplier                                   |
| La Isla Sur S.R.L.                      |       | Guarantee  insurance  |       | 190,841    |       | US$          |       | Supplier                                   |
| Atanor                                  |       | Guarantee  insurance  |       | 17,105,263 |       | US$          |       | Supplier                                   |
| KHS Corpoplast                          |       | Guarantee  insurance  |       | 896,875    |       | US$          |       | Supplier                                   |
| Thermedics Detections de Argentina S.A. |       | Guarantee  insurance  |       | 112,147    |       | US$          |       | Supplier                                   |

 

NOTE28 - SUBSEQUENT EVENTS

 

·             On February 27th,an earthquake shook the central-south zone of Chile.  The main beverage plant located in SanJoaquín suffered no material damage, so the production and sale of beveragesresumed March 1st in the afternoon. Vital Aguas S.A., a subsidiary located in Rengo, suffered virtually nodamage and its operations resumed at dawn on March 1st. Envases Central(ECSA, canned beverages and individual PET bottle beverages) and Vital S.A.(Juices) suffered moderate damage to their production lines, so they graduallybegan to resume production 7 days (ECSA) and 5 days (Vital S.A.) later.

 

·                  On April 28,2010, final dividend number 170 was paid from 2009 revenues as follows:

 

a)              Ch$11.70 for each series Ashare; and

b)             Ch$12.87 for each series Bshare.

 

·                  On May 18,2010, final additional dividend number 171 was paid from retained earnings asfollows:

 

a)              Ch$50.00 foreach series A share; and

b)              Ch$55.00 for each series Bshare.

 

·                  No othersignificant events have occurred between December 31, 2009 and theissuance date of these financial statements that could significantly affect thepresentation of these financial statements.

 

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NOTE29 — IMPLEMENTATION OF INTERNATIONAL ACCOUNTING STANDARDS

 

Itis of public knowledge that the country is committed to the development of aconvergence plan to fully adopt International Financial Reporting Standards(IFRS), based on a progressive calendar as from year 2009.  In accordance with the regulationsestablished by the Chilean Institute of Accountants on this matter and what hasbeen specifically established by official letters N°427 and N°485 of theSuperintendencia de Valores y Seguros *(*Superintendence of Securities and Insurance. As a result,there were changes that affected the beginning balance of shareholders’ equityas of January 1, 2010, and the determination of results for future periods willalso be affected. Additionally, for comparative purposes, the financialstatements for the year 2009 must be reported in accordance with the newstandards, that when reported in such a manner, may differ from the onespresented herein.

 

 Consequently,2010 will be the first year in which the Company will perform a completeapplication of IFRS. The Company is developing a plan to integrally face theimpacts of this change.

 

NOTE 30 — DIFFERENCESBETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

 

ChileanGAAP varies in certain significant respects from the accounting principlesgenerally accepted in the United States (“U.S. GAAP”).  Such differences involve methods formeasuring the amounts shown in the financial statements as well as additionaldisclosures required by U.S. GAAP.

 

Theprincipal methods applied in the preparation of the accompanying financialstatements which have resulted in amounts that differ from those that wouldhave otherwise been determined under U.S. GAAP are as follows:

 

1                  Differences in measurementmethods

 

a)              Inflation accounting

 

Thecumulative inflation rate in Chile as measured by the CPI in the three-yearperiod ended December 31, 2009 was approximately 14.3%.

 

ChileanGAAP requires that the financial statements be restated to reflect the fulleffects of the loss in the purchasing power of the Chilean peso on thefinancial position and results of operations of reporting entities.  The method, described in Note 1 c), is basedon a model which enables calculation of net inflation gains or losses caused bymonetary assets and liabilities exposed to changes in the purchasing power oflocal currency.  The model prescribes thatthe historical cost of all non-monetary accounts be restated for generalprice-level changes between the date of origin of each item and the year-end.

 

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Theinclusion of price-level adjustments in these financial statements isconsidered appropriate under the prolonged inflationary conditions affectingthe Chilean economy even though the cumulative inflation rate for thelast-three years does not exceed 100%. Accordingly, the effect of price-level changes is not eliminated in thereconciliation to U.S. GAAP included under paragraph (o) below.

 

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Theprice-level restatement was determined under Chilean GAAP by restating thefollowing non-monetary assets and liabilities as follows:

 
| ** **                              | ** ** | **For the year ended December 31,** | ** ** |
|-----------------------------------------|------------|-------------------------------------|------------|
| ** **                              | ** ** | **2009**                            | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **ThCh$**                           | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Shareholders’ equity               |       | 7,860,427                           |       | (20,220,155 | ) | (16,830,168 | ) |
| Liabilities                             |       | 2,023,263                           |       | (8,916,903 | ) | (10,479,685 | ) |
| Property, plant and equipment           |       | (2,366,729                          | )          | 8,823,418 |   | 6,513,877 |   |
| Current assets                          |       | (2,745,977                          | )          | 9,847,761 |   | 3,435,565 |   |
| Other assets                            |       | (4,188,420                          | )          | 11,298,506 |   | 14,772,611 |   |
| Adjustment of balance sheet accounts    |       | 582,564                             |       | 832,627 |   | (2,587,800 | ) |
| Adjustment of income statement accounts |       | (36,070                             | )          | (2,874,052 | ) | (2,245,788 | ) |
| Price level restatement expense         |       | 546,494                             |       | (2,041,425 | ) | (4,833,588 | ) |

 

b)             Translation of financialstatements of non-Chilean operations

 

Inaccordance with Technical Bulletin No. 64 of the Chilean Institute ofAccountants, the financial statements of foreign subsidiaries whose activitiesdo not constitute an extension of the Chilean company’s operations, or whichoperate in countries that are exposed to significant risks, restrictions orinflation/exchange fluctuations must be remeasured into U.S. dollars andtranslated into Chilean pesos at the year-end exchange rate.  Accordingly, the financial statements of theCompany’s subsidiaries in Argentina and Brazil were considered to be operatingin countries that are exposed to significant risks, restrictions and exchangefluctuations and were prepared in accordance with Chilean GAAP, with theexception of monetary correction, and then were remeasured into U.S. dollars asfollows:

 

·           Monetary assets andliabilities were translated at year-end rates of exchange between the U.S.dollar and the local currency.

 

·           All non-monetary assets andliabilities and shareholders’ equity were translated at historical rates ofexchange between the U.S. dollar and the local currency.

 

·           Income and expense accountswere translated at average rates of exchange between the U.S. dollar and thelocal currency.

 

·           Any exchange differenceswere included in the results of operations for the period.

 

Theresulting foreign currency amounts are then translated to Chilean pesos at theclosing exchange rate at the balance sheet date.  The difference between the investments’equity value arising from the financial statements remeasured as explainedabove and the net equity value at the beginning of the year restated

 

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byChilean inflation, plus the proportional share of the investments’ income (orloss) for the year, is recorded as other reserves in shareholders’ equity inthe consolidated balance sheets.

 

Inthe opinion of management of the Company, the Chilean GAAP procedures describedabove are part of the comprehensive basis of preparation of price-leveladjusted financial statements required by Chilean GAAP.  Inclusion of inflation and translationeffects in the financial statements is considered appropriate under theinflationary conditions that have historically affected the Chilean economyand, accordingly, are not eliminated in the reconciliation to U.S. GAAP.

 

c)         Revaluation ofproperty, plant and equipment

 

Asdescribed in Note 1 k), certain property, plant and equipment has been reportedin the financial statements at amounts determined in accordance with atechnical appraisal.  The revaluation ofproperty, plant and equipment is an accounting principle not generally acceptedunder U.S. GAAP. The effects of the reversal of this revaluation as well as therelated accumulated depreciation and depreciation expense for the year is shownin the Chilean GAAP to U.S. GAAP reconciliation below under paragraph (o).

 

d)        Income taxes

 

UnderChilean GAAP, effective January 1, 2000, the Company began applying TechnicalBulletin No. 60 of the Chilean Institute of Accountants (“TB 60”)concerning deferred income taxes. TB 60 requires the recognition of deferred income taxes for all temporarydifferences, whether recurring or not, using an asset and liabilityapproach.  The effects of deferred incometaxes at January 1, 2000 that were not previously recorded, were recognized, inaccordance with the transitional provision provided by TB 60, againstasset or liability accounts (“complementary accounts”) and were recorded tooffset the effects of the deferred tax assets and liabilities not recordedprior to January 1, 2000. Complementary accounts are amortized to incomeover the estimated average reversal periods corresponding to underlyingtemporary differences to which the deferred tax asset or liabilityrelated.  A valuation allowance isprovided if, based on the weight of available evidence, some portion, or all,of the deferred income tax assets will not be realized.

 

ForU.S. GAAP purposes, the Company applied ASC 740, “Accounting for Income Taxes”,whereby income taxes are also recognized using substantially the same asset andliability approach, with deferred income tax assets and liabilities establishedfor temporary differences between the financial reporting basis and tax basisof the Company’s assets and liabilities at enacted rates expected to be ineffect when such amounts will be realized. A valuation allowance is provided against deferred tax assets that arenot recoverable on a more-likely-than-not basis.

 

Theeffect of provisioning for deferred income taxes for the differences betweenthe amounts shown for assets and liabilities in the consolidated balance sheetsand the tax bases of those assets and liabilities under US GAAP and theremaining effects from the implementation of TB 60 are included in paragraph(o) below and certain disclosures required under ASC 740 are set forth underparagraph 2 a) below.

 

e)         Accounting for investmentsin related companies

 

TheCompany began accounting for its 11.32% interest in Kaik Participacoes Ltda.under the equity method in 1999 as described in Note 11. In prior years, asappropriate financial information was not available, the Company accounted forthis investment under the cost method. Under U.S. GAAP, as the

 

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Companyonly holds 11.32% interest and the investee’s shares do not trade on anyexchange, the cost method has been applied for all years presented. The effectsfor the difference in accounting for this investment pursuant to the costmethod of accounting for U.S. GAAP for all periods presented are included inthe reconciliation of Chilean GAAP to U.S. GAAP included under paragraph (o)below.

 

f)                Goodwill

 

UnderChilean GAAP, until December 31, 2003, the excess of cost over the net bookvalue of a purchased company was recorded as goodwill (the book value purchasemethod), which is then amortized to income over a maximum period of twentyyears.  Amortization of goodwill may beaccelerated if the acquired company generates sufficient income to absorb theadditional amortization in any given year. The excess of net book value over the cost of an investment isconsidered to be negative goodwill under Chilean GAAP and is also amortized toincome over a maximum period of twenty years. The amortization of negative goodwill may be accelerated if the acquiredcompany sustains losses. Effective January 1,2004, Technical Bulletin No. 72 requires the determination of goodwilland negative goodwill based on the fair value of the acquired company.

 

UnderU.S. GAAP, goodwill and other intangibles are accounted for under ASC 805, “BusinessCombinations” and ASC 350, “Goodwill and Other Intangible Assets”.  ASC805 requires that the purchase method ofaccounting be used for all business combinations initiated after June 30, 2001and prohibits the use of the pooling-of-interests method of accounting afterthis date.  With respect to the purchasemethod of accounting, the cost of an investment is assigned to the tangible andidentified intangible assets acquired and liabilities assumed on the basis oftheir fair values at the date of acquisition. Any excess of cost over the fairvalue of net assets acquired is recorded as goodwill.  If an excess of acquired net assets over costarises, the excess is allocated to reduce proportionally the values assigned tononcurrent assets (except long-term investments in marketable securities) indetermining their fair values.  If theallocation reduces the noncurrent assets to zero value, the remainder of theexcess over cost (negative goodwill) is written off immediately as anextraordinary gain.  ASC 805 establishesspecific criteria for the recognition of intangible assets separately fromgoodwill and requires unallocated negative goodwill to be written offimmediately as an extraordinary gain (instead of being deferred and amortized).

 

ASC350, “Goodwill and Other Intangible Assets” establishes the following:

 

·             The accounting for arecognized intangible asset is based on its useful life to the reportingentity. An intangible asset with a finite useful life is amortized over thelife of the asset, but goodwill and other intangible assets with indefiniteuseful lives are not amortized.

·             The remaining useful lives of intangible assetsbeing amortized are evaluated each reporting period to determine whether eventsand circumstances warrant a revision to the remaining period ofamortization.  If the estimate of anintangible asset’s remaining useful life is changed, the remaining carryingvalue of the intangible asset is amortized prospectively over the revisedremaining useful life.

 

·             Goodwill and other intangible assets with indefiniteuseful lives that are not subject to amortization are tested for impairment atleast annually.

·             All goodwill must be assigned to a reporting unit,which is defined as an operating segment or one level below an operatingsegment.

 

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ASC350 became effective for years beginning after December 15, 2001.  Accordingly, goodwill amortization was ceased for U.S. GAAP purposes beginning in2002.  The effects of eliminatinggoodwill amortization recognized for Chilean GAAP purposes are included in thereconciliation of Chilean GAAP to U.S. GAAP under paragraph (o) below.

 

g)                                     Joint ventureaccounting

 

Inaccordance with Chilean GAAP, in June 2001 the Company recognized a gain ofThCh$ 7,448,939 on the sale of property, plant and equipment to CMF upon theformation of this joint venture with Cristalerías.  In addition, the Company wrote-off the basisdifference of ThCh$ 2,202,256 between its investment in and its share of the netequity of the joint venture. Accordingly, the Company recognized a net gain before income taxes ofThCh$ 5,246,683.

 

UnderU.S. GAAP, a gain can be recognized only if appreciated assets (excluding land)are contributed to a venture, cash or near-cash assets are received, and noother factors exist that could impact realization of the gain (such asguarantees of debt, puts or calls that may result in acquisition of theventure, etc.). Additionally, the gain would be limited to the proportion ofthe assets deemed sold and any basis difference would be amortized based on thelives of the assets that gave rise to the difference.  Finally, all contributions of appreciatedassets to the venture would generally be recorded at the carrying value of thejoint venture shareholder.

 

Theshareholders’ agreement for CMF that establishes joint control of the ventureby the Company and Cristalerías also contains provisions that could require theCompany to purchase Cristalerías’ shares of CMF.  Accordingly, the gain recognized for ChileanGAAP purposes is not considered realized under U.S. GAAP.  The effects of reversing the gain andwrite-off of the basis difference in the investment, amortizing the basisdifference in accordance with U.S. GAAP and adjusting the results of CMF forthe Company’s share of the amortization of excess value assigned to the assetsof CMF under Chilean GAAP are included in paragraph (o) below.

 

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h)                                     Investmentsecurities

 

UnderChilean GAAP, long-term investments in bonds and time deposits held by theCompany are carried at cost plus accrued interest.  Under ASC 320, “Accounting for CertainInvestments in Debt and Equity Securities”, investment securities, whichinclude debt and certain equity securities, are accounted for as follows:

 

·             Debt securities that theCompany has the positive intent and ability to hold to maturity are classifiedas held-to-maturity securities and are reported at amortized cost.

 

·             Debt and equity securitiesthat are bought and held principally for the purpose of selling them in thenear term are classified as trading securities and are reported at fair value,with unrealized gains and losses included in earnings.

 

·             Debt and equity securitiesnot classified as either held-to-maturity or trading securities are classifiedas available-for-sale securities and reported at fair value, with unrealizedgains and losses excluded from earnings and reported in a separate component ofshareholders’ equity.

 

Forthe purposes of ASC 320, the Company’s long-term investments in bonds areclassified as available for sale securities. The effect of the differencebetween Chilean GAAP and U.S. GAAP in accounting for the Company’s long-terminvestments in bonds is included in the reconciliation of Chilean GAAP to U.S.GAAP in paragraph (o) below.

 

i)                                         Staff severanceindemnities

 

UnderChilean GAAP, the Company has recorded a liability for long-term severanceindemnities in accordance with the collective bargaining agreements enteredinto with its employees in Chile.  Thisliability is shown at the present value of the projected benefits, consideringthe effects of inflation.  The benefitaccrued as of the end of the year considers the average future service periodfor all employees covered by such agreements.

 

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UnderU.S. GAAP, the liability for staff severance indemnities would be measured byprojecting future expected severance payments using an assumed salaryprogression rate and discounting the resulting amounts to their present value.In practice, the Company believes that the salary progression rate will notdiffer significantly from the general inflation rate.  In the opinion of management of the Company,the application of U.S. GAAP would not have produced results materiallydifferent from the accepted method under Chilean GAAP.

 

j)                                         Accumulatedtranslation adjustment of foreign investments

 

Asdescribed in Notes 21 and 22, the Company recognized a gain upon therealization of a portion of its accumulated translation adjustment of foreigninvestments account in accordance with Technical Bulletin No. 64.  Under Chilean GAAP, a partial liquidation ofan investment in a foreign entity is deemed to have occurred upon therepatriation of capital or of earnings in excess of net income for theyear.  In the case of a partialliquidation, the proportionate share of the accumulated translation adjustmentof foreign investments account related to the foreign investment should bereversed and recorded in the results of the period.

 

During2009, 2008 and 2007, the dividends paid by the Company’s subsidiary Río deJaneiro Refrescos Ltda. and the capital remittances from Embotelladora delAtlántico S.A., generated a loss of ThCh$ 61,305, ThCh$2,398,826 andThCh$3,809,236 respectively due to the reversal of the cumulative translationreserve.

 

UnderU.S. GAAP as set forth in ASC 830, “Foreign Currency Translation”, theaccumulated translation adjustment of foreign investments account is realizedin the results of the period only upon the sale or upon the complete or substantiallycomplete liquidation of an investment in a foreign entity.  The effect of reversing this loss is includedin the reconciliation of Chilean GAAP to U.S. GAAP in paragraph (o) below.

 

k)                                      Derivativefinancial instruments

 

AtDecember 31, 2009, 2008 and 2007, the Company had derivative contractsconsisting of forward contracts to purchase US dollars and cross-currency swapagreements (UF/US$).  The forwardcontracts were obtained to protect the Company from foreign exchange risk,mainly with respect to future purchases of raw materials denominated in USdollars.  The cross-currency swapagreements were obtained to mitigate foreign exchange risk with respect to theUS dollar-denominated bond investments held by the Company.  In 2009, the Company also entered intofutures contracts for the sale of sugar. These contracts expired in October 2010. These contracts were obtained to hedge the changes in the fair value ofpurchase commitments originated by market fluctuations in the price of sugar,however, as described in Note 6 d), this transaction has not been treated as aderivative under Chilean GAAP.  This transaction has been treated togetherwith the agreement entered into with Iansagro, as a transaction to keep sugarprices variable.

 

UnderChilean GAAP, derivatives are accounted for in accordance with TechnicalBulletin N° 57.  Under TB 57, allderivative financial instruments are recognized on the balance sheet at theirfair value. In addition, TB 57 requires that derivative financial instrumentsbe classified as non-hedging (investment) instruments and hedging instruments,the latter further divided into those covering assets, liabilities or firmcommitments and those covering forecasted transactions.

 

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Contractsto hedge assets, liabilities or firm commitments act as hedging instrumentsagainst the risk of a change in the fair value of a hedged item. The differencesresulting from the changes in the fair value of both the hedged item and thederivative instrument should be accounted for as follows:

 

a.          If the net effect is a loss,it should be recognized in the statements of income in the period of change.

 

b.         If the net effect is a gain,it should be recognized when the contract is closed and accordingly deferred onthe balance sheet.

c.          If the net effect is a gainand net losses were recorded on the transaction in prior years, a gain shouldbe recognized in the statements of income in the current period up to theamount of net losses recorded previously.

d.         If the effect is a net lossand net gains were recorded (as a deferred revenue) on the transaction in prioryears, the gain should be utilized to offset the net loss before recording theremaining loss in the statements of income for the year.

 

Contractsto hedge forecasted transactions are those that have the objective ofprotecting cash flow risks of a transaction expected to occur in the future (acash flow hedge). The hedging instrument should be recorded at its fair valueand the changes in fair value should be stated on the balance sheet asunrealized gains or losses. When the contract is closed, the unrealized gainsor losses on the derivative instrument should be recognized in earnings withoutaffecting the cost or sales price of the asset acquired or sold in thetransaction.

 

Non-hedging(investment) instruments are also presented at their fair value, with changesin fair value reflected in the earnings of the period in which the change infair value occurs.

 

UnderChilean GAAP in accordance with TB 57, the Company has designated certainfutures contracts as hedges of firm commitments.  Forward contracts and cross-currency swapagreements have been designated as hedges of forecasted transactions.

 

ForU.S. GAAP reconciliation purposes only, the Company has adopted ASC 815 “Accountingfor Derivative Instruments and Hedging Activities”, as amended by ASC 815 onthe same matter (collectively referred to herein as “ASC 815”).  ASC 815 establishes accounting and reportingstandards for derivative instruments, including certain derivative instrumentsembedded in other contracts, and for hedging activities. It requires that anentity recognized all derivatives as either assets or liabilities in itsconsolidated balance sheet and measure those instruments at fair value. Ifcertain conditions are met, a derivative may be specifically designated as (a)a hedge of the exposure to changes in the fair value of a recognized asset orliability or an unrecognized firm commitment, (b) a hedge of the exposure tovariable cash flows of a forecasted transaction or to the variability of thecash flows that are to be received or paid in connection with a recognize assetor liability or (c) a hedge of the foreign currency exposure of a netinvestment in a foreign operation, an unrecognized firm commitment, anavailable-for-sale security, a foreign-currency-denominated forecastedtransaction or a recognized asset or liability.

 

Theaccounting for changes in the fair value of a derivative depends on theintended use of the derivative and the resulting designation.

 

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TheCompany has not completed the documentation necessary to qualify the contractsdesignated as hedges for Chilean GAAP purpose, as hedges for U.S. GAAP purposes.  Accordingly, the unrealized loss deferredunder Chilean GAAP of ThCh$ 2,066,428 in 2009 (income deferred ofThCh$ 169,227 in 2008) represents a difference from U.S. GAAP that isincluded in paragraph (o) below. Additional information concerning derivative financial instruments thatis required to be disclosed under ASC 815 is set forth below in paragraph 2 e).

 

l)      Mandatory dividend

 

Asrequired by the Chilean Company law, unless otherwise decided by the holders ofa majority of the shares, the Company has to distribute a cash dividend in anamount equal to at least 30% of the Company’s net income under ChileanGAAP.  Since the payment of the dividendout of each year’s net income is a legal requirement in Chile, an accrual wouldhave been made for US GAAP purposes to recognize the dividend obligation underChilean law.  The effect of this accrualwould be to decrease Shareholders’ equity by ThCh$ 9,227,918 andThCh$ 11,019,398 at December 31, 2009 and 2008 respectively.

 

m)    Reversal of impairment loss on fixed assets

 

In previous years the Company recorded an assetimpairment related to some of its plants. The impairment considered a projection of losses associated with the useof certain production lines and on-going cash flows deficits.  In 2008 and 2007, the Company’s estimates offuture cash flows associated with these plants’ existing service potentialresulted in the reversal of impairment losses previously recognized amountingto ThCh$ 5,100,990 and ThCh$ 4,890,512 respectively, with the effect beingincluded in Other non-operating income in the consolidated statement ofincome.  In2009, reinstated previously-impaired assets started being depreciated underChilean GAAP. Such depreciation amounted to ThCh$ 2,169,038.****UnderUSGAAP, the restoration of a previously recognized impairment loss for adepreciable long-lived asset is prohibited. The depreciation originatedunder Chilean GAAP resulting from the reversal of impairment provisions hashave been recorded as a U.S. GAAP adjustment during 2009.

 

n)   Presentation of non-controlling interest

 

UnderChilean GAAP non-controlling interest is reported in the consolidated balancesheet in the mezzanine section between liabilities and equity. Also, net incomeattributable to non-controlling interest is reported as an expense in arrivingat consolidated net income.

 

ASC 810 “Consolidation” clarifies that anon-controlling interest in an operating subsidiary is an ownership interest inthe entity that should be reported as equity in the consolidated financial statements.It also requires consolidated net income to include the amounts attributable toboth the parent and non-controlling interest, with disclosures on the face of the consolidated statements ofoperations of the amounts attributed to the parent and to the non-controllinginterest. This statements was effective prospectively for fiscal yearsbeginning after December 15, 2008 (calendar year 2009), with presentation anddisclosure requirements applied retrospectively to comparative financialstatements. Effective January1, 2009, the Company adopted the provision of thisstatement and applied its presentation requirements retrospectively.

 

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o)   Effects of conforming to U.S.GAAP

 

Theadjustments to reported net income for the periods indicated required toconform with U.S. GAAP are as follows:

 
| ** **                                                                                         | ** ** | **For the year ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                         | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                         | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Net income as shown in the Chilean GAAP financial  statements                                      |       | 86,918,333                               |       | 92,654,730 |   | 86,820,634 |   |
| Reversal of additional depreciation on revaluation  of property, plant and equipment (paragraph c) |       | 9,706                                    |       | 1,319 |   | 2,002 |   |
| Adjustment to deferred income tax provision  (paragraph d)                                         |       | 389,166                                  |       | 1,742,577 |   | 2,210,790 |   |
| Difference in accounting for investments in  related companies (paragraph e)                       |       | (221,613                                 | )          | 205,454 |   | 601,193 |   |
| Amortization of goodwill (paragraph f)                                                             |       | 6,094,120                                |       | 7,437,058 |   | 6,918,538 |   |
| Joint venture accounting (paragraph g)                                                             |       | 489,886                                  |       | 489,886 |   | 489,886 |   |
| Accumulated translation adjustment of foreign  investments (paragraph j)                           |       | 61,305                                   |       | 2,398,826 |   | 3,805,427 |   |
| Derivative financial instruments (paragraph k)                                                     |       | (2,235,655                               | )          | 343,931 |   | (4,913,249 | ) |
| Reversal of impairment loss on fixed assets  (paragraph m)                                         |       | 2,169,038                                |       | (5,100,990 | ) | (4,890,512 | ) |
| Reclasification of non-controlling interest under  Chilean GAAP (paragraph n)                      |       | 1,949                                    |       | (15,165 | ) | 45,538 |   |
| Net income in accordance with U.S. GAAP                                                            |       | 93,676,235                               |       | 100,157,626 |   | 91,090,247 |   |

 
| ** **                                                                                                                                                               | ** ** | **For the year ended December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                                                                                               | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                                                                                               | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Components of other comprehensive (loss) income:                                                                                                                         |       |                                     |       |   |   |   |   |
| Cumulative translation adjustment for foreign  investments                                                                                                               |       | (26,419,039                              | )          | 18,623,344 |   | (17,980,726 | ) |
| Unrealized (loss) gain on investment securities,  net of applicable income tax expense (benefit) of ThCh$ (1,858) in 2008,  ThCh$ 56,049 in 2007 (paragraph h) |       | —                                   |       | (9,071 | ) | 933,335 |   |
| Subtotal other comprehensive income (loss)                                                                                                                               |       | (26,419,039                              | )          | 18,614,273 |   | (17,047,391 | ) |
| Comprehensive income (loss) in accordance with  U.S. GAAP (paragraph 2 b)                                                                                                |       | 67,257,196                               |       | 118,771,899 |   | 74,042,856 |   |

 

Accumulated other comprehensive income amounted to ThCh$ 6,717,215,ThCh$ 33,136,254 and ThCh$ 14,521,981 as of December 31, 2009, 2008and 2007, respectively.

 

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Thechanges in other comprehensive income (loss) determined under U.S. GAAP were asfollows:

 
| ** **                                                 | ** ** | **For the year ended December 31,** | ** ** |
|------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                 | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                 | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Other comprehensive income (loss), before income  tax:     |       |                                     |       |   |   |   |   |
| Cumulative translation adjustment for foreign  investments |       | (26,419,039                              | )          | 18,623,343 |   | (17,980,727 | ) |
| Unrealized holding gains (losses) arising during  period   |       | —                                   |       | (10,928 | ) | 989,385 |   |
| Other comprehensive income (loss), before income  tax      |       | (26,419,039                              | )          | 18,612,415 |   | (16,991,342 | ) |
| Income tax related to items of other comprehensive  income |       | —                                   |       | 1,858 |   | (56,049 | ) |
| Other comprehensive income (loss), net of income  tax      |       | (26,419,039                              | )          | 18,614,273 |   | (17,047,391 | ) |

 

TheCompany’s earnings per share under U.S. GAAP are as follows:

 
| ** **                                                                 | ** ** | **For the year ended December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                 | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| ** **                                                                 | ** ** | **Series A**                        | ** ** | **Series B** | ** ** | **Series A** | ** ** | **Series B** | ** ** | **Series A** | ** ** | **Series B** | ** ** |
| Basic and diluted net income per share                                     |       | 117.35                                   |       | 129.08 |   | 125.47 |   | 138.01 |   | 114.11 |   | 125.52 |   |
| Weighted average number of common stock  outstanding (thousands of shares) |       | 380,137                                  |       | 380,137 |   | 380,137 |   | 380,137 |   | 380,137 |   | 380,137 |   |

 

SinceSeries B shares are entitled to a 10% higher dividend than Series Ashares, Series B shareholders are entitled to 52.38% of earnings, and Series Ashareholders are entitled to 47.62% of earnings.  In accordance to this calculation, earningsper share are composed as follows for the periods indicated:

 
| ** **                                                                                   | ** ** | **For the year ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                   | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Net income in accordance with U.S. GAAP                                                      |       | 93,676,235                               |       | 100,157,626 |   | 91,090,247 |   |
| (less): Income available to Series B                                                    |       | (49,067,611                              | )          | (52,462,564 | ) | (47,713,071 | ) |
| Basic EPS                                                                                    |       |                                     |       |   |   |   |   |
|                                                                                         |       |                                     |       |   |   |   |   |
| Income available to Series A                                                            |       | 44,608,624                               |       | 47,695,062 |   | 43,377,176 |   |
| Weighted average number of common shares  outstanding (thousands of shares) Series A    |       | 380,137                                  |       | 380,137 |   | 380,137 |   |
| Basic and diluted net income per share  Series A                                        |       | 117.35                                   |       | 125.47 |   | 114.11 |   |
| Basic EPS                                                                                    |       |                                     |       |   |   |   |   |
| Income available to Series B                                                            |       | 49,067,611                               |       | 52,462,564 |   | 47,713,071 |   |
| Weighted average number of preferred shares  outstanding (thousands of shares) Series B |       | 380,137                                  |       | 380,137 |   | 380,137 |   |
| Basic and diluted net income per share  Series B                                        |       | 129.08                                   |       | 138.01 |   | 125.52 |   |

 

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Theadjustments required to conform shareholders’ equity to U.S. GAAP are asfollows:

 
| ** **                                                                                   | ** ** | **At December 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                                   | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                                                                                   | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** |
| Shareholders’ equity as shown in the Chilean GAAP  financial statements                 |       | 336,578,506              |       | 338,284,885 |   |
| Reversal of revaluation of property, plant and  equipment, net of depreciation (paragraph c) |       | (1,624,414               | )          | (1,634,120 | ) |
| Adjustment to deferred income tax provision  (paragraph d)                                   |       | 1,760,217                |       | 1,371,051 |   |
| Difference in accounting for investments in  related companies (paragraph e)                 |       | 1,854,679                |       | 2,076,292 |   |
| Amortization of goodwill (paragraph f)                                                       |       | 46,448,433               |       | 40,354,313 |   |
| Joint venture accounting (paragraph g)                                                       |       | (979,771                 | )          | (1,469,657 | ) |
| Derivative financial instruments (paragraph k)                                               |       | (2,066,428               | )          | 169,227 |   |
| Minimum dividend (paragraph l)                                                               |       | (9,277,918               | )          | (11,019,398 | ) |
| Reversal of impairment loss on fixed assets  (paragraph m)                                   |       | (7,822,465               | )          | (9,991,503 | ) |
| Reclassification of non-controlling interest under  Chilean GAAP (paragraph n)               |       | 10,432                   |       | 1,353,991 |   |
| Shareholders’ equity in accordance with U.S. GAAP                                       |       | 364,881,271              |       | 359,495,081 |   |

 

Thechanges in shareholders’ equity determined under U.S. GAAP were as follows:

 
| ** **                                                            | ** ** | **Equity  Attributable to  Parent  Company** | ** ** | **Non-  Controlling  interest** | ** ** | **Total**   | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------|------------|-------------|------------|
| ** **                                                            | ** ** | **ThCh$**                                    | ** ** | **ThCh$**                       | ** ** | **ThCh$**   | ** ** |
| BALANCE AT DECEMBER 31, 2006                                          |       | 328,213,395                                  |       | 1,337,951                       |       | 329,551,346 |       |
|                                                                  |       |                                         |       |                            |       |        |       |
| Distribution of dividends                                             |       | (87,449,673                                  | )          | —                          |       | (87,449,673 | )          |
| Decrease in cumulative translation adjustment of  foreign investments |       | (17,980,727                                  | )          | —                          |       | (17,980,727 | )          |
| Decrease non-controlling interest                                     |       | —                                       |       | (14,028                         | )          | (14,028     | )          |
| Increase in net unrealized losses on investment  securities           |       | 933,336                                      |       | —                          |       | 933,336     |       |
| Minimum dividend                                                      |       | 2,381,636                                    |       | —                          |       | 2,381,636   |       |
| Net income for the year                                               |       | 91,044,709                                   |       | 45,538                          |       | 91,090,247  |       |
|                                                                  |       |                                         |       |                            |       |        |       |
| BALANCE AT DECEMBER 31, 2007                                          |       | 317,142,676                                  |       | 1,369,461                       |       | 318,512,137 |       |
|                                                                  |       |                                         |       |                            |       |        |       |
| Distribution of dividends                                             |       | (74,521,483                                  | )          |                            |       | (74,521,483 | )          |
| Increase in cumulative translation adjustment of  foreign investments |       | 18,623,343                                   |       | —                          |       | 18,623,343  |       |
| Decrease non-controlling interest                                     |       | —                                       |       | (305                            | )          | (305        | )          |
| Increase in net unrealized gains on investment  securities            |       | (9,070                                       | )          | —                          |       | (9,070      | )          |
| Minimum dividend                                                      |       | (3,267,167                                   | )          | —                          |       | (3,267,167  | )          |
| Net income for the year                                               |       | 100,172,791                                  |       | (15,165                         | )          | 100,157,626 |       |
|                                                                  |       |                                         |       |                            |       |        |       |
| BALANCE AT DECEMBER 31, 2008                                          |       | 358,141,090                                  |       | 1,353,991                       |       | 359,495,081 |       |
|                                                                  |       |                                         |       |                            |       |        |       |
| Distribution of dividends                                             |       | (62,266,978                                  | )          | —                          |       | (62,266,978 | )          |
| Increase in cumulative translation adjustment of  foreign investments |       | (26,419,039                                  | )          | —                          |       | (26,419,039 | )          |
| Decrease non-controlling interest                                     |       | —                                       |       | (1,345,508                      | )          | (1,345,508  | )          |
| Minimum dividend                                                      |       | 1,741,480                                    |       | —                          |       | 1,741,480   |       |
| Net income for the year                                               |       | 93,674,286                                   |       | 1,949                           |       | 93,676,235  |       |
|                                                                  |       |                                         |       |                            |       |        |       |
| BALANCE AT DECEMBER 31, 2009                                          |       | 364,870,839                                  |       | 10,432                          |       | 364,881,271 |       |

 

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2      Additional disclosurerequirements:

 

a)     Income taxes

 

Theaccounting for income taxes under Chilean GAAP and U.S. GAAP differs fordeferred income taxes.  Under U.S. GAAP,as set forth in ASC 740, “Accounting for Income Taxes”, all temporarydifferences arising from transactions that have different accounting and taxtreatments are recognized as deferred tax assets and liabilities as of thebalance sheet date.  A valuationallowance is provided against deferred tax assets that are not recoverable on amore-likely-than-not basis. Under Chilean GAAP, effective January 1, 2000,the Company began applying Technical Bulletin No. 60 of the ChileanInstitute of Accountants concerning deferred income taxes.  Prior to the implementation of TechnicalBulletin No. 60, only deferred tax assets and liabilities that wereexpected to materialize in the future were recognized in these consolidatedfinancial statements.

 

Theprovisions for income taxes included in the consolidated statements of incomewere as follows:

 
| ** **                                                        | ** ** | **For the year ended December 31,** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                        | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                        | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Current tax expense as per tax returns                            |       | (24,612,908                              | )          | (23,888,250 | ) | (24,457,745 | ) |
| Deferred tax expense as previously calculated  under Chilean GAAP |       | (7,752,996                               | )          | (779,119 | ) | (4,131,088 | ) |
| Charge for the year under Chilean GAAP                            |       | (32,365,904                              | )          | (24,667,369 | ) | (28,588,833 | ) |
|                                                              |       |                                     |       |   |   |   |   |
| U.S. GAAP  adjustments:                                           |       |                                     |       |   |   |   |   |
| Deferred tax effect of applying SFAS 109 to  Chilean GAAP results |       | 389,166                                  |       | 1,742,577 |   | 2,210,790 |   |
| Charge from continuing operations for the year  under U.S. GAAP   |       | (31,976,738                              | )          | (22,924,792 | ) | (26,378,043 | ) |

 

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Theabove table can be broken down into geographic sources as follows:

 
| **2009**                                                          | ** ** | **Chilean  and others** | ** ** | **Brazil**  | ** ** | **Argentina** | ** ** | **The Company  (consolidated)** | ** ** |
|-------------------------------------------------------------------|------------|-------------------------|------------|-------------|------------|---------------|------------|---------------------------------|------------|
| ** **                                                        | ** ** | **ThCh$**               | ** ** | **ThCh$**   | ** ** | **ThCh$**     | ** ** | **ThCh$**                       | ** ** |
| Current tax expense as per tax return                             |       | (5,748,039              | )          | (11,481,346 | )          | (7,383,523    | )          | (24,612,908                     | )          |
| Deferred tax expense as previously calculated  under Chilean GAAP |       | 108,993                 |       | (7,590,309  | )          | (271,680      | )          | (7,752,996                      | )          |
| Charge for the year under Chilean GAAP                            |       | (5,639,046              | )          | (19,071,655 | )          | (7,655,203    | )          | (32,365,904                     | )          |
| U.S. GAAP adjustments:                                            |       |                    |       |        |       |          |       |                            |       |
| Deferred tax effect of applying SFAS 109                          |       | (40,760                 | )          | (64,776     | )          | 494,702       |       | 389,166                         |       |
| Charge from continuing operations for the year  under U.S. GAAP   |       | (5,679,806              | )          | (19,136,431 | )          | (7,160,501    | )          | (31,976,738                     | )          |

 
| **2008**                                                                    | ** ** | **Chilean  and others** | ** ** | **Brazil** | ** ** | **Argentina** | ** ** | **The Company  (consolidated)** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------|------------|------------|------------|---------------|------------|---------------------------------|------------|
| ** **                                                                  | ** ** | **ThCh$**               | ** ** | **ThCh$**  | ** ** | **ThCh$**     | ** ** | **ThCh$**                       | ** ** |
| Current tax expense as  per tax return                                      |       | (7,220,404              | )          | (9,217,484 | )          | (7,450,362    | )          | (23,888,250                     | )          |
| Deferred tax (expense) benefit as previously  calculated under Chilean GAAP |       | (1,336,085              | )          | 446,119    |       | 110,847       |       | (779,119                        | )          |
| Charge for the year under Chilean GAAP                                      |       | (8,556,489              | )          | (8,771,365 | )          | (7,339,515    | )          | (24,667,369                     | )          |
| U.S. GAAP adjustments:                                                      |       |                    |       |       |       |          |       |                            |       |
| Deferred tax effect of applying SFAS 109                                    |       | 503,895                 |       | (46,453    | )          | 1,285,135     |       | 1,742,577                       |       |
| (Charge) benefit from continuing operations for  the year under U.S. GAAP   |       | (8,052,594              | )          | (8,817,818 | )          | (6,054,380    | )          | (22,924,792                     | )          |

 
| **2007**                                                                    | ** ** | **Chilean  and others** | ** ** | **Brazil**  | ** ** | **Argentina** | ** ** | **The Company  (consolidated)** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------|------------|-------------|------------|---------------|------------|---------------------------------|------------|
| ** **                                                                  | ** ** | **ThCh$**               | ** ** | **ThCh$**   | ** ** | **ThCh$**     | ** ** | **ThCh$**                       | ** ** |
| Current tax expense as per tax return                                       |       | (13,235,290             | )          | (6,998,136  | )          | (4,224,319    | )          | (24,457,745                     | )          |
| Deferred tax (expense) benefit as previously  calculated under Chilean GAAP |       | 6,235,932               |       | (8,496,288  | )          | (1,870,732    | )          | (4,131,088                      | )          |
| (Charge) benefit for the year under Chilean GAAP                            |       | (6,999,358              | )          | (15,494,424 | )          | (6,095,051    | )          | (28,588,833                     | )          |
| U.S. GAAP adjustments:                                                      |       |                    |       |        |       |          |       |                            |       |
| Deferred tax effect of applying SFAS 109                                    |       | 855,973                 |       | 325,240     |       | 1,029,577     |       | 2,210,790                       |       |
| (Charge) benefit from continuing operations for  the year under U.S. GAAP   |       | (6,143,385              | )          | (15,169,184 | )          | (5,065,474    | )          | (26,378,043                     | )          |

 

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Deferredtax assets (liabilities) as of balance sheet dates are summarized as follows:

 
| ** **                                                | ** ** | **For the year ended December 31,** | ** ** |
|-----------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                | ** ** | **2009**                                 | ** ** | **2008** | ** ** |
| ** **                                                | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** |
| Deferred tax assets:                                      |       |                                     |       |   |   |
|                                                      |       |                                     |       |   |   |
| Tax loss carryforwards                                    |       | —                                   |       | 745,769 |   |
| Social contribution                                       |       | —                                   |       | 857,347 |   |
| Provision for labor and trade lawsuits                    |       | 1,640,625                                |       | 1,775,706 |   |
| Provision for assets written-off                          |       | 3,149,912                                |       | 3,451,423 |   |
| Allowance for doubtful accounts                           |       | 202,314                                  |       | 381,049 |   |
| Vacation accrual                                          |       | 224,837                                  |       | 222,918 |   |
| Provisions for employee benefits                          |       | 1,118,706                                |       | 598,488 |   |
| Joint venture accounting                                  |       | 253,264                                  |       | 379,896 |   |
| Fair value of derivatives not considered to be  hedge     |       | 351,293                                  |       | — |   |
| Other                                                     |       | 1,855,902                                |       | 1,200,084 |   |
| Total deferred tax assets                                 |       | 8,796,853                                |       | 9,612,680 |   |
|                                                      |       |                                     |       |   |   |
| Deferred tax liabilities:                                 |       |                                     |       |   |   |
| Depreciation                                              |       | 6,783,509                                |       | 6,534,052 |   |
| Staff severance indemnities                               |       | 35,038                                   |       | 153,829 |   |
| Fair value of derivatives not considered to be  hedge     |       | —                                   |       | 28,769 |   |
| Exchange rate difference                                  |       | 13,309,062                               |       | 8,116,717 |   |
| Fiscal incentives Brazil                                  |       | 2,683,002                                |       | 923,238 |   |
| Other                                                     |       | 139,334                                  |       | 169,303 |   |
| Total deferred tax liabilities                            |       | 22,949,945                               |       | 15,925,908 |   |
|                                                      |       |                                     |       |   |   |
| Net deferred tax (liabilities) assets under U.S.  GAAP    |       | (14,153,092                              | )          | (6,313,228 | ) |
|                                                      |       |                                     |       |   |   |
| Net deferred tax liabilities under Chilean GAAP           |       | (15,913,309                              | )          | (7,684,279 | ) |
|                                                      |       |                                     |       |   |   |
| Effect of U.S. GAAP adjustments on deferred income  taxes |       | 1,760,217                                |       | 1,371,051 |   |

 

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Theprovision for income taxes differs from the amount of income tax determined byapplying the applicable Chilean statutory income tax rate to pretax income calculatedaccording to U.S. GAAP as a result of the following:

 
| ** **                                                      | ** ** | **For the year ended December 31,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                      | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                      | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Income tax provision at statutory Chilean tax  rates            |       | 21,360,674                               |       | 20,926,590 |   | 19,961,868 |   |
| Increase (decrease) in provision resulting from:                |       |                                     |       |   |   |   |   |
| Tax effects resulting from foreign operations                   |       | 12,756,992                               |       | 10,576,920 |   | 9,825,345 |   |
| Permanent differences                                           |       | 613,162                                  |       | (7,958,191 | ) | (376,795 | ) |
| Effect of remeasurement to U.S. dollars (Brazil  and Argentina) |       | (1,698,858                               | )          | 1,345,868 |   | (1,011,561 | ) |
| Adjustments in prior year income taxes                          |       | 32,148                                   |       | (464,364 | ) | (397,819 | ) |
| Other                                                           |       | (1,087,380                               | )          | (1,502,031 | ) | (1,622,995 | ) |
| Effective tax provision                                         |       | 31,976,738                               |       | 22,924,792 |   | 26,378,043 |   |

 

TheChilean statutory first category (corporate) income tax rate was 17.0% for2009, 2008 and 2007.  In accordance withChilean law, the Company and each of its subsidiaries computes and pays incometaxes on a separate basis.

 

The Brazilian federal statutory income tax rate was approximately 25%for 2009, 2008 and 2007.   Additionally,an additional surtax of 9% for 2009, 2008 and 2007 is charged in Brazil on netincome with respect to a social contribution similar in nature to income tax.

 

TheArgentine income tax rate was 35% for 2009, 2008 and 2007 in accordance withcurrently enacted tax legislation.

 

Taxloss carryforwards related to the Brazilian subsidiaries were fully utilizedduring 2009.

 

Taxloss carryforwards related to the Argentinean subsidiaries were fully utilizedduring 2007.

 

Taxyears that remain subject to income tax audits by taxing authorities by countryare as follows:

 
| Chile     | From  2007 |
|-----------|------------|
| Argentina | From  2005 |
| Brazil    | From  2004 |

 

Interestand penalties related to income tax liabilities are included in income taxexpense.

 

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b)            Comprehensive income(loss)

 

Comprehensiveincome (loss) is the change in equity of a business enterprise during a periodfrom transactions and other events and circumstances from non-ownersources.  For U.S. GAAP purposes,companies are required to report comprehensive income and its components in afull set of general purpose financial statements. U.S. GAAP requires that allitems that are required to be recognized under accounting standards ascomponents of comprehensive income be reported in a financial statement that isdisplayed with the same prominence as other financial statements.  The information required by this standard isshown in paragraph 1 n), above.

 

c)     Statementsof cash flows

 

i)                 For the purpose of thestatements of cash flows using U.S. GAAP classifications, the Company considersall highly liquid investments purchased with an original maturity of threemonths or less to be cash equivalents.  Inaccordance with the Company’s policy, certain cash equivalents that are managedas part of the Company’s investment portfolio are excluded from the amountshown as cash and cash equivalents in the statements of cash flows.  The detail of cash and cash equivalents is asfollows:

 
| ** **                      | ** ** | **For the year ended December 31,** | ** ** |
|---------------------------------|------------|------------------------------------------|------------|
| ** **                      | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                      | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Cash                            |       | 20,217,244                               |       | 20,761,350 |   | 26,337,244 |   |
| Time deposits                   |       | 73,686,673                               |       | 79,841,887 |   | 52,227,730 |   |
| Money market funds              |       | 18,541,092                               |       | 25,676,642 |   | 50,568,819 |   |
| Total cash and cash equivalents |       | 112,445,009                              |       | 126,279,879 |   | 129,133,793 |   |

 

ii)              Additional cash flowdisclosures required under U.S. GAAP that are shown net in Chilean GAAP are asfollows:

 
| ** **                                                   | ** ** | **For the year ended December 31,** | ** ** |
|--------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                   | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                   | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Short-term borrowings with banks and financial  institutions |       | 18,076,402                               |       | 81,947,387 |   | 55,926,349 |   |
| Long-term borrowings with banks and financial  institutions  |       | —                                   |       | — |   | 35,294 |   |
| Repayment of short-term bank borrowings                      |       | (21,963,279                              | )          | (80,687,308 | ) | (54,056,204 | ) |
| Repayment of long-term bank borrowings                       |       | (180,544                                 | )          | (163,577 | ) | (554,771 | ) |
| Net bank borrowings                                          |       | (4,067,421                               | )          | 1,096,502 |   | 1,350,668 |   |

 

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d)   Segment information

 

TheCompany operates principally in three segments which comprise the productionand sales of goods for (i) Coca-Cola soft drinks, (ii)  Otherbeverages (juices, mineral water and beer), and (iii) Packaging.  Total revenues by segment include sales tounaffiliated customers, as reported in the Company’s consolidated incomestatements, and inter-segment sales, which are accounted for at invoice price.

 

TheCompany measures its reportable segments and evaluates their performance basedon operating income under Chilean GAAP.

 

TheCoca-Cola soft drink segment comprises the production and sales of Coca-Cola,Sprite, Fanta and other Coca-Cola soft drinks. The Other beverages segment includes the sales of mineral water, fruitjuices and, in Brazil, beer.  ThePackaging segment consists of the production of PET containers.

 

Theaccounting policies for the segments are the same as those described in “Note 1- Nature of operations and summary of significant accounting policies”.

 

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Asummary of the Company’s operations by segment calculated under Chilean GAAP isas follows:

 
| ** **                       | ** ** | **For the year ended December 31,** | ** ** |
|----------------------------------|------------|------------------------------------------|------------|
| ** **                       | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                       | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Revenue:                         |       |                                     |       |   |   |   |   |
| Sales to unaffiliated customers: |       |                                     |       |   |   |   |   |
| Soft drinks                      |       | 646,899,126                              |       | 725,115,386 |   | 595,069,412 |   |
| Other beverages                  |       | 89,031,012                               |       | 93,206,849 |   | 75,556,481 |   |
| Packaging                        |       | 7,185,850                                |       | 9,491,098 |   | 6,781,311 |   |
| Subtotal                         |       | 743,115,988                              |       | 827,813,333 |   | 677,407,204 |   |
|                             |       |                                     |       |   |   |   |   |
| Intersegment sales:              |       |                                     |       |   |   |   |   |
| Soft drinks                      |       | —                                   |       | — |   | — |   |
| Other beverages                  |       | 16,922,039                               |       | 21,567,084 |   | 21,323,686 |   |
| Packaging                        |       | 10,388,236                               |       | 16,116,191 |   | 12,117,117 |   |
| Eliminations                     |       | (27,310,275                              | )          | (37,683,275 | ) | (33,440,803 | ) |
| Subtotal                         |       | —                                   |       | — |   | — |   |
| Total revenue                    |       | 743,115,988                              |       | 827,813,333 |   | 677,407,204 |   |
|                             |       |                                     |       |   |   |   |   |
| Operating income:                |       |                                     |       |   |   |   |   |
|                             |       |                                     |       |   |   |   |   |
| Soft drinks                      |       | 117,841,117                              |       | 124,684,454 |   | 113,843,610 |   |
| Other beverages                  |       | 9,119,978                                |       | 8,382,189 |   | 7,207,818 |   |
| Packaging                        |       | 3,100,186                                |       | 2,420,396 |   | 1,829,124 |   |
| Total operating income           |       | 130,061,281                              |       | 135,487,039 |   | 122,880,552 |   |
|                             |       |                                     |       |   |   |   |   |
| Financial income:                |       |                                     |       |   |   |   |   |
| Soft drinks                      |       | 5,418,767                                |       | 11,566,383 |   | 24,334,218 |   |
| Other beverages                  |       | —                                   |       | 44,519 |   | 67,714 |   |
| Packaging                        |       | —                                   |       | — |   | — |   |
| Total financial income           |       | 5,418,767                                |       | 11,610,902 |   | 24,401,932 |   |
|                             |       |                                     |       |   |   |   |   |
| Financial expenses:              |       |                                     |       |   |   |   |   |
|                             |       |                                     |       |   |   |   |   |
| Soft drinks                      |       | 7,895,715                                |       | 26,935,759 |   | 13,031,083 |   |
| Other beverages                  |       | 581                                      |       | 4,062 |   | 97,553 |   |
| Packaging                        |       | 1,063                                    |       | 2,428 |   | 108,800 |   |
| Total financial expenses         |       | 7,897,359                                |       | 26,942,249 |   | 13,237,436 |   |

 

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| ** **                                                     | ** ** | **For the year ended December 31,** | ** ** |
|----------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                     | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                     | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Share of income from unconsolidated affiliates:                |       |                                     |       |   |   |   |   |
| Soft drinks                                                    |       | 297,017                                  |       | 213,002 |   | (294,688 | ) |
| Other beverages                                                |       | 1,269,798                                |       | 466,631 |   | 218,163 |   |
| Packaging                                                      |       | 286,453                                  |       | 1,156,368 |   | 870,915 |   |
| Total share of income from unconsolidated  affiliates Subtotal |       | 1,853,268                                |       | 1,836,001 |   | 794,390 |   |
|                                                           |       |                                     |       |   |   |   |   |
| Income tax expenses:                                           |       |                                     |       |   |   |   |   |
|                                                           |       |                                     |       |   |   |   |   |
| Soft drinks                                                    |       | 30,924,390                               |       | 23,245,958 |   | 27,475,077 |   |
| Other beverages                                                |       | 245,969                                  |       | 478,558 |   | 401,999 |   |
| Packaging                                                      |       | 1,195,545                                |       | 942,853 |   | 711,757 |   |
| Total income tax expenses                                      |       | 32,365,904                               |       | 24,667,369 |   | 28,588,833 |   |
|                                                           |       |                                     |       |   |   |   |   |
| Depreciation:                                                  |       |                                     |       |   |   |   |   |
| Soft drinks                                                    |       | 29,463,171                               |       | 35,176,779 |   | 28,817,815 |   |
| Other beverages                                                |       | 936,454                                  |       | 1,324,281 |   | 1,292,813 |   |
| Packaging                                                      |       | 452,418                                  |       | 681,008 |   | 901,441 |   |
| Total depreciation                                             |       | 30,852,043                               |       | 37,182,068 |   | 31,012,069 |   |
|                                                           |       |                                     |       |   |   |   |   |
| Segment assets:                                                |       |                                     |       |   |   |   |   |
|                                                           |       |                                     |       |   |   |   |   |
| Soft drinks                                                    |       | 309,451,867                              |       | 317,147,464 |   | 299,639,839 |   |
| Other beverages                                                |       | 9,082,037                                |       | 10,537,855 |   | 11,347,412 |   |
| Packaging                                                      |       | 6,102,691                                |       | 6,708,946 |   | 4,429,478 |   |
| Total segment assets                                           |       | 324,636,595                              |       | 334,394,265 |   | 315,416,729 |   |
|                                                           |       |                                     |       |   |   |   |   |
| Capital expenditures:                                          |       |                                     |       |   |   |   |   |
|                                                           |       |                                     |       |   |   |   |   |
| Soft drinks                                                    |       | 47,737,737                               |       | 63,050,371 |   | 57,326,751 |   |
| Other beverages                                                |       | 1,566,325                                |       | 1,850,352 |   | 1,669,527 |   |
| Packaging                                                      |       | 458,501                                  |       | 630,964 |   | 611,103 |   |
| Total capital expenditures                                     |       | 49,762,563                               |       | 65,531,687 |   | 59,607,381 |   |

 

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Ageographical summary of the Company’s operations by segment calculated underChilean GAAP is as follows:

 
| ** **                                            | ** ** | **For the year ended December 31,** | ** ** |
|-------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                            | ** ** | **2009**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                            | ** ** | **ThCh$**                                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Revenue:                                              |       |                                     |       |   |   |   |   |
| Sales to unaffiliated customers:                      |       |                                     |       |   |   |   |   |
| Chile                                                 |       | 272,343,865                              |       | 269,152,816 |   | 260,302,408 |   |
| Brazil                                                |       | 311,901,365                              |       | 362,204,596 |   | 287,266,265 |   |
| Argentina                                             |       | 158,870,758                              |       | 196,455,921 |   | 129,838,531 |   |
| Total revenue                                         |       | 743,115,988                              |       | 827,813,333 |   | 677,407,204 |   |
|                                                  |       |                                     |       |   |   |   |   |
| Operating income:                                     |       |                                     |       |   |   |   |   |
| Chile                                                 |       | 55,570,213                               |       | 56,605,290 |   | 60,758,985 |   |
| Brazil                                                |       | 56,988,058                               |       | 60,029,690 |   | 51,085,597 |   |
| Argentina                                             |       | 21,437,276                               |       | 21,643,592 |   | 13,856,785 |   |
| Corporate expenses                                    |       | (3,934,266                               | )          | (2,791,533 | ) | (2,820,815 | ) |
| Total operating income                                |       | 130,061,281                              |       | 135,487,039 |   | 122,880,552 |   |
|                                                  |       |                                     |       |   |   |   |   |
| Financial income:                                     |       |                                     |       |   |   |   |   |
| Chile                                                 |       | 4,018,639                                |       | 9,391,624 |   | 21,727,996 |   |
| Brazil                                                |       | 1,264,726                                |       | 2,164,255 |   | 2,308,893 |   |
| Argentina                                             |       | 135,402                                  |       | 55,023 |   | 365,043 |   |
| Total financial income                                |       | 5,418,767                                |       | 11,610,902 |   | 24,401,932 |   |
|                                                  |       |                                     |       |   |   |   |   |
| Financial expenses:                                   |       |                                     |       |   |   |   |   |
|                                                  |       |                                     |       |   |   |   |   |
| Chile                                                 |       | 5,790,169                                |       | 22,987,769 |   | 10,104,837 |   |
| Brazil                                                |       | 1,420,132                                |       | 2,515,048 |   | 2,651,754 |   |
| Argentina                                             |       | 687,058                                  |       | 1,439,432 |   | 480,845 |   |
| Total financial expenses                              |       | 7,897,359                                |       | 26,942,249 |   | 13,237,436 |   |
|                                                  |       |                                     |       |   |   |   |   |
| Share of income from unconsolidated affiliates:       |       |                                     |       |   |   |   |   |
|                                                  |       |                                     |       |   |   |   |   |
| Chile                                                 |       | 748,826                                  |       | 1,369,371 |   | 871,800 |   |
| Brazil                                                |       | 1,104,442                                |       | 466,630 |   | 218,163 |   |
| Argentina                                             |       | —                                   |       | — |   | (295,573 | ) |
| Total share of income from unconsolidated  affiliates |       | 1,853,268                                |       | 1,836,001 |   | 794,390 |   |
|                                                  |       |                                     |       |   |   |   |   |
| Income tax expenses (benefit):                        |       |                                     |       |   |   |   |   |
|                                                  |       |                                     |       |   |   |   |   |
| Chile                                                 |       | 5,639,046                                |       | 8,556,489 |   | 6,999,359 |   |
| Brazil                                                |       | 19,071,655                               |       | 8,771,365 |   | 15,494,423 |   |
| Argentina                                             |       | 7,655,203                                |       | 7,339,515 |   | 6,095,051 |   |
| Total income tax expenses                             |       | 32,365,904                               |       | 24,667,369 |   | 28,588,833 |   |

 

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| ** **                            | ** ** | **At December 31,** | ** ** |
|---------------------------------------|------------|--------------------------|------------|
| ** **                            | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                            | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Depreciation:                         |       |                     |       |   |   |   |   |
|                                  |       |                     |       |   |   |   |   |
| Chile                                 |       | 14,478,723               |       | 15,271,943 |   | 13,537,826 |   |
| Brazil                                |       | 9,294,639                |       | 13,928,023 |   | 10,546,194 |   |
| Argentina                             |       | 7,078,681                |       | 7,982,102 |   | 6,928,049 |   |
| Total depreciation                    |       | 30,852,043               |       | 37,182,068 |   | 31,012,069 |   |
|                                  |       |                     |       |   |   |   |   |
| Identificable long-lived assets:      |       |                     |       |   |   |   |   |
| Chile                                 |       | 128,429,514              |       | 122,262,538 |   | 114,111,532 |   |
| Brazil                                |       | 130,569,300              |       | 145,724,720 |   | 116,553,784 |   |
| Argentina                             |       | 55,278,229               |       | 70,459,592 |   | 61,505,904 |   |
| Total identificable long-lived assets |       | 314,277,043              |       | 338,446,850 |   | 292,171,220 |   |

 

Areconciliation of total segment assets by product, and long-lived assets bycountry to total consolidated assets for the years ended December 31,2009, 2008 and 2007 is as follows:

 
| ** **                               | ** ** | **At December 31,** | ** ** |
|------------------------------------------|------------|--------------------------|------------|
| **Industry**                             | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                               | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Total segment assets                     |       | 324,636,595              |       | 334,394,264 |   | 315,416,729 |   |
| Cash                                     |       | 20,217,244               |       | 20,761,350 |   | 26,337,244 |   |
| Financial instruments                    |       | 114,919,087              |       | 105,518,529 |   | 103,865,158 |   |
| Amounts due from related parties         |       | 1,088,884                |       | 2,909,130 |   | 2,018,091 |   |
| Recoverable taxes                        |       | 4,254,255                |       | 5,847,628 |   | 2,708,981 |   |
| Deferred income taxes                    |       | 2,573,818                |       | 3,553,365 |   | 5,569,452 |   |
| Investments in related companies         |       | 31,165,243               |       | 28,850,593 |   | 26,558,065 |   |
| Investment in other companies            |       | 134,650                  |       | 127,856 |   | 142,510 |   |
| Intangible assets (net)                  |       | 477,231                  |       | 160,018 |   | 172,869 |   |
| Liabilities deducted from segment assets |       | 85,785,485               |       | 86,965,821 |   | 84,572,038 |   |
| Total assets                             |       | 585,252,492              |       | 589,088,554 |   | 567,361,137 |   |
|                                     |       |                     |       |   |   |   |   |
| Identifiable long-lived assets           |       | 314,277,043              |       | 338,446,850 |   | 292,171,220 |   |
| Current assets                           |       | 270,975,449              |       | 250,641,704 |   | 275,189,917 |   |
| Total assets                             |       | 585,252,492              |       | 589,088,554 |   | 567,361,137 |   |

 

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e)     Derivative financialinstruments

 

Derivativefinancial instruments are used by the Company principally in the management offoreign currency risk and its exposure to changes in the price of sugar.  The Company does not hold or issue derivativefinancial instruments for trading purposes. See Note 25 above for the detail of the derivative instrumentsoutstanding at December 31, 2009 and 2008.

 

Asdescribed in paragraph 1k), under U.S. GAAP, the Company applies ASC 815. ASC815 requires that all derivative instruments be recognized on the balance sheetat fair value and that changes in the fair value be recognized in income whenthey occur, the only exception being derivatives that qualify as hedges.  To qualify the derivative instrument as ahedge, the Company must meet strict hedge effectiveness and contemporaneousdocumentation requirements at the initiation of the hedge and assess the hedgeeffectiveness on an ongoing basis over the life of the hedge.  None of the Company’s derivative financialinstruments were designated as hedges for U.S. GAAP reconciliation purposes.

 

Thefinancial instruments used by the Company involve elements of market risk andcredit risk. Market risk is the possibility that future changes in foreignexchange may make the financial instruments more or less valuable. Credit riskis the possibility of default by the counterparties. The loss that the Companywould incur if a counterparty defaulted is significantly less than theinstruments’ notional value and the loss exposure is the fair value of theinstrument.

 

f)     Operating income

 

UnderChilean GAAP, the following income and expenses arising during the years ended2009, 2008 and 2007 are classified as “Non-operating income and expense”whereas under U.S. GAAP they would be included within “Operating income”:

 
| ** **                                                           | ** ** | **At December 31,** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                           | ** ** | **2009**                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                           | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Operating income as reported under Chilean GAAP                      |       | 130,061,281              |       | 135,487,039 |   | 122,880,552 |   |
| Gain on sale of, plant property and equipment                        |       | 296,775                  |       | 268,436 |   | — |   |
| Re-estimation useful life prior years property,  plant and equipment |       | 894,893                  |       | — |   | — |   |
| Tax recoveries - Pis Cofins                                          |       | —                   |       | — |   | 1,459,635 |   |
| Staff severance indemnities                                          |       | (276,008                 | )          | (932,639 | ) | — |   |
| Lawsuit fees                                                         |       | (283,323                 | )          | (907,880 | ) | — |   |
| Realization of deposits in guaranty over  containers                 |       | —                   |       | — |   | 373,471 |   |
| Provision for labor, tax and commercial lawsuits                     |       | (770,762                 | )          | (928,134 | ) | (748,043 | ) |
| Obsolescence and write-off of property, plant and  equipment         |       | (100,000                 | )          | (1,108,795 | ) | (1,091,243 | ) |
| Loss on sale of property, plant and equipment                        |       | —                   |       | — |   | (156,084 | ) |
| Provision for equity investee in Centralli  Refrigerantes S.A.       |       | (1,346                   | )          | (111,015 | ) | — |   |
| Operating income under U.S. GAAP format                              |       | 129,821,510              |       | 131,767,012 |   | 122,718,288 |   |

 

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g)   Concentrations of credit risk

 

The assets of the Company that are potentially subject to significantconcentrations of credit risk are deposits held with banks and financialinstitutions, investments in derivative instruments and trade accountsreceivable.

 

The Company holds accounts with a varietyof banks and does not hold significant deposits or derivative instruments withany single bank.  The Company has a widecustomer base and trades with a large number of small customers.  Consequently, the Company does not believethat it had any significant concentrations of credit risk at December 31,2009.

 

h)    Disclosures regarding the fair values offinancial instruments

 

The estimated fair values of the Company’s financial instruments wereas follows:

 
| ** **                         | ** ** | **At December 31,** | ** ** |
|------------------------------------|------------|--------------------------|------------|
| ** **                         | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                         | ** ** | **Carrying  value**      | ** ** | **Fair  value** | ** ** | **Carrying  value** | ** ** | **Fair  value** | ** ** |
| ** **                         | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Cash                               |       | 20,217,244               |       | 20,217,244 |   | 20,761,350 |   | 20,761,350 |   |
| Time deposits                      |       | 96,377,995               |       | 96,377,995 |   | 79,841,887 |   | 79,841,887 |   |
| Marketable securities              |       | 18,541,092               |       | 18,541,092 |   | 25,676,642 |   | 25,676,642 |   |
| Trade accounts receivable (net)    |       | 53,698,650               |       | 53,698,650 |   | 45,675,913 |   | 45,675,913 |   |
| Notes receivable (net)             |       | 13,975,488               |       | 13,975,488 |   | 13,791,974 |   | 13,791,974 |   |
| Other receivables (net)            |       | 11,194,554               |       | 11,194,554 |   | 12,951,620 |   | 12,951,620 |   |
| Long-term receivables              |       | 5,819,796                |       | 5,819,796 |   | 19,405 |   | 19,405 |   |
| Investments funds (restricted)     |       | 3,180,618                |       | 3,180,618 |   | — |   | — |   |
| Foreign-currency forward contracts |       | 13,083                   |       | 13,083 |   | 1,015,925 |   | 1,015,925 |   |

 
| ** **                               | ** ** | **At December 31,** | ** ** |
|------------------------------------------|------------|--------------------------|------------|
| ** **                               | ** ** | **2009**                 | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **Carrying  Value**      | ** ** | **Fair  Value** | ** ** | **Carrying  value** | ** ** | **Fair  Value** | ** ** |
| ** **                               | ** ** | **ThCh$**                | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Short and long-term term bank borrowings |       | 816,009                  |       | 816,009 |   | 6,310,926 |   | 6,310,926 |   |
| Bonds payable                            |       | 76,601,887               |       | 85,082,816 |   | 77,962,352 |   | 86,166,925 |   |
| Dividends payable                        |       | 5,800,444                |       | 5,800,444 |   | 5,624,230 |   | 5,624,230 |   |
| Accounts payable                         |       | 63,211,417               |       | 63,211,417 |   | 62,706,819 |   | 62,706,819 |   |
| Other creditors short and long-term      |       | 5,502,141                |       | 5,502,141 |   | 4,681,336 |   | 4,681,336 |   |

 

Cash,receivables and account payable: the carrying amounts approximate fair valuedue to the short-term maturity of these instruments.

 

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Timedeposits, marketable securities and deposit credits:  Fair value of time deposits and depositcredits was determined using rates currently available in the market and thefair value of marketable securities is based on quoted market prices for themarketable securities.

 

Long-term investment in bonds: The fair valueof the investment in bonds was determined based on quoted market prices.

 

Bondspayable:  The fair value of bondspayable, including current portion, is estimated based on the quoted marketprice of the Company’s US dollar - denominated bonds payable.

 

Foreigncurrency contracts:  The estimated fairvalues of the forward and swaps contracts are based on quoted market prices atyear end.

 

Futurescontracts:  The estimated fair values ofthe forward and swaps contracts are based on quoted market prices at year end.

 

Adecline in the market value of any available-for-sale or held-to-maturitysecurity below cost that is deemed to be other-than-temporary results in animpairment to reduce the carrying amount to fair value. The impairment ischarged to earnings and a new cost basis for the security is established. Todetermine whether an impairment is other-than-temporary, the Company considerswhether it has the ability and intent to hold the investment until a marketprice recovery and considers whether evidence indicating the cost of theinvestment is recoverable outweighs evidence to the contrary. Evidenceconsidered in this assessment includes the reasons for the impairment, theseverity and duration of the impairment, changes in value subsequent toyear-end, forecasted performance of the investee, and the general marketcondition in the geographic area or industry the investee operates in.

 

Premiumsand discounts are amortized or accreted over the life of the relatedheld-to-maturity or available-for-sale security as an adjustment to yield usingthe effective-interest method. Such amortization and accretion is included inthe “Interest Expense” line item in the statements of income. Dividend andinterest income are recognized when earned.

 

i)    Fair value of financial instruments

 

EffectiveJanuary 1, 2008, the Company adopted FASB ASC 820, “Fair ValueMeasurements” (ASC 820). This Statement defines fair value, establishes aframework for measuring fair value and expands the disclosures about fair valuemeasurements.

 

ASC 820 defines fairvalue as the price that would be received to sell an asset or paid to transfera liability in an orderly transaction between market participants at themeasurement date in a principal or most advantageous market. Fair value is amarket-based measurement that is determined based on inputs, which referbroadly to assumptions that market participants use in pricing assets orliabilities. These inputs can be readily observable, market corroborated, orgenerally unobservable firm inputs. The Company often makes certain assumptionsthat market participants would use in pricing the asset or liability, includingassumptions about risk, and the risks inherent in the inputs to valuationtechniques. The Company uses valuation techniques that maximize the use ofobservable inputs and minimize the use of unobservable inputs.

 

ASC 820 requiresconsideration of the impact of nonperformance risk (including credit risk) froma market participant perspective in the measurement of the fair value of assetsand liabilities. At December 31, 2009, the Company determined thatnonperformance risk would have no material impact

 

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on their financialposition or results of operations. To assess nonperformance risk, the Companyconsidered information such as collateral requirements, master nettingarrangements, letters of credit and parent company guarantees, and applied amarket-based method by using the counterparty (for an asset) or the Company’s(for a liability) credit default swaps rates.

 

ASC 820 establisheda fair value hierarchy, which prioritizes the inputs to valuation techniquesused to measure fair value in three broad levels. The standard requires thatassets and liabilities be classified in their entirety based on the level ofinput that is significant to the fair value measurement. Assessing thesignificance of a particular input may require judgment considering factorsspecific to the asset or liability, and may affect the valuation of the assetor liability and their placement within the fair value hierarchy. The Companyclassifies fair value balances based on the fair value hierarchy defined by ASC820  as follows:

 
|   | · | Level 1 — Consists  of assets or liabilities whose value is based on unadjusted quoted prices in  active markets at the measurement date. An active market is one in which  transactions for assets or liabilities occur with sufficient frequency and  volume to provide pricing information on an ongoing basis. This category  includes contracts traded on active exchange markets valued using unadjusted  prices quoted directly from the exchange.                                                                                                                                                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | · | Level 2 — Consists  of assets or liabilities valued using industry standard models and based on  prices, other than quoted prices within Level 1, that are either directly or  indirectly observable as of the measurement date. The industry standard  models consider observable assumptions including time value, volatility factors,  and current market and contractual prices for the underlying commodities, in  addition to other economic measures. This category includes contracts traded  on active exchanges or in over-the-counter markets priced with industry  standard models.                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | · | Level 3 — Consists  of assets or liabilities whose fair value is estimated based on internally  developed models or methodologies using inputs that are generally less  readily observable and supported by little, if any, market activity at the  measurement date. Unobservable inputs are developed based on the best  available information and subject to cost benefit constraints. This category  includes contracts priced using models that are internally developed and  contracts placed in illiquid markets. It also includes contracts that expire  after the period of time for which quoted prices are available and internal  models are used to determine a significant portion of the value. |

 

As of December 31,2009, the Company held certain items that are required to be measured at fairvalue on a recurring basis.  These included:

 

(i)                     Investments in short term mutual funds (cashequivalents),

(ii)                  Foreign exchange derivative asset

(iii)               Bonds Payable

 

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The following tableprovides information by level for assets and liabilities that are measured atfair value, as defined by ASC 820, on a recurring basis:

 
| ** **                             | ** ** | **Fair  value at  December 31,** | ** ** | **Fair  value measurements using inputs considered as** | ** ** |
|----------------------------------------|------------|---------------------------------------|------------|---------------------------------------------------------|------------|
| **Descrption**                         | ** ** | **2009**                              | ** ** | **Level  1**                                            | ** ** | **Level  2** | ** ** | **Level  3** | ** ** |
| Assets                                 |       |                                  |       |                                                    |       |   |   |   |   |
| Investments in short term mutual funds |       | 18,541,092                            |       | 18,541,092                                              |       | — |   | — |   |
| Foreign exchange derivative asset      |       | 13,083                                |       | —                                                  |       | 13,083 |   | — |   |
| Liabilities                            |       | —                                |       | —                                                  |       | — |   | — |   |
| Bonds Payable                          |       | 85,082,816                            |       | 85,082,816                                              |       | — |   | — |   |

 

Investments in shortterm mutual funds are valued using publicly available year end quotes,therefore, they have been classified as Level 1.

 

Foreign exchange derivative assets and liabilities:  The estimated fair values of the forward andswaps contracts are based on quoted market prices at year end, they have beenclassified as Level 2.

 

Bonds payable:  The fair value ofbonds payable, including current portion, is estimated based on the quotedmarket price of the Company’s US dollar - denominated bonds payable, they havebeen classified as Level 2.

 

j)    Available-for-salesecurities

 

Thefollowing are required disclosures for investments classified as availablefor-sale in accordance with ASC 320. Realized gains and losses are determinedusing the proceeds from sale less the cost of the investments identified to besold. Gross gains and losses realized on the sale of available-for-salesecurities for the year ended December 31, 2009, 2008 and 2007 are asfollows:

 
| ** **                  | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------|------------|-----------------------------------|------------|
| ** **                  | ** ** | **2009**                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                  | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Proceeds on realized gains  |       | —                            |       | — |   | 9,168,773 |   |
| Realized gains              |       | —                            |       | — |   | 96,484 |   |
| Proceeds on realized losses |       | —                            |       | — |   | 75,509,345 |   |
| Realized losses             |       | —                            |       | — |   | (867,470 | ) |

 

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Thecarrying value and market value of securities available-for-sale as of December 31,2007 are as follows:

 
| ** **                      | ** ** | **Year ended December 31, 2007** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|
| ** **                      | ** ** | **Cost**                              | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Estimated  Fair Value** | ** ** |
| ** **                      | ** ** | **ThCh$**                             | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Available-for-sale-investments: |       |                                  |       |   |   |   |   |   |   |
| Foreign investments             |       | 1,068,611                             |       | 10,928 |   | — |   | 1,079,539 |   |
| Total                           |       | 1,068,611                             |       | 10,928 |   | — |   | 1,079,539 |   |

 

k)     Goodwill

 

The Company has performedthe impairment test of goodwill as required by ASC 350, which did not result inany impairment.

 

Total carrying value ofgoodwill, net of accumulated amortization calculated up to December 31,2001, amounts to ThCh$ 92,542,288 as of December 31, 2009 and hasbeen allocated to the Softdrinks business segment.

 

l)      Concentrations of other risks

 

Themajority of the Company’s net sales are derived from the distribution ofCoca-Cola soft drinks.  The Companyproduces, markets and distributes Coca-Cola soft drinks through standardbottler agreements between the Company’s individual bottler subsidiaries andThe Coca-Cola Company. Under the bottler agreements, The Coca-Cola Companyunilaterally sets the prices for Coca-Cola soft drink concentrates sold to theCompany.

 

TheCompany is dependent on The Coca-Cola Company to renew such bottleragreements.  The bottler agreements aresubject to termination by The Coca-Cola Company in the event of default by theCompany or upon expiration in accordance with their respective terms.  No assurance can be given that the bottleragreements will be renewed upon their expiration.  Termination or non-renewal of the bottleragreements would have a material adverse effect on the Company’s business.

 

Thesoft drink and non-alcoholic beverage business is highly competitive in each ofthe Company’s franchise territories. In each of its franchise territories, theCompany competes with bottlers of PepsiCo Inc. as well as bottlers of regionalbrands.  The Company’s soft drinkproducts also compete generally with other non-alcoholic beverages.

 

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m)    Consolidated valuation and qualifyingaccounts

 
| **Description**                             | ** ** | **Balance at********Beginning********of period** | ** ** | **Additions********(charged to********costs and********expenses)** | ** ** | **Deductions********(debits to********the********allowance)** | ** ** | **Balance at********end of period** | ** ** |
|---------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                  | ** ** | **ThCh$**                                        | ** ** | **ThCh$**                                                          | ** ** | **ThCh$**                                                     | ** ** | **ThCh$**                           | ** ** |
| Allowance for doubtful  accounts (1):       |       |                                             |       |                                                               |       |                                                          |       |                                |       |
| Year ended  December 31, 2007          |       | 1,764,619                                        |       | 338,578                                                            |       | (468,651                                                      | )          | 1,634,546                           |       |
| Year ended  December 31, 2008          |       | 1,634,546                                        |       | 395,501                                                            |       | (505,946                                                      | )          | 1,524,101                           |       |
| Year ended  December 31, 2009          |       | 1,524,101                                        |       | 367,460                                                            |       | (202,573                                                      | )          | 1,688,988                           |       |
|                                        |       |                                             |       |                                                               |       |                                                          |       |                                |       |
| Allowance for  obsolescence of inventories: |       |                                             |       |                                                               |       |                                                          |       |                                |       |
| Year ended  December 31, 2007          |       | 613,021                                          |       | 752,018                                                            |       | (504,254                                                      | )          | 860,785                             |       |
| Year ended  December 31, 2008          |       | 860,785                                          |       | 641,367                                                            |       | (1,029,912                                                    | )          | 472,240                             |       |
| Year ended  December 31, 2009          |       | 472,240                                          |       | 365,169                                                            |       | (646,965                                                      | )          | 190,444                             |       |

 

----

(1)          Includes allowances fortrade, non-trade and other receivables.

 

n)    Recent accounting pronouncements

 

Thefollowing accounting standards have been issued under U.S. GAAP, theapplication of which is required as indicated below:

 

·***ASC 810 (formerly FAS 160)***

 

EffectiveJanuary 1, 2009, the Company adopted new accounting guidance ASC 810,which changed the accounting for and the reporting of an entity’snon-controlling interest. Such non-controlling interest, previously referred toas minority interest, is now referred to as non-controlling interests. The adoption of this guidanceresulted in the reclassification of amounts previously attributable to minorityinterest and classified in the mezzanine outside of shareholders’ equity, to aseparate component of stockholders’ equity titled “Non-controllingInterests” in the accompanying consolidated balance sheets and statement ofchanges in equity. Additionally, net income and comprehensive incomeattributable to non-controlling interests are shown separately fromconsolidated net income and comprehensive income in the accompanyingconsolidated statements of operations and statements of changes in equity.Prior period financial statements have been reclassified to conform to thecurrent year presentation as required by the authoritative guidance.

 

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·***ASC 715 (formerly FSP FAS 132(R)-1)***

 

InDecember 2008, the FASB issued FASB Staff Position FAS 132(R)-1, “Employers ́Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSPFAS 132(R)-1 was codified as a component of ASC 715. This new guidance amendsprevious U.S. GAAP in that this guidance replaces the requirement to disclosethe percentage of fair value of total plan assets with a requirement todisclose the fair value of each major asset category. It also clarifies thatdefined benefits pension or other postretirement plan assets not subject tocertain disclosure requirements. This new guidance is effective for fiscalyears ending after December 2009. This new guidance will increase theamount of disclosures for plan assets in the Company’s 2010 audited financialstatements.

 

·***ASC 860 (formerly FAS 166)***

 

FASBStatement No. 166 “Accounting for Transfers of Financial Assets - anamendment of FASB Statement No. 140” (“FAS 166”) provides for removal ofthe concept of a qualifying special-purpose entity and removes the exceptionfrom applying variable interest entity accounting, to qualifyingspecial-purpose entities.

 

Italso clarifies that one objective of U.S. GAAP is to determine whether atransferor and all of the entities included in the transferor’s financialstatements being presented have surrendered control over transferred financialassets. FAS 166 modifies the financial-components approach used in U.S. GAAPand limits the circumstances in which a financial asset, or portion of afinancial asset, should be derecognized when the transferor has not transferredthe entire original financial asset to an entity that is not consolidated withthe transferor in the financial statements being presented and/or when thetransferor has continuing involvement with the transferred financial asset. FAS166 also defines the term participating interest to establish specificconditions for reporting a transfer of a portion of a financial asset as asale. FAS 166 requires that a transferor recognize and initially measure atfair value all assets obtained (including a transferor’s beneficial interest)and liabilities incurred as a result of a transfer of financial assetsaccounted for as a sale. Enhanced disclosures are also required by FAS 166.

 

FAS166 must be applied as of the beginning of each reporting entity’s first annualreporting period that begins after November 15, 2009. This statement mustbe applied to transfers occurring on or after the effective date. The Companyis currently evaluating the impact that the adoption of this standard will haveon its consolidated financial statements.

 

·***ASC 810 (formerly FAS 167)***

 

TheFASB’s objective in issuing FAS 167 “Amendments to FIN 46R” (“FAS 167”) is toimprove financial reporting by enterprises involved with variable interestentities. The Board undertook this project to address (1) the effects oncertain provisions of ASC 810 (formerly FIN 46R “Consolidation of VariableInterest Entities”(“FIN 46R”)), as a result of the elimination of the qualifyingspecial-purpose entity concept in FAS 166, and (2) constituent concernsabout the application of certain key provisions, including those in which theaccounting and disclosures under previous guidance do not always provide timelyand useful information about an enterprise’s involvement in a variable interest.FAS 167 shall be effective as of the beginning of each reporting entity’s firstannual reporting period that begins after November 15, 2009. Earlierapplication is prohibited. The Company is currently evaluating the impact thatthe adoption of this standard will have on its consolidated financialstatements.

 

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·***ASC 2010-6 Improving Disclosures about Fair Value Measurements***

 

In January 2010, the FASB issued ASU 2010-06 “ImprovingDisclosures about Fair Value Measurements”, ASC 820, Fair Value Measurementsand Disclosures. This update requires the disclosure of transfers between theobservable input categories and activity in the unobservable input category forfair value measurements. The guidance also requires disclosures about theinputs and valuation techniques used to measure fair value and became effectivefor interim and annual reporting periods beginning January 1, 2010. Thenew disclosures and clarifications of existing disclosures are effective forinterim and annual reporting periods beginning after December 15, 2009,except for the disclosures about purchases, sales, issuances, and settlementsin the roll forward of activity in Level 3 fair value measurements. Thosedisclosures are effective for fiscal years beginning after December 15,2010, and for interim periods within those fiscal years. The Group is currentlyevaluating the impact this update will have on its consolidated financialstatements.

 

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