UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 20-F  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR  XANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year endedDecember 31, 2016  OR  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  Date of event requiring this shell company report _____________  For the transition period from                     _____________ to _____________  Commission file number0-20486  COMPAÑIA CERVECERIAS UNIDAS S.A. (Exact name of Registrant as specified in its charter) UNITED BREWERIES COMPANY, INC. (Translation of Registrant's name into English)  Republic of Chile (Jurisdiction of incorporation or organization) Vitacura 2670, Twenty-Third Floor, Santiago, Chile (Address of principal executive offices)  Felipe Dubernet, (562-24273536),fdubern@ccu.clVitacura 2670, Twenty-Third Floor, Santiago, Chile (Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person) _________________________________________   Securities registered or to be registered pursuant to section 12(b) of the Act.    Title of each class

   American Depositary Shares

   Representing Common Stock

   Common Stock, without par value

   

   **Name of each exchange****on which registered**New York Stock ExchangeNew York Stock Exchange* __________ *    Not for trading, but only in connection with the registration of American Depositary Shares which are evidenced by American Depositary Receipts


---



Securities registered or to be registered pursuant to Section 12(g) of the Act. Not applicable Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Not applicable  Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. Common stock, with no par value:         369,502,872  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YESXNO____  If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  YESNOX  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESXNO_____  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YESNO__  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definitions of “accelerated filer”, “large accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filerXAccelerated filerNon-accelerated filer__Emerging growth company__  If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ___  †The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.   Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:  U.S. GAAPInternational Financial Reporting Standards as issued               Other____ by the International Accounting Standards BoardX  If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ITEM 17ITEM 18__  If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YESNOX


---



Table of ContentsPageIntroduction

   iForward Looking Statements

   iiPART I

   3ITEM 1: Identity of Directors, Senior Management and Advisers

   3ITEM 2: Offer Statistics and Expected Timetable

   3ITEM 3: Key Information

   3ITEM 4: Information on the Company

   15ITEM 4A: Unresolved Staff Comments

   56ITEM 5: Operating and Financial Review and Prospects

   56ITEM 6: Directors, Senior Management and Employees

   75ITEM 7: Major Shareholders and Related Party Transactions

   86ITEM 8: Financial Information

   92ITEM 9: The Offer and Listing

   94ITEM 10: Additional Information

   96ITEM 11: Quantitative and Qualitative Disclosures about Market Risk

   110ITEM 12: Description of Securities Other than Equity Securities

   115PART II

   116ITEM 13: Defaults, Dividend Arrearages and Delinquencies

   116ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds

   116ITEM 15: Controls and Procedures

   116ITEM 16A: Audit Committee Financial Expert

   117ITEM 16B: Code of Ethics

   117ITEM 16C: Principal Accountant Fees and Services

   118ITEM 16D: Exemptions from the Listing Standards for Audit Committees

   118ITEM 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   118ITEM 16F: Change in Registrant's Certifying Accountants

   118ITEM 16G: Corporate Governance

   120ITEM 16H: Mine Safety Disclosure

   122PART III

   122ITEM 17: Financial Statements

   122ITEM 18: Financial Statements

   122ITEM 19: Exhibits

   123


---



Introduction  In this annual report on Form 20-F, all references to “we”, “us”, “Company” or “CCU” are to Compañía Cervecerías Unidas S.A., an open stock corporation (sociedad anónima abierta) organized under the laws of the Republic of Chile, and its consolidated subsidiaries. Chile is divided into regions, each of which is known by its roman number (e.g. “Region XI”). Our fiscal year ends on December 31st. The expression “last three years’’ means the years ended December 31, 2014, 2015 and 2016. Unless otherwise specified, all references to “U.S. dollars” “dollars” “USD” or “US$” are to United States dollars, and references to “Chilean pesos” “pesos” “Ch$” or “CLP” are to Chilean pesos. We prepare our financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). See the notes to our consolidated financial statements included in pages F-1 through F-123 of this annual report. We use the metric system of weights and measures in calculating our operating and other data. The United States equivalent units of the most common metric units used by us are as shown below:  1 liter = 0.2642 gallons

   1 gallon = 3.7854 liters1 liter = 0.008522 US beer barrels

   1 US beer barrel = 117.34 liters1 liter = 0.1761 soft drink unit cases (8 oz cans)

   1 soft drink unit case (8 oz cans) = 5.6775 liters1 liter = 0.1174 beer unit cases (12 oz cans).

   1 beer unit case (12 oz cans) = 8.5163 liters1 hectoliter = 100 liters

   1 liter = 0.01 hectoliters1 US beer barrel = 31 gallons

   1 gallon = 0.0323 US beer barrels1 hectare = 2.4710 acres

   1 acre = 0.4047 hectares1 mile = 1.6093 kilometers

   1 kilometer = 0.6214 miles
   i


---



Forward Looking Statements  This annual report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the “Securities Act”, and Section 21E of the Securities and Exchange Act of 1934, which we refer to as the “Exchange Act”. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. They also relate to our future prospects, development and business strategies.  These forward-looking statements are identified by the use of terms and phrases such as “anticipate”; “believes”; “could”; “expects”; “intends”; “may”; “plans”; “predicts”; “projects”; “will” and similar terms and phrases. We caution you that actual results could differ materially from those expected by us, depending on the outcome of certain factors, including, without limitation:  ·our success in implementing our investment and capital expenditure program; ·the nature and extent of future competition in our principal marketing areas; ·the nature and extent of a global financial disruption and its consequences; ·political and economic developments in Chile, Argentina and other countries where we currently conduct business or may conduct business in the future, including other Latin American countries; and ·other factors discussed under “Item 3: Key Information – Risk Factors”, “Item 4: Information on the Company” and “Item 5: Operating and Financial Review and Prospects”.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report. We undertake no obligation to publically update any of these forward-looking statements to reflect events or circumstances after the date of this annual report, including, without limitation, changes in our business strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.  ii


---



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  The following table presents selected consolidated financial data as of December 31, 2016 and 2015, and for the years ended December 31, 2016, 2015 and 2014 which has been derived from our consolidated financial statements prepared in accordance with IFRS and included elsewhere in this annual report, and as of December 31, 2014, 2013 and 2012,and for the years ended December 31, 2013 and 2012 which has been derived from our consolidated financial statements prepared in accordance with IFRS and not included in this annual report. The financial data set forth below should be read in conjunction with the consolidated financial statements and related notes and “Item 5: Operating and Financial Review and Prospects” included elsewhere in this annual report.  Year ended December 31,IFRS

   

   2012

   2013

   2014

   2015

   2016(million of CLP)(1)1. Income Statement Data:Net sales

   

   1,075,690

   1,197,227

   1,297,966

   1,498,372

   1,558,898Gross margin

   582,603

   660,530

   693,429

   813,296

   817,078Other income by function

   5,585

   5,509

   25,464

   6,577

   5,144Other expenses(2)

   -1,756

   -1,260

   -1,743

   -2,372

   -2,027Exceptional Items (EI)(3)

   -

   -2,989

   -1,628

   -

   -MSD&A (4)

   

   -405,243

   -473,524

   -535,603

   -612,565

   -619,543Adjusted Operating Result (5)

   181,188

   188,266

   179,920

   204,937

   200,652Other gains (losses)

   -4,478

   959

   4,037

   8,512

   -8,346Net financing expenses

   -9,362

   -15,830

   -10,821

   -15,256

   -14,627Results as per adjustment units

   -5,058

   -1,802

   -4,159

   -3,283

   -2,247Equity and income from joint ventures

   -177

   309

   -899

   -5,228

   -5,561Foreign currency exchange differences

   -1,003

   -4,292

   -613

   958

   457Income taxes

   

   -37,133

   -34,705

   -46,674

   -50,115

   -30,246Net income for the year:

   123,977

   132,905

   120,792

   140,526

   140,082Attributable to:Equity holders of the Parent Company

   114,433

   123,036

   106,238

   120,808

   118,457Non-controlling interests

   9,544

   9,869

   14,553

   19,717

   21,624Basic and Diluted Income per share

   359.28

   370.81

   287.52

   326.95

   320.59Basic and Diluted Income per ADS (6)

   718.57

   741.61

   575.04

   653.90

   641.17Dividend per share(7)

   179.6

   166.5

   161.8

   163.5

   176.3Dividend per ADS in US$ (6)(7)

   0.76

   0.61

   0.52

   0.47

   0.53Weighted average shares outstanding (000)

   318,503

   331,806

   369,503

   369,503

   369,503Shares outstanding as of December 31st (000)

   318,503

   369,503

   369,503

   369,503

   369,503


3

---








Year Ended December 31,IFRS

   

   2012

   2013

   2014

   2015

   20162. Balance Sheet Data:

   (Million of CLP)(1)Total assets

   

   1,328,710

   1,727,720

   1,768,901

   1,825,447

   1,871,577Total non-current liabilities

   303,662

   234,347

   242,070

   249,235

   228,973Total Financial debt(8)

   263,997

   263,251

   199,853

   180,901

   184,624Capital stock

   

   231,020

   562,693

   562,693

   562,693

   562,693Subtotal Equity attributable to equity holders of the parent company

   613,220

   988,676

   1,025,588

   1,057,816

   1,077,298Total shareholders' equity

   710,518

   1,084,244

   1,148,500

   1,187,522

   1,200,2933. Other DataSales volume (in millions of liters):Total volume

   1,990.9

   2,191.6

   2,289.8

   2,392.7

   2,478.3(1)

   Except for the number of shares outstanding, per share and per ADS amounts and sales volume.(2)

   Other expenses are part of the  ́Other expenses by function ́ as presented in the Consolidated Statement of Income. These Other expenses mainly consist of losses related to the sales and write off of fixed assets.(3)

   EI are part of ‘Other expenses by function’ as presented in the Consolidated Statement of Income; 2013 EI corresponds to a restructuring process of the organization which implied the early retirement of managers replaced internally, promotions and the sole and exceptional payment of incentives to the leaving and remaining personnel; 2014 EI corresponds to the effect of CLP 1,628 million associated with restructuring processes across Operating segments.(4)

   Marketing, Sales, Distribution & Administrative expenses(5)

   For management purposes, Adjusted Operating Result is defined as Net Income before other gains (losses), net financial expense, equity and income of joint ventures, foreign currency exchange differences, result as per adjustment units and income taxes. Please see “Item 5: Operating and Financial Review and Prospects— ADJUSTED OPERATING RESULT” for more details regarding Adjusted Operating Result and a reconciliation of the most directly applicable IFRS measure to Adjusted Operating Result.(6)

   Per ADS amounts are determined by multiplying per share amounts by 2. As of December 20, 2012, there was an ADS ratio change from 1 ADS to 5 common shares, to a new ratio of 1 ADS to 2 common shares.(7)

   Dividends per share are expressed in Chilean pesos as of payment dates, with charge to prior year's net income. Dividends per ADS are expressed in U.S. dollars at the conversion rate in effect on the date on which payment is made.(8)

   Includes short-term and long-term financial debt (mainly bank loans, bonds and financial leasing).










Exchange Rates.Prior to 1989, Chilean law permitted the purchase and sale of foreign currency only in those cases explicitly authorized by the Central Bank of Chile. The Central Bank Act, which was enacted in 1989, liberalized the rules that govern the ability to buy and sell foreign currency. Currently, pursuant to the Central Bank Act, the Central Bank of Chile has the authority to mandate that certain purchases and sales of foreign currency specified by law are to be carried out in the formal exchange market. The formal exchange market is formed by banks and other entities authorized by the Central Bank of Chile. All payments and distributions made to our holders of ADSs must be transacted in the formal exchange market.



In order to keep fluctuations in the average exchange rate within certain limits, the Central Bank of Chile has in the past intervened by buying or selling foreign currency on the formal exchange market. In September 1999, the Central Bank of Chile decided to limit its formal commitment to intervene and decided to exercise it only under extraordinary circumstances, which are to be announced in advance. The Central Bank of Chile also committed to provide periodic information about the levels of its international reserves.



The observed exchange rate is the average exchange rate at which commercial banks conduct authorized transactions on a given date, as certified by the Central Bank of Chile. The Central Bank of Chile generally carries out its transactions at the spot market rate. Authorized transactions by banks are now generally conducted at the spot market rate.



Purchases and sales of foreign currencies effectuated outside the formal exchange market are carried out in theMercado Cambiario Informal(the informal exchange market). The informal exchange market reflects the supply and demand for foreign currency. There are no limits imposed on the extent to which the rate of exchange in the informal exchange market can fluctuate above or below the observed exchange rate. On April 3, 2017 the U.S. dollar observed exchange rate relating to March 31, 2017 was CLP 663.97 per U.S. dollar.





4

---








The following table sets forth the low, high, average and period-end observed exchange rates for U.S. dollars for each of the indicated periods starting in 2012 as reported by the Central Bank of Chile. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.




Daily Observed Exchange Rate (1)(CLP per USD)Low (2)

   High(2)

   Average (3)

   Period-end(4)2012

   469.65

   519.69

   486.58

   479.962013

   466.50

   533.95

   495.53

   524.612014

   524.61

   621.41

   570.50

   606.752015

   597.10

   715.66

   654.79

   710.162016

   645.22

   730.31

   676.70

   669.47October 2016

   651.18

   670.88

   663.78

   651.18November 2016

   650.72

   679.24

   667.18

   673.54December 2016

   649.40

   677.11

   666.48

   669.47January 2017

   646.19

   673.36

   660.51

   646.19February 2017

   638.35

   648.88

   643.34

   648.88March 2017

   650.98

   669.52

   661.86

   663.97Source: Bloomberg(1) Historical pesos.(2) Rates shown are the actual low and high, on a day-by-day basis for each period.(3) For yearly data, the average of monthly average rates during the period reported, and for monthly data, the average of daily average rates during the period reported.(4) Published on the first day after month(year) end.






The exchange rate on April 17, 2017, the latest practicable date, was CLP 647.47 per U.S. dollar.



B.Capitalization and Indebtedness



Not applicable.



C.Reasons for the Offer and Use of Proceeds



Not applicable.



5

---



D.Risk Factors  RISKS RELATING TO CHILE  We are substantially dependent on economic conditions in Chile, which may adversely impact the results of our operations and financial condition.  We are predominantly engaged in business in Chile.64% of our sales revenues in 2016 was generated from our Chile Operating segment,24% came from the International Business Operating segment, which includes Argentina, Paraguay and Uruguay, and13% came from the Wine Operating segment. Thus, the results of our operations and financial condition are dependent to a large extent on the overall level of economic activity in Chile. The Chilean economy has experienced an average annual growth rate of3.4% between 2006 and 2016, and 1.6% in 2016. In the past, slower economic growth in Chile has slowed down the growth rate of consumption of our products and adversely affected our profitability. Chile’s economic performance was affected in the past by the disruption in the global financial markets in 2009 and catastrophic events such as earthquakes in 2010 and 2015. Therefore growth rates of past periods cannot be extrapolated to future performance.  Furthermore, Chile, as an emerging market economy, is more exposed to unfavorable conditions in the international markets which could have a negative impact on the demand for our products as well as products of third parties with whom we conduct business. Any combination of lower consumer confidence, disrupted global capital markets and/or reduced international economic conditions could have a negative impact on the Chilean economy and consequently on our business.  Currency fluctuations may affect our profitability.  Because we purchase the majority of our supplies at prices set in U.S. dollars and export wine in U.S. dollars, Canadian dollars, euros and pounds, we are exposed to foreign exchange risks that may adversely affect our financial condition and the results of our operations. Therefore, any future changes in the value of the Chilean peso against said currencies would affect the revenues of our wine export business. Additionally, the cost of several of our raw materials, especially in the beer and non-alcoholic businesses are indexed to the U.S. dollar. The effect of the exchange rate variation on export revenues will have an opposite effect on the cost of raw materials expressed in Chilean peso terms.  The relative liquidity and volatility of Chilean securities markets may increase the price volatility of our American Depositary Shares (“ADSs”) and adversely impact a holder’s ability to sell any shares of our common stock withdrawn from our American Depositary Receipt (“ADR”) facility.  The Chilean securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States. For example, the Santiago Stock Exchange, which is Chile’s principal stock exchange, had a market capitalization of approximately US$ 209.9 billion as of December 31, 2016, while The New York Stock Exchange (“NYSE”) had a market capitalization of approximately US$26.5trillion and the NASDAQ National Market (“NASDAQ”) had a market capitalization of approximately US$7.78trillion as of the same date. In addition, the Chilean securities markets can be materially affected by developments in other emerging markets, particularly other countries in Latin America.  The lower liquidity and greater volatility of the Chilean markets relative to markets in the United States could increase the price volatility of the ADSs and may impair a holder’s ability to sell in the Chilean market shares of our common stock withdrawn from the ADR facility in the amount and at the price and time the holder wishes to do so. See “Item 9: The Offer and Listing”.


6

---



We are subject to different corporate disclosure requirements and accounting standards than U.S. companies.  Although the securities laws of Chile which govern open stock corporations and publicly listed companies such as us have as a principal objective promoting disclosure of all material corporate information to the public, Chilean disclosure requirements differ from those in the United States in certain important respects. In addition, although Chilean law imposes restrictions on insider trading and price manipulation, the Chilean securities market is not as highly regulated and supervised as the U.S. securities market. We have been subject to the periodic reporting requirements of the Exchange Act since our initial public offering of ADSs in September 1992.   RISKS RELATING TO ARGENTINA  We have operations in Argentina, and economic conditions there have adversely affected the results of our operations in the past and may do so in the future.  We have significant assets in Argentina and we have generated significant income from our operations in this country.  As demand for alcoholic and non-alcoholic beverages is usually correlated with economic conditions prevailing in the local market, which in turn is dependent on the macroeconomic condition of the country, the financial condition and results of our operations in Argentina are, to a considerable extent, dependent upon political and economic conditions prevailing in Argentina. From 1999 through 2002, Argentina suffered a prolonged recession, which culminated in an economic crisis. Although the economic situation in Argentina has improved since the economic crisis of 2002, we have been observing slowdowns of the economy, and therefore, cannot assure you that economic conditions in Argentina will continue to improve or that our business will not be materially affected if Argentine economic conditions were to deteriorate.  The Argentine peso is subject to volatility which could adversely affect our results.  A devaluation of the Argentine peso may adversely affect our operating results.In 2016 Argentina experienced an average devaluation of the Argentine peso versus the U.S. dollar of approximately 60% year over year. In 2009, the Company first reported its financial statements under IFRS, using the Argentine peso as the functional currency for our Argentine subsidiaries. The results are calculated in Argentine pesos and then translated into Chilean pesos for consolidation purposes. In 2016 the Argentine peso devaluated approximately 55% versus the Chilean peso, which generated a translation effect in our reported revenues and expenses.  Argentina’s legal regime and economy are susceptible to changes that could adversely affect our Argentine operations.  The measures taken by previous Argentine governments to address the country’s economic crisis of 2002 severely affected the Argentine financial system’s stability and have had a materially negative impact on the country ́s economy. If Argentina were to experience a new fiscal and economic crisis, the Argentine government could implement economic and political measures, which could adversely impact our business.  In January 2006, the Argentine government adopted different methods to directly and indirectly regulate the prices of various consumer goods, including bottled beer, in an effort to slow inflation. Additionally, measures taken by the previous Argentine government to control the country’s trade balance and to limit the access to foreign currencies negatively impacted the free import of goods and royalty payments by the Company, and also the repatriation of profits. This situation has changed following the installation of the new government in December 2015. We cannot assure you that the current or future Argentine governments will not implement legal and economic measures that could adversely affect our operations in Argentina.


7

---



RISKS RELATING TO OUR BUSINESS Potential changes to Chilean tax rules may result in an increase in the prices of our products and a corresponding decline in sales volumes.  Changes such as the new Chilean tax reform (the “Tax Reform Act”) that became effective on October 1, 2014, and implemented a series of changes to the tax rates and tax policies, increasing among other things the excise tax for alcoholic and sugar-containing beverages in Chile, forced us to implement price increases for certain categories, leading to a possible decline in volume.  Furthermore, the Tax Reform Act establishes that as of 2017 Open Stock Corporations should calculate their taxes based on the “Partially Integrated System” without the possibility to opt for the alternative “Attributed Income Regime”. The "Partially Integrated System" provides for a gradual increase in the First Category Income tax rate, going from 20% to 21% for the 2014 business year, to 22.5% for the 2015 business year, to 24% for the 2016 business year, to 25.5% for the 2017 business year, and to 27% starting in the 2018 business year.  Implementation of these or similar future reforms that we are not aware of nor foresee, might adversely affect our business, our operating result and our financial position.  Fluctuations in the cost of our raw materials may adversely impact our profitability if we are unable to pass those costs on to our customers.  We purchase malt, rice and hops for beer, sugar for soft drinks, grapes for wine, pisco and cocktails, and packaging material from local producers or in the international market. The prices of those materials are subject to volatility caused by market conditions, and have experienced significant fluctuations over time and are determined by the global supply and demand for commodities as well as other factors, such as fluctuations in exchange rates, over which we have no control.  Although we historically have been able to implement price increases in response to increases in raw material costs, we cannot assure you that our ability to recover increases in the cost of raw materials will continue in the future. In particular, where raw material price fluctuations do not keep pace with market conditions in the markets in which we operate, we may have limited capacity to raise prices to offset increases in costs. If we are unable to increase prices in response to increases in raw material costs, any future increases in raw material costs may reduce our margins and profitability if we are not able to offset such cost increases through efficiency improvements or other measures.  Consolidation in the beer industry may impact our market share.  In March 2004, Companhia de Bebidas das Américas (“AmBev”) and Interbrew announced an agreement to merge, creating the world’s largest brewer under the name InBev. Additionally, in January 2007, AmBev assumed control of Quilmes Industrial S.A. (“Quilmes”). In Chile, Quilmes sells its beer through Cervecería Chile S.A. (“Cervecería Chile”). In November 2008 InBev and Anheuser-Busch Companies, Inc. (“Anheuser-Busch”) merged, creating Anheuser-Busch Inbev (“AB Inbev”), the worldwide leader in beer. In 2013, AB Inbev finalized the acquisition of Grupo Modelo.  In 2005, SAB Miller Plc merged with Grupo Empresarial Bavaria, a Colombian brewer with operations in Colombia, Peru, Ecuador and Panama, forming the then second-largest brewer in the world. In 2010SAB Miller Plc acquired Cervecería Argentina S.A. (“CASA Isenbeck”), the third-largest brewer in Argentina, previously subsidiary of Warsteiner Brauerei Hans Cramer GmbH & Co. (“Warsteiner”).  During 2015, SAB Miller plc accepted an offer from AB Inbev to merge its operations. The merger has been approved in the various countries where SAB Miller Plc and AB Inbev currently operate and integration of the companies has begun. With this we face a major challenge: we are witnessing one of the largest global mergers in the history of beer and soft drinks, which will create a powerful global player, capable of producing and distributing more than 700 million hectoliters per year, with presence in more than 65 countries. This might increase the pricing and/or investment power of our competitor, which could negatively affect our market share.


8

---



Competition in the Chilean beer market may erode our market share and lower our profitability.  Our largest competitor in the Chilean beer market by volume is Cervecería Chile. In the past and during 2016, Cervecería Chile has engaged in aggressive pricing. Additionally, during 2016 Cervecería Chile announced plans to expand its current production capacity in Chile. If Cervecería Chile were to amplify its aggressive price discounting practices and continue to expand its production capacity in the future, we cannot assure, given the current environment that any such discounting or other competitive activities will not have a material adverse impact on our profitability or market share.  Our beer brands in Chile may face increased competition from other alcoholic beverages such as wine and spirits, as well as from non-alcoholic beverages, such as carbonated soft drinks.  Beer consumption in Chile may be influenced by changes in the relative price of domestic wine, spirits and/or other non-alcoholic beverages. Increases in domestic wine prices have tended to lead to increases in beer consumption, while reductions in wine prices have tended to reduce or slow the growth of beer consumption. As a result of our lower market share in the Chilean wine, spirits and soft drinks markets as compared to our market share in the Chilean beer market, we expect that our consolidated profitability could be adversely affected if beverage consumers were to shift their consumption from beer to either wine, spirits or non-alcoholic beverages.  Quilmes dominates the beer market in Argentina and we may not be able to maintain our current market share.  In Argentina we face competition from Quilmes and CASA Isenbeck, which as a result of the merger between AB Inbev and SAB Miller plc, become one player in the Argentine beer market. As a result of its dominant position in Argentina, Quilmes’ large size by itself enables it to benefit from economies of scale in the production and distribution. Therefore, we cannot assure you that we will be able to grow or maintain our current market share in the Argentine beer market.  Substitution of fossil fuels by natural gas and taxes on carbon dioxide emissions could increase our energy costs.  In line with the sustainability objective of CCU S.A. for the year 2020, in order to reduce carbon dioxide emissions, we continue with the substitution of fossil fuels with natural gas in our industrial facilities. Taxes on carbon dioxide emissions in Chile will go into effect in 2017, and the cost of these taxes will most likely be passed on to energy prices. A series of investment projects is under evaluation, with the aim of reducing emissions and thereby exempting us from this tax in 2018, but we cannot assure we will be able to meet this goal.  Electric power costs have increased significantly in the past mainly due to hydroelectric plants having lower water reservoir levels, which was exacerbated by the absence of new installed capacity at lower costs. Increases in oil prices or unfavorable hydric conditions could reduce our margins if we are unable to improve efficiencies or increase our prices to offset them.  Changes in the labor market in the countries in which we operate may affect margins in our business.  In August 2016, labor reform Law 20,940 was approved in Chile, and went into effect as of April 2017. The labor reform has resulted in a more regulated labor market. The main elements of the labor reform are the following:   ·

   

   Collective bargaining coverage is expanded to certain employees who were prevented from exercising this right, such as apprentices, temporary workers and others.·

   

   Benefits obtained by a union in the course of a negotiation are extended for the benefit of any worker joining that union after the negotiation has concluded. The extension of said benefits to employees would be contingent to the assent of each union.·

   

   Collective bargaining agreements currently in effect would constitute a floor for the negotiation of new conditions of employment. The parties can agree to lower this floor for the negotiation if justified by the financial situation of the company or business as of the date of discussions.


9

---



·

   

   The employer's right to replace those workers participating in a strike with current or new employees while the strike is taking place is curtailed.·

   

   Modification of the definition of “minimum services” through “emergency teams” for which unions are obliged to provide the personnel required. These minimum services should be of a certain minimum level to prevent accidents, guarantee public service levels and basic needs of the population, prevent environmental or sanitary damage, and protect the equipment.·

   

   Matters that may be subject to collective bargaining agreements are expanded, allowing the negotiation of more flexible workdays, and others.·

   

   Unions may annually request from large companies information regarding the remunerations and duties associated with each category of employees.   In Argentina, the high levels of inflation could affect our salary expenses.  We depend upon the renewal of certain license agreements to maintain our current operations.  Most of our license agreements include certain conditions that must be met during their term, as well as provisions for their renewal at their expiry date. We cannot assure that such conditions will be fulfilled, and therefore that the agreements will remain in place until their expiration or that they will be renewed, or that any of these contracts will not undergo early termination. Termination of, or failure to renew our existing license agreements, could have an adverse impact on our operations.  Consolidation in the supermarket industry may affect our operations.  The Chilean supermarket industry has gone through a consolidation process, increasing the importance and purchasing power of a few supermarket chains. As a result, we may not be able to negotiate favorable prices, which may adversely affect our sales and profitability.  Additionally, and despite having insurance coverage, this supermarket chain consolidation has the effect of increasing our exposure to counterparty credit risk, given the fact that we have more exposure in the event one of these large customers fails to fulfill its payment obligations to us for any reason.  Dependence on a single supplier for some important raw materials.  In the case of cans, both in Chile and Argentina we purchase from a single supplier, Ball, which has production plants in both countries. However, cans could also be imported from other Ball plants or from alternative suppliers in the region. We have long term contracts for malt in Chile and in Argentina. We purchase one way polyethylene terephthalate resins (“PET”) from several suppliers located in China, Mexico and US and in the past we have also purchased in Argentina. While we have alternatives in procuring our supplies, if we were to experience disruptions in our supply chain we cannot assure you we will be able to obtain replacement supplies at favorable pricing or advantageous terms, which may adversely affect our results.  Water supply is essential to the development of our businesses.  Water is an essential component for beer, soft drinks, mineral and purified water. While we have adopted policies for the responsible and sustainable use of water, a failure in our water supply or contamination of our wells could negatively affect our sales and profitability.  The Chilean Congress is currently discussing a bill that provides, among others, for a new regime of temporary water rights, which will apply to future water rights that are granted. The bill would also introduce a system of revocation of water rights, for those not in use. This bill could undergo modifications during its discussion in the Chilean Congress. After its enactment, regulations will be required for the implementation of the new regime.If enacted during 2017, relevant regulations will be dictated for effects of the new implementation of this bill. The implementation of the new regime could impact future applications for water rights for the Company, or could mean we would lose water rights that we do not currently use but have available for future growth.


10

---



The supply, production and logistics chain is key to the timely supply of our products to consumer centers.  Our supply, production and logistics chain is crucial for the delivery of our products to consumer centers. An interruption or a significant failure in this chain may negatively affect our results, if the failure is not quickly resolved. An interruption in the chain could be caused by various factors, such as strikes, planning errors of our suppliers, riots, complaints by communities, safety failures, or other factors which are beyond our control.  If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.  We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for digital marketing activities and electronic communications within the Company and with our clients, suppliers and our subsidiaries. Security breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information. If we are unable to prevent such breaches, our operations could be disrupted, or we may suffer financial damage or loss because of lost or misappropriated information.  Possible regulations for labeling materials and promotion of alcoholic beverages and other food products in Chile could adversely affect us.  On June 26, 2015 decree N° 13 of the Ministry of Health was published which modifies the Sanitary Food Products Regulations (DC 977 of the Ministry of Health) and enforces Law N° 20,606 of 2012 regarding the nutritional composition of food products and its promotion. Both regulations establish certain restrictions on promotion material, labeling, and commercialization of these products that have been classified as being “high” in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats. Additionally on November 13, 2015 Law N° 20,869 regarding the promotion of food products was published, restricting the time of day promotions for products high in calories or any of the defined critical nutrient can be aired on television and in the cinema. This regulation change came into force on June 27, 2016 and affected part of our non-alcoholic portfolio. We cannot assure that this regulation will not have an impact on our volumes and therefore in our results.  Currently a bill that modifies law N° 18,455 is in the third phase of being passed. The bill fixes standards for production, elaboration and commercialization of ethyl alcohol, alcoholic beverages and vinegar. The bill aims to establish restrictions on promotion material, labeling and commercialization of alcoholic beverages including warnings about the consumption of alcohol on labeling and promotion materials, restrictions in hours of promotion and prohibition of participation in sports and cultural events, among others. A regulatory change of this nature will affect our alcohol beverages portfolio and certain marketing activities.  If further proposed bills are passed, or other regulations restricting the sale of non-alcoholic beverages or sweet snacks are enacted, this could affect consumption of our products and, as a consequence, negatively impact our business.  Possible regulations of the promotion of alcoholic beverages in Argentina could adversely affect us.  On November 24, 2016 Law 5,708 was implemented in the city of Buenos Aires, Argentina. This law restricts the promotion of alcoholic beverages on the street and at the points of sale, and prohibits the alcoholic beverage companies from sponsoring cultural, sports, or educational events that have free access to the public, as well as the promotion of alcoholic beverages through official media channels of the city of Buenos Aires. We cannot assure you that this regulation will not have an adverse impact on our volumes and therefore on our results.


11

---



New environmental regulations, may negatively affect our profitability and reputation. CCU’s operations are subject to environmental regulations at local, national and international levels. These regulations cover, among other things, emissions, noise, disposal of solid and liquid wastes, and other activities inherent to our industry. On this topic, on June 1, 2016 Law N° 20,920 was enacted and established a framework for waste management and extended producer responsibility, and stimulation of recycling, with the objective of lowering the generation of waste of proprietary products as determined by the bill and fostering recycling of the waste. We are awaiting the enactment of standards that will establish the procedures of targets for priority products and other associated obligations, along with establishing the procedure, requirements and criteria for the authorization of the control of waste, among others. These regulations should be enacted within one year as of the publication of said law.  Modifications introduced by this law and those incorporated in the regulations will involve new costs and investments by the Company.  Our products are taxed with different taxes, particularly with respect to excise taxes on the consumption of alcoholic and non-alcoholic beverages.  The Argentine ad valorem excise tax is 8.7% for beer, and the Chilean ad valorem excise tax is 20.5% for beer and wine, 31.5% for spirits, 18% for non-alcoholic beverages containing more than 15gr./240ml. of sugar and 10% for non-alcoholic beverages containing 15gr./240ml. or less of sugar. An increase in the rate of these or any other tax could negatively affect our sales and profitability.  Catastrophic events in the regions in which we operate could have a material adverse effect on our financial condition.  Natural disasters, climate change, terrorism, pandemics, strikes or other catastrophic events could impair our ability to manufacture, distribute or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to manage such events effectively if they occur, could adversely affect our sales volume, cost and supply of raw materials, earnings and could have a material effect on our business, operational results, and financial position.  In 2016 Chile was affected by several natural disasters, including the large floods, mudflows and forest fires in the southern regions during January and February 2017. These events did not have a significant effect on our operations, however, a future catastrophic event could have a significant effect on our business, results of operations and financial condition.  If we are unable to maintain the image and quality of our products our financial results may suffer.  The image and quality of our products is essential for our success and growth. Problems with product quality could tarnish the reputation of our products and may adversely affect our revenues.  If we are unable to maintain a good relationship with our clients and consumers, our financial results may suffer.  It is important to ensure a good service level to our clients provided by our sales force, and adjust new product launches and innovations to the needs and preferences of our consumers.  If we are unable to finance our operations we may be adversely affected.  A global liquidity crisis or an increase in financial interest rates may eventually limit our ability to obtain the cash needed to fulfill our commitments. Sales could also be affected by a global disruption if consumption decreases sharply, placing stress on our cash position.


12

---



RISKS RELATING TO OUR ADSs  We are controlled by one majority shareholder, whose interests may differ from those of holders of our ADSs, and this shareholder may take actions that adversely affect the value of a holder’s ADSs or common stock.  As of March 31, 2017, Inversiones y Rentas S.A. (“IRSA”) a Chilean closed corporation, directly and indirectly owned 60.0% of our shares of common stock. Accordingly, IRSA has the power to control the election of most members of our board of directors and its interests may differ from those of the holders of our ADSs. IRSA also has significant influence in determining the outcome of any corporate transaction submitted to our shareholders for approval, including mergers, consolidations, the sale of all or substantially all of our assets and going-private transactions. In addition, actions by IRSA with respect to the disposal of the shares of common stock that it owns, or the perception that such actions may occur, may adversely affect the trading prices of our ADSs or common stock.  Chilean economic policies, currency fluctuations, exchange controls and currency devaluations may adversely affect the price of our ADSs.  The Chilean government’s economic policies and any future changes in the value of the Chilean peso relative to the U.S. dollar could adversely affect the dollar value and the return on any investment in our ADSs. The Chilean peso has been subject to large nominal devaluations and appreciations in the past and may be subject to significant fluctuations in the future. For example, in the period from December 31, 2015 to December 31, 2016, the daily average value of the Chilean peso relative to the U.S. dollar increased by3.5%in nominal terms, whereas the year end value decreased by 6% based on the observed exchange rate for U.S. dollars on those dates. See “Item 3: Key Information – Selected Financial Data – Exchange Rates”.  While our ADSs trade in U.S. dollars, Chilean trading in the shares of our common stock underlying our ADSs is conducted in Chilean pesos. Cash distributions to be received by the depositary for the shares of our common stock underlying our ADSs will be denominated in Chilean pesos. The depositary will translate any Chilean pesos received by it to U.S. dollars at the then-prevailing exchange rate with the purpose of making dividend and other distribution payments on the ADSs. If the value of the Chilean peso declines relative to the U.S. dollar, the value of our ADSs and any distributions to holders of our ADSs received from the depositary may be adversely affected. See “Item 8: Financial Information – Dividend Policy and Dividends”.  For example, since our financial statements are reported in Chilean pesos, a decline in the value of the Chilean peso against the dollar would reduce our earnings as reported in U.S. dollars. Any dividend we may pay in the future would be denominated in Chilean pesos. A decline in the value of the Chilean peso against the U.S. dollar would reduce the U.S. dollar equivalent of any such dividend. Additionally, in the event of a dividend or other distribution, if exchange rates fluctuate during any period of time when the ADS depositary cannot convert a foreign currency into dollars, a holder of our ADSs may lose some of the value of the distribution. Also, since dividends in Chile are subject to withholding taxes, which we retain until the following year when the exact amount to be paid is determined, if part of the retained amount is refunded to the shareholders, the amount received by holders of our ADSs would be subject to exchange rate fluctuations between the two dates.  Holders of our ADSs may be subject to certain risks due to the fact that holders of our ADSs do not hold shares of our common stock directly.  ADS holders may exercise voting rights associated with common stock only in accordance with the deposit agreement governing our ADSs. Accordingly, ADS holders will face practical limitations when exercising their voting rights because ADS holders must first receive a notice of a shareholders’ meeting from the Depositary and may then exercise their voting rights by instructing the Depositary, on a timely basis, on how they wish to vote. This voting process necessarily will take longer for ADS holders than for direct common stock holders, who are able to exercise their vote by attending our shareholders’ meetings. Therefore, if the Depositary fails to receive timely voting instructions from some or all ADS holders, the Depositary will assume that ADS holders agree to give a discretionary proxy to a person designated by us to vote their ADSs on their behalf. Furthermore, ADS holders may not receive voting materials in time to instruct the Depositary to vote. Accordingly, ADS holders may not be able to properly exercise their voting rights.


13

---



The right of a holder of our ADSs to force us to purchase the underlying shares of our common stock pursuant to Chilean corporate law upon the occurrence of certain events may be limited.  Because of the absence of legal precedent as to whether a shareholder that has voted both for and against a proposal, such as the Depositary of our ADSs, may exercise withdrawal rights (as described in “Item 10. Additional Information – B. Memorandum and Articles of Association”) with respect to those shares voted against the proposal, there is doubt as to whether a holder of ADSs will be able to exercise withdrawal rights either directly or through the depositary for the shares of our common stock represented by their ADSs. Accordingly, for a holder of our ADSs to exercise its appraisal rights, it may be required to surrender its ADRs, withdraw the shares of our common stock represented by its ADSs, and vote the shares against the proposal. In the past, Chile has imposed controls on foreign investment and repatriation of investments that affected investments in, and earnings from, our ADSs.  Equity investments in Chile by persons who are not Chilean residents have historically been subject to various exchange control regulations that restrict repatriation of investments and earnings therefrom. In April 2001, the Central Bank eliminated most of the regulations that affected foreign investors, although foreign investors still have to provide the Central Bank with information related to equity investments and must conduct such operations within the formal exchange market. Additional Chilean restrictions applicable to holders of our ADSs, the disposition of the shares underlying them, the repatriation of the proceeds from such disposition or the payment of dividends may be imposed in the future, and we cannot advise you as to the duration or impact of such restrictions if imposed. See also “Item 10: Additional Information, D. Exchange Controls”.  If for any reason, including changes in Chilean law, the depositary for our ADSs were unable to convert Chilean pesos to U.S. dollars, investors would receive dividends and other distributions, if any, in Chilean pesos.  Preemptive rights to purchase additional shares of our common stock may be unavailable to holders of our ADSs in certain circumstances and, as a result, their ownership interest in our Company may be diluted.  TheLey sobre Sociedades Anónimas N° 18,046 (“Chilean Corporations Act”) and theReglamento de Sociedades Anónimas, require us, whenever we issue new shares for cash, to grant preemptive rights to all holders of shares of our common stock, including shares of our common stock represented by ADSs, giving those holders the right to purchase a sufficient number of shares to maintain their existing ownership percentage. We may not be able to offer shares to holders of our ADSs pursuant to preemptive rights granted to our shareholders in connection with any future issuance of shares unless a registration statement under the Securities Act is effective with respect to those rights and shares, or an exemption from the registration requirements of the Securities Act is available.  We intend to evaluate at the time of any future offerings of shares of our common stock the costs and potential liabilities associated with any registration statement as well as the indirect benefits to us of enabling U.S. owners of our ADSs to exercise preemptive rights and any other factors that we consider appropriate at the time, before making a decision as to whether to file such a registration statement. We cannot assure you that any such registration statement would be filed.  To the extent that a holder of our ADSs is unable to exercise their preemptive rights because a registration statement has not been filed, the depositary will attempt to sell the holder’s preemptive rights and distribute the net proceeds of the sale, net of the depositary’s fees and expenses, to the holder, provided that a secondary market for those rights exists and a premium can be recognized over the cost of the sale. A secondary market for the sale of preemptive rights can be expected to develop if the subscription price of the shares of our common stock upon exercise of the rights is below the prevailing market price of the shares of our common stock. Nonetheless, we cannot assure you that a secondary market in preemptive rights will develop in connection with any future issuance of shares of our common stock or that if a market develops, a premium can be recognized on their sale. Amounts received in exchange for the sale or assignment of preemptive rights relating to shares of our common stock will be taxable in Chile and the United States. See “Item 10: Additional Information – E. Taxation – Chilean Tax Considerations – Capital Gains” and “– United States Federal


IncomeTax Considerations – Taxation of Capital Gains”. If the rights cannot be sold, they will expire and a holder of our ADSs will not realize any value from the grant of the preemptive rights. In either case, the equity interest of a holder of our ADSs in us will be diluted proportionately.


14

---



ITEM 4: Information on the Company  A.History and Development of the Company  Our current legal and commercial name is Compañía Cervecerías Unidas S.A. We are a public corporation (sociedad anónima abierta) organized by means of a public deed dated January 8, 1902,following the merger of two existing breweries, one of which traces its origins back to 1850, when Mr. Joaquín Plagemann founded one of the first breweries in Chile (in Valparaíso). By 1916, we owned and operated the largest brewing facilities in Chile. Our operations have also included the production and marketing of soft drinks since the beginning of the last century, the bottling and selling of mineral water products since 1960, the production and marketing of wine since 1994, the production and marketing of beer in Argentina since 1995, the production and marketing of pisco since 2003, the production and marketing of sweet snacks products since 2004 and the production and marketing of rum since 2007.  We are subject to a full range of governmental regulation and supervision generally applicable to companies engaged in business in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. These regulations include labor laws, social security laws, public health, consumer protection and environmental laws, securities laws, and antitrust laws. In addition, regulations exist to ensure healthy and safe conditions in facilities for the production and distribution of beverages and sweet snacks products.  Our principal executive offices are located at Avenida Vitacura N°2670, 23rd floor, Santiago, Chile. Our telephone number in Santiago is (56-2) 2427-3000, and our website is www.ccu.cl. Our authorized representative in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19715, USA, telephone number (302) 738-6680 and fax number (302) 738-7210. The information on our website is not incorporated by reference into this document.  In 1986, IRSA, our current principal shareholder, acquired its controlling interest in us through purchases of common stock at an auction conducted by a receiver who had assumed control of us following the economic crisis in Chile in the early 80’s, which resulted in our inability to meet our obligations to our creditors. IRSA, at that time, was a joint venture between Quiñenco S.A. (“Quiñenco”) and the Schörghuber Group from Germany through its wholly owned subsidiary Finance Holding International B.V. (“FHI”) of the Netherlands.  In September 1992, we issued 4,520,582 ADSs, each representing five shares of our common stock, in an international American Depositary Receipt (“ADR”) offering. The underlying ADSs were listed and traded on the NASDAQ, until March 25, 1999. Since that date, the ADSs have been listed and traded on the NYSE. On December 20, 2012, the ratio of ADSs to shares of common stock was changed from 1 to 5, to a new ratio of 1 to 2.  Prior to November 1994, we independently produced, bottled and distributed carbonated and non-carbonated soft drinks in Chile. In November 1994, we merged our soft drink and mineral water businesses with the one owned by Buenos Aires Embotelladora S.A. (“BAESA”) in Chile (PepsiCo’s bottler in Chile at that time) creating Embotelladoras Chilenas Unidas S.A. (“ECUSA”) for the production, bottling, distribution and marketing of soft drink and mineral water products in Chile. Through ECUSA, we began producing PepsiCo brands under license. We have had control of ECUSA since January 1998, when the shareholders agreement was amended. On November 29, 1999 we purchased 45% of ECUSA’s shares owned by BAESA for approximately CLP 54,118 million. We currently own 99.93% of ECUSA’s shares. In January 2001, ECUSA and Schweppes Holdings Ltd. signed an agreement to continue bottling Crush and Canada Dry brands. See “– Production and Marketing – Chile Operating segment”.


15

---



In 1994 we purchased 48.4% of the equity of the Chilean wine producer Viña San Pedro S.A. (“VSP”) for approximately CLP 17,470 million. During the first half of 1995, VSP’s capital was increased by approximately CLP 14,599 million, of which we contributed approximately CLP 7,953 million. From August through October 1997, VSP’s capital was increased again by approximately CLP 11,872 million, of which we contributed approximately CLP 6,617 million, plus approximately CLP 191 million in additional shares bought during October 1997 in the local stock market. Furthermore, in October 1998 and during 1999, we purchased additional shares in VSP through the local stock exchanges for an amount of approximately CLP 5,526 million. From March through June 1999, VSP’s capital was increased by approximately CLP 17,464 million, of which we contributed approximately CLP 10,797 million.  In December 1995, we entered into a joint venture agreement pursuant to which Anheuser-Busch acquired a 4.4% interest in Compañía Cervecerías Unidas Argentina S.A. (“CCU Argentina”). The agreement involved two different contracts: an investment and a licensing contract. Through CCU Argentina, we began our expansion into Argentina by acquiring an interest in two Argentine breweries: 62.7% of the outstanding shares of Compañía Industrial Cervecera S.A. (“CICSA”), were acquired during January and February 1995 and 98.8% of the outstanding shares of Cervecería Santa Fe S.A. (“CSF”), were acquired in September 1995. In 1997, CCU Argentina increased its interest in CICSA to 97.2% and in CSF to 99.9% through the purchase of non-controlling interests. In January 1998, we decided to merge these two breweries into one company operating under the name of CICSA. Following the merger, CCU Argentina’s interest in CICSA was 99.2%. In April 1998, CCU Argentina completed the purchase of the brands and assets of Cervecería Córdoba S.A. for US$8 million. After the resolution of certain labor issues, we began the production of the Córdoba brand at our Santa Fe plant from the middle of 1998.  After a capital increase approved by our shareholders in October 1996, we raised approximately US$196 million between December 1996 and April 1999. Part of this capital expansion was accomplished between December 1996 and January 1997 through our second ADR offering in the international markets.  In November 2000 we acquired a 50% stake in Cervecería Austral S.A. (“Cervecería Austral”), located in the city of Punta Arenas.  During 2000, VSP, through its subsidiary Finca La Celia S.A. (“FLC”), acquired the winery Finca La Celia in Mendoza, Argentina, initiating its international expansion, allowing VSP to include fine quality Argentine wines into its export product portfolio. In December 2001, Viña Santa Helena S.A. (“VSH”) created its own commercial and productive winemaking operation, distinct from its parent, VSP, under the Viña Santa Helena label in the Colchagua Valley. Between November 2000 and March 2001, VSP’s capital was increased by approximately CLP 22,279 million, of which we contributed approximately CLP 13,402 million.  Further, in May 2002, we acquired a 50% stake in Compañía Cervecera Kunstmann S.A. (“CCK”), a brewery located in the southern city of Valdivia. In June 2003, our beer division began selling Kunstmann nationwide. In November 2006, we acquired additional shares of CCK that allowed us to consolidate this subsidiary into our financial statements since that month.  In February 2003, we began the sale of a new product for our beverage portfolio, pisco, under the brand Ruta Norte. Pisco is a grape spirit very popular in Chile that is produced in the northern part of the country. Our pisco, at that time, was only produced in the Elqui Valley in Region IV of Chile and was sold throughout the country by our beer division sales force. In March 2005, we entered into an association with the second-largest pisco producer at that time, Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. (“Control”). This new joint venture was named Compañía Pisquera de Chile S.A. (“CPCh”), to which the companies contributed principally with assets, commercial brands and – in the case of Control – also some financial liabilities. Currently we own 80% of CPCh and Control owns the remaining 20%.  On April 17, 2003, the Schörghuber Group, at the time an indirect owner of 30.8% of our ownership interest, gave Quiñenco, also at the time an indirect owner of 30.8% of our ownership interest, formal notice of its intent to sell 100% of its interest in FHI to Heineken Americas B.V., a subsidiary of Heineken International B.V. As a result of the sale, Quiñenco and Heineken Americas B.V., the latter through FHI, became the only two shareholders of IRSA, the owner of 61.6% of our equity at that time, each with a 50% interest in IRSA. Heineken International B.V. and FHI subsequently formed Heineken Chile Ltda., to hold the latter’s 50% interest


in IRSA. Therefore, Quiñenco and Heineken Chile Ltda. are the only two current shareholders of IRSA, with 50% equity each. On December 30, 2003, FHI merged into Heineken Americas B.V., which together with Heineken International B.V. remained as the only shareholders of Heineken Chile Ltda. At present IRSA owns, directly and indirectly, 60.0% of our equity.


16

---



In August 2003, VSP formed Viña Tabalí S.A., a joint venture in equal parts with Sociedad Agrícola y Ganadera Río Negro Ltda., for the production of premium wines. This winery is located in the Limarí Valley, Chile’s northernmost winemaking region, which is noted for the production of outstanding wines.  In January 2004, we entered the sweet snacks business by means of a joint venture between CCU Inversiones S.A. and Industria Nacional de Alimentos S.A., a subsidiary of Quiñenco, with a 50% interest each in Calaf S.A. (which has been renamed Foods Compañía de Alimentos CCU S.A., or Foods, a corporation that acquired the trademarks, assets and know-how, among other things, of Calaf S.A.I.C. and Francisca Calaf S.A., traditional Chilean candy makers, renowned for more than a century. In 2007 we acquired the brand Natur, adding a new line of products to our ready-to-eat portfolio. In August 2008, Foods bought 50% of Alimentos Nutrabien S.A., a company specializing in brownies and other high quality home-made products under the brand Nutrabien.  In October 2004, VSP acquired the well-known Manquehuito Pop Wine brand, a sparkling fruit-flavored wine with low alcohol content, broadening its range of products. At VSP’s extraordinary shareholders meeting held on July 7, 2005, the shareholders approved a capital increase that was to be partially used for stock option programs. During October and November 2005, VSP’s capital was increased by approximately CLP 346 million. We did not participate in this capital increase.  In December 2006, we signed a joint venture agreement with Watt’s S.A. (“Watt’s”), a local food related company, under which, as of January 30, 2007, we participate in equal parts in Promarca S.A. (“Promarca”). This new company owns, among others, the brands “Watt’s”, “Watt’s Ice Frut”, “Yogu Yogu” and “Shake a Shake” in Chile. Promarca granted both of its shareholders (New Ecusa S.A., a subsidiary of ECUSA, and Watt ́s Dos S.A., a subsidiary of Watt ́s S.A.), for an indefinite period, the exclusive licenses for the production and sale of the different product categories.  In January 2007, Viña Tabalí S.A. bought the assets of Viña Leyda, located in the Leyda Valley, a new winemaking region south of Casablanca Valley and close to the Pacific Ocean. Viña Leyda produces excellent wines that have won awards in different international contests. After this acquisition, Viña Tabalí S.A. changed its name to Viña Valles de Chile S.A. In September 2007, VSP bought a 50% interest in Viña Altaïr S.A. which belonged to Château Dassault, in line with our strategy of focusing on premium wines. As a consequence, VSP owns 100% of said company. Between April and June 2007, VSP’s capital was increased by approximately CLP 13,692 million, of which we contributed approximately CLP 5,311 million.  In May 2007, CPCh entered the rum market with our proprietary brand Sierra Morena and later, in 2008, added new rum brand extensions and introduced various pisco based cocktails. In June 2010 CPCh purchased Fehrenberg, a small, but well-recognized spirits brand produced in Chile. In July 2011 CPCh began the distribution of Pernod Ricard products (Chivas Regal, Ballantine’s, Havana Club, Absolut, among others). Furthermore, in 2011, CPCh signed a licence agreement for the commercialization and distribution in Chile of the pisco brand Bauzá. In addition, CPCh acquired 49% of the licensor company Compañía Pisquera Bauzá S.A. (“Bauza”), owner of the brand in Chile. In January 2016, CPCh sold its interest in Bauzá to Agroproductos Bauzá S.A.  In December 2007, we entered into an agreement with Nestlé Chile S.A. and Nestlé Waters Chile S.A., the latter of which acquired a 20% interest in our subsidiary Aguas CCU-Nestlé Chile S.A. (“Aguas CCU”), the company through which we develop our bottled water business in Chile. As part of this new association, Aguas CCU introduced in 2008 the Nestlé Pure Life brand in Chile. Nestlé Waters Chile S.A. had a call option to increase its ownership in Aguas CCU by an additional 29.9%, which expired on June 5, 2009. On June 4, 2009 ECUSA received a notification from Nestlé Waters Chile S.A. exercising its irrevocable option to buy 29.9% of Aguas CCU equity, within the scope of the association contract. The completion of the deal represented a profit before taxes for ECUSA of CLP 24,439 million. On September 30, 2009 in extraordinary shareholders’ meetings, Aguas CCU and Nestlé Waters Chile S.A. approved the merger of Nestlé Waters Chile S.A. and Aguas CCU. The current shareholders of Aguas CCU are ECUSA (50.10%) and Nestlé Chile S.A. (49.90%).


17

---



In 2008, the licensing contract was extended until 2025, which grants CCU Argentina the exclusive right to produce, package, commercialize and distribute Budweiser beer in Argentina. After subsequent capital increases, the last one in June 2008, Anheuser-Busch reduced its interest in CCU Argentina to 4.04% and we increased our participation to 95.96%. In April 2008, we bought the Argentine brewer Inversora Cervecera S.A. (“ICSA”) after receiving the approval of the Argentine antitrust authorities. CICSA paid an aggregate amount of US$88 million to acquire ICSA. ICSA owns, among other assets, the Bieckert, Palermo and Imperial beer brands, which together represented approximately 5.8% of the Argentine beer market, and a brewery in Luján, Buenos Aires, with a nominal production capacity of 270 million liters per year.  On November 2008, CCU and its affiliate VSP entered into a Merger Agreement with Compañía Chilena de Fósforos S.A. and its subsidiaries Terciados y Elaboración de Maderas S.A. and Viña Tarapacá S.A. (“VT”), in order to merge VT into VSP. Under the terms of the Merger Agreement, and prior to its execution, CCU had to acquire 25% of VT’s equity. On December 3, 2008, the extraordinary shareholders’ meetings of VSP and VT approved the merger of both companies. Once all the legal requirements were fulfilled, the merger by absorption of VT by VSP was completed on December 9, 2008, with an effective date for accounting purposes of October 1, 2008. The merged company was named Viña San Pedro Tarapacá S.A. (“VSPT”), which began consolidating its financial statements with ours starting on October 1, 2008, with operations commencing on December 9, 2008. VSPT’s capital was increased, as a consequence of the merger, by issuing 15,987,878,653 shares to be exchanged for the total number of shares issued by VT at a ratio of 1,480.30828 new VSPT shares per each share of the absorbed company.  In December 2010, our subsidiary Inversiones Invex CCU Ltda., acquired a 4.04% equity stake in CCU Argentina from Anheuser-Busch Investment, S.L. After the acquisition, CCU, through its subsidiary Inversiones Invex CCU Ltda., became the sole equity holder of CCU Argentina. This transaction had no effect on the Budweiser brand production and distribution contract which expires in 2025 (in 2015 the license for the distribution of the brand in Chile expired). Currently, CCU ́s subsidiaries Inversiones Invex CCU Ltda. and Inversiones Invex CCU Dos Ltda. own 80.649% and 19.351%, respectively, of CCU Argentina ́s share capital. CCU Argentina owns 66.68% of CICSA ́s share capita, Inversiones Invex CCU Dos Ltda owns the remaining 33.32%.  In December 2010, CICSA acquired equity interests in Saénz Briones y Cía SAIC and Sidra La Victoria S.A. Through this transaction, CICSA became the controlling shareholder of these companies. These companies own the assets used in the production, packaging and marketing of cider and other spirits businesses in Argentina, which are marketed through several brands, the most important cider and spirits brands are Real, La Victoria, Saénz Briones 1888 and in spirits, El Abuelo. In 2015 the merger by absorption of Sidra la Victoria S.A. with and into Saénz Briones y Cía SAIC and was executed.  In August 2011, the board of directors of VSPT agreed to spin-off Viña Valles de Chile S.A. (“VDC”), a corporation owned, in equal parts, by VSPT and Agrícola y Ganadero Río Negro Limitada (“ARN”). VDC had two major vineyards: Viña Tabalí and Viña Leyda. According to such agreement, VSPT would remain the 100% owner of Viña Leyda (whose net assets would remain within VDC) and ARN would remain the 100% owner of Viña Tabalí (whose net assets would be assigned to the spun off company). This transaction concluded on December 29, 2011, through a stock swap contract, whereby VDC became a subsidiary of VSPT that is, directly and indirectly, 100% owned by VSPT.  In September 2012, CCU acquired 100% of the shares of the Uruguayan companies Milotur S.A. (“Milotur”), Marzurel S.A. (“Marzurel”) and Coralina S.A. (“Coralina”) and, indirectly, of Andrimar S.A. (“Andrimar”), a wholly-owned subsidiary of Milotur. These companies own the assets of a business developed in Uruguay that engages in the production and marketing of mineral and flavored bottled water under the Nativa brand, and carbonated soft drinks under the Nix brand. Milotur also commercializes Schneider and Heineken beer brands, the latter due to an amendment to the trademark license agreement in force with Heineken Brouwerijen B.V.  In December 2012, Aguas CCU completed an acquisition of 51.01% of the company Manantial S.A. (“Manantial”), a Home and Office Delivery (“HOD”) business of purified water in bottles with the use of dispensers. The partnership enabled Aguas CCU to participate in a new business category. The shareholders agreement of Manantial included a call option to purchase the remaining shares.


18

---



On June 18, 2013 the extraordinary shareholders’ meeting approved the issuance of 51,000,000 of ordinary shares which were registered in the Securities Registry of the Superintendency of Securities and Insurance (“SVS”) under N°980 dated July 23, 2013. On November 8, 2013 CCU successfully concluded this capital increase, the total number of shares issued pursuant to the capital increase having been subscribed and paid, raising a total amount of CLP 331,718,929,410. This capital increase, representing our third ADR offering in the international markets, was made in order to continue our expansion plan, which includes organic and inorganic growth in Chile and the surrounding region.  In December 2013, CCU acquired 50.005% of Bebidas del Paraguay S.A. (“Bebidas del Paraguay”), and 49.959% of Distribuidora del Paraguay S.A. (“Distribuidora del Paraguay”), entering the Paraguayan market with the production, marketing and sale of non-alcoholic beverages, such as soft drinks, juices and water, and import, marketing and sale of beer, under various brands, both proprietary and under licensees and imported.  Furthermore, in 2013, CCU, through its subsidiary CCU Inversiones S.A., increased its stake in VSPT to 64.72% by acquiring an additional stake of the outstanding shares of VSPT. VSPT is formed by the wineries San Pedro, Tarapacá, Santa Helena, Viña Leyda, Misiones de Rengo, Viña Mar, Casa Rivas, FLC, and Bodega Tamarí. These are all important and renowned cellars in Chile and Argentina, each with its own distinctive brands. Since the merger, VSPT has become the second-largest Chilean wine exporter and one of the leaders in the domestic market. In June 2013, the merger of Viña Misiones de Rengo S.A. and Viña Urmeneta S.A. was completed, with Viña Valles de Chile S.A., as the legal successor. In May 2014 Vitivinícola del Maipo S.A merged into Viñas Orgánicas SPT S.A., the latter being the legal successor. Additionally, in April 2015 Viña Santa Helena S.A. merged into Viña San Pedro Tarapacá S.A., pursuant to the Chilean Corporations Act, due to the fact that Viña San Pedro Tarapacá S.A. became the sole shareholder of the company for more than 10 days.  In May 2014, CCU entered the Bolivian market through a partnership with Grupo Monasterio, acquiring 34% of Bebidas Bolivianas BBO S.A. (“BBO”). BBO produces and commercializes alcoholic and non-alcoholic beverages in Bolivia. CCU's initial stake in BBO is 34%, which was obtained by a capital injection, and which contemplates the right of CCU to acquire additional interests that would enable it to own 51% of the shares of BBO in a second stage. This transaction also includes contracts that will allow BBO to operate CCU’s brands in Bolivia. The Company has recorded this investment under joint ventures and associated companies.  As of June 6, 2014, CICSA reached agreements with Cervecería Modelo S.A. de CV. and Anheuser-Busch LLC, for the termination of the contract which allows CICSA to import and distribute on an exclusive basis,CoronaandNegra Modelobeers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. CICSA received compensation in respect of these agreements in the amount of ARS 277.2 million, equivalent to US$34.2 million.  In November 2014, CCU, directly and through its subsidiary CCU Inversiones II Ltda., signed a series of contracts and agreements with the Colombian entity Postobón S.A. (“Postobón”), by which we agreed to initiate a joint venture for the manufacturing, commercialization and distribution of beer and malt based non-alcoholic beverages in Colombia. The joint venture is established through a company named Central Cervecera de Colombia S.A.S. (“CCC”), in which CCU and Postobón participate as equal shareholders. This transaction included the following contracts and agreements: an Investment Framework Agreement, a Shareholders Agreement, a long-term logistics and distribution contract and a sales contract governing services to be provided by Postobón to CCC, a trademark license agreements granted to CCC by CCU and Postobón, a shared services agreement governing services to be provided by Postobón to CCC, and an exclusive license granted by Heineken to CCC for the import, production and distribution of Heineken products in Colombia. As of September 2015 CCC also has anexclusive contract for the import, production and distribution of Coors Light in Colombia.  In November 2015, ECUSA entered into a joint operation agreement with Empresas Carozzi S.A. (“Carozzi”) for the production, commercialization, and distribution of instant powder drinks under the brands Sprim, Fructus, Vivo and Caricia. This joint operation is carried out by Bebidas Carozzi CCU SpA (“Bebidas Carozzi CCU”), of which ECUSA acquired 50% of the share capital. Carozzi will be in charge of the production of the respective products, and ECUSA will be in charge of its distribution.


19

---



In 2015 we sold the brands Calaf and Natur to Carozzi, leaving Foods only with its 50% participation in Alimentos Nutrabien S.A. During 2016, Foods acquired the remaining 50% stake of Alimentos Nutrabien S.A.  On January 29, 2016 Aguas CCU and ECUSA exercised the call option, acquiring 48.07% and 0.92% of the shares of Manantial respectively. As a consequence, Compañía Cervecerías Unidas S.A. is currently the indirect owner of 100% of the shares of Manantial, remaining as the only direct shareholders of Manantial: (i) Aguas CCU with 99.08% of the capital stock, and (ii) ECUSA with 0.92% of the capital stock.  In February 2016 CCU and Watt ́s, among others, entered into an “International Association Agreement” in order to expand the brand Watt ́s to certain South American countries, through Promarca Internacional SpA, currently a wholly owned subsidiary of Promarca S.A.  In March 2016, we acquired 51% of Sajonia Brewing Company SRL (formerly Artisan SRL) which produces and commercializes Sajonia craft beer.  In 2016 CCC acquired the brand and assets related to the craft beer brand “3 cordilleras” of Artesana Beer Company S.A. CCC is reported under Joint ventures and associated companies.  CAPITAL EXPENDITURES The cash flows related tocapital expenditure figures for the last three years shown below reconcile to the Cash Flow statement as shown in the Consolidated Statements of Cash Flows.  Our cash flows related to capital expenditures for the last three years were CLP230,080 million,CLP 131,731 million and CLP 128,883 million, respectively, totaling CLP490,694million of which CLP389,750million was invested in Chile and CLP100,945million outside Chile.  In recent years, cash flows related to our capital expenditures were made primarily for the expansion of our production capacities and bottling, improving the distribution chain, additional returnable bottles and boxes, marketing assets (mainly refrigerators), environmental improvements and the integration of new operations, among others.  During 2014,85% of cash flows related to our capital expenditure was in Chile. These investments were required to increase marketing assets, bottling capacity and new packaging, mostly in our soft drink and beer categories. Furthermore, we acquired an industrial site in the Santiago metropolitan area for future capacity expansions.  During 2015,79% of cash flows related to our capital expenditure was in Chile. These investments were required to support the increased sales volume of our categories experienced in 2014, with investments related to increasing bottling capacity, new packaging, and marketing assets. We also needed to invest in building new warehouses and stores throughout Chile in order to optimize the distribution of our products.  During 2016, 69% of cash flows related to our capital expenditure was in Chile. These investments were required to support the increased sales volume of our categories experienced in 2015, with investments related to increasing bottling capacity, new lines, replacement of obsolete lines and marketing assets. We also invested in warehouse adaptation and stores throughout Chile in order to optimize the distribution of our products and new categories.  The cash flow related to our major capital expenditures for the period 2014 - 2016 are shown in the following table. See “Item 5: Operating and Financial Review and Prospects – Liquidity and Capital Resources – Capital Expenditures” for the 2017 - 2020 period.  **CLP million**

   **2014**

   **2015**

   **2016**Chile

   196,599

   103,860

   89,291Abroad

   33,481

   27,872

   39,593**Total**

   **230,080**

   **131,731**

   **128,883**


20

---



B.Business Overview  Summary  CCU is a diversified beverage company operating in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. CCU is the largest Chilean brewer, the second-largest Chilean carbonated soft drinks producer, the largest Chilean water and nectar producer, and the largest pisco producer. It is the second-largest Argentine brewer, and participates in the beer, water and soft drinks industries in Uruguay, Paraguay and Bolivia, and in the beer industry in Colombia. CCU is one of the largest Chilean wine producers, and the second-largest Chilean wine exporter. The Company ́s principal licensing, distribution and / or joint venture agreements include Heineken Brouwerijen B.V., Anheuser-Busch Incorporated, PepsiCo Inc., Seven-up International, Schweppes Holdings Limited, Société des Produits Nestlé S.A., Pernod Ricard Chile S.A., Watt ́s S.A., and Coors Brewing Company.  CCU reports its consolidated results pursuant to the following Operating segments, essentially defined with respect to its revenues in the geographic areas of commercial activity: Chile, International Business and Wine. These Operating segments mentioned are consistent with the way the Company is managed and how results will be reported by CCU. These segments reflect separate operating results which are regularly reviewed by each segment Chief Operating Decision Maker in order to make decisions about the resources to be allocated to the segment and assess its performance. Corporate revenues and expenses are presented separately as Other.  In 2015 the Committee of International Business was created, which brought together management of business activities in Argentina, Uruguay and Paraguay. Following this, the Río de la Plata Operating segment (consisting of the business activities referred to above) was renamed the International Business Operating segment. The Committee of International Business also represents and looks after the interests associated with investments in Bolivia and Colombia, which continue to report their results under Equity and income of JVs and are associated on a consolidated basis.  CCU has launched its Strategic Plan 2016 - 2018, which is based on two pillars: Growth and Efficiencies, with a focus on our core categories beer and non-alcoholic beverages. We aim to grow profitably in all our categories and businesses, and at the same time we will seek efficiencies with determination, by executing our “ExCCelencia CCU” Program. As part of the ExCCelencia CCU program, during 2016 we implemented the integration of the route-to-market of the beer and non-alcoholic category in Chile throughout the whole country. Simultaneously, the Company incorporated into the Chile Operating segment the business activities performed by the Strategic Service Units (“SSU”), which include Transportes CCU Limitada (“Transportes CCU”), Comercial CCU S.A. (“Comercial CCU”), CRECCU S.A. and Fábrica de Envases de Plásticos S.A. (“Plasco”). This change enables us to capture additional efficiencies and improve the service level of our logistics operation.  In 2016 the Company took important steps in the area of environmental sustainability, including (1) the inauguration of the first satellite natural gas regasification plant at our CCU plant in Temuco, which will allow the conversion from heavy oil to natural gas, decreasing the plant’s CO2 emissions by 20%, (2) inauguration of the mini hydroelectric power plant in Isla de Maipo, which will generate 250 kilowatts of electrical power to supply the operation of the winery of Viña Tarapacá, and (3) inauguration of the biogas plant, in Molina, which only works with solid waste from the harvest.


21

---



Overview Chile Operating segment We estimate that our weighted volume market share1for the Chile Operating segment was approximately 40.9%, 41.6% and 42.3% in 2014, 2015 and 2016, respectively. Weighted volume market share includes all categories in which CCU participates excluding wines and HOD, according to Nielsen figures.  We produce and sell alcoholic and non-alcoholic beverages in Chile. In beer, we carry a wide portfolio of products which includes premium, mainstream and convenience brands, which are primarily marketed under different proprietary brands and licensed brands. In the beer category, we are the exclusive producer and distributor of Heineken, Sol and Coors beer in Chile; the exclusive distributor of imported Tecate beer and Blue Moon beer and we distribute and produce Kunstmann and Austral beer in Chile via distribution or license agreements.  Our non-alcoholic beverages in Chile include carbonated soft drinks (both cola and non-cola), nectars and juices, sports and energy drinks, ice tea; and water, which includes mineral, purified and flavored bottled water (including HOD), both categories consisting of our proprietary brands and brands produced under license, from PepsiCo (carbonated and non-carbonated soft drinks), Schweppes Holdings (carbonated soft drinks) and Promarca (nectars and fruit beverages). In the energy drinks business, we are the exclusive distributor of Red Bull energy drinks in Chile.). We also produce and distribute purified waters under license from Societé des Produits Nestlé S.A. and others, and distribute the imported brand Perrier. We entered in the ready-to-mix category with instant powder drinks in a joint operation with Carozzi.  We also produce and distribute pisco, rum and spirits in Chile. In addition, we have the distribution of Pernod Ricard products through the traditional channel, which excludes supermarkets with centralized distribution.  Wholesale and retail prices of all the previously mentioned categories are not regulated in Chile. Wholesale prices are subject to negotiation between the producer and the purchaser; while retailers determine retail prices to the final consumer. We believe that the key factors determining retailers’ prices include: national and/or local price promotions offered by the manufacturer, the nature of product consumption (on-premises or take-out), the type of packaging (returnable or non-returnable), the applicable tax structure and the desired profit margins considering all related costs and expenditures such as marketing, sales, distribution, and administrative expenses (MSD&A) and production.  During 2016 we implemented the integration of the route-to-market of the beer and non-alcoholic category in Chile throughout the whole country, and at the same time, the Company incorporated into the Chile Operating segment the business activities performed by the Strategic Service Units (“SSU”), which include Transportes CCU, Comercial CCU, CRECCU S.A. and Plasco.  Comercial CCU is responsible for the sale of all of the Company’s products through a unique sales force in those areas where this synergic sales model is more efficient. Additionally, product distribution is handled by our subsidiary Transportes CCU. To the south of Coyhaique, sales and distribution are performed by Comercial Patagona S.A. In Argentina, Uruguay and Paraguay these operations are carried out by our own sales force as well as distributors.  Plasco, a subsidiary of CCU, produces nearly all of the returnable and non-returnable plastic bottles used by the Chile operating segment.  International Business Operating segment We estimate that our weighted volume market share1for the International Business Operating segment was approximately 12.9%, 13.8% and 14.0% in 2014, 2015 and 2016, respectively, including beer and ciders in Argentina according to Nielsen; carbonated soft drinks, beer, nectar, mineral water and flavored water in Uruguay, according to IDRetail; and beer, carbonated soft drinks, nectar and mineral water in Paraguay, according to internal estimates.  1The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.


22

---



We produce and/or import, sell and distribute beer under proprietary brands and licensed brands in Argentina, Uruguay and Paraguay. We also produce, sell and distribute cider in Argentina.  In Argentina, we are the exclusive producer and distributor of Heineken, Amstel, Sol, Budweiser and Miller beer brands; and the exclusive distributor of imported Kunstmann beer brands. Also, from Argentina we export Schneider and Kunstmann beers, our proprietary brands, and Heineken to Uruguay. Additionally, through our subsidiaries in Paraguay, we have the license to distribute beer under the Heineken, Coors, Paulaner, Schneider and Kunstmann brands.  In Uruguay, CCU through its subsidiaries, produce and distribute mineral and flavored bottled water under the Nativa brand, and carbonated soft drinks under the Nix brand. Also, we produce and distribute Watt ́s in Uruguay.  In Paraguay, CCU through its subsidiaries, produce and distribute carbonated soft drinks under the brand Pulp, Puro Sol for juices, La Fuente for waters, and Zuma for flavored water, and has been granted the license to produce and distribute nectars under the Watt’s brand. In addition to imported beer distribution in Paraguay, the company entered into craft beer market production with the Sajonia brand, an important local brand.  Wine Operating segment Viña San Pedro Tarapacá S.A. (VSPT) produces and markets a full range of wine products for the domestic and mainly the export market, reaching over 80 countries. The weighted average volume market1share was 18.3%, 18.0% and 18.1% in 2014, 2015 and 2016, respectively. In 2016 VSPT’s sales amounted to approximately 29.4% of total measured domestic industry sales by volume in Chile, according to Nielsen, and 12.9% of total Chilean wine export sales by volume, when excluding bulk wine, according to Wines of Chile Association.  VSPT’s main vineyards are located in all principal viticulture Chilean valleys, including productive plants in the cities of Lontué, Molina, Isla de Maipo and also in Mendoza, Argentina. As of January 2017 the carton packaging line of our plant in Lontué has been moved to Molina, as part of our efficiency plan. As a result of this change Lontué continues to serve as one of our storage locations.  We believe that having entered into the Chilean wine business provided us with the opportunity to further leverage our nationwide distribution system through the expansion of our beverage portfolio. We also believe that the development of our domestic wine business helps to reduce the seasonality of our sales, as wine sales in Chile tend to be stronger during winter months when beer and soft drinks consumption decline.  Joint Ventures and Associated companies  CCU participates in the sweet snacks business by means of a joint venture between our CCU Inversiones S.A. and Industria Nacional de Alimentos S.A., a subsidiary of Quiñenco, with a 50% interest each in Foods Compañía de Alimentos CCU S.A. (“Foods”), parent company of Alimentos Nutrabien S.A. Foods initially owned 50% of Alimentos Nutrabien S.A., which specializes in brownies and other high quality home-made products under the brand Nutrabien. During 2016, Foods acquired the remaining 50% stake of Alimentos Nutrabien S.A.  In Bolivia, CCU participates through BBO, which is engaged in the production, marketing and multi-category sales of alcoholic beverages and non-alcoholic beverages in Bolivia. Specifically, it produces soft drinks and beer in three plants located in the cities of Santa Cruz de la Sierra and Nuestra Señora de la Paz. Since 2015 BBO has the exclusive license to import, distribute and sell Heineken beer from CICSA.  In Colombia, CCU entered into a series of contracts and agreements with Postobón, by which the parties agreed to initiate a joint agreement for the manufacturing, commercialization and distribution of beer and malt based non-alcoholic beverages through CCC in Colombia. CCC has exclusive contracts for the import, production and distribution of Heineken products and Coors Light in Colombia. In 2016 CCC acquired the brand and assets related to the craft beer brand “3 cordilleras” of Artesana Beer Company S.A.  1The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.


23

---



The Beverage Market  Chile Operating segment We estimate that annual beer consumption in Chile was 787 million liters in 2016 or approximately 43 liters per capita. The following table shows our estimates for total and per capita consumption levels for beer in Chile for the years 2012 - 2016: Year

   **Total Beer Sales Volume**(1)

   Per Capita(in millions of liters)

   (liters)2012

   681

   392013

   723

   412014

   745

   422015

   767

   432016

   787

   43(1) Source: Canadean, Global Beverage Forecast of March 2017. Figures have been rounded.
  The non-alcoholic beverages market in Chile consists of both carbonated and non-carbonated beverages. The principal types of carbonated beverages are colas, non-colas and carbonated mineral bottled water. The non-carbonated beverages are fruit nectars and juices, functional drinks and non-carbonated mineral, purified and flavored bottled water.  The table below sets forth our estimates of total and per capita consumption of non-alcoholic beverage in Chile during each of the last five years:  **TotalNon-Alcoholic Beverage****Sales Volume**(1)

   

   

   **Per Capita** (1)(in millions of liters)

   

   

   (liters)Year

   CarbonatedSoft drinks

   Nectar & Juices

   Functional drinks(3)

   Water(2)

   

   CarbonatedSoft drinks

   Nectar & Juices

   Functional drinks(3)

   Water(2)2012

   2,340

   394

   39

   496

   

   134

   23

   2

   282013

   2,376

   425

   53

   556

   

   135

   24

   3

   322014

   2,296

   429

   56

   596

   

   129

   24

   3

   332015

   2,270

   417

   67

   638

   

   126

   23

   4

   352016

   2,249

   424

   78

   677

   

   124

   23

   4

   37(1)  Source: Canadean, Global Beverage Forecast of March 2017.(2) Includes HOD, packaged water, flavored water, enhanced water.(3) Includes Sports drinks, Energy drinks, Iced tea and Iced coffee.
  The following table sets forth Nielsen estimates as to the percentage of total carbonated soft drinks sales in Chile, represented by each of the two principal categories of carbonated soft drinks during the last three years:  Type

   2014

   2015

   2016Colas

   55%

   54%

   54%Non-colas

   45%

   46%

   46%Total

   100%

   100%

   100%
  Traditionally, beer, wine and pisco have been the principal alcoholic beverages consumed in Chile. Pisco is a distilled wine spirit, produced exclusively in the III and IV Regions of Chile.


24

---



The table below sets forth our estimates of Spirits consumption in Chile during each of the last five years:   Year

   **Total Spirits Sales Volume** (1)

   Per Capita(in millions of liters)

   (liters)2012

   63

   42013

   68

   42014

   70

   42015

   71

   42016

   71

   4(1) Source: Canadean, Global Beverage Forecast of March 2017.
  On October 1, 2014, the Chilean Tax Reform Act became effective, bringing a series of changes to tax rates and tax schemes. There has been an increase in excise taxes for alcoholic and sugar containing beverages in Chile. The new excise taxes are as shown in the following table:   Category

   Previous Tax

   Current TaxBeer

   15.0%

   20.5%Wine

   15.0%

   20.5%Spirits

   27.0%

   31.5%Sugar containing Softdrink(1)

   13.0%

   18.0%No sugar containing Softdrink(2)

   13.0%

   10.0%Flavored Water

   13.0%

   10.0%(1) More than 15gr./240ml of sugar(2) With 15 gr./240ml or less of sugar   International Business Operating segment The Argentine beer market is estimated by us to be 2.3 times the size of Chile’s. Traditionally, beer and wine have been the principal alcoholic beverages consumed in the country. We estimate that annual beer consumption in Argentina was 1,812 million liters in 2016 or approximately 42liters per capita, reflecting a 3.3% industry decrease for 2016.  The table below sets forth our estimates of beer, functional, spirits and cider consumption, which are the categories we participate in Argentina, during each of the last five years: ArgentinaTotal Sales Volume

   

   Per Capita(in millions of liters)

   

   (liters)Year

   Beer

   Functional Drinks

   Spirits

   Cider

   

   Beer

   Functional Drinks

   Spirits

   Cider2012

   1,870

   105

   128

   94

   

   45

   3

   3

   22013

   1,849

   112

   129

   97

   

   44

   3

   3

   22014

   1,833

   117

   130

   94

   

   43

   3

   3

   22015

   1,875

   124

   130

   93

   

   43

   3

   3

   22016

   1,812

   118

   134

   87

   

   42

   3

   3

   2Source: Canadean, Global Beverage Forecast of March 2017.


25

---



Excise taxes for the beverage industry in Argentina have been subject to variations in the past. The last modification was in 1999 and has been applicable since January 2000. The following table shows current Argentine excise beverage taxes:  Product Type

   Current Excise TaxesNon-Alcoholic BeveragesFlavored soft drinks, mineral water and juices

   4.17% - 8.7%Alcoholic BeveragesBeer

   8.7%Whisky

   25%10-29% alcohol content

   25%30% or more alcohol content

   25%Wine-cider

   0%   In Uruguay, we participate in the beer and non-alcoholic beverages categories since our entrance to the market in 2012. The table below sets forth our estimates of beer and non-alcoholic categories consumption, in which we participate in Uruguay:  UruguayTotal Sales Volume

   

   Per Capita(in millions of liters)

   

   (liters)Year

   Beer

   Carbonated Soft drinks

   Nectar & Juices

   Water(1)

   

   Beer

   Carbonated Soft drinks

   Nectar & Juices

   Water(1)2012

   100

   383

   27

   268

   

   29

   112

   8

   782013

   100

   395

   29

   305

   

   29

   115

   9

   892014

   104

   395

   31

   329

   

   30

   114

   9

   952015

   106

   386

   33

   360

   

   31

   111

   10

   1042016

   107

   373

   32

   387

   

   31

   107

   9

   111Source: Canadean, Global Beverage Forecast of March 2017.(1)Includes HOD, packaged water, flavored water, enhanced water.
 In Paraguay, we participate in the beer and non-alcoholic beverages categories since our entrance to the market in 2013, both proprietary and under license. The table below sets forth our estimates of beer and non-alcoholic categories consumption, in which we participate in Paraguay:  ParaguayTotal Sales Volume

   

   Per Capita(in millions of liters)

   

   (liters)Year

   Beer

   Carbonated Soft drinks

   Nectar & Juices

   Water(1)

   

   Beer

   Carbonated Soft drinks

   Nectar & Juices

   Water(1)2012

   280

   546

   54

   214

   

   43

   84

   8

   332013

   285

   543

   59

   231

   

   44

   83

   9

   352014

   289

   554

   60

   261

   

   43

   83

   9

   392015

   290

   541

   62

   284

   

   43

   80

   9

   422016

   296

   535

   65

   302

   

   43

   78

   9

   44Source: Canadean, Global Beverage Forecast of March 2017.(1)Includes HOD, packaged water, flavored water, enhanced water.
 Wine Operating segment We estimate wine consumption in Chile was approximately 13 liters per capita in 2016. Given that the Chilean wine industry is fragmented, no single wine producer accounts for the majority of production and/or sales.The


leading wineries include, other than VSPT, Viña Concha y Toro S.A.(“Concha y Toro”), Viña Santa Rita S.A. (“Santa Rita”) and Bodegas y Viñedos Santa Carolina S.A.(“Santa Carolina”).In addition, there are numerous medium-sized wineries, including Viña Undurraga S.A. (“Undurraga”), Cousiño Macul S.A. (“Cousiño Macul”) and Viña Montes. Chile’s formal wine market includes all wineries that sell wine products that comply with industry and tax regulations. VSPT is a member of the formal wine market, as are most other principal wineries in Chile. The informal wine market is composed of many small wine producers. The Agricultural and Livestock Service (Servicio Agrícola y Ganadero, or “SAG”) is the entity in charge of wine industry regulation and principally oversees inventory records and product quality.


26

---



The following chart shows our estimates for the formal wine market and per capita consumption levels for wine in Chile for the last five years: Year

   **Total Volume******(1)

   Per Capita(in millions of liters)

   (liters)2012

   226

   132013

   227

   132014

   225

   132015

   231

   132016

   233

   13(1) Source: Canadean, Global Beverage Forecast of March 2017.
  Wines in Chile can be segmented by product type. Chilean wineries produce and sell premium, varietal and popular-priced wines within the domestic market. Premium wines and many of the varietal wines are produced from high-quality grapes, aged and packaged in glass bottles. Popular-priced wines are usually produced using non-varietal grapes and are not aged. These products are generally sold in either cartons or jug packaging.


27

---



Production and Marketing Chile Operating segment  The production, marketing and sales of beverages in Chile generated Net sales of CLP 835,430 million, CLP 909,460million and CLP 997,376 million, or 64.4%, 60.7% and 64.0% of our total Net sales, in 2014, 2015 and 2016, respectively. Our sales by volume in Chile increased 4.5% in 2016.  Under each license agreement, we have the right to produce and/or sell and distribute the respective licensed products in Chile. Generally, under our license agreements, we are required to maintain certain standards of quality with respect to the production of licensed products, to achieve certain levels of marketing and, in certain cases, to fulfill minimum sales requirements. We believe that we are in compliance with the quality of all of our license agreements.  Cristal is our principal and best selling beer brand in Chile, followed by Escudo, the second most popular beer in the country. Other relevant brands are: Royal Guard, our single, proprietary, premium brand; Morenita in the dark beers; Dorada as our convenience brand; and Stones a flavored sweetened beer, with 2.5% alcohol content. From time to time, we introduce innovations in our most relevant brands, highlighting during 2016 the following: Cristal Radler, Szot, Guayacán and Maracuyá Stones. Royal Scotch Ale as of April 2017.  In October 2001, Cervecería Austral entered into a license agreement with our subsidiary Cervecera CCU Chile Limitada (“Cervecería CCU”) to produce and sell our brand Cristal, any other brand owned by or licensed to Cervecería CCU in the southern part of Chile, as well as produce the Austral brand by our beer division. This agreement is currently renewable for periods of two years, subject to compliance with the contract conditions.  On April 28, 2003, through our subsidiaries Cervecería CCU and CCU Argentina, we and Heineken Brouwerijen B.V. signed license and technical assistance agreements providing us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina commencing June 18, 2003. On October 12, 2011, we signed with Heineken Brouwerijen B.V. the Amended and Restated versions of the Trademark License Agreements, which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina, as of January 1, 2011. These agreements have an initial term of 10 years, and shall automatically be renewed each January 1 for a new period of ten years, unless either party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires. Heineken beer is the leading brand in the premium segment, the beer segment with the highest growth in Chile in recent years.  On April 30, 2010, FEMSA announced the closing of the transaction pursuant to which FEMSA agreed to exchange 100% of its beer operations for a 20% economic interest in the Heineken Group. Since then, Heineken introduced the Sol brand to its portfolio, and in 2013 we launched the Sol brand in the north of Chile as a successful test plan to compete in the imported Mexican beer segment, and in 2014 we completed the national roll out of the brand. Since 2105 we produce Sol in our facilities. Similar to the Heineken brand, we have an exclusive 10 year, automatically renewable license on the same terms (rolling contract), each year for a period of 10 years, unless notice of non-renewal is given for Chile and Argentina. In addition, we also have the license to import, sell and distribute Tecate in Chile, under this licensing agreement.  During January 2015, we launched Coors and Coors Light in Chile. The license agreement with Coors Brewing Company considers after the initial termination date, the automatic renewal under the same conditions (Rolling Contract), each year for a period of 5 years, subject to the compliance with the contract conditions. Furthermore, we import, sell and distribute Blue Moon, under the same conditions.


28

---



The following table shows our proprietary parent beer brands, brands produced under license and brands imported under license for the Chilean Market:   Premium

   Mainstream

   ConvenienceRoyal Guard

   Cristal

   DoradaHeineken(1)

   Cristal Cer0,0°(2)Austral(1)

   EscudoKunstmann

   MorenitaD'olbek

   StonesSol(1)Coors(3)Tecate(4)Blue Moon(4)Szot (5)

   Guayacán (5)(1) Produced under license.(2) Non-alcoholic beer.(3) Imported/Produced under license.(4) Imported.(5) Distribution contract.
  Our beer products sold in Chile are bottled or packaged in returnable and non-returnable bottles, aluminum cans or stainless steel kegs at our production facilities in the Chilean cities of Santiago, Temuco, Valdivia and Punta Arenas.  During the last three years we sold our beer products in Chile in the following containers:   Percentage of Total Beer Products SoldContainer

   2014

   

   2015

   

   2016Returnable (1)

   44%

   

   42%

   

   37%Non-returnable (2)

   52%

   

   55%

   

   59%Returnable kegs (3)

   3%

   

   4%

   

   4%Total

   100%

   

   100%

   

   100%(1) Returnable beer containers include glass bottles of various sizes.(2) Non-returnable beer containers include bottles and aluminum cans, both of assorted sizes.(3) Returnable kegs are stainless steel containers, which have a capacity of 20, 30 and 50 liters.
  The following table sets forth our beer sales volume breakdown in Chile by category, for each of the last three years:  Category

   2014

   2015

   2016Premium

   18%

   20%

   21%Mainstream

   78%

   76%

   75%Convenience

   4%

   4%

   4%Total

   100%

   100%

   100%


29

---



Our soft drinks includes proprietary brands, in addition to brands produced under license from PepsiCo, Inc, Schweppes Holdings Ltd and Promarca, which are produced in three production plants: Santiago, Temuco and Antofagasta. We have a line of bottled mineral water since 1960, under our two proprietary brand names, Cachantun and Porvenir, which are bottled and distributed nationally from our two natural sources located within the central region of Chile (Casablanca and Coinco). We also produce and distribute purified waters under license from Societé des Produits Nestlé S.A. and others, and distribute the imported brand Perrier.  In 1994, our subsidiary ECUSA and Cadbury Schweppes plc (“Cadbury Schweppes”), the latter through its subsidiaries CS Beverages Ltd. and Canada Dry Corporation Ltd., entered into license agreements for all Cadbury Schweppes products. On December 11, 1998, The Coca-Cola Company announced an agreement with Cadbury Schweppes to acquire certain of the latter's international beverage brands, including those licensed to ECUSA, and in August 1999 the agreement was reported to have been consummated. In September 2000, after more than a year’s litigation, both in Chile (suits at civil courts and antitrust authorities) and England (arbitration under ICC rules), ECUSA and The Coca-Cola Company reached an agreement superseding ECUSA’s previous license contracts with CS Beverages Ltd. and Canada Dry Corporation Ltd. The new agreement, referred to as the “Bottler Contract”, was executed between ECUSA and Schweppes Holdings Ltd, concerning the Crush and Canada Dry brands, and was approved by the Chilean antitrust commission, thus putting an end to the proceeding regarding the Cadbury Schweppes brands issue and dismissing all complaints filed in consideration of the agreement. On January 15, 2009, the parties executed an amendment to the Bottler Contract which, among others, extended its duration until December 31, 2018, renewable for consecutive five-year periods provided that certain conditions are fulfilled.  In August, 2002, we began importing, selling and distributing Gatorade, a sport drink. In March 2006, a new exclusive bottling agreement was executed between ECUSA and Stokely Van-Camp, Inc., a subsidiary of PepsiCo, Inc., authorizing ECUSA to bottle, sell and distribute Gatorade products in Chile, for an initial term ending on March 31, 2010, automatically renewable for successive two or three-year periods if certain conditions set forth in the contract are met. In 2012, this agreement was renewed until March 31, 2015. At this time the Gatorade license is set to expire in December 2018, renewable for an additional period equal to the duration of the Shareholders Agreement of Bebidas CCU-PepsiCo SpA, subject to the compliance with the contract conditions. Since October 2006, we have been producing Gatorade locally.  In February 2005, we launched Mas, a sugar free product made of mineral water, calcium and flavor, creating a new category of flavored water.  In November 2007, ECUSA signed an exclusive bottling agreement with Pepsi Lipton International Limited, authorizing ECUSA to produce, sell and distribute ready to drink tea beverages in Chile. This agreement terminates on March 31, 2020.  The license agreement for nectar products with Watt’s, which granted us exclusive production rights, was first signed in June 1977 and originally had a 33-year term. In February 1999, a new license agreement was signed allowing us to produce new flavors and bottle Watt’s nectars in non-returnable packaging (wide mouth glass and plastic bottles). A new license agreement between us and Watt’s S.A. was signed in July 2004. This new contract provided us with a ten-year license renewable automatically for three consecutive periods of three years if the conditions set forth in the contract were fulfilled at the date of renewal. In December 2006, we signed a joint venture agreement with Watt’s S.A., under which, as of January 30, 2007, we participate in equal parts in Promarca S.A. This new company owns the brands “Watt’s”, “Watt’s Ice Frut”, “Yogu Yogu”, “Shake a Shake” and “Frugo”, among others in Chile. Promarca S.A. granted both of its shareholders(New Ecusa S.A., a subsidiary of ECUSA, and Watt ́s Dos S.A., a subsidiary of Watt ́s S.A.),for an indefinite period, the exclusive licenses for the production and sale of the different product categories.  Since December 2007, through our subsidiary Aguas CCU, we produce and sell the Nestlé Pure Life brand in Chile under a license contract of the same date, with an initial term of five years, renewable for successive periods of five years if certain conditions are met. And since 2012, under the Manantial brand we carry out the business of home and office delivery of purified water in bottles with the use of dispensers (HOD).


30

---



On October 2013, CCU together with its subsidiary ECUSA executed a series of contracts and agreements with PepsiCo Inc. and affiliates, which allowed them to expand their current relationship in the non-alcoholic beverages segment with specific focus on the carbonated soft drinks, as well as extending long-term relationship duration. Pursuant to these agreements, which take into account the creation of an affiliate, Bebidas CCU-PepsiCo SpA, the licenses to produce, sell and distribute in Chile Pepsi, 7up and Mirinda (Pepsi brands) and Bilz, Pap, Kem and Nobis (CCU brands) were granted to ECUSA until December 2043.  In line with our multicategory business strategy, in November 2015, we entered to the ready-to-mix category into a joint operation agreement with Carozzi, for the production, commercialization, and distribution of instant powder drinks under the brands Sprim, Fructus, Vivo and Caricia, and in December 2015 we started to distribute Red Bull in Chile.Aligned with our innovation process in non-alcoholic beverages during 2016, we strengthened our position in the light segment with the launches of Pepsi Zero, Crush Zero, Canada Dry Limon Soda Zero and Ocean Spray Light.  The following table shows the soft drink and water parent brands produced and/or sold and distributed by us through our non-alcoholic subsidiary ECUSA, during 2016:  Brand

   Product

   Category

   Affiliation(1)Bilz

   Soft Drink

   Non-Cola Proprietary

   CCU ProprietaryPap

   Soft Drink

   Non-Cola Proprietary

   CCU ProprietaryPop Candy

   Soft Drink

   Non-Cola Proprietary

   CCU ProprietaryKem

   Soft Drink

   Non-Cola Proprietary

   CCU ProprietaryNobis

   Soft Drink

   Non-Cola Proprietary

   CCU ProprietaryCanada Dry Ginger Ale

   Soft Drink

   Non-Cola Licensed

   SchweppesCanada Dry Agua Tónica

   Soft Drink

   Non-Cola Licensed

   SchweppesCanada Dry Limón Soda

   Soft Drink

   Non-Cola Licensed

   SchweppesCrush

   Soft Drink

   Non-Cola Licensed

   SchweppesPepsi

   Soft Drink

   Cola Licensed

   PepsiCoSeven-Up

   Soft Drink

   Non-Cola Licensed

   PepsiCoLipton Ice Tea

   Ice Tea

   Non-Cola Licensed

   PepsiCoMirinda

   Soft Drink

   Non-Cola Licensed

   PepsiCoGatorade

   Isotonic

   Functional

   PepsiCoOcean Spray

   Nectars

   Licensed

   PepsiCoAdrenaline Red

   Energy

   Licensed

   PepsiCoLife Water

   Functional Drink

   Licensed

   PepsiCoRed Bull

   Energy

   Licensed

   Red BullFrugo

   Soft Drink

   Licensed

   PromarcaWatt’s

   Nectars

   Licensed

   PromarcaWatt’s Selección

   Nectars

   Licensed

   PromarcaCachantun

   Mineral Water

   Proprietary

   Aguas CCUMas

   Flavored Water

   Proprietary

   Aguas CCUMas Woman

   Flavored Water

   Proprietary

   Aguas CCUPorvenir

   Mineral Water

   Proprietary

   Aguas CCUPerrier

   Mineral Water

   Licensed

   NestléNestlé Pure Life

   Purified Water

   Licensed

   Nestlé & othersManantial

   HOD

   Proprietary

   ManantialVivo

   Ready-to-mix

   Licensed

   Bebidas Carozzi CCUFructus

   Ready-to-mix

   Proprietary

   Bebidas Carozzi CCUSprim

   Ready-to-mix

   Proprietary

   Bebidas Carozzi CCUCaricia

   Ready-to-mix

   Licensed

   Bebidas Carozzi CCU(1)CCU owns indirectly 50% of Promarca and 50.1% of Aguas CCU.

   Aguas CCU and ECUSA own 99.08% and 0.92% of Manantial, respectively.

   ECUSA owns 50% of Bebidas Carozzi CCU.


31

---



During the last three years, we sold our non-alcoholic beverageproducts in the following packaging formats:  Soft drinks

   

   Mineral, purified and flavored waterContainer

   2014

   

   2015

   

   2016

   

   2014

   

   2015

   

   2016Returnable(1)

   28%

   

   27%

   

   28%

   

   28%

   

   28%

   

   28%Non-returnable(2)

   70%

   

   71%

   

   69%

   

   72%

   

   72%

   

   72%“Post-Mix”(3)

   2%

   

   2%

   

   2%

   

   -

   

   -

   

   -Total

   100%

   

   100%

   

   100%

   

   100%

   

   100%

   

   100%(1)Returnable soft drink containers include both glass and plastic bottles of assorted sizes. Returnable water containers include glass bottles of assorted sizes and returnable 20-liter jugs and HOD.(2)Non-returnable soft drink containers include glass and plastic bottles, and aluminum cans of assorted sizes. Non-returnable water containers include plastic bottles and certain glass bottles of assorted sizes.(3)Post-mix cylinders are sold specifically to on-premise locations for fountain machines.
  The following table shows the sales mix of our non-alcoholic beverages by category during each of the last three years:  Category

   2014

   2015

   2016Carbonated soft drinksColasLicensed

   16%

   15%

   16%Non-colasProprietary

   36%

   35%

   34%Licensed

   23%

   23%

   22%Non-carbonated soft drinksNectarsLicensed

   22%

   22%

   22%OthersLicensed

   3%

   4%

   6%Soft drinks total

   100%

   100%

   100%Mineral waterProprietary

   44%

   43%

   41%Licensed

   0%

   0%

   0%Purified waterLicensed

   8%

   11%

   12%Flavored waterProprietary

   20%

   19%

   19%HOD

   28%

   27%

   28%Total Bottled Water

   100%

   100%

   100%
  After the completion of the CPCh transaction with Control, we expanded our proprietary parent brand portfolio considerably, adding brands such as Campanario in the mainstream and cocktail categories, as well as Control C, Mistral, Horcón Quemado and Tres Erres MOAI in the ultra-premium segment, Mistral, Bauzá and 3RRR in the premium segment and La Serena in the popular-priced category. Furthermore, from time to time we introduce new brand extensions and flavors. For example, during 2016 we introduced Campanario Sparkling Sour and its Mango sour version. Our spirits were produced at four plants which are located in Regions III and IV of Chile. The bottling process was done in the Ovalle plant bottling facility. Horcón Quemado is produced and bottled in a third-party plant.  In the rum market, our proprietary parent brands are Cabo Viejo and Sierra Morena. Also, CPCh distributes Pernod Ricard products, including Chivas Regal, Ballantine’s, Havana Club and Absolut, among others.  The following table shows our parent pisco brands:


32

---



Premium

   Mainstream

   ConvenienceControl C

   Campanario

   La SerenaMistral

   Mistral IceMOAI

   Bauzá Ice(1)Horcón Quemado

   RutaTres ErresBauzá(1)(1) In January 2016 CPCh divested its interest in Compañía Pisquera Bauzá S.A.
  International Business Operating segment Our operation in International Business generated Net sales of CLP 299,668 million, CLP 405,714 million and CLP 370,109 million, representing 23.1%, 27.1% and 23.7% of our total Net sales in the last three years, respectively.  CCU, through its subsidiary CCU Argentina, produces beers at its plants located in the cities of Salta, Santa Fe and Luján. Our main brands are Schneider, Imperial, Palermo, Santa Fe, Salta, and Córdoba and we hold exclusive license agreements for the production and marketing of Budweiser, Heineken, Amstel and Sol. CCU Argentina imports the Kunstmann brand. Furthermore, it exports beer to several countries, mainly under the brands Schneider and Heineken. Also, CCU is the exclusive distributor in Argentina of Red Bull energy drink.  On April 28, 2003, CCU Argentina and Heineken Brouwerijen B.V., a subsidiary of Heineken International B.V., signed license and technical assistance agreements that provide us with the exclusive rights to produce, sell and distribute Heineken beer in Argentina commencing June 18, 2003. On October 12, 2011, we and Heineken Brouwerijen B.V. signed the Amended and Restated versions of the Trademark License Agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Argentina, in force as of January 1, 2011. These agreements have an initial term of 10 years, and shall automatically be renewed each year (January 1st) for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires. Heineken beer is the second-largest brand in terms of volume in the premium segment in Argentina.  In October 2006, we signed a long-term contract with ICSA to brew, bottle and package beer in the former AmBev plant in Luján, near Buenos Aires, that was purchased by ICSA. In January 2007, we began brewing our local brands in this plant, obtaining enough production capacity to ensure future growth. In April 2008, we acquired ICSA, including the Luján plant and the brands Imperial, Bieckert and Palermo. ICSA also had a brewing contract agreement with AmBev and, under such contract CICSA brewed beer for AmBev during the peak demand season of 2008-2009.  The license agreement between CCU Argentina and Anheuser-Busch LLC, which provides CCU Argentina with the exclusive right to produce, package, market, sell and distribute Budweiser beer in Argentina and Uruguay, had an initial term of 20 years commencing in December 1995, which in March 2008, was extended to December 2025. Among other things, the license agreement includes provisions for both technical and marketing assistance from Anheuser-Busch LLC. Under the license agreement, CCU Argentina is obligated to purchase certain raw materials from Anheuser-Busch Incorporated or from suppliers approved by Anheuser-Busch LLC. We began distribution of our locally produced Budweiser in December 1996. See “– Sales, Transportation and Distribution”. In addition, the license agreement is subject to certain specified market share targets and marketing expenditures. In 2010, the license agreement was modified due to regulatory reasons under the context of the merger between Anheuser-Busch LLC and InBev. As a result, certain contractual restrictions were released, and rights granted to Anheuser-Busch LLC waived, both in favor of CCU Argentina.  In November 2011, we signed an addendum to the import and distribution contract with Cervecería Modelo S.A. de C.V., including a clause that specified the automatic renewal of the contract for a period of four years at the end


of 2014 provided that CICSA would meet certain minimum purchases goal. In that case, the agreement would last until December 31, 2018.


33

---



In 2011, we started to export Schneider beer to Paraguay through Bebidas del Paraguay, and in 2013 to Uruguay through Milotur.  In 2012, the Company began in Argentina the migration process to its new proprietary returnable bottle in place of the generic container currently in the industry. The decision to implement this important project was based primarily on the change introduced by the main market player, who in 2011 started to replace the use of generic packaging by a proprietary container for one liter returnable products. The proprietary container’s use results in significant important changes in logistics processes, including the adaptation of the building structure of plants, the acquisition of specific equipment, the adaptation of production lines and agreements with glass bottles and crates suppliers in order to achieve the timely supply of the new bottling process required inputs. The introduction of these proprietary returnable bottles resulted in significant impacts on the industry’s value chain, with higher operating costs associated with the operation of recovery and classification of packaging that significantly affect the level of profitability and industry ́s return on capital employed (ROCE). This transition process requires significant investments between 2012 and 2017 mainly in packaging, equipment and infrastructure. To partially finance these investments, bank loans were obtained in local currency with long repayment periods, mitigating the risk of exchange rate and interest rate fluctuations thereby minimizing the fluctuation risk.  On November 29, 2012, CICSA and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rights to produce, sell and distribute Heineken beer in Argentina and Paraguay. This agreement has an initial term of 10 years, and will be automatically renewed for a five years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.  In 2013 the production of Budweiser beer started in Luján, in addition to Heineken which was already being brewed since 2009. Currently Santa Fe and Luján Plants produce both brands. Additionally, the production of Amstel beer was launched under the license of Amstel Brouwerijen BV, an affilliate of Heineken International.  In 2013 we started exporting Heineken to Uruguay through Milotur and in 2015 to Bolivia through BBO.  In June 2014, CICSA reached agreements with Cervecería Modelo S.A. de C.V. and Anheuser-Busch LLC, for the termination of the contract which allows CICSA to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. CICSA received compensation in respect of these agreements in the amount of ARS 277.2 million, equivalent to USD 34.2 million.  In September 2014, CICSA began with the exclusive distribution in Argentina of imported Sol beer; the Sol beer brand is owned by Heineken. This licensing agreement is for a period for 10 years in Argentina, automatically renewable on the same terms (rolling contract), each year for a period of 10 years, unless notice of non-renewal is given.  On July 15, 2015, CICSA, BBO and Heineken Brouwerijen B.V. signed the Ancillary Trademark License Agreement which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Bolivia, in force as of January 1, 2015. This agreement has an initial term of 10 years, and will be automatically renewed for a five years period unless any party gives notice of its decision not to renew, in which case the agreement will be in force until the last renewal period expires.  In August 2016 CICSA signed a license and distribution agreement with Coors Brewing Company to manufacture, package, commercialize and distribute the Miller brands in Argentina. We started to commercialize and distribute Miller Genuine Draft in April 2017, and plan to start production of the brand in our own facilities as of May 2017.  In addition, CCU Argentina participates in the cider business, with the leading Real brand and other brands such as La Victoria and 1888. Also, we participate in the liquor business, under the El Abuelo brand, in addition to importing other liquors from Chile.


34

---



On June 4, 2013, CICSA, Milotur and Heineken Brouwerijen B.V. signed a trademark license agreement that provides us with the exclusive rights to produce, sell and distribute Heineken beer in Uruguay, in force as of May 1, 2013. This agreement has an initial term of 10 years, and automatically renews on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires. In Uruguay, we participate in the mineral and flavored water business with the Nativa brand, in soft drinks with the Nix brand, and in Watt's branded nectars. In addition, we import Heineken, Schneider and Kunstmann beer, as well as the cider brand Real.  In Paraguay we participate in the beer and non-alcoholic categories since our entrance to the market in 2013, with the introduction of new brands such as Zuma, and the acquisition of the craft brewery related to the beer brand Sajonia.  At present we produce and market premium, medium-priced and popular-priced beer brands in the International Business Operating segment, which includes Argentina, Uruguay and Paraguay. The following table shows our principal brands produced, imported, commercialized and/or distributed under license in Argentina in 2016:  Premium

   Mainstream

   Conveniencebeer brands

   beer brands

   beer brandsHeineken(1)

   Budweiser (1)

   CórdobaSol (1)

   Salta

   PalermoKunstmann (2)

   Santa Fe

   BieckertImperial

   SchneiderAmstel (1)Guinness(2)(3)

   Negra Modelo(2)(3)

   Corona(2)(3)

   Otro Mundo(4)

   Miller (5)(1)Produced under license.(2)Imported.

   (3)Up to June 2014.

   (4)Up to August 2015.(5)As of April 2017.
    The following table sets forth our beer sales volume in Argentina by category during each of the last three years, including exports to other countries:  Category

   Argentina2014

   2015

   2016Premium

   18%

   19%

   21%Mainstream

   62%

   62%

   62%Convenience

   20%

   19%

   17%Total

   100%

   100%

   100%


35

---



Our beer products are bottled or packaged in returnable and non-returnable glass bottles, aluminum cans, or stainless steel kegs at our production facilities. During the last three years, we sold our beer products in Argentina in the following packaging formats:  Container

   Percentage of Total Beer Sold in Argentina2014

   2015

   2016Returnable (1)

   81%

   76%

   72%Non-returnable (2)

   18%

   23%

   27%Returnable kegs (3)

   1%

   1%

   1%Total

   100%

   100%

   100%(1) Returnable beer containers include glass bottles of various sizes.(2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted sizes.(3)Returnable kegs refer to stainless steel containers in assorted sizes.
   Wine Operating segment VSPT is one of Chile’s largest producers and distributors of wine in terms of sales volume and Net sales. Our wine Operating segment sales amounted to CLP 172,349 million, CLP 189,515 million and CLP 201,402 million or 13.3%, 12.6% and 12.9% of our total Net sales in the last three years, respectively. VSPT is composed of seven different wineries in Chile and two in Argentina. Its principal vineyards are located in Molina, approximately 200 kilometers south of Santiago. The VSPT estate in Molina is one of the largest single-site vineyards in Chile with an area of 1,064 hectares. As of December 31, 2016, VSPT’s vineyards covered an aggregate of 3,489 hectares in Chile, distributed among 10 different plantations. The winery also has 339 hectares under long-term leases. In Argentina, we have another 379 planted hectares located in the province of Mendoza.  The following table indicates the breakdown of Wine Operating segment’s volume in the domestic and export markets, including sales from FLC and Tamarí in Argentina: Year

   DomesticVolume

   **ExportVolume******(1)

   Total Volume(in millions of liters)2012

   60

   72

   1322013

   61

   70

   1312014

   62

   71

   1332015

   62

   76

   1382016

   64

   78

   142(1)Includes Argentinian operations and bulk sales.  According to Nielsen, the Wine Operating segment’s share by value of Chile’s formal wine market was approximately 27.2% in 2014, 27.4% in 2015 and 28.7% in 2016. According to the Wines of Chile Association, Wine Operating segment’s share of Chile’s total wine export sales by volume was 13.6%, 13.5% and 12.9% in the last three years, respectively.  Viña San Pedro, Viña Tarapacá, Viña Leyda, Viña Santa Helena, Viña Misiones de Rengo, Viña Mar, Viña Casa Rivas in Chile and Finca La Celia and Tamarí in Argentina, produce and market premium, varietal and popular-priced wines.The principal brands are set forth below:


36

---



Brand

   

   Icon

   Premium

   Varietal

   Popular-PricedViña San PedroAltaïr

   XSideral

   XCabo de Hornos

   XKankana del Elqui

   XTierras Moradas

   X1865

   

   XCastillo de Molina

   

   XÉpica

   

   X35 South

   

   

   XUrmeneta

   

   

   XGato Negro

   

   

   XGato

   

   

   

   XManquehuito

   

   

   

   XSan Pedro Exportación

   

   

   

   XViña TarapacáTarapakay

   XGran Reserva Etiqueta Azul

   XGran Reserva Etiqueta Negra

   

   XTarapacá Gran Reserva

   

   XGran Tarapacá

   

   XTarapacá Reserva

   

   XTarapacá Varietal

   

   

   XLeón de Tarapacá

   

   

   XViña Santa HelenaParras Viejas

   XVernus

   

   XSelección del Directorio

   

   XSiglo de Oro

   

   

   XSanta Helena Varietal

   

   

   XAlpaca

   

   

   XGran Vino

   

   

   

   XSanta Helena

   

   

   

   XViña Misiones de RengoMisiones de Rengo Cuvée

   

   XMisiones de Rengo Reserva

   

   XMisiones de Rengo Varietal

   

   

   XMisiones de Rengo Espumante

   

   X

   XViña MarViña Mar

   

   X

   XViña Mar Espumante

   

   X

   XCasa RivasCasa Rivas Reserva

   

   XViña LeydaLeyda Lot

   XLeyda Reserva

   

   XLeyda Single Vineyard

   

   XLa CeliaLa Celia Supremo

   XLa Celia

   

   XLa Consulta

   

   XLa Finca

   

   

   XEugenio Bastos

   

   

   XTamariTamarí Zhik

   XTamarí Reserva

   

   X


37

---



The following table presents our breakdown of total sales volume in thousands of liters by category of the Wine Operating segment during 2016:   Category

   

   Domestic

   

   Export(1)

   

   Total(in thousands of liters)Premium

   

   6,496

   

   8,303

   

   14,799Varietal

   

   7,256

   

   58,129

   

   65,386Popular-Priced

   

   50,718

   

   7,911

   

   58,629Bulk

   

   0

   

   3,583

   

   3,583Total

   

   64,470

   

   77,927

   

   142,397(1) Includes Argentinean operations and bulk wine   Domestic Market. Our Chilean domestic wine is packaged in bottles, jugs, cartons, and bag-in-box containers at VSPT’s production facilities in Lontué1, Molina and Isla de Maipo. The following chart shows our packaging mix for domestic wine sales for the last three years:   Container

   

   Percentage of Total DomesticWine Sold in Chile

   ****2014

   

   2015

   

   2016Carton

   

   54%

   

   51%

   

   49%Glass Bottles

   

   46%

   

   49%

   

   51%Bag-in-Box

   

   -

   

   -

   

   -Total

   

   100%

   

   100%

   

   100%    Export Market.According to industry sources, exports of Chilean wine increased from approximately 43 million liters in 1990 to 908 million liters in 2016, at a compounded annual growth rate of 12%. During 2015 and 2016, Chilean wine exports reached 877 million liters and 908 million liters, respectively. We believe that Chilean wine exports have grown steadily due to their comparatively low prices and positive international image, as well as due to external factors, such as low wine production in the Northern Hemisphere in certain years.  VSPT exported from Chile 68 million liters in 2014, 73 million liters of wine in 2015, and 74 million liters of wine in 2016. During 2016, VSPT exported wine to more than 80 countries worldwide. Exports accounted for Net sales of CLP 108,064 million, CLP 123,544 million and CLP 131,168 million, in the last three years, respectively. In 2016, VSPT’s primary export markets included the United States, Japan, Brazil, Finland, Paraguay, the Netherlands and China.  Most exported wine is sold in glass bottles, except for a certain quantity of unbranded wine that is occasionally sold in bulk, as well as the amount that is sold in bag-in-box containers. The following chart shows our packaging mix for export Chilean wine volume in the last three years:   Container

   

   Percentage of Total ExportWine Volume from Chile2014

   

   2015

   

   2016Glass Bottles(1)

   

   85%

   

   86%

   

   86%Bulk

   

   3%

   

   4%

   

   4%Bag in box

   

   13%

   

   10%

   

   10%Total

   

   100%

   

   100%

   

   100%(1)Includes jugs.    1As of January 2017 Lontué continues as storage location only.


38

---



Raw Materials and other Supplies  The main raw materials we use are sugar, soft drink concentrates, fruit pulps, malt, rice, hops, grapes and water. The sugar and fruit pulps we use are from local and international origin suppliers. We obtain our supply of malt through long term contracts with malt suppliers from Chile and Argentina. Rice is sourced mainly from international suppliers in spot transactions.  Water is essential in our production. We obtain all of our water from wells located at our plants and/or from public utilities. The water is treated at facilities located at our plants to remove impurities and to adjust the characteristics of the water before it is used in the production process.  We own two mineral water sources in Chile from which the Cachantun and Porvenir brand mineral water products are obtained. These water springs are located in two areas near Santiago: Coinco and Casablanca, respectively. All of our mineral water products are bottled at their respective sources and distributed throughout the country. Purified water is produced with water pumped from our wells located in the plant.  The most relevant packaging materials are: glass bottles, aluminum cans, PET bottles, caps, films, labels, corrugated cases and folding cartons. Long term contracts are signed with the main strategic suppliers.  Glass bottles used in our packaging are purchased from the main local glass suppliers, Cristalerías Chile S.A. and Verallia Chile S.A. and Cristalerías Toro S.A.I.C in Chile, and Rigolleau S.A, Cattorini Hnos S A I C F E I, and Owens Illinois Argentina S.A. in Argentina. During 2016, all of our aluminum cans were purchased from global suppliers, Ball Chile S.A. and Ball Argentina S.A. We buy our labels, films and corrugated cartons mainly from local suppliers. The majority of our PET resins are imported from Asia. Bottles and injected preforms are produced by our subsidiary Plasco.  We maintain testing facilities at each of our plants and factories where raw materials are analyzed according to our standards. Additionally, the samples are analyzed at various stages of production to ensure product quality. For example, samples of Heineken, Cristal and Budweiser beer are periodically sent to the Heineken facilities in The Netherlands and to Anheuser-Busch facilities in the United States, respectively, to verify the quality of the product. Samples of Nestlé Pure Life water are sent to Perrier in France, and samples of Pepsi and Schweppes are analyzed by PepsiCo either at our plants or at the point of sale.  Prices of our main raw materials used in the production are tied to the U.S. dollar, and have fluctuated in Chilean and Argentine peso terms due to general commodity price fluctuations in the international markets as well as to the variation of the Chilean and Argentine peso against the U.S. dollar. In addition, from time to time, prices of grapes and wine have varied depending on fluctuations in demand and supply factors.  Standard and customary commercial terms and conditions are widely used in all our contracts and supply agreements. Strategic alliances and supplier diversification allow us to ensure low dependency from a single supplier of raw and packaging materials. During the past ten years, we have not experienced any material shortage or difficulties in obtaining adequate supplies of necessary raw materials, nor do we expect to do so in the future.  VSPT’s main raw materials and packaging materials are purchased and harvested grapes, purchased wine, bottles, carton containers, corks and cardboard boxes. VSPT obtained approximately 40.0% of the grapes used for export wines from our own vineyards during 2016. Of the wine sold in the domestic market, 9.7% are grapes from our vineyards.In 2016, approximately 40.7% of the wine used in domestic and export sales was purchased from ten local producers: Vinícola Patacón SpA, Agrícola y Comercial Bodegas de las Mercedes Ltda., Vitivinícola Melior Ltda., Anatolio Segundo Albornoz Vargas, Cooperativa Agrícola y Pisquera Elqui Ltda., Viñedos y Vinos S.A., Corretajes Torres y Cia Ltda., Comercial y Agrícola S.A, RR Wine Ltda., Viñedos Gurfinkel Ltda.VSPT has various alternative sources of supply, which can be used when they are attractive. VSPT’s bottles are mainly purchased from Cristalerías Chile and Verallia; however, when prices have been favorable, VSPT has purchased bottles from other local and international suppliers. Carton containers are purchased from SIG Combibloc Inc. and are assembled in VSPT’s own automated packing lines.


39

---



Sales, Transportation and Distribution Chile Operating segment We distribute all of our products in Chile directly to retail, supermarket and wholesale customers. This system enables us to maintain a high frequency of contact with our customers, obtain more timely and accurate marketing-related information, and maintain good working relationships with our retail customers.  After production, bottling and packaging, our beverages are either stored at one of our production facilities or transported to a network of 25 owned or leased warehouses that are located throughout Chile. Products are generally shipped from the region of production to the closest warehouse, allowing us to minimize our transportation and delivery costs.  In July 2002, Comercial Patagona Limitada began selling all of our beer products in the far south of Chile, Chile’s Region XII. Comercial Patagona Limitada is a subsidiary of Cervecería Austral and is responsible for the sales and distribution of our products and those of Cervecería Austral in Chile’s extreme south. Today Comercial Patagona Limitada does the selling for all our products, reaching 870 points of sale.  In October 2005, we launched Comercial CCU, a subsidiary responsible for a single sales force dedicated to selling our beverages, in order to capture synergies and focus on sales execution. Originally, this plan was piloted in rural areas and small cities in southern Chile. As of 2008, the territory covered by Comercial CCU S.A. has expanded to include the north of Chile from Arica to Copiapó/Vallenar, and the south, from Curicó to Coyhaique except for the city of Concepción.  As of August 2016, following the restructuring in Chile that encompassed combining the route-to-market of the beer and non-alcoholic categories in the whole country, Comercial CCU also covers the beer and non-alcoholic category in the Metropolitan Region including the capital Santiago, and several other large cities such as Viña del Mar, Rancagua, La Serena, and Concepción.  For areas not covered by Comercial CCU we have dedicated sales forces. Together with Comercial CCU we have a total sales force of 1,044 persons, reaching 127,062 points of sale, related to the Chile Operating segment. None of our customers accounted for more than 2.2% of our total sales by volume, with the exception of three large supermarket chains that represented in the aggregate 27.6% of our total sales by volume.  Our customers make payment for our products either in cash at the time of delivery or in accordance with one of several types of credit arrangement we offer. Payment on credit sales for the Chile Operating segment are generally due 28 days from the date of delivery. Credit sales accounted for 40.0%, 39.8% and 40.8% of our sales in Chile during 2014, 2015 and 2016, respectively. Losses on credit sales in Chile have not been significant.  Product distribution is carried out by Transportes CCU throughout the country or by Comercial Patagona Limitada in its territory.  Beginning in October 2001, all of the warehouses and transportation companies used to store and deliver all of our products are managed on a consolidated basis by our Transportes CCU.  We distribute our products throughout Chile to: ·off-premises retail: small and medium-sized retail outlets, which in turn sell beer to consumers for take-out consumption; ·on-premises retail: retail establishments such as restaurants, hotels and bars for on-premises consumption; ·wholesalers; and ·supermarket chains


40

---



In the last three years, the percentage mix of the above distribution channels for our products in Chile was as follows:   Percentage of Total Products SoldDistribution Channels

   2014

   2015

   2016Off-premise retail

   41%

   41%

   40%On-premise retail

   10%

   11%

   12%Wholesalers

   14%

   14%

   14%Supermarkets

   35%

   34%

   34%Total

   100%

   100%

   100%
    International Business Operating segment In Argentina, after production, bottling and packaging, our beer is either stored at the production facilities or transported to a network of six warehouses leased or owned by us. Beer products are generally shipped to warehouses which are located within the region in which the beer products are sold.  We have the capacity to reach 159,197 points of sale in Argentina with our direct and indirect sales force. We have six owned or leased warehouses. Approximately 54% of our beer in Argentina is sold and/or distributed through third-party sales and distribution chains, including two independent Coca Cola bottlers who distribute our products mainly in the north and south of the country, representing in the aggregate 20% of our total sales by volume. As of December 31, 2016, we had a direct sales force and four logistics operators which sold our beer products to approximately 36,099 customers within Salta, San Juan, San Luis, Mendoza, Córdoba, Santa Fé, Rosario, and Buenos Aires City, in addition to 77 regional and national supermarket chains throughout the country. None of our customers individually accounted for more than 4.3% of our total beer sales by volume.  Looking for greater operational efficiency, during 2016 we modified our route to the market, moving volume from direct sales to wholesalers within the outer Buenos Aires Metropolitan Area.  In Argentina, though most beer is sold through wholesalers and distributors, we also sell our products to retailers and supermarket chains. In the last three years, the percentage mix of the above distribution channels for our beer products in Argentina was as follows:  ArgentinaDistribution Channels

   2014

   2015

   2016Wholesalers/distributors

   50%

   49%

   54%Retailers

   33%

   31%

   28%Supermarkets

   17%

   20%

   19%Total

   100%

   100%

   100%
   In Uruguay our commercial distribution system reaches the whole country and all supermarkets. During 2016, as a result of restructuring, we changed from a direct sales system in Montevideo to an indirect sales system. In 2016, we reached approximately 15,200 points of sale through 25 distributors.


41

---



In the last three years, the percentage mix of the above distribution channels for our beer and non-alcoholic products in Uruguay was as follows:  UruguayDistribution Channels

   2014

   2015

   2016Indirect

   81%

   84%

   84%Retailers

   -

   -

   -Supermarkets

   19%

   16%

   16%Total

   100%

   100%

   100%
  In Paraguay, we have four distribution centers strategically located that enable us to attend with our direct sales force approximately 23,066 points of sale, including all supermarket chains. Supported by a network of distributors and wholesalers we reach a total of approximately 33,788 points of sale, which allows us to have national coverage with our products.  In the last three years, the percentage mix of the above distribution channels for our beer and non-alcoholic products in Paraguay was as follows: ParaguayDistribution Channels

   2014

   2015

   2016Indirect

   27%

   30%

   31%Retailers

   50%

   48%

   48%Supermarkets

   23%

   22%

   21%Total

   100%

   100%

   100%
   Our International Business customers either make payments for our products in cash at the time of delivery or through one of our various credit arrangements. In Argentina, payment on credit sales is currently due 15 days from the date of delivery to wholesalers, and an average of 71 days of delivery to supermarkets. Credit sales in Argentina accounted for 88% of total sales during 2016, while in Uruguay and Paraguay they accounted for 100% and 35% of total sales, respectively.  Wine Operating segment Domestic.After production, bottling, and packaging, wine is either stored at the production facilities or transported to one of our 25 warehouses located throughout Chile. VSPT wines are distributed and sold in Chile through our sales and distribution network, under the same system and payment terms as all our other products.  We distribute our wine products throughout Chile in the territories not covered by Comercial CCU or Comercial Patagona Limitada, with our own sales force, to:  ·off-premises retail: small and medium-sized retail outlets, which in turn sell wine to consumers for take-out consumption; ·on-premises retail: retail establishments such as restaurants, hotels and bars for on-premises consumption; ·wholesalers; and ·supermarket chains.


42

---



For the last three years, the percentage mix of the above distribution channels for our wine products in Chile was as follows:   Distribution Channels

   

   2014

   

   2015

   

   2016Off-premise retail

   

   34%

   

   33%

   

   31%On-premise retail

   

   5%

   

   5%

   

   5%Wholesalers

   

   22%

   

   24%

   

   25%Supermarkets

   

   39%

   

   38%

   

   39%Total

   

   100%

   

   100%

   

   100%   We reach a total of 29,339 points of sale with our dedicated sales force of 72 persons, together with the sales force of Comercial CCU. We do not maintain any long-term contractual arrangements for the sale of wine with any of our customers.  Export.VSPT has a presence in more than 80 countries. In order to increase its presence in the international market, we have distribution agreements with key distributors, such as Pernod Ricard in Sweden, Finland, Norway and Estonia; Shaw Ross International in the U.S.; Asahi in Japan; Interfood in Brasil; DGS and Baarsma in The Netherlands and Denner in Switzerland. In Canada we have distribution agreements with Phillipe Dandurand wines, in Korea with Keumyang, as well as agreements with other distributors.  Seasonality  Chile Operating segment As a result of the seasonality of our different beverages, our sales and production volumes are normally at their lowest in the second and third calendar quarters and at their highest in the first and fourth calendar quarters (i.e., those months corresponding to the holidays as well as the summer vacation season in Chile).  The following table shows our annual sales volume of beer, non-alcoholic beverages and spirits in Chile, excluding exports, by quarter in the last three years:  Seasonality Chile Operating segmentYear

   

   Quarter

   

   Sales Volume

   ****

   **% of Annual**

   Sales Volume(millions of liters)2014

   

   1st quarter

   

   455.5

   

   28%2nd quarter

   

   334.7

   

   21%3rd quarter

   

   354.8

   

   22%4th quarter

   

   476.6

   

   29%Total

   

   1621.6

   

   100%2015

   

   1st quarter

   

   474.0

   

   28%2nd quarter

   

   362.3

   

   21%3rd quarter

   

   367.3

   

   22%4th quarter

   

   484.5

   

   29%Total

   

   1688.2

   

   100%2016

   

   1st quarter

   

   511.1

   

   29%2nd quarter

   

   341.8

   

   19%3rd quarter

   

   380.2

   

   22%4th quarter

   

   531.2

   

   30%Total

   

   1764.3

   

   100%


43

---



International Business Operating segment As a result of the seasonality of the beverage industry with respect to the categories in which we participate, our sales and production volumes are normally at their lowest in the second and third calendar quarters and at their highest in the first and fourth quarters (i.e., those months corresponding to the summer and holiday seasons in the region). The following table shows the annual sales volume for the International Business operating segment, including exports, during each quarter in the last three years:  Seasonality International Business Operating segmentYear

   

   Quarter

   

   Sales Volume(*)

   

   **% of Annual**

   Sales Volume(millions of liters)2014

   

   1st quarter

   

   149.5

   

   28%2nd quarter

   

   96.7

   

   18%3rd quarter

   

   114.9

   

   21%4th quarter

   

   176.5

   

   33%Total

   

   537.5

   

   100%2015

   

   1st quarter

   

   154.6

   

   27%2nd quarter

   

   108.9

   

   19%3rd quarter

   

   127.3

   

   22%4th quarter

   

   179.0

   

   31%Total

   

   569.7

   

   100%2016

   

   1st quarter

   

   158.3

   

   27%2nd quarter

   

   98.1

   

   17%3rd quarter

   

   128.6

   

   22%4th quarter

   

   190.2

   

   33%Total

   

   582.4

   

   100%


44

---



Geographical Markets  Our principal beverages production facilities in Chile are located in Santiago. Santiago and the surrounding areas (referred to as the Metropolitan Region) account for approximately 41% of the population of Chile and accounted for approximately 40% of our sales in Chile by volume in 2016. We also have one additional beer and non-alcoholic production facility in Temuco and two other beer facilities, in Valdivia (Kunstmann) and in Punta Arenas (Austral), all of which are located in the southern region of Chile. We also have a non-alcoholic production and bottling facility in Antofagasta. We own two mineral water sources in Chile located in areas near Santiago: Coinco and Casablanca. All of our mineral water products are bottled at their respective sources and distributed throughout the country. Currently most of our brands are primarily supplied and distributed from these production facilities.  The following table provides the distribution of Wine Operating segment’s exports from Chile and Argentina during 2016 by geographical markets:   Market

   

   Volume(1)

   

   Percentage ofTotal Exports(thousands of liters)Europe

   

   23,018

   

   31%Latin America

   

   17,904

   

   24%USA and Canada

   

   9,396

   

   13%Asia and Oceania

   

   23,412

   

   31%Others

   

   614

   

   1%Total

   

   74,344

   

   100%(1) Includes Argentinean operations, excludes bulk wine     The Metropolitan Region represented approximately 38%of total domestic sales of Wine Operating segment products by volume in 2016.


45

---



Competition  Chile Operating segment The beer market in Chile is driven by the competitive environment of locally produced and imported beers, promoting among other factors, according to internal valuations, an estimated average industry volume growth rate of 4.4% over the last ten years.  Our largest competitor in the beer business is Cervecería Chile (a subsidiary of AB InBev), which commenced operations in Chile during the second half of 1991. Cervecería Chile has one production facility located in Santiago and also imports products from various beer operations abroad. They distribute their products throughout Chile using a mix of direct distribution and third party distributors.  Another relevant player in the beer market in Chile is Viña Concha y Toro through its subsidiary Distribuidora Peumo, which imports and distributes the Miller beer brand along with a number of local craft beers. In addition, a number of small direct importers of several international brands compete in the beer market in Chile.  Our principal competitors in the non-alcoholic beverages business are companies which produce, bottle and distribute soft drinks in Chile under licenses from The Coca-Cola Company and its affiliates. The two principal soft drinks players in Chile are the licensees of The Coca-Cola Company and us. The Coca-Cola Company operates through Embotelladora Andina S.A. and Coca-Cola Embonor S.A. In October 2012, Embotelladora Andina S.A. merged with Coca-Cola Polar S.A., where Embotelladora Andina S.A. absorbed Coca-Cola Polar S.A.  Our principal competitor in the mineral water business is Vital S.A. (a subsidiary of Embotelladora Andina S.A., one of The Coca-Cola Company licensees in Chile).  Our domestic competitors in the soft drinks business have benefited from both internationally recognized brand labels (especially with regard to the Coca-Cola product line) and a large number of local bottling companies distributing their products throughout Chile. As a result of the formation of ECUSA, we also similarly benefited from the internationally recognized Pepsi brand as well as our competitive strengths, which include a portfolio of nationally well-known brands and a nationwide distribution system.  With respect to pisco, our main competitor is Capel which has nine production facilities located in Regions III and IV of Chile and distributes its products throughout the country. Capel uses its own sales force, as well as third-party distributors. In January 2016 CPCh divested its interest in Compañía Pisquera Bauzá S.A. Following this change, Bauzá became a relatively small competitor compared to Capel.  The following chart shows estimates of our Chile market share for the last five years based on store audits conducted by Nielsen.  Year

   

   ****

   **Chile Operating segment Volume market share**(1)2012

   

   38.1%2013

   

   40.0%2014

   

   40.9%2015

   

   41.6%2016

   

   42.3%
  (1)The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.


46

---



International Business Operating segment Since 2003, after the agreement between Quilmes and AmBev, the Argentine beer market consisted of three principal brewing groups: AmBev-Quilmes, us and CASA Isenbeck. The principal proprietary brands of these companies are Quilmes, Schneider and Isenbeck, respectively. In December 2006, ICSA, a new competitor, entered the Argentine beer market. ICSA began its operations at the former AmBev brewery in Luján producing three beer brands: Palermo, Bieckert and Imperial, which had previously belonged to Quilmes. These assets were sold by AmBev-Quilmes in response to requirements of the antitrust authorities in Argentina. In 2008, these assets were bought by CCU Argentina and subsequently merged into CICSA. In November 2010, SABMiller acquired CASA Isenbeck.  The following table shows estimates of the market share of our International Business Operating segment (including Beer and Cider (since 2011) in Argentina, beer, carbonated soft drinks, nectar, mineral and flavored water in Uruguay, and beer, carbonated soft drinks, nectar and mineral water in Paraguay). For the last five years based on ID Retail sources for Uruguay and Nielsen source for Argentina.  Year

   

   **International Business Operating segment Volume market share**(1)2012

   

   10.9%2013

   

   11.6%2014

   

   12.9%2015

   

   13.8%2016

   

   14.0%
  (1)The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.  Quilmes, the beer market leader in Argentina and our principal competitor, also has beer operations in Chile, Paraguay, Uruguay and Bolivia. As of December 31, 2016, Quilmes had five breweries in Argentina with an estimated total annual production capacity of 1,600 million liters. Quilmes’ large size enables it to benefit from economies of scale in the production and distribution of beer throughout Argentina. In 1994, Companhia Cervejaria Brahma, one of the two largest beer producers in Brazil, commenced production at its new brewery in Luján, near Buenos Aires, which at present belongs to CCU Argentina. In addition, Warsteiner (today SAB Miller), a large German brewer, commenced production at its new brewery in Zárate, also near Buenos Aires, with an annual production capacity estimated to be approximately 140 million liters. Prior to commencing production in Argentina, Companhia Cervejaria Brahma and Warsteiner competed in the Argentine market with imported beer. In July 1999, the merger of Companhia Cervejaria Brahma and Companhia Antarctica Paulista was announced, creating AmBev. This merger was finally approved in March 2000, creating one of the largest beverage producers in the world.  In May 2002, AmBev and Quilmes announced that pursuant to an agreement between both parties, AmBev would transfer all of its beer assets in Argentina, Bolivia, Paraguay and Uruguay to Quilmes in exchange for 26.4 million new B shares of Quilmes. Additionally, according to that announcement, AmBev would purchase from the controlling shareholders of Quilmes 230.92 million class A shares for US$346.4 million. The agreement further stipulated that AmBev can purchase at the end of a seven-year period the remaining Quilmes shares owned by the current controlling group, the Bemberg family, with AmBev shares. The Bemberg family had the option to sell to AmBev their remaining class A shares during a period beginning with the end of the first year and ending with the seventh year after the agreement was announced. This option was exercised in April 2006. This transaction was approved by the Argentine antitrust authorities on January 13, 2003, subject to the condition that AmBev and Quilmes divest themselves of certain brands and the AmBev plant in Luján, near Buenos Aires, to a company currently not present in the Argentine beer market. On February 14, 2003, through our subsidiary CICSA, we filed a complaint before the Argentine federal courts in order to be eligible to participate in the acquisition of these assets. In February 2006, the Argentine Supreme Court of Justice ruled against our complaint. In December 2006, the Argentine authorities approved the sale of these assets to ICSA, a company owned by local investors. On March 3, 2004, AmBev and Interbrew announced an agreement to merge the two companies, creating the world’s largest brewer under the name InBev. This merger was closed in August 2004. On November 18, 2008 Anheuser Busch and InBev merged creating the global beer leader. Consolidation in the beer industry has resulted in larger and more competitive participants, which could change the current market conditions under which we operate.


47

---



In 2010 SAB Miller bought Casa Isenbeck (Isenbeck, Warsteiner and La Diosa brands) and launched Miller Genuine Draft and Miller Lite beer in Argentina.  During 2015 SAB Miller plc accepted an offer from AB Inbev to merge its operations. As a result of the merger between AB Inbev and SAB Miller plc, Quilmes and CASA Isenbeck become one player. See “Risk Factors – Risks Relating to Our Business – Consolidation in the beer industry may impact our market share”.  In 2016 AB Inbev sold the Miller brands Lite to Coors Brewing Company. In Argentina, CICSA signed an agreement with Coors Brewing Company to manufacture, package, commercialize and distribute the Miller brands through December 2026, with an automatic renewal for a period of five (5) years if the renewal criteria have been satisfied.  Our beer brands in Argentina also face competition from other alcoholic beverages, such as wine and spirits, as well as from non-alcoholic beverages, such as soft drinks.  Wine Operating segment The wine industry is highly competitive in both the domestic and the export markets. In Chile, VSPT competes directly against all other Chilean wineries. We believe that VSPT’s primary domestic competitors, Concha y Toro and Santa Rita, derive their relative competitive strengths from their wide portfolio of products, well-recognized brand names and established distribution networks. In 2016, Concha y Toro and Santa Rita had a volume market share of approximately 28.0% and 31.4%, respectively. VSPT also competes with Santa Carolina and numerous medium-sized wineries, including Undurraga and Cousiño Macul, and many small wine producers that make up Chile’s informal wine market.  Internationally, VSPT competes against Chilean producers as well as with wine producers from other parts of the world. According to information compiled by the Wineries of Chile Association, VSPT is the second-largest exporter of Chilean wines with a market share of approximately 12.9% in 2016, excluding bulk wine. Our other principal Chilean competitors, namely Concha y Toro, Santa Rita and Santa Carolina had market shares of 33.6%, 4.9% and 4.5%, respectively.  The following table shows estimates of the volume market share of our Wine Operating segment (excluding bulk wine sales) for the last five years according to Nielsen figures for domestic wine and Viñas de Chile for export figures.  Year

   

   **Wine Operating segment Volume market share**(1)2012

   

   17.3%2013

   

   17.6%2014

   

   18.3%2015

   

   18.0%2016

   

   18.1%
  (1)The calculation of the weighted average for past periods includes markets and industries that CCU entered at a later date.


48

---



Government Regulation  Government Regulation in Chile We are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in Chile. These regulations include labor laws, social security laws, public health, consumer protection, environmental laws, securities laws, and antitrust laws. In addition, regulations exist to ensure healthy and safe conditions in facilities for the production, bottling, and distribution of beverages. For a more detailed discussion of environmental laws, see “Item 4.D. Environmental Matters”.  Regulations specifically concerning the production and distribution of “alcoholic beverages” are contained in Chilean Law N°18,455 and its Ordinance, which set the standards for human consumption of such beverages, by minutely describing the different types of alcohol; the minimum requirements that must be met by each class of beverage; raw materials and additives that may be used in their manufacture; their packaging and the information that must be provided by their labels; and the procedure for their importation, among others.  Additional regulations concerning wine origin denominations are contained in Executive Decree N°464 of the Ministry of Agriculture, dated December 14, 1994, which also laid out the wine-growing regions and set rules regarding grape varieties, vintage year, labeling and selling requirements. Pisco origin denominations, also applicable to us, are regulated in Executive Decree N°521 dated May 27, 2000 of the Ministry of Agriculture and likewise contains provisions relating to pisco producing regions, raw material standards, manufacturing procedures, packaging and labeling.  The large-scale production of alcoholic beverages does not need any licenses or permits other than those required for the general run of commercial and industrial enterprises engaged in the manufacture of consumer commodities.  According to Law N°19,925 enacted in 2004, which amended and restated the Act on Sale and Consumption of Alcoholic Beverages (former Law N°17,105), all establishments dealing in alcoholic beverages, whether wholesale or retail, require a special municipal license, the cost of which is fixed by the law and varies according to the nature of the outlet or point of sale (i.e. liquor store, tavern, restaurant, hotel, warehouse, etc.). We are in possession of all licenses necessary for our wholesale operations.  Law N°19,925 also set opening and closing hours; limited geographical areas for the sale of alcohol; reduced the maximum number of licenses to be granted by zones and population; increased criminal liability for selling alcohol to persons under eighteen years of age; and tightened the restrictions, imposing prison sentences and higher fines, for violations formerly deemed lighter. One of its most important innovations is to forbid the sale of alcohol to minors at all outlets, and not just for on-premises drinking (the only exception retained is the case of children who are served meals when accompanied by their parents).  The regulatory agency for alcoholic beverages is the Servicio Agrícola y Ganadero (“SAG”).  The production, bottling and marketing of non-alcoholic beverages is subject to applicable sanitary legislation and regulations, particularly the Sanitary Code and the Food Ordinance (the Reglamento Sanitario de los Alimentos).  Non-alcoholic beverages are also subject to the provisions of Law N°20,606 on Nutritional Composition of Food and Advertising enacted in 2012, Decree N° 13 of Ministry of Health enacted on June 26, 2015, which amended the Food Ordinance referred to above, and Law N°20,869 on Food Advertising, enacted on November 13, 2015, which set certain restrictions on advertising, labeling and marketing of foods that are qualified as " high" in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats.  Law N°19,937, enacted in 2004, and fully operative by February 2006, established the structure and powers for the current Sanitary Authority. The Ministry of Health’s Regional Offices, which constitute the Sanitary Authorities, inspect plants on a regular basis, taking samples for analysis, directing the adoption of new safety procedures and applying fines and other penalties for infringement of regulations.


49

---



The production and distribution of mineral water is also subject to special regulation. Mineral water may only be bottled directly from sources, which have been designated for such purpose by a Supreme Decree signed by the President of Chile. The competent Sanitary Authority provides a certification of the data necessary to achieve such a designation. All of our facilities have received the required designation.  Independently of the products manufactured or services provided in each plant or facility, the premises are also regularly inspected by the Sanitary Authorities, regarding sanitary and environmental conditions, labor safety, and related matters.  There are currently no material legal or administrative proceedings pending against us in Chile with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our businesses in Chile.  Government Regulation in Argentina We are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in Argentina, including social security laws, public health, consumer protection and environmental laws, securities laws and antitrust laws.  National Law N° 18,284 (the Argentine Food Code, or the “Food Code”) regulates the manufacturing, packaging, import, export and marketing of food and beverages. The Food Code provides specific standards with which manufacturing plants must comply and regulates the production of food and beverages mentioned in the Food Code. The Food Code also specifies the different methods in which beer may be bottled as well as the information to be provided on labels. National Law N° 24,788, enacted in March 1997, regulates the sale and consumption of alcoholic beverages and its advertising and establishes the national minimum age requirements for the purchase of alcoholic beverages. Under this Law, the sale of alcoholic beverages is not permitted to persons under 18 years of age, and the health authorities of each province undertake the enforcement of the Food Code. In the Federal Capital and many provinces of Argentina, local law restricts the sale of alcoholic beverages, particularly between the hours of 11 p.m. and 8 a.m., and establishes harsh penalties for infringement. Additionally, Regulatory Decree N°688/2009 regulates the advertising of alcoholic beverages.  There are currently no material legal or administrative proceedings pending against us in Argentina with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Argentina.  Government Regulation in Uruguay In Uruguay, we are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in said country. As a closed corporation, our subsidiaries are principally governed by Law N° 16,060, which regulates all commercial companies.  The main applicable laws are Decree 315/94 containing the National Bromatological Regulations, Code of Children and Adolescents regulating aspects related to sale and advertising of alcoholic beverages, Law N°17,849 and its Regulatory Decree 260/07 regulating Integrated Packaging Management System, Mercosur Technical Regulations for labeling of packaged food, Law N°18,159 regulates the promotion and defense of competition and Law N°19,196 governing the criminal liability of employers for breach of occupational safety rules when it threatens or causes damage to the lives of workers.  Government Regulation in Paraguay In Paraguay, Bebidas del Paraguay and Distribuidora del Paraguay are governed by Articles 1048 to 1159 of Law N°1183/85 Civil Code and its subsequent amendments: (i) Law N°388/94 creating detailed rules on the establishment or formation, capital and powers of the assembly of corporations and (ii) Law N°3228/07 which, in turn, modifies N°388/94 regarding formalities for the organization of corporations.


50

---



In addition, for the import, sale and advertising of alcoholic and non-alcoholic beverages, the corporation Bebidas del Paraguay is subject to the provisions of the Health Code Law N°836/80, Law N°1,333/98 on advertisement and promotion of tobacco and alcohol, Law N°1.642/00 prohibiting the sale of alcoholic beverages to minors and its consumption on public roads, Executive Decree N°1635/99 and Resolution of the Ministry of Public Health and Social Welfare N°643/12 regulating aspects relating to registration of food products.  C.Organizational Structure  Ownership Structure as of March 31, 2017     We are controlled by IRSA, which owns directly and indirectly 60.0% of the shares of our common stock. IRSA, since 1986, was a joint venture between Quiñenco and the Schörghuber Group through its wholly owned subsidiary FHI of the Netherlands. In April 2003, the Schörghuber Group sold FHI to Heineken Americas B.V., a subsidiary of Heineken International B.V. FHI and Heineken International B.V. formed Heineken Chile Ltda., through which 50% of IRSA shares are held. On December 30, 2003, FHI merged into Heineken Americas B.V. Currently, Quiñenco and Heineken Chile Ltda., a Chilean limited corporation controlled by Heineken Americas B.V., are the only shareholders of IRSA, each with a 50% equity interest.  Quiñenco is the holding company of one of the largest and most diversified business conglomerates in Chile, with investments in various sectors of the Chilean economy. Apart from CCU, Quiñenco’s principal holdings include Banco de Chile (a leading financial institution in Chile), Invexans S.A. (the largest shareholder of the French cable producer Nexans S.A.), Empresa Nacional de Energía Enex S.A. (the second-largest retail fuel distributor in Chile), Compañía Sud Americana de Vapores S.A. (main shareholder of Hapag-Lloyd A.G., one of the largest container ship operators worldwide), and SM SAAM S.A. (one of the main port operators in South America and the fourth largest tugboat operator worldwide).  Heineken, the Dutch brewer, is one of the largest brewers in the world with over 165 breweries in more than 70 countries and 73,500 employees worldwide. Heineken group’s beer volume was 200.1 million hectoliters during 2016, and its principal brands are Heineken and Amstel.


51

---



The following table provides our significant subsidiaries as of December 2016:  Subsidiaries

   Country

   Total Ownership InterestCervecería CCU

   Chile

   100.00%CCU Argentina

   Argentina

   99.99%ECUSA

   Chile

   99.98%VSPT

   Chile

   64.70%
  D.Property, Plants and Equipment  Set forth below is information concerning our production facilities as of December 31, 2016, all of which are owned and operated by us or our subsidiaries.  For the Chile Operating segment, we had an aggregated Supply Capacity per month1of 339.6 million liters with a Utilized Capacity during peak month2of 60.72%. The annual Nominal Installed Capacity for this segment is 37.4 million hectoliters.  Our Chile Operating segment total facilities size is 587,765 square meters (total built area including warehousing logistics activities related to the production process).  Set forth below is a list of our principal production facilities:  Chile Operating segmentPlant

   Type of PlantSantiago

   BeerSantiago

   Non-alcoholic beveragesTemuco

   MixedValdivia

   BeerPunta Arenas (*)

   BeerAntofagasta

   Non-alcoholic beveragesCoinco

   Non-alcoholic beveragesCasablanca

   Non-alcoholic beveragesManantial

   Non-alcoholic beveragesPisco Elqui

   SpiritsSotaquí

   SpiritsMonte Patria

   SpiritsSalamanca

   SpiritsOvalle

   Spirits(*) Production in the Punta Arenas facility is under licensing agreements and, accordingly, we do not consolidate this facility.
   1Supply Capacity per month is defined as nominal installed production capacity for the current product/packaging mix during 25 days per month and 3 shifts per day. The calculated slack (spare) capacity does not necessarily indicate real slack capacity. The real production capacity is less than the nominal installed production capacity as adjustments are required for real machinery performance, packaging mix, availability of raw materials and bottles, seasonality within the months and other factors. As a result, we believe that the peak monthly capacity utilization rates shown above understate real capacity utilization and that slack capacity is overstated.
 2Utilized Capacity During Peak Month is equal to production output as a percentage of Nominal Installed Production Capacity during our peak month for each respective plant.


52

---



For the International Business Operating segment, we had an aggregated Supply Capacity per month of 106 million liters with a Utilized Capacity during peak month of 74%. The annual Nominal Installed Capacity for the International business is 9.9 million hectoliters.  Our International Business Operating segment total facilities size is 282,761 square meters (total built area including warehousing logistics activities). Set forth below is a list of our principal production facilities:  International Business Operating segmentPlant

   Type of PlantSanta Fé

   BeerSalta

   BeerLuján

   BeerRío Negro

   CiderPilar

   CiderCiudadela

   CiderPan de Azúcar

   San Antonio

   Non-alcoholic beverages

   Non-alcoholic beverages
  For the Wine Operating segment, we had an aggregated Nominal Filling Capacity of 73,320 liters per hour and a Storage Capacity in Tanks and Barrels of 89.3 million liters. The total facilities size is 153,706 square meters.  Set forth below is a list of our principal production and storage facilities: WineOperating segmentPlant

   Type of PlantMolina

   Wine ProductionTotihue

   Wine ProductionIsla de Maipo

   Wine ProductionFinca La Celia

   Wine ProductionLontué

   Wine StorageViña Mar

   Wine Storage


53

---



E.Environmental Matters  Chile Our operations are subject to both national and local regulations in Chile relating to the protection of the environment. Regarding human health, the fundamental law in Chile is the Health Code, which establishes minimum health standards and regulates air and water quality, as well as sanitary landfills. The local Sanitary Authority is the governmental entity in charge of the enforcement of these rules and has the authority to impose fines.  The environmental framework is governed by Law N°19,300, enacted in 1994, as amended, which includes not only environmental protection rules but also rules concerning the preservation of natural resources. Among other matters, it creates the environmental impact assessment system which requires any future project or major amendment of an existing activity that may affect the environment to evaluate its possible environmental impact, in order to fulfill related regulations and to implement mitigation, compensation and restoration measures.  Law N°19,300 also creates a mechanism of point sources emission limits and environmental quality standards that are developed and detailed by specific regulations. In this sense, there is a special regulation for wastewater discharges into sewage systems, and another regulation for wastewater discharges into superficial water bodies, in both cases pursuant to a schedule of deadlines. Over the years, CCU implemented specific action plans in each operation, optimizing those emissions and, based on the location and wastewater quality, invested in highly efficient treatment plants. Such plants are also designed to generate boiler-suitable biogas. We are in compliance with this law and related regulations in all material respects, having fulfilled at each relevant stage all requirements prescribed by them. Through the enactment of Law N°20,417 in 2010 and Law N°20,600 in 2012 (amending Law N°19,300), the Ministry of Environment and the three governmental bodies (Environmental Superintendency, Environmental Assessment Service and specific Environmental Courts) were established, replacing all former activities of the CONAMA, the National Environmental Commission (or Comision Nacional del Medio Ambiente, or “CONAMA”). Those new governmental bodies are now responsible for the development, implementation and enforcement of various regulations regarding environmental management in relation to environmental standards, protection of natural resources, environmental education and pollution control, among other responsibilities. In addition to the new institutional framework, a digital system was created in order to gather and report periodic information called “Register of Emissions and Transfer of Pollutants” (Registro de Emisiones y Transferencia de Contamintantes or RETC). The referred system is necessary to proceed with both, waste and emissions declarations.The waste declarations cover Hazardous Wastes Declarations (Declaración de Residuos Peligrosos or SIDREP), the National Waste Declaration System (Sistema Nacional de Declaración de Residuos or SINADER) and the National Hazardous Substances Storage Declaration System (Sistema Nacional de Declaración de Instalaciones que Almacenan Sustancias Peligrosas or DASUSPEL).Meanwhile the emissions declaration covers the form required to report our stationary sourced emissions, in compliance with DS N°138. In line with the above, in June 2016, Law N°20,920 was enacted, which establishes the framework for waste management, the extended responsibility of the producer (REP) and promotion of recycling, which names “priority products” that must be recovered by the producers who put them on the market. The priority payments must be managed through recycling, recovery or final disposal through an individual or collective Waste Management System. Regarding the latter, the authority will impose collection goals through specific regulations that are still under development. Relating to environmental pollution levels, Law N°19,300 gives the possibility to the Office of the Secretary-General of the Presidency to define categories of highly polluted areas as “Latent Zone” and “Saturated Zone” through the enactment of a Supreme Decree. For the former category, the Ministry must establish decontamination plans, and for the latter category, it must establish prevention plans. Due to the high levels of air pollution in the Santiago Metropolitan Area, the relevant authorities have implemented a decontamination plan, which includes different types of measures depending on the air quality levels, some of


which can be directly imposed on industries. In the case of emergency situations, those companies comprising the industries classified as producing the highest levels of particle and gas emissions must suspend their activities. We are in compliance with current regulations applicable to both our beer and soft drink facilities in the Santiago Metropolitan Area in all material respects.


54

---



On October 4, 2016, a decontamination plan for Santiago City was approved (“Santiago Respira”). Santiago Respira includes new measures to reduce levels of pollution during winter. The plan includes a “low emissions area” that will only allow the circulation of newer models of trucks and may impose a permanent restriction on the circulation of vehicles with a “green seal” between May and August of each year. Regarding the Tax Reform Act of 2014, and its amendments of 2016, an annual tax has been adopted, applicable to emissions from stationary sources over 50MWt. On December 2, 2016, a list of facilities subject to payment of such tax was published. Included on that listCervecería CCU ́s industrial plant located in Quilicura. Therefore during 2017, we are required to report our emissions on a monthly basis. Based on those reports, the Chilean Tax Authority (SII) will determine the tax amount payable on 2018. Our improvement plan for 2017 includes actions that are aimed at reducing our emissions below the 50 MW limit established by SII. Finally according to the RE 2129 of July 29, 2016 from the General Water Authority (Dirección General de Aguasor DGA), owners of groundwater usage rights will be required to modify their extraction control systems and to report their results periodically to DGA. There are currently no material legal or administrative proceedings pending against us in Chile with respect to any environmental matter. We believe that we are in compliance in all material respects with all applicable environmental regulations.  During 2016, VSPT Wine Group was recognized as the “Green Company of the Year”,  VSPT Wine Group was recognized as a leader in the Implementation of Renewable Energies by the British magazine The Drinks Business in the 2016 Green Awards, one of the most important prizes in terms of sustainability. Argentina New laws and regulations have been enacted in Argentina as a result of heightened community concerns for environmental issues. Consequently, there are several statutes imposing obligations on companies regarding environmental matters at the municipal, provincial and federal levels in accordance with the General Environmental Protection Framework (Law N°25,675), which establishes the Basic Environmental Protection Budgets, forming the fundamentals to develop all legislation and national environmental policy. In many cases, private entities operating public utilities such as water supply and sewage are in charge of controlling and enforcing those regulations. Examples of new laws and regulations recently enacted are: (i) the National Register of Chemical Substances (Decree 900/12), which was implemented in January 2014 and aims to improve the traceability of chemical substances by means of strict control of all chemical substances that enter or leave the industrial plant, (ii) Decree 801/2015 regarding the global system of classification and labeling of chemical products, which based on Decree 3359/2015 was implemented in April 2016 for pure substances, and will be implemented in January 2017 for mixed substances, and (iii) Law N°26,190 the National Regime for the Use and Promotion of Renewable Sources of Energy, which was modified by Law N°27,191 and regulated by Decree 531/2016, with the objective to gradually implement the Use of Renewable Sources of Energy in the plants.  Another important federal environmental legislation in Argentina is the Hazardous Waste Act (Law N°24,051), which is supplemented by additional provincial legislation, to enforce the provisions of the Hazardous Waste Act when specific federal tests indicate the need to do so. The application of the provisions of the Hazardous Waste Act depends upon the magnitude of the public health risk and whether those conditions exist in more than one province. Hazardous waste is defined broadly and includes any residue that may cause harm, directly or indirectly, to human beings that may pollute the soil, water, atmosphere or the environment in general. Generally, claims involving hazardous waste give rise to strict liability in the event of damage to third parties. In addition, each province in which we operate facilities has enacted environmental legislation with broad and generic goals, as well as water codes and related agencies to regulate the use of water and the disposal of effluents in the water.


55

---



Over the last several years CCU Argentina has implemented a complete program for the treatment of its industrial waste, which involves the separation, collection, transportation and reusing of the generated solid waste, in compliance with the Industrial Waste Act (Law N°25,612), as well as wastewater treatment plants. The waste program is part of our constant effort to improve environmental conditions.  Notwithstanding the foregoing, the regulation of matters related to environmental protection is not as well developed in Argentina as in the United States and certain other countries. Accordingly, we anticipate that additional laws and regulations will be enacted over time with respect to environmental matters.  While we believe that we will continue to be in compliance with all applicable environmental regulations, we cannot assure you that future legislative or regulatory developments will not impose restrictions on us, which could result in material adverse effects on our businesses, results of operations and our financial condition. There are currently no material legal or administrative proceedings pending against us in Argentina with respect to any regulatory matter. We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business in Argentina.  ITEM 4A: Unresolved Staff Comments  Not applicable.  ITEM 5: Operating and Financial Review and Prospects  Overview  We face certain key challenges and risks associated with our business. These risks include competition within the marketplace, managing operating costs and the integration of new products. We are the leading brewery in Chile; however, competitors are investing in this market and launching new products, and therefore, we must concentrate on competitive pricing and marketing strategies to maintain our market share. Operating costs are subject to variations depending on plant efficiency, product mix and production cycles, and also on U.S. dollar commodities prices and the rate of exchange from Chilean pesos to U.S. dollars or Euros. Our principal costs include the cost of raw and packaging materials, distribution and marketing costs. We continue to sell and deliver new products to our customers, including products through new licensing agreements and new products through internal development.  The analysis of our results is based on financial statements prepared in accordance with IFRS as issued by the IASB. The three most recent years are considered in the discussion below.  Circular Letter N° 856  On September 29, 2014 Act N°20,780 was published in Chile, regarding the Tax Reform Act which introduced amendments, among others, to the income tax system. The Tax Reform Act establishes that as of 2017 Open Stock Corporations should calculate their taxes based on the “Partially Integrated System” without the possibility to opt for the alternative “Attributed Income Regime”. The "Partially Integrated System" provides for a gradual increase in the First Category Income tax rate, going from 20% to 21% for the 2014 business year, to 22.5% for the 2015 business year, to 24% for the 2016 business year, to 25.5% for the 2017 business year, and to 27% starting in the 2018 business year.  The difference between assets and liabilities for deferred taxes that occur as a direct effect of the increase in the First Category Income tax rate introduced by Act N°20,780 and according to the Circular Letter N°856 (Oficio Circular N°856) of the SVS, has been accounted against Equity, under Retained earnings. As of September 30, 2014, the total effect registered against the Company’s Equity amounted to CLP 14,395 million.


56

---



Consequently, since December 31, 2014, in addition to the financial statements issued to comply with the rules and instructions of the SVS, the Company issues financial statements in which the adjustment caused by the application of the new tax rates in Chile to the difference in assets and liabilities for deferred taxes, is registered against income in order to comply with IFRS as issued with the IASB, the regulation required by the Securities and Exchange Commission (“SEC”).  A.ADJUSTED OPERATING RESULT  The following discussion should be read in conjunction with our consolidated financial statements and the notes included thereto in this annual report. In the following discussion, Chilean peso amounts have been rounded to the nearest million pesos, unless otherwise indicated. Certain amounts (including percentage amounts) which appear herein have been rounded and may not sum to the totals shown.  We evaluate the performance of the segments based on several indicators, including Adjusted Operating Result, Adjusted Operating Result Before Depreciation and Amortization (ORBDA), ORBDA margin (% of ORBDA of total revenues for the Operating segment), volumes and sales revenues. Sales between segments are conducted using terms and conditions at current market rates.  Adjusted Operating Result is a non-IFRS financial measure, and reflects a subtotal in Note 7 under Operating segment ́s additional information (page F-51). A non-IFRS financial measure does not have a standardized meaning prescribed by either IFRS or U.S. GAAP. For management purposes, Adjusted Operating Result is defined as Net Income before other gains (losses), net financial expense, equity and income of joint ventures, foreign currency exchange differences, result as per adjustment units and income taxes. Or alternatively, can be defined as "Income from Operational Activities" excluding "Other gains/(losses)".  The Company believes that the use of "Adjusted Operating Result" provides investors with a better understanding of the day-to-day performance of the Company, because elements included under "Other gains/(losses)" such as impacts derived from derivative contracts and marketable securities are not considered part of the core business of each Operating segment and therefore are managed at the corporate level. The performance of Operating segments is assessed by this measure, and for the same reason this measure is used by each segment ́s Chief Operating Decision Maker to assess the performance of the Operating segments. This measure eliminates items that have less bearing on our operating performance and thus highlights trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company believes that disclosure of Adjusted Operating Result provides useful information to investors and financial analysts in their review of our operating performance and their comparison of operating performance to the operating performance of other companies in the beverage industry, but it may not be comparable to similarly titled indicators used by other companies. Adjusted Operating Result is not a substitute for IFRS measures of earnings.  “Adjusted Operating Result” has important limitations as an analytical tool. For example, “Adjusted Operating Result” does not reflect (a) our cash expenditures or future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements needed for, our working capital needs; (c) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; or (d) tax payments or distributions to our parent to make payments with respect to taxes attributable to us that represent a reduction in cash available to us. Although we consider the items excluded in the calculation of non-IFRS measures to be less relevant to the evaluation of our performance, some of these items may continue to take place and accordingly may reduce the cash available to us. The following table presents the Net sales and Adjusted Operating Result, and the relevant percentage as a component of Net sales, for each of our Operating segments. Starting from the third quarter of 2016, the Company has incorporated into the Chile Operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU, Comercial CCU, CRECCU S.A. and Plasco. Prior to December 2015, the revenue and expenses of the Strategic Service Units were reported under Others. However, for comparability purposes, these revenues and expenses have been restated and are now allocated to the Chile Operating segment. For an overview of the restatements see F-46 and F-47 of our Consolidated Financial Statements.


57

---



Year Ended December 31,2014

   

   2015

   

   2016(in millions of CLP, except percentages)Net salesChile Operating segment(1)

   

   835,430

   64.4%

   

   909,460

   60.7%

   

   997,376

   64.0%International Business Operating segment(2)

   

   299,668

   23.1%

   

   405,714

   27.1%

   

   370,109

   23.7%Wine Operating segment(3)

   

   172,349

   13.3%

   

   189,515

   12.6%

   

   201,402

   12.9%Other

   

   -9,480

   -0.7%

   

   -6,317

   -0.4%

   

   -9,989

   -0.6%Total

   

   1,297,966

   100.0%

   

   1,498,372

   100.0%

   

   1,558,898

   100.0%Adjusted Operating Result(4)Chile Operating segment(1)

   

   132,876

   73.9%

   

   155,331

   75.8%

   

   154,551

   77.0%International Business Operating segment(2)

   

   28,153

   15.6%

   

   30,266

   14.8%

   

   20,815

   10.4%Wine Operating segment(3)

   

   24,780

   13.8%

   

   32,533

   15.9%

   

   37,189

   18.5%Other

   

   -5,888

   -3.3%

   

   -13,193

   -6.4%

   

   -11,903

   -5.9%Total

   

   179,920

   100.0%

   

   204,937

   100.0%

   

   200,652

   100.0%VolumeChile Operating segment(1)

   

   1,621.6

   70.8%

   

   1,688.2

   70.6%

   

   1,764.3

   71.2%International Business Operating segment(2)

   

   537.5

   23.5%

   

   569.7

   23.8%

   

   575.2

   23.2%Wine Operating segment(3)

   

   130.6

   5.7%

   

   134.8

   5.6%

   

   138.8

   5.6%Total

   

   2,289.8

   100.0%

   

   2,392.7

   100.0%

   

   2,478.3

   100.0%(1)Includes beers, non-alcoholic beverages, spirits and shared services units in Chile.(2)Includes beers, cider, non-alcoholic beverages and spirits in Argentina, Uruguay and Paraguay.(3)Includes domestic and export wine sales to more 80 countries.(4)Defined, for management purposes, as Net Income before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes.
    The following is a reconciliation of our Net Income; the most directly comparable IFRS measure to Adjusted Operating Result for the years ended December 31, 2012, 2013, 2014, 2015 and 2016.   For the years ended December 31,2012

   2013

   2014

   2015

   2016(in CLP million)Net income of year

   123,977

   132,905

   120,792

   140,526

   140,082Add (Subtract):Other gains (losses)

   4,478

   -959

   -4,037

   -8,512

   8,346Financial Income

   -7,693

   -8,254

   -12,137

   -7,846

   -5,680Financial costs

   17,055

   24,084

   22,957

   23,101

   20,307Share of net loss of joint ventures and associates accounted for using the equity method

   177

   -309

   899

   5,228

   5,561Foreign currency exchange differences

   1,003

   4,292

   613

   -958

   -457Result as per adjustment units

   5,058

   1,802

   4,159

   3,283

   2,247Income taxes

   37,133

   34,705

   46,674

   50,115

   30,246Adjusted Operating result (1)

   181,188

   188,266

   179,920

   204,937

   200,652Exceptional Item (EI)

   -

   2,989

   1,628

   -

   -Adjusted Operating result before (EI)

   181,188

   191,255

   181,548

   204,937

   200,652Depreciation and amortization

   54,760

   64,246

   68,608

   81,567

   83,528ORBDA before (EI)

   235,948

   255,502

   250,155

   286,504

   284,180Exceptional Item (EI)

   -

   -3

   -1,628

   -

   -ORBDA

   235,948

   255,499

   248,528

   286,504

   284,180(1) Defined, for management purposes, as Net Income before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes.


58

---



The following table presents our Income statement and as a percentage of Net sales:  Year Ended December 31,2014

   

   2015

   

   2016(millions of CLP, except percentages)Net sales

   

   1,297,966

   100.0%

   

   1,498,372

   100.0%

   

   1,558,898

   100.0%Cost of sales

   

   -604,537

   46.6%

   

   -685,075

   45.7%

   

   -741,820

   47.6%Gross margin

   

   693,429

   53.4%

   

   813,297

   54.3%

   

   817,078

   52.4%Other income by function

   

   25,464

   2.0%

   

   6,577

   0.4%

   

   5,144

   0.3%Other expenses (1)

   

   -1,743

   0.1%

   

   -2,372

   0.2%

   

   -2,027

   0.1%Exceptional Items (EI) (2)

   

   -1,628

   0.1%

   

   -

   -

   

   -

   -MSD&A (3)

   

   -535,603

   41.3%

   

   -612,565

   40.9%

   

   -619,543

   39.7%Adjusted Operating Result(4)

   

   179,920

   13.9%

   

   204,937

   13.7%

   

   200,652

   12.9%Net financing expenses

   

   -10,821

   0.8%

   

   -15,256

   1.0%

   

   -14,627

   0.9%Results as per adjustment units

   

   -4,159

   0.3%

   

   -3,283

   0.2%

   

   -2,247

   0.1%Exchange rate differences

   

   -613

   0.0%

   

   958

   -0.1%

   

   457

   0.0%Equity and income from joint ventures

   

   -899

   0.1%

   

   -5,228

   0.3%

   

   -5,561

   0.4%Other gains/(losses)

   

   4,037

   0.3%

   

   8,512

   0.6%

   

   -8,346

   -0.5%Income before taxes

   

   167,465

   12.9%

   

   190,640

   12.7%

   

   170,328

   10.9%Income taxes

   

   -46,674

   3.6%

   

   -50,115

   3.3%

   

   -30,246

   1.9%Net income for the year

   

   120,792

   9.3%

   

   140,525

   9.4%

   

   140,082

   9.0%Attributable to:Equity Holders of Parent Company

   

   106,238

   8.2%

   

   120,808

   8.1%

   

   118,457

   7.6%Non controlling interest

   

   14,553

   1.1%

   

   19,717

   1.3%

   

   21,624

   1.4%(1) Other expenses are part of the  ́Other expenses by function ́ as presented in the Consolidated Statement of Income. These Other expenses mainly consist of losses related to the sales and write off of fixed assets.(2) EI are part of ‘Other expenses by function’ as presented in the Consolidated Statement of Income; 2014 EI corresponds to the effect of CLP 1,628 million associated with restructuring processes across Operating segments.(3) The difference between the MSD&A presented in this table and the total of  ́Distribution costs ́,  ́Administrative expenses ́ and  ́Other expenses by function ́ of the Consolidated Statement of Income (F-8) for an amount of CLP 3,371 million, CLP 2,372 million, and 2,027 for the years 2014, 2015 and 2016 respectively, is the total of Other expenses for an amount of CLP 1,743 million, CLP 2,372 million, and CLP 2,072 million for the years 2014, 2015 and 2016 respectively, and Exceptional Items for an amount of CLP 1,628 million, CLP 0 million, and CLP 0 million for the years 2014, 2015 and 2016 respectively.(4) Defined, for management purposes, as Net Income before other gains (losses), net financial expenses, equity and income of joint ventures, foreign currency exchange differences, results as per adjustment units and income taxes.


59

---



FISCAL YEAR ENDED DECEMBER 31, 2016 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2015  The major occurrences of the fiscal year ended 2016 were: (a) the 60% average devaluation of the Argentine peso against the US dollar and 55% against the Chilean peso during 2016; (b) the continuous execution of the “ExCCelencia CCU” program; (c) the combination of the route-to-market in the beer and non-alcoholic categories in Chile; (d) the new “Labeling Law”, which establishes certain restrictions on promotion material, labeling, and commercialization of non-alcoholic beverages and  products that have been classified as being “high” in calories or that contain any of the defined critical nutrients, such as sodium, sugar and saturated fats. Net sales Our Net sales were CLP 1,558,898 million in 2016 compared to CLP 1,498,372 million in 2015, representing an increase of 4.0%, primarily due to higher sales volumes and higher average prices in the Chile and Wine Operating segments. Net sales performance of each of our Operating segments during 2016 is described below: Chile:Net sales increased 9.7% to CLP 997,376 million as a result of 4.5% higher sales volume coupled with 4.9% higher average prices. Higher sales volumes were fueled partially by promotional activities performed throughout the year as well as the successful implementation of the combined route-to-market in beer and non-alcoholic beverages, which led to improve execution at the points of sale. Average prices increased due to revenue management initiatives and the incorporation of high value brands to the portfolio. International Business:Net sales decreased 8.8% to CLP 370,109 million, as a result of 1.0% higher sales volumes offset by 9.6% lower average prices as a consequence of the devaluation of the Argentine peso against Chilean peso. Wine:Our Net sales of wine increased 6.3% to CLP 201,402 million in 2016, from CLP 189,515 million in 2015. The increase in Net sales was achieved due to a 3.0% higher sales volume and a 3.2% increase in average prices. This was due to both the domestic business, where we once again consolidated our leading position in market value, and the growth in the export businesses, combined with price increases and the strengthening of our distribution to our strategic markets. Cost of sales The cost of sales consists primarily of the cost of raw materials, packaging, labor costs for production, personnel, depreciation of assets related to production, depreciation of returnable packaging, licensing fees, bottle breakage and costs of operating and maintaining plants and equipment. Our Cost of sales in 2016 was CLP 741,820 million compared to CLP 685,075 million in 2015, an 8.3% increase compared to 2015. As a percentage of Net sales, Cost of sales increased to 47.6% in 2016 from 45.7% in 2015. The Cost of sales for our Operating segments during 2016 is described below: ***Chile:***The Cost of sales for our Chile Operating segment increased 14.5% to CLP 471,152 million in 2016, from CLP 411,375 million in 2015. Cost of sales as a percentage of Net sales increased to 47.2% in 2016 from 45.2% in 2015, primarily due to the incorporation of high value brands, and the 3.5% average currency devaluation in Chile during the year compared to last year, partially offset by the results of the industrial and procurement initiatives of the efficiency program “ExCCelencia CCU”.** ***International Business:***The Cost of sales of our International Business Operating segment decreased 3.2% to CLP 157,486 million in 2016, from CLP 162,665 million in 2015. Cost of sales as a percentage of Net sales increased to 42.6% in 2016 from 40.1% in 2015. This was mainly due to the average devaluation of the local currency against the USD in 2016 when compared to 2015: 60% in Argentina, 11% in Uruguay and 9% in Paraguay. This was partially offset by the results of the industrial and procurement initiatives of the efficiency program “ExCCelencia CCU”.** ***Wine:***The Cost of sales for our Wine Operating segment increased 6.6% to CLP 112,938 million in 2016, from CLP 105,956 million in 2015. Cost of sales, as a percentage of Net sales, increased from 55.9% in 2015 to 56.1% in 2016, mostly due to the cost of grapes of the 2016 harvest, which had challenging weather conditions but was partially offset by the results of the industrial initiatives of the efficiency program. Gross margin Our Gross margin increased 0.5% to CLP 817,078 million in 2016, from CLP 813,296 million in 2015. As a percentage of Net sales, Gross margin decreased to 52.4% in 2016 from 54.3% in 2015.


60

---



Marketing, Selling, Distribution and Administrative Expenses The Marketing, Selling, Distribution and Administrative expenses (“MSD&A”) primarily include advertising and promotional expenses, selling expenses, distribution costs such as product transportation costs, services provided by third parties and other administrative expenses. Our MSD&A expenses increased 1.1% to CLP 619,543 million in 2016, from CLP 612,565 million in 2015. As a percentage of Net sales, our MSD&A decreased to 39.7% in 2016 from 40.9% in 2015. The MSD&A performance of each Operating segment during 2016 is described below: Chile:The MSD&A expenses of our Chile Operating segment increased 8.7% to CLP 373,408 million in 2016, from CLP 343,381 million in 2015. Nevertheless, as a percentage of Net sales, MSD&A decreased to 37.4% in 2016 from 37.8% in 2015, mainly due to the results of the efficiency plan “ExCCelencia CCU” especially in the logistics front. International Business:The MSD&A of our International Business Operating segment decreased 11.4% to CLP 191,414 million in 2016, from CLP 216,099 million in 2015, mainly due to the currency translation effect and efficiencies captured. As a percentage of Net sales, our MSD&A decreased to 51.7% in 2016 from 53.3% in 2015, partially explained by the results of the logistics initiatives of the "ExCCelencia CCU" program. Wine:The MSD&A of our Wine Operating segment increased 1.8% to CLP 52,007 million in 2016, from CLP 51,070 million in 2015. Nevertheless, MSD&A as a percentage of Net sales, decreased to 25.8% in 2016 from 26.9% in 2015, primarily due to our “ExCCelencia CCU” plan. Other Operating Income/(expenses) and Exceptional items The Other operating income/(expenses) decreased 25.9% in 2016 to CLP 3,117 million, from CLP 4,205 million in 2015. In 2016, we incurred restructuring costs of CLP 980 million from our operation in Uruguay, where we moved to an indirect distribution model. Due to greater efficiencies of the indirect distribution model, we expect to recover these costs within two years. Adjusted Operating Result Our Adjusted Operating Result decreased 2.1% to CLP 200,652 million in 2016, as compared to CLP 204,937 million in 2015 and as a percentage of Net Sales decreased from 13.7% to 12.9% in 2016. The Adjusted Operating Result performance of each of our Operating segments during 2016 is described below: Chile:The Adjusted Operating Result for the Chile Operating segment decreased 0.5% to CLP 154,551 million, with a 9.7% increase in Net sales but offset with an increase of 14.5% in Cost of sales and an 8.7% increase of MSD&A expenses. The Adjusted Operating Result margin decreased from 17.1% in 2015 to 15.5% in 2016, mostly as a result of the slow economic environment and the increase in cost of sales as a result of the 3.5% average currency devaluation in Chile during 2016 compared to 2015. International Business:The Adjusted Operating Result for the International Business Operating segment decreased 31.2% to CLP 20,815 million. The Adjusted Operating Result margin decreased from 7.5% in 2015 to 5.6% for 2016, mostly as a result of the slow economic environment, high levels of inflation, and the devaluation of the local currencies against the USD in 2016 when compared to 2015. Wine:The Adjusted Operating Result from our wine Operating segment increased 14.3% to CLP 37,189 million in 2016, from CLP 32,533 million in 2015. The Adjusted Operating Result margin increased from 17.2% in 2015 to 18.5% in 2016, mainly due to our increased volumes and prices in CLP terms, combined with efficiencies obtained through the "ExCCelencia CCU" plan, partially offset by the increased cost of the grape. Other:The Adjusted Operating Result for Others improved from a loss of CLP 13,193 million in 2015 to a loss of CLP 11,903 million in 2016, mainly due to an increase in unrealized gains. Net Financing Expenses Our Net financing expenses decreased 4.1% to CLP 14,627 million in 2016 as compared to CLP 15,256 million in 2015. This increase was mainly due to a lower debt level in Argentina, partially offset by a lower level of Cash and cash equivalents in 2016. Equity and income from joint ventures and associated CCU has 50% or less participation in Cervecería Austral, Foods, BBO, CCC, and in other companies. The share of the gain/loss in the referred companies decreased to a loss of CLP 5,561 million in 2016, from a loss of CLP 5,228 million in 2015 mainly due to lower results in CCC and Foods, partially offset by a better result in Cervecería Austral.


61

---



Result as per adjustment units and Foreign currency exchange differences The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net loss of CLP 1,790 million in 2016, as compared to a net loss of CLP 2,325 million in 2015. This variation is primarily due to higher Result as per adjustment units and lower inflation during 2016 compared to 2015, partially offset by higher foreign currency exchange differences. Other gains (losses) Our Other gains (losses) decreased from a net gain of CLP 8,512 million in 2015 to a net loss of CLP 8,346 million in 2016. Mostly due to the negative results on our hedges related to the impact of foreign exchange rate fluctuations on taxes on our foreign currency denominated assets. Income taxes Our income taxes in 2016 amounted to CLP 30,246 million, translating into an effective consolidated tax rate of 17.8%. Income taxes in 2015 amounted to CLP 50,115 million translating into an effective consolidated tax rate of 26.3%. Income tax decreased by CLP 19,868 million due to a lower taxable income and to the positive effect of foreign exchange fluctuations on taxes, the latter also explaining the decrease in the effective tax rate from 2016 to 2015. Net income for the year Our Net income in 2016 decreased 0.3%, from CLP 140,526 million in 2015 to CLP 140,082 million in 2016. Net income attributable to equity holders of parent Our Net income attributable to equity holders of our parent company decreased 1.9% from CLP 120,808 million in 2015 to CLP 118,457 million in 2016. Non-controlling interests Non-controlling interests increased from CLP 19,717 million in 2015 to CLP 21,624 million in 2016.


62

---



FISCAL YEAR ENDED DECEMBER 31, 2015 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2014  The major occurrences of the fiscal year ended 2015 were: (a) the 15% average devaluation of the Chilean peso and the 14% average devaluation of the Argentine peso during 2015; (b) decrease in commodity prices, especially oil, aluminum and sugar; (c) the implementation of the “ExCCelencia CCU” program. Net sales Our Net sales were CLP 1,498,372 million in 2015 compared to CLP 1,297,966 million in 2014, representing an increase of 15.4%, primarily due to higher sales volumes and higher average prices in all Operating segments. Net sales performance of each of our Operating segments during 2015 is described below: Chile:Net sales increased 8.9% to CLP 909,460 million as a result of 4.1% higher sales volume coupled with 4.6% higher average prices. Higher sales volumes were fueled partially by promotional activities performed throughout the year as well as good execution at the points of sale and effective marketing campaigns, which allowed us to increase our consolidated market share and higher temperatures during the year. Average prices increased due to a higher sales mix price, coupled with price increases throughout the year. International Business:Net sales increased 35.4% to CLP 405,714 million, due to 6.0% higher sales volumes coupled with 27.7% higher average prices. Volumes and prices in Argentina, Uruguay and Paraguay where higher in 2015 than in 2014, compensating inflation and currency devaluation in those countries. Wine:Our Net sales of wine increased 10.0% to CLP 189,515 million in 2015, from CLP 172,349 million in 2014. The increase in Net sales was achieved due to a 3.2% higher sales volume and a 6.5% increase in average prices, mainly due to the export side of the business, which showed good performance, mainly driven by the markets in Asia and Oceania. Cost of sales The cost of sales consists primarily of the cost of raw materials, packaging, labor costs for production, personnel, depreciation of assets related to production, depreciation of returnable packaging, licensing fees, bottle breakage and costs of operating and maintaining plants and equipment. Our Cost of sales in 2015 was CLP 685,075 million compared to CLP 604,537 million in 2014, a 13.3% increase compared to 2014. As a percentage of Net sales, Cost of sales decreased to 45.7% in 2015 from 46.6% in 2014. The Cost of sales for our Operating segments during 2015 is described below: Chile:The Cost of sales for our Chile Operating segment increased 9.9% to CLP 411,375 million in 2015, from CLP 374,336 million in 2014. Cost of sales as a percentage of Net sales increased to 45.2% in 2015 from 44.8% in 2014, primarily due to the 15% average currency devaluation in Chile during the year compared to last year, partially offset by lower USD denominated price of raw materials and by the results of the efficiency program “ExCCelencia CCU”. International Business:The Cost of sales of our International Business Operating segment increased 19.5% to CLP 162,665 million in 2015, from CLP 136,175 million in 2014. Cost of sales as a percentage of Net sales decreased to 40.1% in 2015 from 45.4% in 2014. This was mainly due to the results of the efficiency program “ExCCelencia CCU” and lower raw material prices denominated in USD, offsetting the average devaluation of the currencies in the region in 2015 when compared to 2014: 14% in Argentina, 18% in Uruguay and 16% in Paraguay. Wine:The Cost of sales for our Wine Operating segment increased 8.6% to CLP 105,956 million in 2015, from CLP 97,524 million in 2014. Cost of sales, as a percentage of Net sales, decreased from 56.6% in 2014 to 55.9% in 2015, mostly due to the excellent 2015 harvest, and the results of the efficiency program. Gross margin Our Gross margin increased 17.3% to CLP 813,296 million in 2015, from CLP 693,429 million in 2014. As a percentage of Net sales, Gross margin increased to 54.3% in 2015 from 53.4% in 2014. Marketing, Selling, Distribution and Administrative Expenses The Marketing, Selling, Distribution and Administrative expenses (“MSD&A”) primarily include advertising and promotional expenses, selling expenses, distribution costs such as product transportation costs, services provided


by third parties and other administrative expenses. Our MSD&A expenses increased 14.4% to CLP 612,565 million in 2015, from CLP 535,603 million in 2014. As a percentage of Net sales, our MSD&A decreased to 40.9% in 2015 from 41.3% in 2014. The MSD&A performance of each Operating segment during 2015 is described below:


63

---



Chile:The MSD&A expenses of our Chile Operating segment increased 4.5% to CLP 343,381 million in 2015 from CLP 328,766 million in 2014. Nevertheless, as a percentage of Net sales, MSD&A decreased to 37.8% in 2015 from 39.4% in 2014, mainly due to the results of the efficiency plan “ExCCelencia CCU”. International Business:The MSD&A of our International Business Operating segment increased 40.1% to CLP 216,099 million in 2015, from CLP 154,300 million in. As a percentage of Net sales, our MSD&A increased to 53.3% in 2015 from 51.5% in 2014, partially explained by higher marketing expenses. Wine:The MSD&A of our Wine Operating segment increased 1.6% to CLP 51,070 million in 2015, from CLP 50,284 million in 2014. Nevertheless, MSD&A as a percentage of Net sales, decreased to 26.9% in 2015 from 29.2% in 2014. Other Operating Income/(expenses) and Exceptional items The Other operating income/(expenses) decreased 82.3% in 2015 to CLP 4,205 million, from CLP 23,721 million in 2014, mainly due to the CLP 18,882 million compensation received by our Argentine subsidiary CICSA in 2014, for the termination of the contract that allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay. Adjusted Operating Result Our Adjusted Operating Result increased 13.9% to CLP 204,937 million in 2015, as compared to CLP 179,920 million in 2014 and as a percentage of Net Sales decreased from 13.9% to 13.7% in 2015. Excluding the positive one-time effect compensation of CLP 18,882 million received by our Argentine subsidiary CICSA in Q2’14 for the termination of the contract that allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina and to produce and distribute Budweiser beer in Uruguay, Adjusted Operating Result increased by 27.3%, which means an EBIT margin expansion of 127 bps. The Adjusted Operating Result performance of each of our Operating segments during 2015 is described below: Chile:The Adjusted Operating Result for the Chile Operating segment increased 16.9% to CLP 155,331 million due to an 8.9% increase in Net sales, partially offset by an increase of 4.5% in MSD&A expenses and an increase of 9.9% in Cost of sales. The Adjusted Operating Result margin increased from 15.9% in 2014 to 17.1% in 2015. International Business:The Adjusted Operating Result for the International Business Operating segment increased 7.5% to CLP 30,266 million. The Adjusted Operating Result margin decreased from 9.4% in 2014 to 7.5% for in 2015. Excluding the above mentioned one-time effect compensation, the Adjusted Operating Result margin expansion was 437 bps. Wine:The Adjusted Operating Result from our wine Operating segment increased 31.3% to CLP 32,533 million in 2015, from CLP 24,780 million in 2014. The Adjusted Operating Result margin increased from 14.4% in 2014 to 17.2% in 2015. Other:The Adjusted Operating Result for this segment increased from a loss of CLP 5,888 million in 2014 to a loss of CLP 13,193 million in 2015, mainly due to a lower result in Corporate costs. Net Financing Expenses Our Net financing expenses increased 41.0% to CLP 15,256 million in 2015 as compared to CLP 10,821 million in 2014. This increase was primarily due to a lower level of Cash and cash equivalents in 2015. Equity and income from joint ventures and associated CCU has 50% or less participation in Cervecería Austral, Foods, BBO, CCC, and in other companies. The share of the gain/loss in the referred companies decreased to a loss of CLP 5,228 million in 2015, from a loss of CLP 899 million in 2014 mainly due to lower results in some of these joint ventures, including the divestments of the brands Calaf and Natur which generated a loss net of taxes of CLP 1,035 million.


64

---



Result as per adjustment units and Foreign currency exchange differences The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net loss of CLP 2,325 million in 2015, as compared to a net loss of CLP 4,772 million in 2014. This variation is primarily due to higher foreign currency exchange differences and higher Result as per adjustment units, due to a lower inflation during 2015 compared to 2014. Other gains (losses) Our Other gains (losses) increased from a net gain of CLP4,037million in 2014 to a net gain of CLP8,512million in 2015. The increase mainly resulted from gains related to hedges covering foreign exchange variations on taxes. Income taxes Our income taxes in 2015 amounted to CLP 50,115 million, translating into an effective consolidated tax rate of 26.3%. Income taxes in 2014 amounted to CLP 46,674 million translating into an effective consolidated tax rate of 27.9%. Income tax increased by CLP 3,441 million. Net income for the year Our Net income in 2015 increased 16.3%, from CLP 120,792 million in 2014 to CLP 140,526 million in 2015, primarily as a result of a 13.9% increase in Adjusted Operating Result. Net income attributable to equity holders of parent Our Net income attributable to equity holders of our parent company increased 13.7% from CLP 106,238 million in 2014 to CLP 120,808 million in 2015. Non-controlling interests Non-controlling interests increased from CLP 14,553 million in 2014 to CLP 19,717 million in 2015.


65

---



B.Liquidity and Capital Resources  Our principal source of liquidity has been cash generated by our operating activities, which amounted to CLP 173,622 million, CLP 219,511 million and CLP 190,014 million, during the years 2014, 2015 and 2016, respectively.  Our cash flow from operations and working capital are our primary sources to meet both our short-term and long-term obligations. In the opinion of our management, they are sufficient for those purposes.  The principal component of cash flows generated by operating activities in 2016 were amounts collected from clients net of payments to suppliers of CLP 646,311 million compared to CLP 649,767 million in 2015 and CLP 532,878 million in 2014.  In 2016, our cash flows from financing activities totalled outflows of CLP 95,303 million compared to outflows of CLP 82,839 million in 2015 and outflows of CLP 132,156 million in 2014. The principal components of cash flows used in financing activities consisted of dividends paid of CLP 69,820 million in 2016, including dividends paid relating to minority interests (CLP 66,147 million in 2015 and CLP 65,316 million in 2014), of the repayment of bank borrowings of CLP 25,295 million in 2016 (CLP 54,797 million in 2015 and CLP 20,766 million in 2014), partially offset by the proceeds from short-term and long-term borrowings of CLP 23,150 million in 2016 (CLP 42,929 million in 2015 and CLP 37,366 million in 2014), and other cash movement outflows of CLP 1,945 million in 2016 mainly due to the amortization of the series E bond (outflows of CLP 2,526 million in 2015 and outflows  of CLP 81,471 million in 2014 mainly due to the payment of the series I bond). Additionally, we paid amount of CLP 19,112 million for the acquisition of additional interests in Manantial S.A. through own subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A.  In 2016, our cash used in investment activities totalled CLP 155,007 million compared to CLP 165,810 million in 2015 and CLP 238,970 million in 2014. The principal components of cash used in investment activities in 2016 consisted of capital expenditures of CLP 128,883 million (CLP 131,731 million in 2015 and CLP 230,080 million in 2014) and payments made to acquire interests in joint ventures, in non-controlling interests and to obtain control of subsidiaries or other businesses of CLP 29,859 million (CLP 44,084 million in 2015 and CLP 15,222 million in 2014).  As of December 31, 2016, we had CLP 58,342 million (CLP 75,485 million in 2015 and CLP 131,558 million in 2014) in cash, overnight deposits, bank balances, time deposits and investments in mutual funds, which do not include CLP 75,448 million (CLP 117,069 million in 2015 and CLP 83,217 million in 2014) corresponding to securities purchased under resale agreements. Indebtedness, including accrued interest, amounted to CLP 160,490 million as of December 31, 2016. Short-term indebtedness included:  • CLP 39,080 million of short-term bank borrowings, • CLP 3,250 million of bonds payable, and • CLP 216 million of financial lease obligations.  As of December 31, 2016, long-term indebtedness, excluding the current portion, comprised: • CLP 29,606 million of long-term obligations to banks, • CLP 70,837 million of long-term obligations to the public represented by bonds, and • CLP 17,501 million of long-term financial lease obligations.


66

---



In December 2004 the Company issued a bond (“E” series) for UF 2 million with a 20-year term to maturity in the local market. This obligation accrues interest at a fixed annual rate of UF+4.0% and amortizes capital on a constant semi-annual basis.  In April 2009 the Company issued two series of notes in the local market for UF 3 million and UF 2 million for a total of CLP 104,188 million in order to refinance a previous loan of CLP 30,000 million and a US$ 100 million syndicated loan that matured in November 2009. The conditions of the bonds are as follows:  “I” Series

   “H” SeriesUF amount

   3 million

   2 millionTerm

   5 years

   21 yearsAmortization

   Bullet

   Semi-annual

   since year 11Interest Rate

   UF+3.00%

   UF+4.25%
  Additionally, during March 2014 we paid all outstanding amounts under the “I” Series bonds.  As of December 31, 2016, some of our outstanding debt instruments required that we maintain certain financial ratios. The most significant covenants required us to maintain a consolidated interest coverage ratio of Adjusted Operating Result before Depreciation and Amortization (as calculated by CCU in accordance with particular debt instruments in order to measure such instruments’ financial covenants) to interest expenses equal to or higher than 3.00 to 1.00; to maintain a consolidated leverage ratio (the ratio of adjusted liabilities to adjusted equity) equal to or lower than 1.50 to 1.00 in CCU, 1.20 to 1.00 in VSPT and 2.50 to 1.00 in CPCh; a minimum consolidated equity of CLP 312,516.75 million, of CLP 83,337.8 million in VSPT and of UF 770 thousand (CLP 20,288 million as of December 31, 2016) in CPCh; and a maximum indebtedness ratio of less than 3.00 to 1.00 from financial liabilities (bank loans, notes, and leasing obligations) to Adjusted Operating Result before Depreciation and Amortization. Furthermore, we were required to maintain a ratio of our unpledged assets over our unsecured liabilities of at least 1.2. The definition of, and calculation mechanics for, all covenants were established when we first entered into these debt instruments, and were based on Chilean GAAP, which are no longer in use since the Company adopted IFRS, as issued by the IASB. For that reason, the Company in 2010 adapted, with the consent of its creditors, these requirements to the new accounting standards and principles.  At December 31, 2016, we met all our financial debt covenants and had a consolidated interest coverage ratio of 13.99 to 1.00, a consolidated leverage ratio of 0.49 to 1.00. The consolidated adjusted equity attributable to equity holders of the parent company as of December 31, 2016 was CLP 1,136,527 million. Our ratio of unpledged assets over unsecured liabilities was 3.06.  None of our indebtedness, or that of our subsidiaries, contains any term that restricts our ability to pay dividends other than the requirement to maintain a minimum consolidated equity.  The following table summarizes debt obligations held by us as of December 31, 2016. The table presents principal payment obligations in millions of Chilean pesos by interest rate structure, financial instrument and currency, with their respective maturity dates and related weighted-average interest rates:


67

---



**Interest - Bearing Debts**(1)**as of December 31, 2016**(millions of CLP, except percentages)Contractual Flows MaturitiesFixed Rate

   

   Averge Int.Rate

   

   2017

   

   2018

   

   2019

   

   2020

   

   2021

   

   Thereafter

   

   TOTALCLP (UF)(2)

   Bonds

   4.2%

   

   5,660

   

   5,556

   

   7,846

   

   9,986

   

   9,680

   

   56,879

   

   95,607CLP (UF)(2)(3)

   Banks

   6.0%

   

   1,775

   

   1,620

   

   11,588

   

   1,153

   

   1,153

   

   28,639

   

   45,929CLP$

   Banks

   5.8%

   

   28,794

   

   2,660

   

   2,660

   

   313

   

   313

   

   -

   

   34,740US$

   Banks

   2.9%

   

   1,086

   

   -

   

   -

   

   -

   

   -

   

   -

   

   1,086Argentine pesos(4)

   Banks

   28.7%

   

   9,686

   

   4,378

   

   2,683

   

   -

   

   -

   

   -

   

   16,747Uruguayan pesos

   Banks

   6.0%

   

   1,045

   

   348

   

   348

   

   -

   

   -

   

   -

   

   1,742TOTAL

   

   

   

   48,046

   

   14,562

   

   25,126

   

   11,452

   

   11,146

   

   85,517

   

   195,850Variable rate

   

   Averge Int.Rate

   

   2017

   

   2018

   

   2019

   

   2020

   

   2021

   

   Thereafter

   

   TOTALUS$

   Banks

   1.8%

   

   108

   

   5,332

   

   -

   

   -

   

   -

   

   -

   

   5,440Argentine pesos

   Banks

   16.6%

   

   2,154

   

   1,586

   

   1,005

   

   -

   

   -

   

   -

   

   4,744TOTAL

   

   

   

   2,262

   

   6,917

   

   1,005

   

   -

   

   -

   

   -

   

   10,184TOTAL

   

   

   

   50,308

   

   21,480

   

   26,130

   

   11,452

   

   11,146

   

   85,517

   

   206,034(1)   Including long-term debt obligations and capital lease obligations.(2)   UF as of December 31, 2016(3)   Includes Capital Lease Obligations for an amount of CLP 34,962 million (4)   Includes Capital Lease Obligations for an amount of CLP 5 million
     To hedge our market risks, we hold debt obligations in various currencies and enter into derivatives contracts. See “Item 11: Quantitative and Qualitative Disclosure about Market Risk”.  Our treasury policy is to invest in highly liquid financial instruments issued by first-class financial institutions. Investments are made primarily in Chilean pesos. As of December 31, 2016, we had invested CLP 92,407million in time deposits, mutual funds and securities purchased under resale agreements (Repos). The following table summarizes financial instruments, including time deposits, mutual funds and securities purchased under resale agreements (Repos), held by us as of December 31, 2016:    Short-Term Financial Instruments(in millions of CLP)Time deposits

   16,935Mutual Funds

   25Repos

   75,448Total

   92,407


68

---



Capital Expenditures Our plans for capital expenditures through the period 2017-2020 are displayed in the following table:  **CLP million**

   **2017**

   **2018**

   **2019**

   **2020**Chile

   138,102

   197,254

   127,745

   90,394Abroad

   37,637

   43,372

   22,155

   23,130**Total**

   **175,739**

   **240,626**

   **149,899**

   **113,523**  During the years 2017 through 2020, we plan to make capital expenditures mainly to adapt, update and increase production capacity, installing new packaging lines, enhancing environmental protection, optimizing our distribution system and warehouse facilities, investing in additional returnable bottles and crates to replace obsolete inventories, adapting to new packaging formats and supporting industry volume growth. Capital expenditures are also directed to improving management information systems and making additional investments in marketing assets.  We review our capital investment program periodically and changes to the program are made as appropriate. Accordingly, we cannot assure you that we will make any of these proposed capital expenditures at the anticipated level or at all. In addition, we are analyzing the possibility of making acquisitions in the same or related beverage businesses, either in Chile or in other countries of South America’s southern cone. Our capital investment program is subject to revision from time to time due to changes in market conditions for our products, general economic conditions in Chile, Argentina and elsewhere, interest, inflation and foreign exchange rates, competitive conditions and other factors.  The financing of our investments comes mostly from cash flow from operations generated by the Company and new credits, always taking into account an adequate debt/equity structure in order to minimize capital costs, and at the same time debt levels and maturities compatible with our operational cash flow generation.  C.Research and Development  Innovation is the driver that allows CCU to meet constantly evolving demand. Our research and development efforts to continuously satisfy the market by introducing new products and brands, although significant, do not involve material expenditures, as we have a close relationship with the companies that own the brands subject to license contracts. The relationship with the license owners is a constant resource in these matters as well as in the application of production best practices, providing access to the “state of the art” techniques and knowledge in the industry.  In 2003, we entered into two technical agreements with Heineken Brouwerijen B.V. for assistance regarding all technical issues related to the production and bottling of Heineken Lager, one for Chile and the other for Argentina.  In May 2005, we entered into a technical assistance agreement withHeineken Technical Services B.V. (currently Heineken Supply Chain B.V.)for certain operational aspects of our breweries, with an initial term of one year, renewable for subsequent periods of one year each. See “Item 6: Directors, Senior Management and Employees” and “Item 7: Major Shareholders and Related Party Transactions”.  The license agreement between CCU Argentina and Anheuser-Busch, signed in 1995, as amended, also provides us with both technical and marketing assistance for the production and marketing of Budweiser beer brand in Argentina. See “Item 4: Information on the Company – Business Overview – Production and Marketing –International Business Operating segment”.


69

---



D.Trend Information  The Chilean economy grew 1.6% in 2016, with an inflation rate of 2.8%. Average unemployment was 6.5% in 2016. We cannot assure you that the consumption of our products will vary in the same proportion as the overall economic indicators, since there is no perfect correlation. The conditions in particular sectors of the economy may have different impact in our business. Factors such as competition and changes in relative prices among the various types of beverages can affect the consumption of our products.  In August 2016, labor reform Law N°20,940 was approved, which results in a more rigid labor market, effective as of April 2017.  On June 26, 2015 Decree N°13 of the Ministry of Health was published which modifies the Sanitary Food Products Regulations (DC 977 of the Ministry of Health) and enforces Law N°20,606 of 2012 regarding the nutritional composition of food products and its promotion. Both regulations establish certain restrictions on promotion material, labeling, and commercialization of these products that have been classified as being “high” in calories or any of the defined critical nutrients, such as sodium, sugar and saturated fats. Additionally on November 13, 2015 Law N°20,869 regarding the promotion of food products was published, restricting the time of day promotions for products high in calories or any of the defined critical nutrient can be aired on television and in the cinema. This regulation change came into force on June 27, 2016 and affected part of our non-alcoholic portfolio. We have taken measures to mitigate the impact of this new law.  The Chilean Congress is currently discussing a bill that provides, among others, for a new regime of temporary water rights, which apply to future water rights that are granted. The bill would also introduce a system of revocation of water rights, for those not in use. This bill could undergo modifications during its discussion in the Chilean Congress. After its enactment, regulations will be required for the implementation of the new regime, which is not expected to occur during the year 2016.If enacted during 2017, respective regulations should be dictated for effects of the new implementation of this bill.  All CCU plants have electrical power contracts, either regulated or agreed with distributors or generators, with prices tied to spot prices, coal prices and CPI (U.S. consumer price index). A shortage is not foreseen in the coming years.  Natural gas for CCU plants came from GNL Quinteros facilities, which imports gas from renewable sources at international prices. We do not foresee any shortages.  In 2016 the Argentine economy contracted 3.8% and the country experienced inflation levels of approximately 40%, and devaluation levels of 60% against the U.S. Dollar, impacting our U.S. Dollar denominated cost of sales, and devaluation of 55% against the Chilean peso, impacting our revenues from CCU Argentina reported in Chilean pesos. Future volatility of exchange rates of the Chilean peso and Argentine peso in any given period may affect the level of income reported from our foreign operations under IFRS.  The measures taken by the previous Argentine government to address the country’s economic crisis of 2002 severely affected the Argentine financial system’s stability and have had a materially negative impact on the country ́s economy. If Argentina were to experience a new fiscal and economic crisis, the Argentine government could implement economic and political measures, which could adversely impact our business.  Since January 2006, the Argentine government has adopted different methods to directly and indirectly regulate the prices of various consumer goods, including bottled beer, in an effort to slow inflation. Additionally, measures taken by the previous Argentine government to control the country’s trade balance and to limit the access to foreign currencies have negatively impacted the free import of goods and royalty payments by the Company, and also the repatriation of profits. This situation has changed following the installation of the new government in December 2015. We cannot assure you that the current Argentine government will not implement this type of measures and that these will not have an adverse effect on our operations in Argentina.


70

---



E.Off Balance Sheet Arrangements  We do not have any off-balance sheet arrangements involving any transactions, agreements or other contractual arrangements involving an unconsolidated entity under which we have:   ·

   

   made guarantees;·

   

   a retained or a contingent interest in transferred assets;·

   

   an obligation under derivative instruments classified as equity; or·

   

   any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.  We record payments made under operating leases as expenses, and none of our operating lease obligations are reflected on our balance sheet. We have no other off-balance sheet arrangements. See Note 34 to our audited consolidated financial statements for a more detailed discussion of contingencies, including guarantees.  F.Contractual Obligations  The following table summarizes our known contractual obligations as of December 31, 2016:   Payments due by period(in million of CLP)Contractual Obligations(1)

   Total

   Less than 1 year

   1 - 3 years

   3 - 5 years

   More than 5 yearsLong-Term Debt Obligations

   171,067

   48,889

   45,007

   20,293

   56,879Capital Lease Obligations (2)

   34,967

   1,419

   2,603

   2,306

   28,639Operating Lease Obligations (3)

   482,101

   175,604

   239,761

   32,682

   34,053Purchase Obligations (4)

   484,323

   137,417

   240,128

   62,209

   44,570Total

   1,172,458

   363,329

   527,499

   117,489

   164,141(1) Includes interest payments.(2) Includes our obligations to lease our headquarters building (see Note 26 to the financial statements).(3) includes real state property, vineyards and warehouse leases, as well as marketing contracts.(4) Includes raw material purchase contracts.
   Critical Accounting Policies and Practices  A summary of our significant accounting policies is included in Note 2 to our audited consolidated financial statements, which are included in this annual report. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions are based on historical experiences, changes in the business environment and information collected from qualified external sources. However, actual results may differ from estimates under different conditions, sometimes materially. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and/or require management’s subjective judgments. The most critical accounting policies and estimates are described below.  a) Property, plant, equipment and bottles:The key judgments we must make under the property and equipment policy include the estimation of the useful lives of our various asset types, expected residual values, the election of a method for recording depreciation, management’s judgment regarding appropriate capitalization or expensing of costs related to fixed assets, and the evaluation of potential impairments, if any.  Property and equipment are stated at cost and are depreciated using the straight-line method based on the estimated useful lives of the assets. In estimating the useful lives (residual values are considered) we have primarily relied upon actual experience with the same or similar types of equipment and recommendations from the manufacturers. Useful lives are based on the estimated amount of years an asset will be productive and are


revised periodically to recognize potential impacts caused by new technologies, changes to maintenance procedures, changes in utilization of the equipment, and changing market prices of new and used equipment of the same or similar types.


71

---



Property and equipment assets are evaluated for possible impairment. Factors that would indicate potential impairment may include, but are not limited to, significant decreases in the market value of the long-lived asset(s), a significant change in the long-lived asset’s physical condition and operating or cash flow losses associated with the use of the long-lived asset. This process requires our estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the appropriate asset’s carrying values are written down to net realizable value and the amount of the write-down is charged against the results of continuing operations.  Expenditures that substantially improve and/or increase the useful life of facilities and equipment are capitalized. Other maintenance or repair costs are charged income as incurred.  b) Goodwill, impairment of goodwill and intangible assets other than goodwill:Management exercises judgment in assessing goodwill and the useful lives of other intangible assets including commercial trademarks and software programs. Judgments are also exercised for assessing potential impairments for these kinds of assets. Goodwill is recorded as the excess of the purchase price of companies acquired over the fair value of identifiable net assets acquired and is accounted for at its cost value less accumulated impairment losses, if any. Goodwill in the acquisition of joint ventures is assessed for impairment as part of the investment, provided that there are signs indicating that the investment may be impaired. We annually review the recorded value of our goodwill, or sooner if changes in circumstances indicate that the carrying amount may exceed fair value. Recoverability of the carrying value of the asset is determined by comparing net book value, including goodwill, to fair value based on the estimated future net cash flows of the relevant assets. See Notes 2.15 and 2.16 to our financial statements.  c) Deposits for returns of bottles and containers:Deposits for returns of bottles and containers corresponds to the liabilities registered by the guarantees of money received from customers for bottles and containers placed at their disposal and represents the value that will be returned to the customer when it returns the bottles to the Company in good condition along with the original document. This value is determined by the estimation of the bottles and containers in circulation that are expected to be returned to the Company in the course of time based on the historic experience, physical counts held by clients and independent studies over the quantities that are in the hands of end consumers, valued at the average weighted guarantees for each type of bottles and containers.  The Company does not intend to make significant repayment of these deposits within the next 12 months. Such amounts are classified within current liabilities, under the line Other financial liabilities, since the Company does not have the legal ability to defer this payment for a period exceeding 12 months. This liability is not discounted, since it is considered a payable on demand, with the original document and the return of the respective bottles and containers and it does not have adjustability or interest clauses of any kind in its origin.  d) Severance Indemnities:As of December 31, 2016, the liabilities for mandatory severance indemnities have been determined at their current actuarial value, based on the accrued cost of the benefit, using an annual discount interest rate of 5.52% in Chile and 31.88% in Argentina. The calculation also considers several assumptions such as the estimated years of service that personnel will have at the date of their retirement, mortality rates and future salary increases.  e) Financial instruments:  Financial assets  The Company recognizes a financial asset in its Consolidated Statement of Financial Position according to the following:  As of the date of the initial recognition, Management classifies its financial assets (i) at fair value through profit and loss and (ii) collectible credits and accounts, depending on the purpose for which the financial assets were


acquired. For those instruments not classified at fair value through income, any cost attributable to the transaction is recognized as part of the asset value.


72

---



The fair value of the instruments that are actively quoted in formal markets is determined by the quoted price as of the financial statement closing date. For those investments without an active market, the fair value is determined using valuation technique including (i) the use of recent market transactions, (ii) references to the current market value of another financial instrument of similar characteristics, (iii) discounted cash flow and (iv) other valuation models.  After the initial recognition the Company values the financial assets as described below:  Accounts receivable  Trade receivable credits or accounts are recognized according to their invoice value.  The Company acquires loan insurances covering approximately 90% and 99% of the individually significant accounts receivable balances, for the domestic market and the international market, respectively, of the total of accounts receivable, net of a 10% deductible.  An impairment of accounts receivable balances is recorded when there is objective evidence that the Company will not be capable to collect amounts according to the original terms. Some indicators that an account receivable has impairment are the financial problems, initiation of a bankruptcy, financial restructuring and age of the balances of our customers.  Estimated losses from bad debts are determined by applying different percentages, taking into account maturity factors, until reaching 100% of the balance in most of the debts older than 180 days, with the exception of those cases that in accordance with current policies, losses are estimated due to partial deterioration based on a case by case analysis.  Current trade receivable credits and accounts are initially recognized at their nominal value and are not discounted because they do not differ significantly from their fair value. The Company has determined that the calculation of the amortized cost is not materially different from the invoiced amount because the transactions do not have significant associated costs.  Financial liabilities  The Company recognizes a financial liability in its Consolidated Statement of Financial Position according to the following:  Debts and financial liabilities that accrue interests  Loans and financial obligations accruing interest are initially recognized at the fair value of the resources obtained, less costs incurred directly attributable to the transaction. After initial recognition, loans and obligations accruing interest are measured at their amortized cost. The difference between the net amount received and the value to be paid is recognized in the Consolidated Statement of Income during the term of the loan, using the effective interest rate method.  Interest paid and accrued related to debts and obligations used in a financing operations appear under financial cost.  Loans and obligations accruing interest with a maturity within twelve month period are classified as current liabilities, unless the Company has the unconditional right to defer the payment of the obligation for at least a twelve month period after the financial statement closing date.


73

---



Trade accounts payable and other payables  Accounts payable and other accounts payable are initially recognized at their nominal value because they do not differ significantly from fair value. The Company has determined that no significant differences exist between the carrying value and amortized cost using the effective interest method.  Derivative Instruments  All derivative financial instruments are initially recognized at fair value as of the date of the derivative contract and subsequently re-measured at their fair value. Gains and losses resulting from fair value measurement are recorded in the Statement of Income as gains or losses due to fair value of financial instruments, unless the derivative instrument is designated as a hedging instrument.  The Financial Instruments at fair value through profit and loss include financial assets classified as held for trading and financial assets which have been designated as such by the Company. Financial assets are classified as held for trading when acquired with the purpose of selling them within a short term. Derivative financial instruments fair values that do not qualify for hedge accounting are immediately recognized in the consolidated statement of income under Other gains (losses). These derivatives fair values are recorded under Other financial assets or Other financial liabilities.  Derivative instruments are classified as held for trading unless they are classified as hedge instruments.  Derivative instruments classified as hedges are accounted for as cash flow hedges.  In order to classify a derivative as a hedging instrument for accounting purposes, the Company documents (i) as of the transaction date or at designation time, the relationship or correlation between the hedging instrument and the hedged item, as well as the risk management purposes and strategies, (ii) the assessment, both at designation date as well as on a continuing basis, whether the derivative instrument used in the hedging is highly transaction effective to offset changes in inception  cash flows of the hedged item. A hedge is considered effective when changes in the cash flows of the underlying directly attributable to the risk hedged are offset with the changes in fair value, or in the cash flows of the hedging instrument with effectiveness between 80% to 125%.  The total fair value of hedging derivatives are classified as assets or financial liabilities in Other non-current if the maturity of the hedged item is more than 12 months and as other assets or current liabilities if the remaining maturity of the hedged item is less than 12 months. The ineffective portion of these instruments can be viewed in Other gains (losses) of the Consolidated Statements of Income. The effective portion of the change in the fair value of derivative instruments that are designated and qualified as cash flow hedges are initially recognized in Cash Flow Hedge Reserve in a separate component of Equity. The income or loss related to the ineffective portion is immediately recognized in the Statement of Income. The amounts accumulated in Equity are reclassified in Income during the same period in which the corresponding hedged item is reflected in the Statement of Income. When a cash flow hedge ceases to comply with the hedge accounting criteria, any accumulated income or loss existing in Equity remains in Equity and is recognized when the expected transaction is finally recognized in the Statement of Income. When it is estimated that an expected transaction will not occur, the accumulated gain or loss recorded in Equity is immediately recognized in the Statement of Income.  f)Accounting changes:  During the year ended on December 31, 2016, there have been no significant changes in the use of accounting principles or relevant changes in any accounting estimates with regard to previous years that have affected these consolidated financial statements.


74

---



ITEM 6: Directors, Senior Management and Employees A.Directors and Senior Management  The following table sets forth certain information with respect to the members of our board of directors:   Directors

   Position

   Position Held Since

   At CCU SinceAndrónico Luksic

   Chairman of the Board

   April 2013 (Chairman) November 1986 (Director)

   November 1986Marc Busain

   Vice Chairman of the Board

   April 2016

   April 2016Francisco Pérez

   Director

   July 1998

   February 1991Carlos Molina

   Director

   April 2012

   April 2012Vittorio Corbo

   Director

   April 2012

   April 2012Pablo Granifo

   Director

   April 2013

   April 2013Rodrigo Hinzpeter

   Director

   July 2015

   July 2015Didier Debrosse

   Director

   July 2015

   July 2015José Miguel Barros

   Director

   April 2016

   April 2016John Nicolson (1)

   Vice Chairman of the Board

   November 2008 (Vice Chairman) October 2008 (Director)

   October 2008Jorge Luis Ramos (1)

   Director

   May 2011

   May 2011(1)Until April 13, 2016
   Andrónico Luksic(63) was appointed Chairman of the board in April 2013 and has served as a Director since November 1986. He is currently the Chairman of the board of Cervecería CCU, ECUSA, CCU Argentina and a member of the board of CCC. He is also currently Chairman of the Board of Quiñenco S.A. and LQ Inversiones Financieras S.A., Vice Chairman of the Board of Banco de Chile and Compañía Sud Americana de Vapores S.A., as well as a member of the board of directors of several other companies and institutions, including Antofagasta plc, Antofagasta Minerals, Nexans, Tech Pack S.A., and Invexans S.A. Mr. Luksic is a member of the International Business Leaders’ Advisory Council for the Mayor of Shanghai. He is a member of the International Advisory Board of Barrick Gold, the International Advisory Council of the Brookings Institution, the Advisory Board of the Panama Canal Authority, and the Chairman’s International Council of the Council of the Americas. In addition, Mr. Luksic is a Trustee Emeritus at Babson College, and a member of the Harvard Global Advisory Council, the International Advisory Board of the Blavatnik School of Government at Oxford University, the International Advisory Boards of both the Tsinghua University School of Economics and Management and the Fudan University School of Management, the Harvard Business School Latin America Advisory Board, the Dean’s Council at the Harvard Kennedy School, the Advisory Committee of the David Rockefeller Center at Harvard University, and the Latin American Executive Board of the MIT Sloan School of Management.  Marc Busain(49) was appointed as our director and Vice Chairman of the board in April 2016. He is member of the board of Cervecería CCU, ECUSA, CCU Argentina and CCC. He has been with Heineken since 1995 where he is currently President of Heineken Americas. Prior to that he served within Heineken as Managing Director of different countries including Mexico, France, Egypt and Burundi. He holds a Master ́s degree in Economics from the Vrije Universiteit Brussel.  Francisco Pérez(59), has served as director since July 1998. He is Chief Executive Officer of Quiñenco since 1998. Prior to joining Quiñenco, he was our Chief Executive Officer between 1991 and 1998. He is member of the board of several companies, including Cervecería CCU, CICSA, CCU Argentina, ECUSA, CPCh, CCC, IRSA, Banco de Chile, Banchile Corredores de Seguros S.A., LQ Inversiones Financieras S.A.,VSPT, SM SAAM S.A., Nexans and Hapag Lloyd. Also he is chairman of the board of CSAV (Compañía Sud Americana de Vapores S.A.), ENEX (Empresa Nacional de Energía Enex S.A.) and Invexans S.A., and Vice Chairman of Tech Pack S.A. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a Master’s degree in Business Administration from the University of Chicago.  Carlos Alberto Molina(60), has served as our director since April 2012. He is also member of the board of Cervecería CCU, ECUSA, CCU Argentina, CICSA, VSPT, Foods, CCC and CPCh. He has over 30 years of management and strategic consulting experience in multiple industries, especially in beverages and consumer goods across the Americas. In beverages, his roles have included Business Development for Heineken Americas; Planning and Strategy for Femsa Cerveza; and board member of Kaiser in Brazil. Prior to these


roles, Mr. Molina was a Partner with Booz, Allen & Hamilton, a global business consulting firm. Mr. Molina is a Mexican citizen and has a BBA from the University of Houston, and an MBA from the University of Texas.


75

---



Vittorio Corbo(74),has served as our director since April 2012. He is a Senior Research Associate at the Centro de Estudios Públicos (CEP) in Santiago, Chile. He is also Chairman of the board of Directors of Banco Santander Chile, Director of Grupo Santander Mexico, and economic consultant to several large corporations in Chile and abroad. He served in senior management positions at the World Bank in Washington, DC, was Professor of Economics in Canada, the U.S.A. and Chile, was also President of the Central Bank of Chile (2003-2007) and Director of Banco Santander S.A. (Spain) from 2011-2014 among other jobs. Mr. Corbo holds a Commercial Engineering degree (with maximum distinction) from Universidad de Chile and a Ph.D. in economics from MIT.  Pablo Granifo(58), was appointed as a director in April 2013. He has been the Chairman of Banco de Chile since 2007 and the Chairman of VSPT since 2013. He is member of the board of Cervecería CCU and ECUSA. Additionally, he is Chairman of the boards of Banchile Asesoría Financiera S.A., Socofin S.A., Banchile Securitizadora S.A., and Banchile Administradora General de Fondos S.A., and a member of the executive committee of Banchile Corredores de Seguros Limitada. He is also a member of the board of ENEX. He holds a Business Administration degree from the Pontificia Universidad Católica de Chile.  Rodrigo Hinzpeter (51),was appointed as a director in July 2015. He is also member of the board of Cervecería CCU, CCU Argentina, ECUSA and IRSA. Since 2014 he has been the General Counsel of Quiñenco. He is also member of the board of Invexans S.A. and Tech Pack S.A. Before that he was Minister of Interior Affairs and later Secretary of Defense for the Government of Chile. He received his Law degree from the Pontificia Universidad Católica de Chile.  Didier Debrosse(60), was appointed as a director in July 2015. He is also member of the board of Cervecería CCU, ECUSA and CCU Argentina. He has been working for Heineken since 1997, where he is currently President of Heineken Brazil. Additionally he is President of the Dutch Brazilian Chamber of Commerce and is Knight of the Legion of Honor as awarded by France. He received an Advanced Management Programme degree from INSEAD and completed the Board Member course at Harvard Business School.  José Miguel Barros(53), was appointed as a director in April 2016. He is member of the board of Cervecera CCU, CPCh, ECUSA and VSPT. He is a Senior Managing Director and Partner of Chilean Investment Bank Larrain Vial S.A. He is currently member of the Board of Lipigas S.A., CDF, and Stel Chile S.A. Mr. Barros holds a Commercial Engineering degree from Pontificia Universidad Católica de Chile and is a graduate from PADE, ESE Business School, Universidad de los Andes.  John Nicolson(63), served as our director from October 2008, and Vice Chairman from November 2008, until April 13, 2016. He served as member of the board of Cervecería CCU, ECUSA, CCU Argentina, CICSA and CPCh. He is the Chairman of IRSA and he was President of Heineken Americas and member of Heineken’s Executive Committee until 2013, having joined from Scottish & Newcastle following its acquisition by Heineken N.V. His early career was with ICI Plc, Unilever PLC and Fosters Brewing Group. He also holds a non-executive position as Chairman of AG Barr PLC, NED of Stock Spirits Group PLC, and NED of North American Breweries and is a member of Edinburgh University’s Advisory Board. He received a degree in Marketing and Economics at the University of Strathclyde, Scotland and also completed the Executive Program at Carnegie Mellon University, U.S.A. and the Directors’ Forum at London Business School, United Kingdom.  Jorge Luis Ramos(64), served as our director from May 2011 until April 13, 2016. He was member of the board of directors of Cervecería CCU, VSPT, ECUSA, CPCh and IRSA, among others. Mr. Ramos was appointed Deputy President for Heineken Americas in 2010 until 2013. He currently provides assistance to other boards of Heineken joint ventures in Central America. He also serves as director in other public and private companies in Mexico. He joined FEMSA in 1996 and became CEO of FEMSA Cerveza in 2006, after serving two years as Co-CEO. Mr. Ramos has a bachelor’s degree in Administration and Public Accounting from Tecnológico de Monterrey and an MBA degree from the University of Pennsylvania’s Wharton School of Business.


76

---



The principal business activities of our current and former 2016 and 2017 directors are summarized in the following table:  Directors

   Business ActivitiesAndrónico Luksic

   Chairman of CCUMarc Busain

   President of Heineken AmericasFrancisco Pérez

   Quiñenco’s CEOCarlos Molina

   Director of CompaniesVittorio Corbo

   Director of CompaniesPablo Granifo

   Chairman of Banco de Chile and VSPTRodrigo Hinzpeter

   Manager Legal Department QuiñencoDidier Debrosse

   President of Heineken BrazilJosé Miguel Barros

   Director of CompaniesJohn Nicolson

   Former Vice Chairman of CCUJorge Luis Ramos

   Director of Companies
 At the shareholder’s meeting held on April 13, 2016 a new board was elected for a term of three years.The current members are Messrs. Andrónico Luksic, Marc Busain, Francisco Pérez, Carlos Molina, Vittorio Corbo, Pablo Granifo, Rodrigo Hinzpeter, Didier Debrosse and José Miguel Barros.  The following table sets forth certain information with respect to our senior management as registered at the SVS, as of April 12, 2017:   Senior Management

   Position

   Position Held Since

   At Company SincePatricio Jottar

   Chief Executive Officer

   July 1998

   July 1998Marisol Bravo

   Corporate Affairs Senior Director

   June 1994

   July 1991Felipe Arancibia

   Chief Human Resources Officer

   February 2014

   April 2002Diego Bacigalupo

   Corporate Development Manager

   January 2014

   August 2013Matías Bebin

   General Manager CPCh

   February 2014

   October 2006Felipe Benavides

   General Counsel

   March 2015

   March 2015Francisco Diharasarri

   General Manager CCU Chile

   October 2003

   June 1985Felipe Dubernet

   Chief Financial Officer

   February 2014

   May 2011Pedro Herane

   General Manager VSPT

   April 2013

   May 2010Ronald Lucassen

   Industrial Processes Corporate Manager

   May 2014

   May 2014Martín Rodriguez

   Head of Project Management Office

   March 2015

   March 2015Fernando Sanchis

   General Manager CCU Argentina

   May 1995

   November 1994Jesús García

   General Comptroller

   May 2005

   May 2005Ludovic Auvray

   Manager International Business

   June 2015

   June 2015Alvaro Rio

   Manager Comercial CCU

   March 2015

   January 1991Alvaro Román

   Manager TransportesCCU

   March 2015

   March 1999    Patricio Jottar(54), has served as our Chief Executive Officer since 1998. He is also currently a director of Aguas CCU, Comercial CCU, Cervecería CCU, CCU Argentina, CICSA, ECUSA, VSPT, Foods, Bebidas CCU-Pepsico SpA, CCK, Bebidas del Paraguay and CCC, and is Chairman of the Board of CPCh, Transportes CCU and Promarca, among others. Prior to joining us, he was Chief Executive Officer of Santander Chile Holding. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a Master’s degree in Economics and Business Administration from the Instituto de Estudios Superiores de la Empresa, in Barcelona, Spain.


77

---



Marisol Bravo(57), is our Corporate Affairs Senior Director and has been with us since 1991. Prior to her current position, she was Head of Special Projects. Before joining us, she was Assistant Manager of Marketing at Citicorp Mutual Funds. She received a degree in Business Administration from the Universidad de Chile.  Felipe Arancibia(42), is our Chief Human Resources Officer and assumed the position in January 2014. He has been with us since 2002, holding several positions in Finance and Business Development. The latest position was as of Corporate Finance and Investor Relations Manager. Prior to this position he was Global Finance Manager for Heineken International in Amsterdam and Business Development Manager for Heineken Brazil in Sao Paulo. Before this position he was the Planning and Finance Manager at ECUSA. He received a degree in Business Administration from Universidad de Los Andes in Chile and holds an Executive Scholar Program in Finance and Alumnus from Kellogg School of Management, Northwestern University and a certificate in Human Resources from the Ross School of Business from the University of Michigan and is also a part-time Professor at Universidad de Los Andes in Chile.  Ludovic Auvray(46) is our Manager International Business, and has held that position since July 2015. He is Chairman of the board of Andrimar, Coralina, Marzurel, Milotur in Uruguay and, of Bebidas del Paraguay, and member of the board of CCC and BBO among others. He has worked with Heineken since 1995 where he has held various positions in Sales and Marketing, his latest position was Global Marketing Director for Cerveza Sol and Specialty Beers in Heineken International in Amsterdam. He received an MBA from the Babson Graduate School.  Diego Bacigalupo(37), is our Corporate Development Manager, and has held that position since January 2014. He has been with CCU since August 2013. He is currently a member of the board of Plasco, Aguas CCU, Manantial, BBO, Distribuidora del Paraguay, Milotur and Nutrabien, amongst others. Prior to his current position, he was Strategic Planning Manager of CCU between August and December 2013. Before joining us, he worked at Quiñenco within its Business Development area. He received an Industrial Engineering degree from the Pontificia Universidad Católica de Chile and an MBA from MIT Sloan School of Management.  Matías Bebin(34), has been the General Manager of CPCh since January 1, 2014. He is currently a member of the board of Transportes CCU. Prior to this position he was the Planning & Finance Manager for CPCh. He has been with us since 2006, working in different companies of the group such as ECUSA and Aguas CCU. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a MBA from Berkeley University.  Felipe Benavides(41) is our General Counsel, and has held the position since March 2015. He is currently a member of the board of Aguas CCU and Andrimar, Coralina, Marzurel, Milotur in Uruguay. Previous to this position he was the General Counsel at SMU since 2013. He was also a Senior Associate at Cariola, Diez, Pérez Cotapos and an International Associate for Debevoise & Plimpton LLP (New York). He received his Law degree from the Pontifica Universidad Católica de Chile and an LLM from Duke University.  Francisco Diharasarri(56), is the General Manager of CCU Chile and has been with us since 1985. Prior to his current position, General Manager of ECUSA and before that, he was General Manager of Cervecería CCU and General Manager of Plasco. He is also currently Chairman of the board of Aguas CCU, Comercial CCU, Plasco, Foods, Alimentos Nutrabien S.A., Manantial, and Bebidas Carozzi CCU and is also a member of the board of CRECCU, CICSA, Transportes CCU, Bebidas CCU-Pepsico, Bebidas del Paraguay, Promarca, among others. He received a degree in Civil Engineering from the Universidad de Chile.  Felipe Dubernet(47), is our Chief Financial Officer, and has held that position since February 2014. He has been with us since May 2011 as Procurement officer until January 2014. He is currently a member of the board of Plasco, CRECCU and Transportes CCU, among others. Prior to joining us, he worked for 15 years at Unilever holding several positions in Supply Chain and Finance in Chile, Brazil and United States. He received a degree in Civil Engineering from the Pontificia Universidad Católica de Chile.  Pedro Herane(47) is the General Manager of VSPT and assumed the position as of April 2013. Additionally, he is a member of the board of Viña Valles de Chile S.A., Viña Ältair S.A., Viña del Mar de Casablanca S.A., Viñas Orgánicas SPT. S.A., Finca La Celia S.A., and Transportes CCU. Prior to his current position, he was in charge of the Domestic Market as Commercial Manager of VSPT. Prior to joining us, he was Senior Group Manager at


Procter & Gamble for 10 years in multiple positions in Chile, Latin America and United States. He received a Bachelor’s degree in Business from University Adolfo Ibáñez in Chile and a Master’s degree in Marketing from the Paris School of Management (ESCP – EAP) in France.


78

---



Ronald Lucassen(52), has been the Industrial Processes Corporate Manager since May 2014. Prior to this position, Ronald worked for Heineken since January 1990. He worked in The Netherlands as Production Manager in the Zoeterwoude Brewery and as Quality Manager in Den Bosch. Subsequently he has completed a number of international assignments, working as General Manager Brewing for DB Breweries’ in New Zealand, Technical Manager of GBNC in New Caledonia, Production Manager of the Hainan Brewery in China for Asia Pacific Breweries, Supply Chain Director Czech Republic, and Supply Chain Director Russia. He holds a Mechanical Engineering degree and a Master’s degree from the Technische Universiteit Delft.  Martín Rodriguez(56), is the Head of our Project Management Office, holding this new position since March 2015. He was at Quiñenco from 1999 to March 2015, as M&A Manager and Strategic Development Manager. He was a board member of Cervecería CCU, ECUSA and Foods until March 2015. He received a degree in Business and Administration from the Pontificia Universidad Católica de Chile, and holds a Master ́s degree in Economics from the same University and an MBA from UCLA.  Fernando Sanchis(56), is the General Manager of CCU Argentina and has been with us since 1995. Prior to joining us, he was Chief Financial Officer of Embochile, a former PepsiCo bottler and held the same position at Uruguay’s PepsiCo’s bottler. He is also currently a board member of CCU Argentina, CICSA and Bebidas del Paraguay, among others. He received an accounting degree from the University of Buenos Aires in Argentina.  Alvaro Román(44),is our General Manager of Transportes CCU, and has held that position since May 2010. He has been with us since March 1999, where prior to his current role he held various positions in sales, marketing and business development. He received a degree in Civil Engineering from the Pontificia Universidad Católica de Chile.  Alvaro Río (56) is our General Manager of Comercial CCU, and has held that position since May 2010, and as part of the Senior Management since March 2015. Also, he is currently Chairman of the board of CRECCU S.A., amongst others. He has been with CCU since 1991 holding various positions including Operational Manager of Transportes CCU, and Sales Manager of Cervecería CCU. He received a degree in Business Administration from Universidad Diego Portales.  Jesús García(54) is our General Controller since May 2015. He is currently a member of the board of Plasco and Transportes CCU. He has also worked with Heineken since 2000 in various Finance positions in Spain, the Netherlands and Singapore, and previously with Diageo and with PWC in Spain. Prior to joining CCU he served as Senior Regional Tax Manager Asia Pacific for the Heineken Group. He holds a degree in Business Law from Universidad de Sevilla, in Spain and a Master’s degree in Business Administration from Instituto Internacional San Telmo in Sevilla.  Our senior managers are full time employees; therefore, they do not perform principal business activities outside us.  B.Compensation  The board of directors’ gross compensation is determined by the shareholders at the annual shareholders’ meeting. As approved at the annual shareholders ́ meeting held on April 13, 2016, the directors’ monthly remuneration, for their attendance to meetings, independent of the number of meetings held in each period, was fixed at UF 100 per Director, and UF 200 for the Chairman, plus an amount equivalent to 3% of the distributed dividends, for the board as a whole, at a rate of one-ninth for each director and in proportion to the time each one served as such during the year 2016. If the distributed dividends exceed 50% of the net profits, the board of directors’ variable remuneration shall be calculated over a maximum 50% of such profits. Those directors that are members of the directors committee (See Item 6.C. Board Practices – directors committee) receive a gross remuneration of UF 34 for each meeting they attend, plus the amount that, as the percentage of the dividends, is required to complete one third of the total remuneration a director is entitled to, pursuant to article 50 bis of Law No


18,046 and Regulation N° 1,956 of the SVS. Directors that are members and observers of the audit committee receive a monthly gross remuneration of UF 25. The described compensation package was also approved for 2017 at shareholders’ meeting held on April 12, 2017.


79

---



In 2016, the total compensation paid by us and our subsidiaries to each of our directors for services rendered was as follows:   Attendance

   DividendDirector

   Meetings fee

   **Participation**(1)

   Total(in thousands of CLP)Andrónico Luksic Craig

   68,564

   201,347

   269,911Marc Busain

   27,769

   -

   27,769John Nicolson

   40,593

   201,347

   241,940Jorge Luis Ramos

   59,011

   260,930

   319,941Manuel José Noguera Eyzaguirre

   -

   100,673

   100,673Philippe Pasquet

   -

   147,244

   147,244Francisco Pérez Mackenna

   203,582

   283,644

   487,226Carlos Molina Solís

   192,894

   214,359

   407,253Vittorio Corbo

   48,718

   268,463

   317,181Pablo Granifo Lavin

   139,457

   253,397

   392,854Jose Miguel Barros van Hövell tot Westerflier

   107,063

   -

   107,063Rodrigo Hinzpeter Kirberg

   139,483

   100,673

   240,156Didier Debrosse

   55,874

   100,673

   156,547Total

   1,083,008

   2,132,750

   3,215,758(1)Includes the remuneration for members of the Audit and Directors Committees.
    For the year ended December 31, 2016, the aggregate amount of compensation paid by us to all our Directors was CLP3,216million.  For the year ended December 31, 2016, the aggregate amount of compensation paid to our senior managers registered at the SVS during 2016, was CLP7,566million. We do not and are not required under Chilean law to disclose to our shareholders or otherwise make public information as to the compensation of our individual senior managers.  We do not maintain any stock option, pension or retirement programs for our directors or senior managers.  C.Board Practices  We are managed by our board of directors which, in accordance with our bylaws (Estatutos), is formed by nine directors who are elected at the annual shareholders’ meeting. The entire board of directors is elected for three years. The board of directors may appoint replacements to fill any vacancies that occur during periods between annual shareholders’ meetings. If such vacancy occurs, the entire board of directors must be renewed at the next following shareholders’ meeting.  Due to the resignation of Messrs. Manuel José Noguera Eyzaguirre and Philippe Pasquet of their positions as directors of the Company, both effective as of June 30, 2015, at the board of directors ́ meeting held on July 7, 2015, Messrs. Didier Debrosse and Rodrigo Hinzpeter Kirberg were appointed as directors, until the next annual shareholders ́ meeting, as permitted by Article 32 of the Chilean Corporations Act.  At the shareholder’s meeting held on April 13, 2016, a new board was elected for a term of three years. The current members of the board of directors are Messrs. Andrónico Luksic, Marc Busain, Francisco Pérez, Carlos Molina, Vittorio Corbo, Pablo Granifo, Rodrigo Hinzpeter, Didier Debrosse and José Miguel Barros.None of our directors is party to a service contract with us or any of our subsidiaries that provides for benefits upon termination.


80

---



Our senior managers are appointed by the board of directors and hold office at the discretion of the board of directors. There are regularly scheduled meetings of the board of directors once a month; extraordinary meetings are specially summoned by the Chairman, at the request of one or more board members where prior qualification of the necessity of such meeting has been met and, in any case, if requested by the absolute majority of the directors. The board of directors does not have an executive committee.  Directors Committee  The directors committee discussions, agreements, and organization are regulated, in every applicable matter, by the Chilean Corporations Act provisions relating to board of directors’ meetings. The directors committee shall inform the board of directors about the manner in which it will request information and about its resolutions.  In addition to the general liabilities imputable to any director, the directors that compose the directors committee shall, in the exercise of their duties, be jointly and severally liable for any damage caused to the corporation or the shareholders.  According to the Chilean Securities Market Law and the Chilean Corporations Act, corporations whose market capitalization reaches or exceeds 1.5 million Unidades de Fomento (as of March 31, 2017 approximately CLP 39,708 million) and at least 12.5% of its outstanding shares with voting rights are in the possession of shareholders that individually control or possess less than 10% of such shares, shall designate a “comité de directores” or “directors committee” and appoint at least one independent director. The directors committee shall be composed of three members and at least one member shall be independent. If the market capitalization or stock percentage falls below this threshold, the obligation to designate a directors committee no longer applies. However, corporations which do not meet these requirements may voluntarily assume the obligations concerning the directors committee, in which case they shall strictly follow the provisions of the Chilean Corporations Act.  Pursuant to the Chilean Corporations Act, the powers and duties of the directors committee are as follows:  to examine the independent accountants’ reports, the balance sheets, and other financial statements submitted by the corporation’s managers or liquidators to the shareholders, and issue an opinion about them prior to their submission for shareholder approval;to propose to the board of directors the independent accountants and the risk rating agencies, which the board must then propose to the shareholders. Should the board of directors disagree with the directors committee’s proposal, the board shall be entitled to make its own proposal, submitting both to the shareholders for their consideration;to examine the documentation concerning related-party transactions of the company and its subsidiaries, and to produce a written report on such transactions. A copy of the report shall be delivered to the board, and shall be read at the board meeting in which the transaction is presented for approval or rejection;to examine the managers’, principal executive officers’ and employees ́ remuneration policies and compensation plans;to prepare an annual report of the performance of its duties, including the principal recommendations to shareholders;to advise the board of directors as to the suitability of retaining the independent accounting firm to provide non-audit services, which are not prohibited by the Chilean Securities Market Law, if the nature of such services could impair the accountants independence from the Company; andall other matters contemplated in our bylaws or entrusted to the directors committee by a shareholders’ meeting or the board of directors.  Regarding related party transactions mentioned in the third bullet point above, Chapter XVI of the Chilean Corporations Act applies to open stock corporations and its subsidiaries, while dispositions of Articles 44, 89 and 93 of the Chilean Corporations Act, are applicable only to closed corporations, which are not subsidiaries of an open stock corporation. See “Item 7: Major Shareholders and Related Party Transactions”.  Pursuant to the Chilean Corporations Act, no person shall be considered independent who, at any time during the previous eighteen months:


81

---



1.

   Maintained any relationship, interest or economic, professional, credit or commercial dependence, of a nature and relevant volume, with the company, other companies of the financial conglomerate to which the company belongs, its comptroller, or principal executive officer of any one of them, or was a director, manager, administrator, principal executive officer or advisor of such companies;2.

   Was a close relative (i.e., parents, father/mother in law, sisters, brothers, sisters/brothers in law), to any one of the persons referred to in 1 above;3.

   Was a director, manager, administrator or principal executive officer of non-profit organizations that received contributions or large donations from any individual referred to in clause 1 above;4.

   Was a partner or shareholder that possessed or controlled, directly or indirectly, 10% or more of the company’s capital; a director; manager; administrator or principal executive officer of entities who had provided consulting or legal services, for relevant amounts, or of external audit, to the persons referred to in 1 above; or5.

   Was a partner or shareholder who possessed or controlled, directly or indirectly, 10% or more of the company’s capital; a director; manager; administrator or principal executive officer of principal competitors, suppliers or clients of the company.   Should there be more than three directors entitled to participate in the directors committee, the board of directors shall elect the members of the directors committee by unanimous vote. Should the board of directors fail to reach an agreement, preference to be appointed to the committee shall be given to directors elected with the highest percentage of votes cast by shareholders that individually control or possess less than 10% of the company’s shares. If there is only one independent director, such director shall appoint the other members of the committee among non-independent directors. Such directors shall be entitled to exercise full powers as members of the committee. The chairman of the board of directors shall not be entitled to be appointed as a member of the committee nor any of its subcommittees, unless he is an independent director.  To be elected as independent director, the candidates must be proposed by shareholders that represent 1% or more of the shares of the company, at least 10 days prior to the date of the shareholders' meeting called to that end.  The candidate who obtains the highest number of votes shall be elected as independent director.  Due to the resignation of Mr. Philippe Pasquet of his position as director of the Company, effective as of June 30, 2015, at the board of directors meeting held on July 7, 2015, the independent director Mr. Vittorio Corbo appointed director Mr. Jorge Luis Ramos as a member of the directors committee, to replace Mr. Philippe Pasquet, as required by article 50 bis of the Chilean Corporations Act.  Therefore, as of July 7, 2015 and until April 13, 2016, our directors committee was composed of Messrs. Vittorio Corbo, Francisco Pérez and Jorge Luis Ramos.  At the board meeting held on April 13, 2016, following the election of a new board of directors at the shareholders ́ meeting held the same day, Mr. Vittorio Corbo, elected as independent director in accordance with Article 50 bis of the Chilean Corporations Act, appointed Messrs. Carlos Molina and Francisco Pérez as members of our directors committee in accordance with the above-referenced law.  The members of the directors committee receive a remuneration the amount of which is established annually by the shareholders, taking into consideration the duties that the directors committee members shall perform, which shall not be less than a third of the remuneration of a director. The gross remuneration of our directors committee members, as approved at the shareholders’ meeting of the Company held on April 12, 2017, is 34 Unidades de Fomento (as of March 31, 2017, approximately CLP 900.1 thousand) per attendance at a directors committee meeting plus the amount required to complete the remaining third of the remuneration of a director. The same remuneration package was approved for 2015 and 2016, at the shareholders’ meetings of the Company held on  April 15, 2015 and April 13, 2016, respectively.


82

---



The shareholders shall determine the budget of the directors committee and those of its advisors, which, pursuant to Chilean Corporations Act, shall not be less than the aggregate amount of the annual remuneration of the committee members. The directors committee shall be allowed to request the recruitment of professionals to fulfill its duties within the limits imposed by the budget. The activities of the directors committee, the annual report of the performance of its duties and its expenses, including its advisors’ expenses, shall be included in the annual report and conveyed to the shareholders. The budget of the directors’ committee and its advisors, approved at the shareholders’ meeting of the Company held on April 12, 2017, shall be equal to the aggregate amount of the annual remuneration of the committee members.  Audit Committee  In accordance with provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the corporate governance rules of the New York Stock Exchange (the “NYSE Rules”) applicable to us as a foreign private issuer with securities listed on a U.S. national exchange, we have an audit committee.  Due to the resignation of Mr. Philippe Pasquet of his position as director of the Company, effective as of June 30, 2015, at the board of directors ́ meeting held on June 7, 2015, Mr. Jorge Luis Ramos was appointed as a member of the audit committee to replace Mr. Pasquet. Additionally, at the board of directors ́ meeting held on July 7, 2015, director Mr. Carlos Molina was appointed to the audit committee on an observer status. Therefore, as of July 7, 2015 and until April 13, 2016, the audit committee was comprised of Messrs. Vittorio Corbo and Jorge Luis Ramos, and Messrs. Francisco Pérez and Carlos Molina participated in the audit committee ́s meetings on an observer status.  At the board of directors meeting held on April 13, 2016, following the election of a new board at the shareholders ́ meeting held the same day, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Messrs. Corbo and Molina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee ́s meetings as observers.  The duties of the audit committee are:  To be responsible for the hiring, remuneration and supervision of the work of public accounting firms hired to prepare or issue audit reports or review or certify such reports. The external auditors shall report directly to the audit committee regarding such matters.Resolve disputes that arise between our administration and the external auditors with regard to financial reports.Grant approval prior to the contracting of non-audit services provided by the external auditors.Establish a procedure for receiving and responding to complaints received with regard to accounting, accounting controls or other auditing matters whereby employees may anonymously and confidentially report their concerns related to these matters.Establish an annual budget for expenses and hiring of external consultants.  The audit committee meets regularly and also holds meetings with our managers, our comptroller, and our internal and external auditors in order to discuss a variety of topics related to its duties.  As approved at the shareholders’ meetings of the Company held on April 13, 2016 and April 12, 2017, members and observers of the audit committee receive a monthly gross remuneration of UF 25. The total annual budget for operating cost and advisors of the audit committee, approved at the shareholders’ meetings referred to above, amounts to UF 2,000.


83

---



D.Employees  The following table shows the breakdown of our employees by operating segments as of December 31 for each of the years listed below:   2014

   2015

   2016Chile

   4,439

   4,547

   4,567International Business

   1,857

   1,938

   1,990Wine

   1,206

   1.250

   1,264Others (1)

   340

   365

   365Total

   7,842

   8,100

   8,186(1)Includes corporate head office functions only.
  All employees whose contracts are terminated for reasons other than misconduct are entitled by law to receive a severance payment. In the last three years, we made severance payments in the amounts of CLP 9,258 million, CLP 6,078 million and CLP 10,342 million, respectively.  In Chile, permanent employees are entitled to the basic payment, as required by law, of one month’s salary for each year, or six-month portion thereof, worked. This condition is subject to a limitation of a total payment of no more than 11 months’ pay for employees hired after August 14, 1981. Severance payments to employees hired before August 14, 1981 are not subject to this limitation. Our employees who are subject to collective bargaining agreements have a contractual benefit to receive a payment in case of resignation, consisting of a payment of one monthly base salary for each full year worked, not subject to a limitation on the total amount payable but subject to a limitation on the total number of employees who can claim the severance benefit during any one year. In 2016, we laid off 735 employees.  Chile Operating segment, Wine Operating segment and Other  In the Chile and Wine Operating segments and Other, as of December 31 of the last three years, we had a total of 5,985, 6,162 and 6,196 permanent employees, respectively. As of December 2016, 3,466 were represented by 45 labor unions. The average tenure of our permanent employees was approximately eight years.  Unionized employees represent approximately 56% of our total permanent workforce. Our management believes it generally has a good relationship with the labor unions representing our employees.  During 2016, 2,166 employees renewed their collective contracts, most of them for a period of two years.  We do not maintain any pension fund or retirement program for our employees. Workers in Chile are subject to a national pension fund law which establishes a system of independent pension plans, administered by Administradoras de Fondos de Pensiones (“AFPs”). We have no liability for the performance of the pension plans or any pension payments to be made to our employees.  In addition to our permanent work force, as of December 31, 2016, we had 424 temporary employees, who were hired for specific time periods to satisfy short-term needs.


84

---



International Business Operating segment  Collective bargaining in Argentina is done on an industry-wide basis, rather than, as in Chile, on a company-by-company basis. In Argentina, as in Chile, all employees who are terminated for reasons other than misconduct are entitled by law to receive a severance payment. According to the Argentine Labor Law, employees who joined us before October 1998 are entitled to the basic payment as required by law of one month’s salary for each year or fraction thereof worked. This monthly amount cannot exceed three times the average monthly salary established under the applicable collective bargaining agreement and cannot be less than the equivalent of two monthly salaries of the employee.  In Argentina, unionized employees represent approximately 68% of our total permanent workforce, moreover in Uruguay this number represent 59% of our total permanent workforce.  In addition to our permanent work force, as of December 31, 2016, we had 239 temporary employees, who were hired for specific time periods to satisfy short-term needs.  E.Share Ownership  Except as disclosed in “Item 7: Major Shareholders and Related Party Transactions – Major Shareholders”, as of March 31, 2017, our senior management and our board members in the aggregate directly owned less than one percent of our shares.  We do not maintain stock option or other programs involving our employees in the capital of the Company.


85

---



ITEM 7: Major Shareholders and Related Party Transactions  A.Major Shareholders  Our only outstanding voting securities are our shares of our common stock. The following table sets forth information concerning the ownership of our common stock as of March 31, 2017, presenting the twelve largest shareholders and all of our directors and senior management as a group:   Shareholder

   Number of shares owned

   % OwnershipINVERSIONES Y RENTAS S.A. (1)

   196,421,725

   53.16%J P MORGAN CHASE BANK SEGUN CIRCULAR

   56,360,299

   15.25%BANCO ITAU POR CUENTA DE INVERSIONISTAS EXTRANJEROS

   30,477,217

   8.25%BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES

   25,836,720

   6.99%INVERSIONES IRSA LTDA.(1)

   25,279,991

   6.84%BANCO SANTANDER POR CUENTA DE INV. EXTRANJEROS

   8,527,278

   2.31%BANCO SANTANDER-HSBC BANK PLC LONDON CLIENT ACCOUNT

   3,118,000

   0.84%BANCHILE C. DE B. S.A

   2,576,522

   0.70%BOLSA ELECTRONICA DE CHILE BOLSA DE VALORES

   1,862,931

   0.50%BOLSA DE COMERCIO DE SANTIAGO BOLSA DE VALORES

   1,344,589

   0.36%BTG PACTUAL CHILE S.A.C.B.

   951,529

   0.26%VALORES SECURITY S.A.C.B.

   855,859

   0.23%Our directors and senior management as a group(2)

   14,897

   0.004%(1) Inversiones y Rentas S.A. owns 99.9999% of Inversiones IRSA Ltda.’s equity.(2) Does not include the 221,701,716 shares of our common stock owned, directly and indirectly, by Inversiones y Rentas S.A., which is 50% beneficially owned by Quiñenco, holding company of the Luksic Group, as discussed below, which is controlled by the Luksic family. Andrónico Luksic, our Director, is a member of the Luksic family.
    To the best of our knowledge our beneficial shareholders who own more than 5% of the outstanding shares of our common stock are IRSA with 60.00% and Commonwealth Bank of Australia with 7.62% (according to the Schedule 13G filed on February 14, 2017, stating a holding of 28,150,464 shares, as of December 31, 2016).  As of March 31, 2017, JPMorgan Chase Bank N.A. (“JPMorgan”), the Depositary for our ADR facility, was the record owner of 56,360,299 shares of our common stock (15.25% of the outstanding common stock) deposited in our ADR facility.  As of March 31, 2017, we had4,274shareholders of record. To the best of our knowledge 13 shareholders are not Chilean, excluding ADR holders, and of those 13 non-Chilean shareholders, to the best of our knowledge 2 are U.S. corporations with a total of 151,543 (0.04%) shares of common stock. Non-Chileans can also hold shares in custody of private banks. However, as that information is not publicly available, we have included four custodians as part of the 13 non-Chilean shareholders although we have no citizenship information relating thereto. All shareholders have equal voting rights.  IRSA is a Chilean corporation owned 50% by Quiñenco, which is a holding company of the Luksic Group, and 50% by Heineken Chile Ltda., a subsidiary of Heineken International. IRSA directly owns 196,421,725 shares of our common stock and indirectly, through Inversiones IRSA Ltda., 25,279,991 additional shares of our common stock.  To our knowledge, none of our common stock is currently owned by governmental entities. Our common stock is listed and traded on the principal Chilean stock exchanges. See “Item 7: Major Shareholders and Related Party Transactions”.


86

---



B.Related Party Transactions  Regarding related party transactions, Chapter XVI of the Chilean Corporations Act is applicable to open-stock corporations and their subsidiaries, while Articles 44, 89 and 93 are only applicable to closed corporations which are not subsidiaries of an open-stock corporation.  Pursuant to Chapter XVI of the Chilean Corporations Act referenced above, a related-party transaction shall be any and all negotiation, agreement or operation between the open-stock corporation and any one of the following: one or more related persons pursuant to the Chilean Securities Market Law;

a director, manager, administrator, principal executive officer or liquidator of the company, personally or acting on behalf of a person other than the company, or their respective spouses or close relatives (e.g. parents, father/mother in law, sisters, brothers, sisters/brothers in law);

company or concern in which the persons referred to in the above clause are the owners, directly or indirectly through any other individual or corporation, of 10% or more of its capital; or of which any of the persons referred to in the above clause are a director, manager, administrator, principal executive officer thereof;

those contemplated by the bylaws of the company or upon sufficient grounds determined by the directors committee, as the case may be, which can include subsidiaries in which the company owns, directly or indirectly, at least 95% of the equity or capital stock; and

those in which the office of director, manager, administrator, principal executive officer or liquidator has been held by a director, manager, administrator, principal executive officer or liquidator of the company within the prior 18 months.  The following persons are considered under the Chilean Securities Market Law to be related persons:  any entities within the financial conglomerate to which the company belongs;  corporate entities that have, with respect to us, the character of parent company, affiliated companies or subsidiary. Parent companies are those that control directly or indirectly more than 50% of the subsidiary’s voting stock (or participation, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment, of the majority of the directors or officers. A limited partnership (sociedades en comandita) may likewise be a subsidiary of a corporation, whenever the latter has the power to direct or guide the administration of the general partner (gestor) thereof. For these purposes, affiliated companies are those where one of them, without actually controlling the other, owns directly or indirectly 10% or more of the latter’s voting stock (or equity, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment of, at least one board member or manager;  persons who are directors, managers, administrators, principal executive officers or liquidators of us, and their spouses or their close relatives (i.e. parents, father/mother in law, sisters, brothers, sisters/brothers in law); as well as any other entity controlled by, directly or indirectly, any one of the above; and  any person who, whether acting alone or in agreement with others, may appoint at least one member of our management or controls 10% or more of our voting capital.  The SVS may presume that any individual or corporate entity is related to a company if, because of relationships of equity, administration, kinship, responsibility or subordination, the person: whether acting alone or in agreement with others, has sufficient voting power to influence the company’s management


87

---



creates conflicts of interest in doing business with the company;

in the case of a corporate entity, is influenced in its management by the company; or

holds employment or a position which affords the person access to non-public information about the company and its business, which renders the person capable of influencing the value of the company’s securities. However, a person shall not be considered to be related to a company by the mere fact of owning up to 5% of the company, or if the person is only an employee of the company without managerial responsibilities.  Additionally, pursuant to Article 147 of Chapter XVI of the Chilean Corporations Act, an open-stock corporation shall only be entitled to enter into a related-party transaction when it is in the interest of the company, the price, terms and conditions are similar to those prevailing in the market at the time of its approval and the transaction complies with the requirements and procedures stated below:  1.  The directors, managers, administrators, principal executive officers or liquidators that have an interest or that take part in negotiations conducive to the execution of an arrangement with a related party of the open-stock corporation, shall report it immediately to the board of directors or whomever the board designates. Those who breach this obligation will be jointly liable for damages caused to the company and its shareholders.  2.   Prior to the company’s consent to a related party transaction, it must be approved by the absolute majority of the members of the board of directors, with exclusion of the interested directors or liquidators, who nevertheless shall make public his/her/their opinion with respect to the transaction if it is so requested by the board of directors, which opinion shall be set forth in the minutes of the meeting. Likewise, the grounds of the decision and the reasons for excluding such directors from its adoption must also be recorded in the minutes.  3.  The resolutions of the board of directors approving a related party transaction shall be reported at the next following shareholders' meeting, including a reference to the directors who approved such transaction. A reference to the transaction is to be included in the notice of the respective shareholders' meeting.  4.  In the event that an absolute majority of the members of the board of directors should abstain from voting, the related-party transaction shall only be executed if it is approved by the unanimous vote of the members of the board of directors not involved in such transaction, or if it is approved in a shareholders' extraordinary meeting by two-thirds of the voting shares of the company.  5.  If a shareholders' extraordinary meeting is called to approve the transaction, the board of directors shall appoint at least one independent advisor who shall report to the shareholders the terms of the transaction, its effects and the potential impact for the company. In the report, the independent advisor shall include all the matters or issues the directors committee may have expressly requested to be evaluated. The directors committee of the company or, in the absence of such committee, directors not involved in the transaction, shall be entitled to appoint an additional independent advisor, in the event they disagree with the appointment made by the board.  The reports of the independent advisors shall be made available to the shareholders by the board on the business day immediately following their receipt by the company, at the company’s business offices and on its internet site, for a period of at least 15 business days from the date the last report was received from the independent advisor, and such arrangement shall be communicated to the shareholders by means of a “Relevant Fact” (Communication sent to the SVS and the stock markets in Chile).  The directors shall decide whether the transaction is in the best interest of the corporation, within five business days from the date the last report was received from the independent advisors.  6.  When the directors of the company must decide on a related party-transaction, they must expressly state the relationship with the transaction counterparty or the interest involved. They shall also express their opinion on whether the transaction is in the best interest of the corporation, their objection or objections that the directors committee may have expressed, as well as the conclusions of the reports of the advisors. The opinions of the directors shall be made available to the shareholders the day after they were received by the company, at the business offices of the company as well as on its internet site, and such arrangement shall be reported by the company as a “Relevant Fact”.


88

---



7.   Notwithstanding the applicable sanctions, any infringement of the above provisions will not affect the validity of the transaction, but it will grant the company or the shareholders the right to sue the related party involved in the transaction for reimbursement to the company of a sum equivalent to the benefits that the operation reported to the counterpart involved in the transaction, as well as indemnity for damages incurred. In this case, the defendant bears the burden of proof that the transaction complies with the requirements and procedures referred to above.  Notwithstanding the above, the following related party transactions may be executed, pursuant to letters a), b) and c) of Article 147 of the Chilean Corporations Act, without complying with the requirements and procedures stated above, with prior authorization by the board:  1.   Transactions that do not involve a “material amount”. For this purpose, any transaction that is both greater than 2,000 Unidades de Fomento (as of March, 31, 2017, approximately CLP 52.9 million) and in excess 1% of the corporation’s equity, or involving an amount in excess of 20,000 Unidades de Fomento (as of March 31, 2017, approximately CLP 529.4 million) shall be deemed to involve a material amount. All transactions executed within a 12 month period that are similar or complementary to each other, with identical parties, including related parties, or objects, shall be deemed to be a single transaction.  2.   Transactions that pursuant to the company’s policy of usual practice as determined by its board of directors, are in the ordinary course of business of the company. Any agreement or resolution establishing or amending such policies shall be communicated as a “Relevant Fact” and made available to shareholders at the company’s business offices and on its internet site, and the transaction shall be reported as a “Relevant Fact”, if applicable.  3.   Transactions between legal entities in which the company possesses, directly or indirectly, at least 95% of the equity of the counterpart.  The usual practice policy adopted by the board of directors in the meeting held on January 13, 2010, as amended on July 6, 2011 and July 5, 2016, remains available to shareholders at the Company’s offices in Avenida Vitacura N° 2670, 26th Floor, Santiago, Chile, and on the web site www.ccu.cl.  In the ordinary course of business, we engage in a variety of transactions with some of our affiliates and related parties. Financial information concerning these transactions is set forth in Note 15 to our consolidated financial statements.  Our corporate support units and strategic service units provide shared services to all the organization through service level-agreements. Shared services are provided in a centralized manner to capture the synergies between the different units. Service-level agreements are annual contracts specifying the services to be provided as well as the variables used to measure the levels of service and their prices. Service levels are evaluated directly by users three times a year.  Additionally, our logistic subsidiaries Transportes CCU and Comercial CCU provide logistic, warehousing and sales services on a consolidated basis to all of our strategic business units. These services are regulated by annual contracts specifying the services to be provided as well as the variables used to measure the levels of service and their prices. Service levels are evaluated directly by users three times a year.  We engage in a variety of transactions with affiliates of the Luksic Group and Heineken, the beneficial owners of IRSA, as well as with other shareholders of ours. Currently, Quiñenco and Heineken Chile Ltda., a Chilean limited corporation controlled by Heineken Americas B.V., are the only shareholders of IRSA, each with a 50% equity interest See “Item 4: Information on the Company – Organizational Structure”.  On November 30, 2005, we and Heineken Brouwerijen B.V. amended the license and technical assistance agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina commencing June 18, 2003. These agreements have an initial term of 10 years beginning in June 2003, renewable for subsequent periods of five years. See “Item 4: Information on the Company – Business Overview –


Our Beer Chile business– Beer Production and Marketing in Chile” and “Item 4: Information on the Company – Business Overview – Our Beer Argentina business– Production and Marketing in Argentina”.


89

---



On October 12, 2011, we and Heineken Brouwerijen B.V. signed the Amended and Restated versions of the Trademark License Agreements which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Chile and Argentina, in force as of January 1, 2011. These agreements have an initial term of 10 years, and automatically renew on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.  On November 29, 2012, CICSA and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides us with the exclusive rights to produce, sell and distribute Heineken beer in Paraguay. This agreement has an initial term of 10 years, and will be automatically renewed for a five years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.  On September 28, 2012, CICSA and Amstel Brouwerij B.V. signed the Trademark License Agreement which provides with the exclusive rights to produce, sell and distribute Amstel beer in Argentina. This agreement has an initial term of 10 years, and will be automatically renewed for a ten years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.  On June 4, 2013, CICSA, Milotur and Heineken Brouwerijen B.V. signed the Trademark License Agreement, which provides us with the exclusive rights to produce, sell and distribute Heineken beer in Uruguay, in force as of May 1, 2013. This agreement has an initial term of 10 years, and automatically renews on January 1 of each year for a new period of ten years, unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.  On July 15, 2015, CICSA, BBO and Heineken Brouwerijen B.V. signed the Ancillary Trademark License Agreement, which provide us with the exclusive rights to produce, sell and distribute Heineken beer in Bolivia, in force as of January 1, 2015. This agreement has an initial term of 10 years, and will be automatically renewed for a five-year period unless any party gives notice of its decision not to renew, in which case the agreement will be in force until the last renewal period expires.  Additionally, a Technical Assistance Agreement was executed with Heineken Technical Services B.V. (currently Heineken Supply Chain B.V.) on May 4, 2005, whereby the latter was appointed, on a non-exclusive basis, as our technical advisor in respect of operational aspects of our breweries, including also special services regarding project engineering for extensions of the breweries’ capacity and construction of new plants, assistance in development of new products, production methods and distribution systems as well as advice on purchasing systems, among others. This agreement has an initial term of one year as from May 4, 2005, renewable for subsequent periods of one year each, unless either party gives at least three months’ prior written notice to the other of its intention to terminate this agreement. This agreement has been renewed automatically each year.  On January 28, 2015, a Trade Mark License Agreement (TMLA) was executed between our subsidiary Cervecería CCU and Heineken Brouwerijen B.V. to produce, sell and distribute beer under the brand name SOL in Chile. The TMLA contemplates a 10-year term as of July 1, 2014 and shall each year (as of July 1st) automatically be renewed for a new period of 10 years, unless any party has given notice in writing of its decision not to renew.  On March 23, 2015, CICSA and Heineken Brouwerijen B.V. signed the Trademark License Agreement which provides with the exclusive rights to produce, sell and distribute Sol beer in Argentina. This agreement has an initial term of 10 years, and will be automatically renewed for a ten years period unless any party gives notice of its decision not to renew, in which case the agreements will be in force until the last renewal period expires.  Finally, in 2015, we revised and amended the 2014 amended and restated Framework Agreement entered with Banco de Chile, a Quiñenco subsidiary, which was in effect as of May 1, 2003, for the rendering of banking services to us and certain of our subsidiaries and affiliates, including, among others, payment to suppliers and shareholders, cashier service, transportation of valuables and payment of salaries.


90

---



Since the establishment of our directors’ committee in 2001, as required by the Chilean Corporations Act, it has reviewed all related-party contracts, before being sent to our board of directors for approval, which was standard practice prior to the creation of the directors’ committee. The above does not include related-party transactions executed according to the usual practice policy adopted by the board of directors on January 13, 2010 as amended on July 6, 2011 and July 5, 2016, in respect of transactions mentioned in letters a), b) and c) of Article 147 of the Chilean Corporations Act. Our principal related-party contracts include rental of properties, the rendering of services and product sales.  Our principal transactions with related parties for the twelve-month period ended December 31, 2016, are detailed below:  Company

   Relationship

   Transaction

   Amount (in millions of CLP)Heineken Brouwerijen B.V.

   Related to the controlling shareholder

   Products sale/ license/ technical assistance/ billed services

   9,689Amstel Brouwerijen BV

   Related to the controller

   License and technical assistance

   166Inversiones y Rentas S.A.

   Shareholder

   Dividends paid/Office rental

   32,121Inversiones Irsa Ltda.

   Shareholder

   Billing services

   4,133Inversiones PFI Chile Ltda.

   Shareholders of subsidiary

   Purchase of products/Billed services

   13,318Nestlé Waters S.A.

   Shareholder of subsidiary

   Royalty

   433Nestlé Chile S.A.

   Shareholder of subsidiary

   Dividends paid

   3,531Cervecería Kunstmann Ltda.

   Shareholder of subsidiary

   Product sales/billed services

   523Cervecería Valdivia S.A.

   Shareholder of subsidiary

   Dividends paid

   634Comercial Patagona Ltda.

   Subsidiary joint venture

   Marketing services/products sale

   4,260Cooperativa Agrícola Control Pisquero Ltda.

   Shareholder of subsidiary

   Loan/supply contract/ purchase grape/Dividends paid

   4,960Compañía Chilena de Fósforos S.A.

   Shareholder of subsidiary

   Dividends paid

   1,274Cervecería Austral S.A.

   Joint venture

   Sales of Products/Purchase of products/Billed services

   5,735Banco de Chile

   Related to the controlling shareholder

   Sales of products/Derivatives/Investments

   158,293Foods Compañía de Alimentos CCU S.A.

   Joint venture

   Services/ product sales/ consignment sales/ interests/ remittance paid and recieved

   7,425Alusa S.A.

   Subsidiary related

   Purchase of products

   3,223Canal 13 S.P.A.

   Parent company related

   Advertising

   3,428Banchile Corredores de Bolsa S.A.

   Parent company related

   Financial investments

   231,900Bebidas Bolivianas BBO S.A.

   Associated

   Sales of product and Contribution of capital

   2,570Central Cervecera de Colombia S.A.S.

   Joint operation

   Contribution of capital

   22,944Viña Tabalí S.A.

   Related to the controller

   Billed services

   52Operaciones y Servicios Enex Ltda.

   Related to the controller

   Sales of products

   224Quiñenco S.A.

   Shareholder to Controller

   Sales of products

   14Antofagasta Minerals S.A.

   Related to the controller

   Sales of products

   36Inversiones Enex S.A

   Sales of products

   Sales of products

   1,162Empresas Carozzi S.A.

   Shareholder of joint operation

   Sales of products

   312
   See Note 15 to our Consolidated Financial Statements for detailed information.


91

---



C.Interests of Experts and Counsel  Not applicable. ITEM 8: Financial Information  A.Consolidated Statements and Other Financial Information  See “Item 18: Financial Statements” and “Item 19: Exhibits” for the Company's Financial Statements and notes, audited by PricewaterhouseCoopers.  Wine Exports  We, through our subsidiary VSPT, exported wine to more than80countries in 2016. VSPT is the second-largest wine exporter in Chile. See “Item 4: Information on the Company–Business Overview– Operating Segments Information– Our Wine Operating Segment”.  The following table presents our total wine exports by volume and sales, as of December of the last three years as percentage of consolidated volume and sales for the last three years:   2014

   2015

   2016Exports (thousands of liters) (1)

   70,519

   75,788

   77,927% of total consolidated sales volume

   3.08%

   3.17%

   3.14%Exports (CLP million) (1)

   108,064

   123,544

   131,168% of total consolidated sales

   8.33%

   8.25%

   8.41%(1)Includes Argentinean operations and bulk wine.
    Legal Proceedings  Nothing to report.  Dividend Policy and Dividends  Our dividend policy is reviewed and established from time to time by our board of directors and reported during our annual shareholders’ meeting, which is generally held in April of each year. Each year our board of directors must submit its proposal for a final dividend for the preceding year for shareholder approval at the annual shareholders’ meeting. As required by the Chilean Corporations Act, we must distribute a cash dividend in an amount equal to at least 30% of our net income for that year, after deducting any accumulated losses from previous years, unless otherwise decided by unanimous vote of the issued shares of our common stock. Our board of directors has the authority to pay interim dividends during any one fiscal year, to be charged to the earnings for that year.  Our board of directors announced at our annual shareholders’ meeting held on April 13, 2016, its dividend policy for future periods, authorizing the distribution of cash dividends in an amount at least equal to 50% of our Net income of the Year Attributable to Equity Holders of the Parent Company under IFRS for the previous year. Our dividend policy is subject to change in the future due to changes in Chilean law, capital requirements, economic results and/or other factors. During our annual shareholders’ meeting held on April 13, 2016, a dividend of CLP 97.47388 per share of common stock (CLP 194.94776 per ADS using the new ratio as of December 20, 2012 of 1 ADS to 2 common shares) was approved, in addition to the interim dividend of CLP 66 per share of common stock (CLP 132 per ADS) distributed in January 8, 2016. Together, these dividend payments amounted to CLP 60,404


million, representing 50.0% of the “Net income of the Year Attributable to Equity Holders of the Parent Company” for 2015.


92

---



Dividends are paid to shareholders of record on midnight of the fifth business day, including Saturdays, preceding the date set for payment of the dividend. The holders of ADRs on the applicable record dates are entitled to dividends declared for each corresponding period.  The board of directors, in its meeting held on December 6, 2016, approved the distribution, with a charge to 2016’s Net income attributable to equity holders of the parent company, of an interim dividend of CLP 66 per share of common stock (CLP 132 per ADS), totaling CLP 24,387,189,552, which was paid on January 6, 2017. Additionally, the board of directors, in its meeting held on March 8, 2017, resolved to propose to the next regular shareholders meeting, the distribution, with a charge to 2016’s Net income attributable to equity holders of the parent company, of a final dividend of CLP 110.32236 per share of common stock (CLP 220.64472 per ADS). The proposal, representing a total payment of CLP 40,764,428,866, was approved at our last annual shareholders’ meeting held on April 12, 2017 and the final dividend was paid beginning April 26, 2017 to the shareholders of record at midnight on April 20, 2017.  The following table sets forth the amounts of interim and final dividends and the aggregate amounts of such dividends per share of common stock and per ADS in respect of each of the years indicated:  Year endedDecember 31,

   **CLP Per share**(1)

   

   **US$ Per ADS**(2)Interim

   **Final**(3)

   Total

   

   Interim

   **Final**(3)

   Total2012

   63

   116.64

   179.64

   

   0.27

   0.49

   0.762013

   63

   103.49

   166.49

   

   0.24

   0.37

   0.612014

   63

   98.78

   161.78

   

   0.21

   0.32

   0.522015

   66

   97.47

   163.47

   

   0.18

   0.29

   0.472016

   66

   110.32

   176.32

   

   0.20

   0.33

   0.53(1) Interim and final dividend amounts are expressed in historical pesos.(2) U.S. dollars per ADS dividend information serves reference purposes only as we pay all dividends in Chilean pesos. On December 20, 2012, there was an ADS ratio change from 1 ADS to 2 common shares. The ammounts shown above have been adjusted to reflect this change. The Chilean peso amounts as shown here have been converted into U.S. dollars at the respective observed exchange rate in effect at each payment date. Note: The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.(3) The final dividend with respect to each year is declared and paid within the first five months of the subsequent year.
 Pursuant to current Chilean foreign exchange regulations, a shareholder who is not a resident of Chile does not need to be authorized as a foreign investor in order to receive dividends, sale proceeds or other amounts with respect to its shares remitted outside Chile, but the investor must inform the Central Bank about any such transactions and must remit foreign currency through the Formal Exchange Market. See “Item 10. Additional Information – Exchange Controls” for additional information on how ADR holders may remit currency outside Chile. Dividends received in respect of shares of common stock by holders, including holders of ADRs who are not Chilean residents, are subject to Chilean withholding taxes. See “Item 10: Additional Information – Taxation”.  B.Significant Changes  Nothing to report.


93

---



ITEM 9: The Offer and Listing  A.Offer and Listing Details  For the periods indicated, the table below sets forth the reported high and low closing sales prices for the common stock on the Stock Exchanges in Chile as well as the high and low sales prices of the ADSs as reported by the NYSE:   Santiago Stock Exchange

   **NYSE**(1)(per share of common stock)

   (per ADS)High

   Low

   High

   Low(CLP)

   (CLP)

   (US$)

   (US$)Years2012

   7,788

   5,930

   32.73

   24.072013

   8,094

   5,900

   34.91

   22.892014

   6,900

   5,600

   24.22

   17.892015

   8,784

   5,479

   25.27

   17.732016

   8,120

   6,500

   24.17

   18.782017 (through Mar. 31)

   8,449

   6,820

   25.46

   20.3120141st quarter

   6,400

   5,670

   24.22

   20.462nd quarter

   6,900

   5,804

   23.94

   21.023rd quarter

   6,750

   6,200

   23.79

   21.024th quarter

   6,594

   5,600

   22.13

   17.8920151st quarter

   6,500

   5,479

   20.90

   17.732nd quarter

   7,146

   6,409

   23.91

   20.733rd quarter

   7,935

   6,550

   23.80

   20.234th quarter

   8,784

   7,300

   25.27

   20.5820161st quarter

   7,875

   6,502

   22.87

   18.782nd quarter

   8,120

   7,128

   24.12

   19.853rd quarter

   7,810

   6,530

   24.17

   19.314th quarter

   7,250

   6,500

   21.85

   19.49Last six monthsOctober 2016

   7,250

   6,577

   21.85

   19.58November 2016

   7,140

   6,500

   21.58

   19.49December 2016

   7,119

   6,585

   21.39

   19.79January 2017

   7,367

   6,820

   22.66

   20.31February 2017

   7,740

   7,285

   23.94

   22.40March 2017

   8,449

   7,529

   25.46

   22.93(1)On December 20, 2012, there was an ADS ratio change from 1 ADS to 5 common shares, to a new ratio of 1 ADS to 2 common shares. Prices shown above take into account this change.
   Significant trading suspensions of the Company's stock have not occurred in the last three years.


94

---



B.Plan of distribution  Not applicable.  C.Markets  Our common stock is currently traded on the Santiago Stock Exchange, the Chile Electronic Stock Exchange and the Valparaíso Stock Exchange under the symbol “CCU”. The Santiago Stock Exchange accounted for approximately 87.7%, 88.3% and 87.4% of the trading volume of our common stock in Chile in the last three years, respectively. The remaining 12.3%, 11.7% and 12.6% respectively, was traded mainly on the Chile Electronic Stock Exchange. Shares of our common stock were traded in the United States on the NASDAQ Stock Market between September 24, 1992 and March 25, 1999 and on the NYSE since March 26, 1999, in the form of ADSs, under the symbol “CCU”, with such ADSs being evidenced by ADRs, which until December 20, 2012, had each represented five shares of our common stock. Starting on December 20, 2012, the ratio was changed so that each ADS represented two shares of our common stock. The ADSs are issued under the terms of a deposit agreement dated September 1, 1992, as amended and restated on July 31, 2013, among us, JPMorgan, as depositary, and the holders from time to time of the ADSs.  The trading volume of our ADSs in the NYSE in the last three years is as follows:   Year

   Quarter

   Traded Volume(1)(thousands of ADS)2014

   1st quarter

   12,0522nd quarter

   10,0943rd quarter

   9,6424th quarter

   10,771Total

   42,5592015

   1st quarter

   8,4642nd quarter

   8,1333rd quarter

   8,7304th quarter

   9,338Total

   34,6662016

   1st quarter

   10,8532nd quarter

   10,1213rd quarter

   16,0934th quarter

   15,288Total

   52,355
   D.Selling Shareholders  Not applicable.  E.Dilution  Not applicable.  F.Expenses of the Issue  Not applicable.


95

---



ITEM 10: Additional Information  A.Share Capital  Not applicable.  B.Memorandum and Articles of Association  Provided below is a summary of certain material information found in our bylaws and provisions of Chilean law. This summary is not exhaustive. For more information relating to the items discussed in this summary, the reader is encouraged to read our updated bylaws, available in our website atwww.ccu.cl. The information on our website is not incorporated by reference into this document.  Registration and corporate purposes. We are a public corporation (sociedad anónima abierta) organized by means of a public deed dated January 8, 1902, executed before the notary public of Valparaíso, Mr. Pedro Flores, and our existence was approved by Supreme Decree N° 889 of the Treasury Department, dated March 19, 1902, both of which were recorded on the reverse of folio 49, N° 45 of Valparaíso’s Registry of Commerce for 1902, and published in Chile’s Official Gazette on March 24, 1902. We were recorded on March 8, 1982, at Chile’s Securities Registry of the SVS under N° 0007.  The last amendment to our articles of association, which incorporates the resolutions of the extraordinary shareholders’ meeting held on June 18, 2013, that approved to increase the capital of the Company, by the issuance of 51,000,000 shares, were set forth in a public deed dated June 18, 2013, executed before the notary public of Santiago, Eduardo Diez Morello, an extract of which was recorded on the folio 48,216 N° 32,190 of the Santiago Registry of Commerce for 2013, published in the Official Gazette on June 25, 2013.  Under Article 4 of our bylaws, the corporation’s principal purpose is to produce, manufacture and market alcoholic and non-alcoholic beverages, to manufacture containers and packaging, and to provide transportation services, among other businesses.  Directors.Under the Chilean Corporations Act, a corporation may not enter into a contract or agreement in which a director has a direct or indirect interest without prior approval by the board of directors, and then only if it is in the interest of the company, the price, terms and conditions are similar to those prevailing in the market at the time of its approval and the transaction complies with the requirements and procedures stated in Chapter XVI of the Chilean Corporations Act regarding Related Party Transactions. See “Item 7: Major Shareholders and Related Party Transactions”.  The amount of any director’s remuneration is established each year by the annual shareholders’ meeting. Directors are forbidden, unless previously and duly authorized thereto by the board of directors, to borrow or otherwise make use of corporate money or assets for their own benefit or that of their spouses, certain relatives or related persons. These rules can only be modified by law.  It is not necessary to hold shares to be elected director, and there is no age limit established for the retirement of directors.  Rights, preferences and restrictions regarding shares. At least 30% of our net profits for each fiscal year are required to be distributed as dividends in cash to our shareholders, unless our shareholders unanimously decide otherwise. Any remaining profits may be used to establish a reserve fund (that may be capitalized at any time, amending the corporate bylaws by the vote of a majority of the voting stock issued), or to pay future dividends. Compulsory minimum dividends, i.e., at least thirty percent of our net profits for each fiscal year, become due thirty days after the date on which the annual shareholders' meeting has approved the distribution of profits in the fiscal year. Any additional dividends approved by our shareholders become due on the date set by our shareholders or our board of directors.


96

---



Accrued dividends that corporations fail to pay or make available to their shareholders within certain periods are to be adjusted from the date on which those dividends became due and that of actual payment. Overdue dividends will accrue yearly interest at established rates over the same period.  Dividends and other cash benefits unclaimed by shareholders after five years from the date on which they became due will become the property of the Chilean Fire Department.  We have only one class of shares and there are therefore no preferences or limitations on the voting rights of shareholders. Each of our shareholders is entitled to one vote per share. In annual shareholders’ meetings, resolutions are made by a simple majority of those present, provided legal quorums are met. A special or extraordinary meeting generally requires an absolute majority, in other words, 50% plus one of the shares entitled to vote; however, the Chilean Corporations Act provides that in order to carry certain motions, a two-thirds majority of the outstanding voting stock is necessary.  Our directors are elected every three years and their terms are not staggered. Our shareholders may accumulate their votes in favor of just one person or distribute their votes to more than one person. In addition, by unanimous agreement of our shareholders present and entitled to vote, the vote may be omitted and the election made by acclamation.  In the event of liquidation, the Chilean Corporations Act provides that corporations may carry out distributions to shareholders on account of a reimbursement of capital only after the payment of corporate indebtedness.  There are no redemption or sinking fund provisions applicable to us, nor are there any liabilities to our shareholders relating to future capital calls by us.  Under Chilean law, certain provisions affect any existing or prospective holder of securities as a result of the shareholder owning a substantial number of shares. The Chilean Securities Market Law, establishes that (a) any person who, directly or indirectly, owns 10% or more of the subscribed capital of an open-stock corporation (the “majority shareholders”) or that, as a consequence of an acquisition of shares, attains such percentage, and (b) all directors, liquidators, principal executive officers, administrators and managers of such corporations, regardless of the number of shares they possess, either directly or indirectly, must report any purchase or sale of shares to the SVS and to each of the stock exchanges in Chile where such corporation has securities listed, the day immediately following the execution of the transaction, through the technological means authorized by the SVS. This obligation shall also apply to the acquisition or sale of contracts or securities, the price or result of which is dependent upon or is conditioned on, in whole or in a relevant part, the fluctuation or evolution of the price of such shares. In addition, majority shareholders must inform the SVS and the stock exchanges with respect to whether the purchase is aimed at acquiring control of the corporation or just as a financial investment.  The Chilean Securities Market Law also provides that when one or more persons intend to take over a corporation subject to oversight by the SVS, they must give prior public notice. This notice must include the price to be offered per share and the conditions of the proposed transaction, including the expected manner of acquiring the shares.  Finally, Chapter XXV of the Chilean Securities Market Law was enacted on December 20, 2000, to ensure that controlling shareholders share with minority shareholders the benefits of a change of control, by requiring that certain share acquisitions be made pursuant to a tender offer.  Article 199 bis of the Chilean Securities Market Law extends the obligation to make a tender offer for the remaining outstanding shares to any person, or group of persons with a joint performance agreement, that, as a consequence of the acquisition of shares, becomes the owner of two-thirds or more of the issued shares with voting rights of a corporation. Such tender offer must be effected within 30 days from the date of such acquisition.  The Chilean Corporations Act provides shareholders with preemptive rights. The Act requires that options to purchase stock representing capital increases in corporations and debentures duly convertible into stock of the issuing corporation, or any other securities extending future rights over such stock, must be offered preferably, at least once, to existing shareholders, in proportion to the number of shares owned by them. A corporation must distribute any bonus stock in the same manner.


97

---



The Chilean Corporations Act also provides shareholders with the right to withdraw from a corporation in certain situations. Unless there is an ongoing bankruptcy proceeding, if a shareholders’ meeting approves any of the following matters, dissenting shareholders will be automatically entitled to withdraw from the corporation upon payment by the corporation of the market value of their shares:   ·

   our transformation into a different type of legal entity;·

   our merger with and/or into another company;·

   the disposition of 50% or more of the corporate assets, whether or not liabilities are also transferred, to be determined according to the balance sheet of the previous fiscal year, or the proposal or amendment of any business plan that contemplates the transfer of assets exceeding said percentage; the disposition of 50% or more of the corporate assets of a subsidiary, which represents at least 20% of the assets of the corporation, as well as any disposition of shares which results in the parent company losing its status as controller;·

   the granting of real or personal guarantees to secure third-party obligations exceeding 50% of the corporate assets, except when the third party is a subsidiary of the company (in which case approval of the board of directors will suffice);·

   the creation of preferences for a series of shares or the increase, extension or reduction in the already existing ones. In this case, only dissenting shareholders of the affected series shall have the right to withdraw;·

   curing certain formal defects in the corporate charter which otherwise would render it null and void or any modification of its bylaws that should grant this right; and·

   other cases provided for by statute or in our bylaws, if any.  In addition, shareholders may withdraw if a person becomes the owner of two-thirds or more of the outstanding shares of the corporation as a consequence of a share acquisition and such person does not make a tender offer for the remaining shares within 30 days from the date of such acquisition.  Minority shareholders are also granted the right to withdraw when the controlling shareholder acquires more than 95% of the shares of an open-stock corporation.  Our bylaws do not provide for additional circumstances under which shareholders may withdraw.  Action necessary to change the rights of holders of stock. The rights of stockholders are established by law and pursuant to the bylaws of a corporation. For certain modifications of shareholders’ rights, the law requires a special majority, such as the creation, increase, extension, reduction or suppression of preferred stock, which may be adopted only with the consent of at least two-thirds of the affected series. Consequently any other impairment of rights not specifically regulated needs only an absolute majority (more than 50%) of the stock entitled to vote. However, the waiver of the shareholders’ right to receive no less than 30% of the net profits accrued in any fiscal year (the “minimum dividend”) requires the unanimous vote of all stockholders. The above notwithstanding, no decision of the shareholders’ meeting can deprive a shareholder of any part of the stock that he/she owns.  Our bylaws do not contemplate additional conditions in connection with matters described in this subsection.  Shareholders’ meetings. Our annual shareholders' meetings are to be held during the first four months of each year. During the meetings, determinations are made relating to particular matters, which matters may or may not be specifically indicated in the summons for such meeting.  The quorum for a shareholders' meeting is established by the presence, in person or by proxy, of shareholders representing at least an absolute majority of our issued voting stock; if a quorum is not present at the first meeting, the meeting can be reconvened and upon the meeting being reconvened, shareholders present at the reconvened meeting are deemed to constitute a quorum regardless of the percentage of the voting stock represented. In that case, decisions will be made by the absolute majority of stock with voting rights present or otherwise represented. The following matters are specifically reserved for annual meetings:   ·

   review of our state of affairs and of the reports of external auditors, and the approval or rejection of the annual report, balance sheet, financial statements and records submitted by our officers or liquidators;·

   distribution of profits of the respective fiscal year, including the distribution of dividends;·

   election or revocation of regular and alternate board members, liquidators and external auditors; and


98

---



·

   determination of the remuneration of the board members, directors committee remuneration and budget, designation of the newspaper where summons for meetings shall be published and, in general, any other matter to be dealt with by the annual meeting being of corporate interest and not specifically reserved to extraordinary shareholders' meetings.   Extraordinary shareholders' meetings may be held at any time, when required by corporate necessity. During extraordinary meetings, determinations are made relating to any matter which the law or the Company's bylaws reserve for consideration by such extraordinary meetings, which matters shall be expressly set forth in the relevant summons. When in an extraordinary shareholders' meeting determinations relating to matters specifically reserved to annual meetings must be made, the operation and decisions of such extraordinary meeting will follow the requirements applicable to annual meetings. The following matters, are specifically reserved for extraordinary meetings:   ·

   dissolution of the corporation;·

   transformation, merger or spin-off of the corporation and amendments to its bylaws;·

   issuance of bonds or debentures convertible into stock;·

   the disposition of 50% or more of the corporate assets, whether or not liabilities are also transferred, to be determined according to the balance sheet of the previous fiscal year, or the proposal or amendment of any business plan that contemplates the transfer of assets exceeding said percentage, the disposition of 50% or more of the corporate assets of a subsidiary, which represent at least 20% of the assets of the corporation, as well as any disposition of shares which results in the parent company losing its status of controlling shareholder; and·

   guarantees of third parties' obligations, except when these third parties are subsidiary companies (in which case approval of the board of directors will suffice).  In addition to the above, annual and extraordinary shareholders' meetings must be called by the board of directors in the following circumstances:   ·

   when requested by shareholders representing at least 10% of issued stock with voting rights regarding closed corporations; and·

   when required by the SVS, notwithstanding its right to call such meeting directly.  Only holders of stock recorded in the Register of Shareholders of open-stock corporations at midnight of the fifth business day, including Saturdays, before the date of the pertinent meeting may participate with the right to be heard and vote in shareholders' meetings. Directors and officers other than shareholders may participate in shareholders' meetings with the right to be heard.  Shareholders may be represented at meetings by other individuals, regardless of whether or not those persons are shareholders themselves. A proxy must be conferred in writing, and for the total number of shares held by the shareholder and entitled to vote in accordance with the previous paragraph.  Limitations on the right to own securities. The right to own any kind of property is guaranteed by the Chilean Constitution, and the Chilean Corporations Act does not contain any general limitation regarding the right to own securities. There are, however, certain limitations on the right of foreigners to own securities of Chilean corporations, but only for certain special types of companies. We are not affected by these limitations, and our bylaws do not contain limitations or restrictions in this regard.  Article 14 of the Chilean Corporations Act forbids open stock corporations from including in their bylaws any provisions restricting the free transferability of stock. However, shareholders may enter into a private agreement on this matter, but, in order for these agreements to be effective against the company and third parties, they must be recorded by the corporation and thus made available to any interested third parties. See “Item 6: Directors, Senior Management and Employees – Directors and Senior Management”.  Takeover defenses.Our bylaws do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of us and that would operate only with respect to a merger, acquisition or corporate


restructuring involving us (or any of our subsidiaries). See “Item 10.B. Memorandum and Articles of Association – rights, preferences and restrictions regarding shares”.


99

---



Ownership threshold. Our bylaws do not contain any ownership threshold above which shareholder ownership must be disclosed. For a description of the ownership thresholds mandated by Chilean law, see “– Rights, preferences and restrictions regarding shares” above. See “Item 10.B. Memorandum and Articles of Association – rights, preferences and restrictions regarding shares”.  Our bylaws do not impose any conditions that are more stringent than those required by law for effecting changes in our capital.  C.Material Contracts  Not applicable.  D.Exchange Controls  General Legislation and Regulations. The Central Bank of Chile is responsible for, among other things, monetary policies and exchange controls in Chile. See “Item 3. Key Information – Selected Financial Data – Exchange Rates”. Foreign investments can be registered with the Central Bank of Chile under Chapter XIV of the Central Bank Foreign Exchange Regulations, which regulates foreign exchange transactions, including access to the Formal Exchange Market. Pursuant to Law N° 20,780, on June 25, 2015 Law N° 20,848 was enacted, replacing Decree Law N° 600 of 1974 and establishing a new statute for direct foreign investments (henceforth, the "New Statute for Foreign Investment"). The New Statute for Foreign Direct Investments went into effect as of January 1, 2016. Foreign investors in companies that maintain a valid foreign investment agreement with the Government of Chile pursuant to the regulations of Decree Law N° 600 will fully retain the rights and obligations set forth in said agreements, provided that the agreements were executed prior to January 1, 2016. The New Statute for Foreign Investment does not grant investors eligibility for a tax invariability regime, which was granted to them by Decree Law N° 600. However, a transitory 4 four-year system has been established, under which foreign investors may request foreign investment authorizations via the execution of agreements with the Government of Chile, albeit subject to a total income tax rate of 44.5%.  Effective April 19, 2001, the Central Bank of Chile abrogated the then existing Chapter XXVI of the Central Bank Foreign Exchange Regulations (“Chapter XXVI”), which addressed issuance of ADSs by a Chilean company, and issued an entirely new set of Foreign Exchange Regulations (the “April 19th Regulations”), virtually eliminating all the restrictions and limitations that had been in force up to that date. The April 19th Regulations were based upon the general principle that foreign exchange transactions can be made freely in Chile by any person, notwithstanding the power conferred by law to the Central Bank of Chile of imposing certain restrictions and limitations to such transactions.  With the issuance of the April 19th Regulations, the approval by the Central Bank of Chile required for access to the Formal Exchange Market was replaced with the requirement of reporting of the relevant transactions to the Central Bank of Chile. However, some foreign exchange transactions, notably foreign loans, capital investment or deposits, continued to be subject to the requirement of being effected through the Formal Exchange Market. The April 19th Regulations reduced the time needed to effect foreign exchange transactions by foreign investors in Chile.  According to the April 19th Regulations, foreign exchange transactions performed before April 19, 2001, remained subject to the regulations in effect at the time of the transactions (i.e. Chapter XXVI), unless the interested parties elected the applicability of the April 19th Regulations, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the respective transaction.  On January 23, 2002, the Central Bank of Chile issued an entirely new set of Foreign Exchange Regulations, effective March 1, 2002, replacing the April 19th Regulations (the “New Rules”). The New Rules preserve the general principle established in the April 19th Regulations of freedom in foreign exchange transactions, simplified


procedures to reduce the time needed to materialize foreign exchange transactions by foreign investors in Chile, and introduced several new provisions.


100

---



Pursuant to the New Rules, Chilean entities are allowed, under Chapter XIV, which governs credits, deposits, investments and capital contribution from abroad, to: (i) dispose of such foreign currency allocated abroad, executing any of the transactions contemplated in Chapter XIV, without the need of delivering it into Chile, subject to the obligation of reporting said transaction to the Central Bank of Chile; and (ii) capitalize any liability expressed in foreign currency and acquired abroad.  According to the New Rules, section 7 of Chapter XIV, duly in force, states that foreign exchange transactions made pursuant to Chapter XIV, executed before April 19, 2001, were to continue to be subject to the regulations in effect at the time of the transactions, unless the interested parties elect the applicability of the New Rules, expressly waiving the applicability of the provisions which would otherwise govern them.  In connection with our initial public offering of ADSs, we entered into a foreign investment contract (the “Foreign Investment Contract”) with the Chilean Central Bank and the Depositary, pursuant to Article 47 of the Central Bank Act and former Chapter XXVI. Absent the Foreign Investment Contract, under Chilean exchange controls in force until April 19, 2001, investors would not have been granted access to the Formal Exchange Market for the purpose of converting Chilean pesos to U.S. dollars and repatriating from Chile amounts received in respect of, among other things, deposited Shares or Shares withdrawn from deposit on surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying Shares and any rights with respect thereto).  Notwithstanding the April 19th Regulations and the New Rules, Chapter XXVI remained in effect with respect to our ADR facility. On March 3, 2014, we, the Central Bank of Chile and the Depositary executed an agreement that terminated the Foreign Investment Contract. Consequently, the special exchange regime established under Chapter XXVI is no longer applicable. The Deposit Agreement, therefore, and the Company’s ADR program became subject to the exchange regulations of general applicability of Chapter XIV or such new regulations that may be issued in the future.  The ADS facility is currently governed by Chapter XIV on “Regulations applicable to Credits, Deposits, Investments and Capital Contributions from Abroad”. According to Chapter XIV number 2.3, the establishment of an ADS facility is regarded as an ordinary foreign investment, subject to the above mentioned limitations, and it is not necessary to seek the Central Bank’s prior approval in order to establish an ADS facility. The establishment of an ADS facility only requires that the Central Bank be informed of the transaction, and that the transactions thereunder be conducted through the Formal Exchange Market.  Investment in Our Shares and ADSs  Investments made in shares of our common stock are subject to the following requirements:  According to Chapter XIV of the Central Bank Foreign Exchange Regulations Information Procedures and Forms Manual (hereinafter the “Manual”), any foreign investor acquiring shares of our common stock who brought funds into Chile for that purpose must bring those funds through an entity participating in the Formal Exchange Market; any foreign investor acquiring shares of our common stock to be deposited and converted into ADSs who brought funds into Chile for that purpose must bring those funds through an entity participating in the Formal Exchange Market; in both cases, the entity of the Formal Exchange Market through which the funds are brought into Chile must report such investment to the Central Bank following the instructions detailed in Chapter I of the Manual; all remittances of funds from Chile to the foreign investor upon the sale of the acquired shares of our common stock or from dividends or other distributions made in connection therewith must be made through the Formal Exchange Market; all remittances of funds from Chile to the foreign investor upon the sale of shares underlying ADSs (after conversion is implemented through the depositary) or from dividends or other distributions made in connection therewith must be made through the Formal Exchange Market; and all remittances of funds made to the foreign investor must be reported to the Central Bank by the intervening entity of the Formal Exchange Market.  When funds are brought into Chile for a purpose other than to acquire shares for subsequent deposit and eventual conversion into ADSs and subsequently such funds are used to acquire shares to be deposited and converted into


ADSs, such investment must be reported to the Central Bank by the foreign investor (or its custodian in Chile) within ten days following the end of each month, using Appendix 3 of the Manual as detailed on its Chapter XIV number 6.


101

---



When funds to acquire shares of our common stock or to acquire shares for subsequent deposit and eventual conversion into ADSs are received by us abroad (i.e., outside of Chile), such investment must be reported to the Central Bank directly by the foreign investor within ten days following the end of the month in which the investment was made, according to number 2.2 of Chapter XIV of the Manual, using its Appendix N° 4.  When funds to acquire shares of our common stock or to acquire shares for subsequent deposit and eventual conversion into ADSs are received by us in Chile, such investment must be reported to the Central Bank directly by an entity participating in the Formal Exchange Market on the day the investment is made, according to number 1.2 of Chapter XIV of the Manual.  All payments in foreign currency in connection with our shares of common stock or ADSs made from Chile through the Formal Exchange Market must be reported to the Central Bank by the entity participating in the transaction, according to number 4 of Chapter XIV of the Manual. In the event there are payments made with foreign currency originating outside of Chile, the foreign investor must provide the relevant information to the Central Bank directly within the first ten calendar days of the month following the date on which the payment was made, according to number 5 of Chapter XIV of the Manual.  There can be no assurance that additional Chilean restrictions applicable to the holders of shares of our common stock or ADSs, the disposition of shares of our common stock underlying ADSs or the conversion or repatriation of the proceeds from such disposition will not be imposed in the future, nor can we assess the duration or impact of such restrictions if imposed.  This summary does not purport to be complete and is qualified by reference to Chapter XIV of the Central Bank Foreign Exchange Regulations, a copy of which is available in Spanish and English versions at the Central Bank’s website atwww.bcentral.cl.  E.Taxation  Chilean Tax Considerations  The following discussion is based on certain Chilean income tax laws presently in effect, including Rulings N°324 of January 29, 1990, and N°3,708 of October 1, 1999 of the Chilean Internal Revenue Service and other applicable regulations and rulings. The discussion summarizes the principal Chilean income tax consequences of an investment in the ADSs or shares of common stock by an individual who is not domiciled in or a resident of Chile or a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile which we refer to as a foreign holder. For purposes of Chilean law, an individual holder is a resident of Chile if he or she has resided in Chile for more than six consecutive months in one calendar year or for a total of more than six months, whether consecutive or not, in two consecutive tax years. An individual holder is domiciled in Chile if he or she resides in Chile with the purpose of staying in Chile (such purpose to be evidenced by circumstances such as the acceptance of employment within Chile or the relocation of his or her family to Chile). This discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation. Neither is it intended to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of shares or ADSs and does address all of the tax consequences that may be relevant to specific holders in light of their particular circumstances. Holders of shares and ADSs are advised to consult their own tax advisors concerning the Chilean or other tax consequences relating to the ownership of shares or ADSs.  Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign holders, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may be amended only by another statute. In addition, the Chilean tax authorities issue rulings and regulations of either general or specific application interpreting the provisions of Chilean tax law. Chilean taxes may not be assessed retroactively against taxpayers who act in good faith relying on such rulings and regulations,


but Chilean tax authorities may change said rulings and regulations prospectively. There is a general income tax treaty signed by Chile and the United States, but it is not in force (Congress approval is required).


102

---



Cash dividends and Other Distributions.Cash dividends paid by us with respect to the ADSs or shares of common stock held by a foreign holder will be subject to a 35.0% withholding tax, which is withheld and paid by us (the “Chilean Withholding Tax”). A credit against the Chilean Withholding Tax is available based on the level of corporate income tax, or first category tax, actually paid by us on the taxable income to which the dividend is imputed; however, this credit does not reduce the Chilean Withholding Tax on a one-for-one basis because it also increases the base on which the Chilean Withholding Tax is imposed. In addition, distribution of book income in excess of retained taxable income is subject to the Chilean Withholding Tax, but such distribution does not have a related credit. Under modifications incorporated to the Chilean income tax law by Act N°20,780 enacted on September 29, 2014, and Act. N°20,899 enacted on February 1st, 2016, for purposes of determining the level of the first category tax that has been paid by us, dividends generally are assumed to have been paid out of our oldest retained taxable profits.Those modifications also provide for the "Partially Integrated System” for corporate tax, implementing a gradual increase in the First Category Income tax rate, going from 20% to 21% for the 2014 business year, to 22.5% for the 2015 business year, to 24% for the 2016 business year, to 25.5% for the 2017 business year and to 27% starting the 2018 business year. Whether the first category tax is imposed or not, the effective overall combined rate of Chilean taxes imposed with respect to our distributed profits would be 35.0%. Nevertheless, in the case that the retained taxable profits or exempted profits as of December 31 of the year preceding a dividend are not sufficient to attribute to such dividend, we will make a withholding of 35.0% of the amount that exceeds those retained taxable or exempted profits. In case such withholding is determined to be excessive before the end of the year, there will be rights to file for the reimbursement of the excess withholding.  The foregoing tax consequences apply to cash dividends paid by us. Dividend distributions made in property (other than shares of common stock) will be subject to the same Chilean tax rules as cash dividends.  Capital Gains.Gain realized on the sale, exchange or other disposition by a foreign holder of ADSs (or ADRs evidencing ADSs) will not be subject to Chilean taxation, provided that such disposition occurs outside Chile or that it is performed under the rules of Title XXIV of the Chilean Securities Market Law, as amended by Law N°19,601, dated January 18, 1999. The deposit and withdrawal of shares of common stock in exchange for ADRs will not be subject to any Chilean taxes, according to Rulings N°1,705 of May 15, 2006 and N°2,144 of October 3, 2013. Until December 31, 2016, gain recognized on a sale or exchange of shares of common stock (as distinguished from sales or exchanges of ADSs representing such shares of common stock) by a foreign holder will be subject to both the first category tax and the Chilean Withholding Tax (the former being creditable against the latter) if (1) the foreign holder has held such shares of common stock for less than one year since exchanging ADSs for the shares of Common Stock, (2) the foreign holder acquired and disposed of the shares of common stock in the ordinary course of its business or as a regular trader of stock or (3) the sale is made to a company in which the foreign holder holds an interest (10.0% or more of the shares in the case of open stock corporations). In all other cases, gain on the disposition of shares of common stock will be subject only to the first category tax levied as a sole tax. However, if it is impossible to determine the taxable capital gain, a 5.0% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due. From January 1, 2017, the taxation with the alternative regime of first category as a sole tax on gains recognized on a sale or exchange of shares of common stock by a foreign holder will no longer be available. Consequently, gains obtained from this operations would be subject to both the first category tax and the Chilean Withholding Tax (the former being creditable against the latter), according to new article 17 N° 8 of the Chilean Income Tax Law, effective as of January 1,2017. The tax basis of shares of common stock received in exchange for ADSs will be the acquisition value of such shares. The valuation procedure set forth in the deposit agreement, which has been analyzed by the Chilean Internal Revenue Service pursuant to Ruling No 324 of 1990, values shares of common stock that are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, generally will determine the acquisition value for this purpose. Consequently, the conversion of


ADSs into shares of common stock and sale of such shares of common stock for the value established under the deposit agreement will not generate a capital gain subject to taxation in Chile. Ruling N° 324 of 1990 specifically analyzes the tax regime applicable to share transactions held with foreign investors through ADRs.


103

---



In the case where the sale of the shares is made on a day that is different from the date in which the exchange is recorded, capital gains subject to taxation in Chile may be generated. However, following Ruling N° 3708 of 1999 of the Chilean Internal Revenue Service, we will include in the deposit agreement a provision whereby the capital gain that may be generated if the exchange date is different from the date in which the shares received in exchange for ADSs are sold, will not be subject to taxation. Such provision states that in the event that the exchanged shares are sold by the ADS holders in a Chilean stock exchange on the same day in which the exchange is recorded in the shareholders’ registry of the issuer or within two business days prior to the date on which the sale is recorded in the shareholders’ registry, the acquisition price of such exchanged shares shall be the price registered in the invoice issued by the stock broker that participated in the sale transaction. The exercise of preemptive rights relating to the shares of common stock will not be subject to Chilean taxation. Amounts received for the assignment of preemptive rights relating to the shares will be subject to both the first category tax and the Chilean Withholding Tax (the former being creditable against the latter to the extent described above). Given the amendments made to the Chilean Tax Legislation which is fully enforced from 2017, please bear in mind that the tax treatment just mentioned regarding the ADR could be subject to future modifications, considering that the current tax treatment of ADR is supported in Chilean Internal Revenue Service rulings mentioned above, taking into account the new regulation of the taxation in indirect transfer of assets. The Chilean Internal Revenue Service has not enacted any rule nor issued any ruling about the applicability of the norms explained below (referred to as Laws No 19,738 and No 19,768) to the foreign holders of ADRs. To the extent that our shares are actively traded on a Chilean stock exchange, foreign institutional investors who acquire our shares may benefit from a tax exemption included in an amendment to the Chilean Income Tax Law, Law No 19,738 published on June 19, 2001, as amended by Law No 20,448 published on August 13, 2010. The amendment established an exemption for the payment of income tax by foreign institutional investors, such as mutual funds, pension funds and others, that obtain capital gains in the sales through a Chilean stock exchange, a tender offer or any other system authorized by the SVS, of shares of publicly traded corporations that are significantly traded in stock exchanges. A foreign institutional investor is an entity that is either: a fund that makes public offers of its shares in a country which public debt has been rated investment grade by an international risk classification agency qualified by the SVS;a fund that is registered with a regulatory entity of a country which public debt has been rated investment grade by an international risk classification agency qualified by the SVS, provided that the investments in Chile, including securities issued abroad that represent Chilean securities, held by the fund represent less than 30.0% of its share value;a fund that holds investments in Chile that represent less than 30.0% of its share value, provided that it proves that no more that 10.0% of its share value is directly or indirectly owned by Chilean residents;a pension fund that is exclusively formed by individuals that receive their pension on account of capital accumulated in the fund;a fund regulated by Law No 18,657, or the Foreign Capital Investment Funds Law, in which case all holders of its shares must reside abroad or be qualified as local institutional investors; orany other institutional foreign investor that complies with the characteristics defined by a regulation with the prior report of the SVS and the Chilean Internal Revenue Service.


104

---



In order to be entitled to the exemption, foreign institutional investors, during the time in which they operate in Chile must: be organized abroad and not be domiciled in Chile;not participate, directly or indirectly, in the control of the issuers of the securities in which they invest and not hold, directly or indirectly, 10.0% or more of such companies’ capital or profits;execute an agreement in writing with a Chilean bank or securities broker in which the intermediary is responsible for the execution of purchase and sale orders and for the verification, at the time of the respective remittance, that such remittances relate to capital gains that are exempt from income tax in Chile or, if they are subject to income tax, that the applicable withholdings have been made; andregister in a special registry with the Chilean Internal Revenue Service. It is important to take into account that Article 106 of the Chilean Income Tax Law that contains the mentioned exemption was abrogated by Act N° 20,712 enacted on December 24, 2013. Transitional article 5 of Act N° 20,712 indicate that the funds regulated by Law N° 18,657 will maintain the applicable tax regime of article 106, allowing the distribution of profits established in article 106, as long as they do not transform into one of the funds created by Act. No 20,712. In addition, Transitory article 9 of Act N° 20,712 allows institutional foreign investors who have acquired securities as referred to in article 107 of the Income Tax Law prior to January 1, 2017, to enjoy, in the subsequent disposal of these securities, the exemption established in article 106, provided that during its operation in the country and the moment of acquisition and disposal of said securities comply with the requirements established in article 106. Pursuant to the enacted amendment to the Chilean Income Tax Law published on November 7, 2001 (Law N° 19,768) as amended by Law No 19,801 published on April 25, 2002, as amended by Law No 20,448 published on August 13, 2010,  the sale and disposition of shares of Chilean public corporations which are actively traded on a Chilean stock exchange is not levied by any Chilean tax on capital gains if the sale or disposition was made: on a local stock exchange or any other stock exchange authorized by the SVS or in a tender offer process according to Title XXV of the Chilean Securities Market Law, so long as the shares (a) were purchased on a public stock exchange or in a tender offer process pursuant to Title XXV of the Chilean Securities Market Law, (b) are newly issued shares issued in a capital increase of the corporation, or (c) were the result of the exchange of convertible bonds (in which case the option price is considered to be the price of the shares). In this case, gains exempted from Chilean taxes shall be calculated using the criteria set forth in the Chilean Income Tax Law; orwithin 90 days after the shares would have ceased to be significantly traded on stock exchange. In such case, the gains exempted from Chilean taxes on capital gains will be up to the average price per share of the last 90 days. Any gains above the average price will be subject to the first category tax. Other Chilean Taxes.No Chilean inheritance, gift or succession taxes apply to the transfer or disposition of the ADSs by a foreign holder but such taxes generally will apply to the transfer at death or by a gift of shares of common stock by a foreign holder. No Chilean stamp, issue, registration or similar taxes or duties apply to foreign holders of ADSs or shares of common stock. Withholding Tax Certificates.Upon request, we will provide to foreign holders appropriate documentation evidencing the payment of the Chilean Withholding Tax. We will also inform when the withholding was excessive in order to allow the filing for the reimbursement of taxes.


105

---



United States Federal Income Tax Considerations  The following discussion summarizes the principal U.S. federal income tax considerations relating to the acquisition, ownership and disposition of Common Stock or ADSs by a U.S. holder (as defined below) holding such Common Stock or ADSs as capital assets for U.S. federal income tax purposes (generally, property held for investment). This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This summary does not describe any implications under state, local or non-U.S. tax law, or any aspect of U.S. federal tax law (such as the estate tax, gift tax, the alternative minimum tax or the Medicare tax on net investment income) other than U.S. federal income taxation. This summary does not purport to address all the material U.S. federal income tax consequences that may be relevant to the holders of the Common Stock or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial institutions, insurance companies, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real-estate investment trusts, partnerships and other pass-through entities, U.S. expatriates, investors that own or are treated as owning 10% or more of our voting stock, investors that hold the Common Stock or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction and persons whose functional currency is not the U.S. dollar) may be subject to special tax rules. As used below, a “U.S. holder” is a beneficial owner of Common Stock or ADSs that is, for U.S. federal income tax purposes:   ·

   

   an individual citizen or resident of the United States;·

   

   a corporation (or an entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;·

   

   an estate, the income of which is subject to U.S. federal income tax regardless of its source; or·

   

   a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.  If a partnership or other entity taxable as a partnership holds Common Stock or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of partnerships holding Common Stock or ADSs should consult their tax advisors. In general, for U.S. federal income tax purposes, holders of ADRs evidencing ADSs will be treated as the beneficial owners of the Common Stock represented by those ADSs. Taxation of Distributions Since January 1st, 2017, we are subject to Chile’s Partially Integrated System, which may affect the U.S. federal income tax treatment of distributions on our Common Stock or ADSs. See “Item 10, Additional Information—E. Taxation—Chilean Tax Considerations—Cash dividends and Other Distributions” above. In general, distributions with respect to the Common Stock or ADSs will, to the extent made from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. If a distribution exceeds the amount of our current and accumulated earnings and profits, as so determined under U.S. federal income tax principles, the excess will be treated first as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in the Common Stock or ADSs, and thereafter as capital gain. We do not intend to maintain calculations of our earnings and profits under U.S. federal income tax principles and, unless and until such calculations are made, U.S. holders should assume all


distributions are made out of earnings and profits and constitute dividend income. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.


106

---



The gross amount of any dividends (including amounts withheld in respect of Chilean taxes) paid with respect to the Common Stock or ADSs generally will be subject to U.S. federal income taxation as ordinary income and will not be eligible for the dividends received deduction allowed to corporations. Dividends paid in Chilean currency will be included in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividends are actually or constructively received by the U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are actually or constructively received by the depositary or its agent, whether or not converted into U.S. dollars. A U.S. holder will have a tax basis in any distributed Chilean currency equal to its U.S. dollar amount on the date of receipt by the U.S. holder or disposition, as the case may be, and any gain or loss recognized upon a subsequent disposition of such Chilean currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary income or loss. If dividends paid in Chilean currency are converted into U.S. dollars on the day they are received by the U.S. holder, the depositary or its agent, as the case may be, U.S. holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Chilean currency received by the U.S. holder or the depositary or its agent is not converted into U.S. dollars on the date of receipt. Under current law, the U.S. dollar amount of dividends by an individual with respect to the ADSs will be subject to taxation at a reduced rate if the dividends represent “qualified dividend income”. Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States, (ii) the U.S. holder meets the holding period requirement for the ADSs (generally more than 60 days during the 121-day period that begins 60 days before the ex-dividend date), and (iii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The ADSs are listed on the New York Stock Exchange, and should qualify as readily tradable on an established securities market in the United States so long as they are so listed. However, no assurances can be given that the ADSs will be or remain readily tradable. Based on our audited financial statements as well as relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2016 taxable year. In addition, based on our audited financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2017 taxable year. Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current (or any past or future) tax year. Based on existing guidance, it is not entirely clear whether dividends received with respect to the shares of Common Stock (to the extent not represented by ADSs) will be treated as qualified dividend income, because the Common Stock are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury Department has announced its intention to promulgate rules pursuant to which holders of ADSs or preferred stock and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. U.S. Holders of ADSs and Common Stock should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances. Dividends paid by us generally will constitute foreign source “passive category” income and will be subject to various other limitations for U.S. foreign tax credit purposes. Subject to generally applicable limitations under U.S. federal income tax law, Chilean income tax withheld on such dividends, reduced by the credit for any first category tax, as described above under “Item 10, Additional Information—E. Taxation—Chilean Tax Considerations—Cash dividends and Other Distributions”, generally will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. holder’s election if it does not elect to claim a foreign tax credit for any foreign income taxes paid during the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holder’s taxable income). In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax.


107

---



U.S. holders should be aware that the IRS has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of Chilean income tax on dividends could be affected by future actions that may be taken by the IRS. The rules with respect to the U.S. foreign tax credit are complex, and U.S. holders of Common Stock or ADSs are urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances. Taxation of Capital Gains Deposits and withdrawals of Common Stock by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. In general, gain or loss, if any, realized by a U.S. holder upon a sale, exchange or other taxable disposition of Common Stock or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the sale, exchange or other taxable disposition and such U.S. holder’s adjusted tax basis in the Common Stock or ADSs. Such capital gain or loss will be long-term capital gain or loss if at the time of sale, exchange or other taxable disposition the Common Stock or ADSs have been held for more than one year. Under current U.S. federal income tax law, net long-term capital gain of certain U.S. holders (including individuals) is eligible for taxation at preferential rates. The deductibility of capital losses is subject to certain limitations under the Code. Gain, if any, realized by a U.S. holder on the sale, exchange or other taxable disposition of Common Stock or ADSs generally will be treated as U.S. source gain for U.S. foreign tax credit purposes. Consequently, if a Chilean income tax is imposed on the sale or disposition of Common Stock, a U.S. holder that does not receive sufficient foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such Chilean income tax. Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if it does not elect to claim a foreign tax credit for any foreign taxes paid or accrued during the taxable year. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, Common Stock or ADSs. Passive Foreign Investment Company Rules In general, a foreign corporation is a PFIC with respect to a U.S. holder if, for any taxable year in which the U.S. holder holds stock in the foreign corporation, at least 75% of the foreign corporation’s gross income is passive income or at least 50% of the value of its assets (determined on the basis of a quarterly average) produce passive income or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties and gains from the disposition of investment assets (subject to various exceptions). Based upon our current and projected income, assets and activities, we do not expect the Common Stock or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years. However, because the determination of whether the Common Stock or ADSs constitute shares of a PFIC will be based upon the composition of our income, assets and the nature of our business, as well as the income, assets and business of entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that the Common Stock or ADSs will not be considered shares of a PFIC for any fiscal year. If the Common Stock or ADSs were shares of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) may be subject to adverse tax consequences, including the possible imposition of an interest charge on gains or “excess distributions” allocable to prior years in the U.S. holder’s holding period during which we were determined to be a PFIC, unless such U.S. holder makes an election to be taxed currently on its pro rata portion of our income, whether or not such income is distributed in the form of dividends, or otherwise makes a “mark-to-market” election with respect to the Common Stock or ADSs as permitted by the Code. If we are deemed to be a PFIC for a taxable year, dividends on our Common Stock or ADSs would not be “qualified dividend income” eligible for preferential rates of U.S. federal income taxation. A U.S. Holder who owns Common Stock or ADSs during any taxable year that we are a PFIC in excess of certainde minimisamounts and fails to qualify for certain other exemptions would be required to file IRS Form 8621. In addition, under certain circumstances, the temporary regulations also require a “United States person” (as such term is defined under the Code) that owns an interest in a PFIC as an indirect shareholder through one or more United States persons to file Form 8621 for any taxable year during which such indirect shareholder is


treated as receiving an excess distribution in connection with the ownership or disposition of such interest, or reports income pursuant to mark-to-market election. U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the Common Stock or ADSs.


108

---



U.S. Information Reporting and Backup Withholding A U.S. holder of Common Stock or ADSs may, under certain circumstances, be subject to information reporting and backup withholding with respect to certain payments to such U.S. holder, such as dividends paid by our company or the proceeds of a sale, exchange or other taxable disposition of Common Stock or ADSs, unless such U.S. holder (i) is an exempt recipient and demonstrates this fact when so required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable against a U.S. holder’s U.S. federal income tax liability, provided the requisite information is timely furnished to the IRS. “Specified Foreign Financial Asset” Reporting Owners of “specified foreign financial assets” with an aggregate value in excess of US$50,000 (and in some circumstances, a higher threshold), may be required to file an information report with respect to such assets with their U.S. federal income tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. Prospective purchasers should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations as well as any additional tax consequences resulting from purchasing, holding or disposing of Common Stock or ADSs, including the applicability and effect of the tax laws of any state, local or foreign jurisdiction, including estate, gift, and inheritance laws.  F.Dividends and Paying Agents  Not applicable.  G.Statement by Experts  Not applicable.  H.Documents on Display  We are subject to the informational requirements of the Exchange Act. In accordance with these requirements, we file annual reports and submit other information to the United States Securities and Exchange Commission (the “SEC”). These materials, including this Form 20-F and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. The SEC also maintains a website at http://www.sec.gov/ that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC. Form 20-F reports and the other information submitted by us to the SEC may be accessed through this website. Additionally, the documents concerning us, which are referred to in this annual report, may be inspected at our principal offices at Vitacura 2670, Twenty Third Floor, Santiago, Chile.  I.Subsidiary Information  Not applicable.


109

---



ITEM 11: Quantitative and Qualitative Disclosures about Market Risk  The following discussion about our risk management activities includes “forward-looking statements” that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.  We face primary market risk exposures in three categories: interest rate fluctuations, exchange rate fluctuations and commodity price fluctuations. We periodically review our exposure to the three principal sources of risk described above and determine at our senior-management level how to minimize the impact on our operations of commodity price, foreign exchange and interest rate changes. As part of this review process, we periodically evaluate opportunities to enter into hedging mechanisms to mitigate such risks.  The market risk sensitive instruments referred to below are entered into only for purposes of hedging our risks and are not used for trading purposes.  Qualitative Information About Market Risk  Interest Rate Risk  As of December 31, 2016, we had a total of CLP 10,143 million in debt indexed to variable interest rates (CLP 20,207 million as of December 31, 2015). Consequently, as of December 31, 2016, our financing structure consisted (without taking into account the cross currency interest rate swaps and cross interest rate swaps effects) of 6% (12% as of December 31, 2015) of debt with variable interest rates, and 94% (88% as of December 31, 2015) of debt with fixed interest rates.  To manage the interest rate risk, we have an interest rate administration policy that intends to reduce the volatility of our financial expenses, and to maintain an ideal percentage of our debt in fixed rate instruments. The financial position is mainly set by the use of short-term and long-term debt, as well as derivative instruments such as cross currency interest rate swaps and cross interest rate swaps.  As of December 31, 2016, after considering the effect of cross currency interest rate swaps and cross interest rate swaps, 97% (97% in 2015) of our debt had fixed interest rates.  The terms and conditions of the Company’s obligations as of December 31, 2016, including exchange rates, interest rates, maturities and effective interest rates are detailed in Note 26 to our audited financial statements included elsewhere in this annual report.  Commodity and Raw Material Price Sensitivity  The principal commodity price sensitivity faced by us relate to fluctuations in: 1) prices and supply of barley, malt and cans, which we use for the production of beer, 2) prices of concentrates, sugar and plastic resin, which we use for the production and packaging of soft drinks, and 3) prices of bulk wine and grapes, which we use for the manufacturing of wine and spirits.  Barley, malt and cans. In Chile, we obtain our supply of barley and malt from local producers and in the international market. Long-term supply agreements are entered into with local producers, where the barley price is set annually according to the market price, which is used to determine the malt price as per the agreements’ algorithms. The purchases and commitments expose the Company to risk regarding the fluctuation of commodity prices.  During 2016, we purchased 61,753 tons of malt (53,890 tons in 2015) and 13,914 tons of barley (46,620 tons in 2015). CCU Argentina acquires malt only from local producers. Such raw materials represent approximately 7% (9% in 2015 and 12% in 2014) of the direct cost for the Chile Operating segment.  Of the cost of Chile Operating segment, the cost of cans represents approximately 15% of the direct cost (12% in 2015 and 12% in 2014). Meanwhile in the International Business Operating segment the cans cost represent approximately 34% of the direct cost of raw materials in 2016 (30% in 2015 and 20% in 2014). See “Item 4:


Information on the Company – Business Overview – Raw Materials and other Supplies” We do not hedge these transactions. Rather, we negotiate yearly contracts with malt suppliers.


110

---



Concentrates, sugar and plastic resin. The principal raw material used in the production of non-alcoholic beverages are concentrates, which are mainly acquired from licensees, sugar and plastic resin for the manufacturing of plastic bottles and containers. The Company is exposed to price fluctuation risks with regards to these raw materials, which jointly represent 30% (29% in 2015 and 29% in 2014) of the direct cost for the Chile Operating segment. See “Item 4: Information on the Company – Business Overview – Raw Materials and other Supplies”. We do not hedge these transactions.  Grapes and wine. The principal raw materials used by our wine subsidiary VSPT in the production of wine are its own harvested grape as well as purchased grapes and wine. VSPT obtains approximately 40% of the grapes used for export wines from its own vineyards, thereby reducing grape price volatility and ensuring quality consistency. Approximately 10% of the grape supply for the production of the wine sold in the domestic market is purchased from own vineyards. During 2016, VSPT purchased 11% of the necessary grapes and wine on the basis of yearly contracts at fixed prices from third parties. Spot transactions for wine are executed from time to time depending on additional wine needs. “Item 4: Information on the Company – Business Overview – Raw Materials and other Supplies”.  Exchange Rate Sensitivity  We are exposed to exchange rate risks resulting from: a) our net exposure of foreign currency assets and liabilities, b) exports sales, c) the purchase of raw material, products and capital investments effected in foreign currencies, or indexed to such currencies, and d) the net investment of subsidiaries in Argentina, Uruguay and Paraguay, of associated in Bolivia and of joint venture in Colombia. Our greatest exchange rate risk exposure is the variation of the Chilean peso as compared to the U.S. dollar, euro, argentine peso, uruguayan peso, paraguayan guaraní, bolivians and colombian peso.  As of December 31, 2016, we maintained in Chile foreign currency liabilities amounting to CLP 49,694 million (CLP 49,786 million as of December 31, 2015), mostly denominated in U.S. dollars. Obligations with financial institutions and bonds in foreign currency (CLP 6,352 million as of December 31, 2016 and CLP 16,626 million as of December 31, 2015) represent 4% (10% as of December 31, 2015) of the total of such liabilities. The remaining 96% (90% as of December 31, 2015) is denominated mainly in inflation-indexed Chilean pesos. In addition, the Company maintains foreign currency assets for CLP 66,435 million (CLP 72,888 million as of December 31, 2015) that mainly correspond to exports in accounts receivable.  Regarding the foreign subsidiaries operations, the net exposure assets in U.S. dollars and other currencies amounted to CLP 3,806 million as of December 31, 2016 (CLP 1,368 million as of December 31, 2015).  To protect the value of the foreign currency assets and liabilities net position of our Chilean operations, we enter into derivative agreements (currency forwards) to hedge against any variation in the Chilean peso as compared to other currencies.  As of December 31, 2016, net exposure in foreign currencies of our Chilean operations, after the use of derivative instruments, amounted to an asset of CLP 3,809 million (liability of CLP 757 million as of December 31, 2015).  In 2016, of our total sales, 8% (8% in 2015 and 2014) corresponded to export sales made in foreign currencies, mainly U.S. dollars, euros and pounds sterling, and of the total costs, 63% (54% in 2015 and 55% in 2014) correspond to raw material and product purchases in foreign currencies, or indexed to such currencies. We do not actively hedge the variations in the expected cash flows from such transactions.  On the other hand, we are exposed to exchange rate movements related to the conversion from argentine pesos, uruguayan pesos, paraguayan guaranis, bolivians and colombian pesos to chilean pesos in the income, assets and liabilities of our subsidiaries in Argentina, Uruguay and Paraguay, associated in Bolivia and joint venture in Colombia. We do not actively hedge the risks related to this conversion at our subsidiaries, the effects of which are recorded in Equity.


111

---



As of December 31, 2016, the net investment in foreign subsidiaries, associated and joint ventures amounted to CLP 135,002 million, CLP 8,249 million and CLP 35,449 million, respectively (CLP 133,555 million, CLP 6,628 million and CLP 18,719 million as of December 31, 2015).  Quantitative Information About Market Risk  Interest Rate Sensitivity Most of our debt is at a fixed interest rate, so it is not mainly exposed to fluctuations in interest rates. As of December 31, 2016, our interest-bearing debt amounted to CLP 160,490 million (see note 26 to the consolidated financial statements), 94% of which was fixed debt and 6% of which was variable-rate debt (without taking into account the cross currency interest rate swaps and cross interest rate swaps effects).  The following table summarizes debt obligations with interest rates by maturity date, the related weighted-average interest rates and fair values:   Interest - Bearing Debts as of December 31, 2016(millions of Ch$, except percentages)Contractual Flows Maturities2017

   2018

   2019

   2020

   2021

   Thereafter

   Total

   Fair ValueInterest bearing liabilitiesFixed rateCh$ (UF)(1)

   Bonds and Banks

   

   

   7,435

   7,176

   19,435

   11,139

   10,833

   85,517

   141,536

   122,528Average interest rate

   

   

   4.6%

   4.6%

   3.6%

   4.5%

   4.5%

   5.2%Ch$

   

   

   

   

   28,794

   2,660

   2,660

   313

   313

   -

   34,740

   34,318Average interest rate

   

   

   5.9%

   5.2%

   5.2%

   5.1%

   5.1%US$

   

   

   

   

   1,086

   -

   -

   -

   -

   -

   1,086

   1,083Average interest rate

   

   

   2.9%Argentine pesos

   

   

   

   

   9,686

   4,378

   2,683

   -

   -

   -

   16,747

   13,163Average interest rate

   

   

   27.4%

   30.5%

   30.5%Uruguayan pesos

   

   

   

   1,045

   348

   348

   -

   -

   -

   1,742

   1,742Average interest rate

   

   

   6.0%

   6.0%

   6.0%Variable rateUS$

   

   

   

   

   108

   5,332

   -

   -

   -

   -

   5,440

   5,336Average interest rate

   Libor +

   

   1.8%

   1.8%Argentine pesos

   

   

   

   

   2,154

   1,586

   1,005

   -

   -

   -

   4,744

   3,423Average interest rate

   Badlar +

   18.0%

   15.67%

   15.7%Non interest bearing liabilitiesDerivate ContractCross Interest Rate Swap:Receive

   

   

   

   

   -

   -

   -

   -

   -

   -

   -

   -Pay

   

   

   

   

   -

   -

   -

   -

   -

   -

   -

   -Forwards

   

   

   

   

   11,119

   -

   -

   -

   -

   -

   11,119

   11,119(1) UF as of Dec 31, 2016


112

---



Commodity Price Sensitivity  The major commodity price sensitivity faced by us relate to fluctuations in malt prices.  The following table summarizes information about our malt, sugar and bulk wine inventories and futures contracts that are sensitive to changes in commodity prices, mainly malt prices. For inventories, the table presents the carrying amount and fair value of the inventories and contracts as of December 31, 2016. For these contracts the table presents the notional amount in tons, the weighted average contract price, and the total dollar contract amount by expected maturity date.   Commodity Price Sensitivity as of December 31, 2016Carrying Amount

   

   

   

   

   Fair ValueOn Balance Sheet PositionMalt inventory (millions of CLP)

   

   8,817

   

   

   

   

   

   8,817Bulk wine inventory - raw material (millions of CLP)

   30,337

   

   

   

   

   

   30,337Expected Maturity

   

   

   

   Fair Value2017

   2018

   2019

   2020

   2021

   ThereafterPurchase ContractsMalt:Fixed Purchase Volume (tons)

   

   126,033

   128,867

   133,183

   87,983

   -

   -

   -Weighted Average Price (US$ per ton)(*)

   

   523

   523

   523

   523

   -

   -

   -Contract Amount (thousands of US$)

   

   65,967

   67,450

   69,709

   46,051

   -

   -

   239,797Sugar:

   

   

   -

   -

   -

   -

   -

   -

   -Fixed Purchase Volume (tons)

   

   65,219

   -

   -

   -

   -

   -

   -Weighted Average Price (US$ per ton)(*)

   

   610

   -

   -

   -

   -

   -

   -Contract Amount (thousands of US$)

   

   39,784

   -

   -

   -

   -

   -

   39,322Grapes:Fixed Purchase Volume (tons)

   

   34,752

   24,789

   13,247

   4,026

   1,110

   84

   -Weighted Average Price (CLP per kg.)(*)

   

   201

   189

   203

   259

   182

   934

   -Contract Amount (millions of CLP)

   

   6,971

   4,676

   2,690

   1,043

   202

   78

   14,752Wine:Fixed Purchase Volume (Mlts)

   

   4,639

   2,700

   2,700

   -

   -

   -

   -Weighted Average Price (CLP per liter)(*)

   

   373

   166

   166

   -

   -

   -

   -Contract Amount (millions of CLP)

   

   1,730

   448

   448

   -

   -

   -

   2,507(*) Weighted average price estimation is calculated based on expected market prices. Prices to be paid by us are adjusted based on current market conditions.
  As of December 31, 2016 we had malt purchase contracts for US$37.8 million in Chile, compared with US$54.8 million as of December 31, 2015.


113

---



Exchange Rate Sensitivity The major exchange rate risk faced by us is the variation of the Chilean peso against the U.S. dollar.  A portion of our subsidiaries adjusted operating results, assets and liabilities are in currencies that differ from our functional currencies. However, since some of their operating revenues, costs and expenses are in the same currency, this can create a partial natural hedge. For the portion that is not naturally hedged of operations in Chile we enter into derivative agreements (currency forwards) to mitigate any variation in the Chilean peso as compared to other currencies.  The following table summarizes our debt obligations, cash and cash equivalents, accounts receivable, accounts payable and derivative contracts in foreign currencies as of December 31, 2016 in millions of Chilean pesos, according to their maturity date, weighted-average interest rates and fair values:   Exchange Rate Sensitivity as of December 31, 2016(millions of CLP, except percentages and exchange rate)**Contractual Maturity Date**2017

   2018

   2019

   2020

   2021

   Thereafter

   Total

   Fair ValueDebt ObligationsVariable rate (US$)Short and medium term

   

   

   108

   5,332

   -

   -

   -

   -

   5,440

   5,336Average int.rate Libor +

   1.8%

   1.8%

   -

   -

   -

   -

   -

   -Fixed rate (US$)Short term

   

   

   

   1,086

   -

   -

   -

   -

   -

   1,086

   1,083Interest rate

   2.9%

   -

   -

   -

   -

   -

   -

   -Cash and CashEquivalents(1)US$

   

   

   

   8,238

   -

   -

   -

   -

   -

   8,238

   8,238Others

   

   

   

   1,290

   -

   -

   -

   -

   -

   1,290

   1,290TOTAL

   

   

   

   9,528

   -

   -

   -

   -

   -

   9,528

   9,528Accounts Receivable(1)US$

   

   

   

   24,449

   -

   -

   -

   -

   -

   24,449

   24,449EUR

   

   

   

   7,025

   -

   -

   -

   -

   -

   7,025

   7,025Others

   

   

   

   1,257

   -

   -

   -

   -

   -

   1,257

   1,257TOTAL

   

   

   

   32,732

   -

   -

   -

   -

   -

   32,732

   32,732(1)Figures as of December 31, 2016.**Contractual Maturity Date**Notional

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total

   Fair ValueamountDerivate Contracts (inmillions of Ch$)Receive US$

   

   

   

   467

   5,332

   -

   -

   -

   -

   5,799

   5,695Pay US$

   

   

   

   18,031

   -

   -

   -

   -

   -

   18,031

   17,991Receive EUR

   

   

   

   109

   -

   -

   -

   -

   -

   109

   109Pay EUR

   

   

   

   578

   4,967

   -

   -

   -

   -

   5,545

   5,603Receive Others

   

   

   

   11

   -

   -

   -

   -

   -

   11

   11Pay Others

   

   

   

   9

   -

   -

   -

   -

   -

   9

   9


114

---



ITEM 12: Description of Securities Other than Equity Securities  12.D.3. Depositary Fees and Charges  JPMorgan is the depositary of CCU shares in accordance with the amended and restated Deposit Agreement, dated July 31, 2013, entered into by and among CCU, JPMorgan, as depositary, and all owners from time to time of ADSs issued by CCU (“Deposit Agreement”).  Pursuant to the Deposit Agreement, holders of our ADSs may have to pay to JPMorgan, either directly or indirectly, fees or charges up to the amounts set forth in the table below.   Service

   FeeIssuance of ADSs

   US$5 per each 100 ADSs issuedCancellation of ADSs

   US$5 per each 100 ADSs canceledCash distributions

   US$0.05 or less per ADS
  During each year, the depositary will collect fees of US$0.05 or less per ADS per calendar year for administering the ADSs.  ADS holders will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as: stock transfer or other taxes and other governmental charges; cable, telex and facsimile transmission and delivery charges incurred upon the transfer of securities; transfer or registration fees for the registration of transfers charged by the registrar and transfer agent; and expenses incurred for converting foreign currency into U.S. dollars.  12.D.4. Depositary Payments  In 2016, the following reimbursements were made by JPMorgan, pursuant to the corresponding tax retention, in connection with our ADR program:   Expenses

   amount in thousands US$ (*)Documents Edgar and filing

   7.2FASB fee

   0.7PCAOB fee

   6.7Teleconferencing

   8.8Legal advise related to 20-F preparation & filing

   62.5Software and licenses subscription Fee

   61.7Representative Fees

   0.7Investor communications

   15.7Total

   164.1(*) includes 30% tax retention


115

---



PART II ITEM 13: Defaults, Dividend Arrearages and Delinquencies  Not applicable.  ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds  Not applicable.  ITEM 15: Controls and Procedures  (a) Controls and Procedures. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2016. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2016.  Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods required and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.  (b) Management’s Annual Report on Internal Control over Financial Reporting. Our management, including our CEO and CFO, are responsible for establishing and maintaining adequate internal controls over financial reporting and has assessed the effectiveness of our internal control over financial reporting as of December 31, 2016 based on the criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on such criteria, our management has concluded that, as of December 31, 2016 our internal control over financial reporting is effective.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.  The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers, an independent registered public accounting firm, as stated in their report which appears herein.


116

---



(c) Attestation Report of the Registered Public Accounting Firm. See page F-2 of our audited consolidated financial statements.  (d) Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting during 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  (e) Whistle-blowing procedure. We have a whistle-blowing procedure which allows any employee of CCU, of its associates or any person, to communicate to a designated person questionable practices or activities that constitute a breach of accounting procedures, internal controls, audit matters and the Code of Business Conduct.  ITEM 16A: Audit Committee Financial Expert  At the board of directors ́ meeting held on April 13, 2016, following the election of a new board at the shareholders ́ meeting held the same day, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Mr. Corbo and Mr. Molina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee ́s meetings as observers.  We do not have an audit committee financial expert serving on our audit committee, as such term is defined under Item 407 of Regulation S-K. We do not have an audit committee financial expert because we are not required to appoint one under Chilean law.   ITEM 16B: Code of Ethics  We have adopted a Code of Business Conduct that applies to all of our executive officers and employees. Our Code of Business Conduct is available on our website atwww.ccu.clorwww.ccuinvestor.com. Our code of ethics was updated on March 4, 2014 and no waivers, either explicit or implicit, of provisions of the code of ethics have been granted to the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer. The information on our website is not incorporated by reference into this document.  In December 2013, we adopted a Code of Conduct of the board of directors that applies to all of the members of our board of directors, which was updated in July and December 2015. This Code of Conduct is available on our website atwww.ccu.clorwww.ccuinvestor.com. The Code of Conduct sets forth certain basic principles intended to guide the actions of our directors, as well as certain procedures, policies and corporate governance best practices. The Code of Conduct covers matters of confidentiality, access to independent experts, orientation of newly elected directors and review of information regarding candidates for election to the board of directors. The Code of Conduct also establishes rules and procedures regarding conflicts of interest. The information on our website is not incorporated by reference into this document.


117

---



ITEM 16C: Principal Accountant Fees and Services  The following table sets forth the fees billed to us by our independent auditors, PricewaterhouseCoopers (“PwC”), during the fiscal years ended December 31, 2015 and 2016:   2014

   2015

   2016(millions of CLP)Audit Fees

   462

   487

   743Audit-Related Fees

   -

   -

   30Tax Fees

   -

   8

   7All Other Fees

   2

   11

   18Total Fees

   464

   506

   798
    “Audit fees” in the above table are the aggregate fees billed by PwC in connection with the review and audit of our semi-annual and annual consolidated financial statements, as well as the review of other filings. “Audit-Related Fees” are fees billed by PwC for the issuance of special full IFRS reports related to foreign entities. “Tax fees” are fees billed by PwC associated with the issuance of certificates for tax and legal compliance purposes. “All Other Fees” are fees billed by PwC associated with expenses related to Due Diligence, upgrade of the carbon footprint measurement system, and certifications of royalty payments, among others.  Audit Committee Pre-Approval Policies and Procedures  Since July 2005, our audit committee pre-approves all audit and non-audit services provided by our independent auditor pursuant to Sarbanes-Oxley Act of 2002.   ITEM 16D: Exemptions from the Listing Standards for Audit Committees  Not applicable.  ITEM 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers  Not applicable.  ITEM 16F: Change in Registrant’s Certifying Accountants Pursuant to the Chilean Corporations Act, the Company is obliged to elect on an annual basis its principal accountant. The election takes place at the annual shareholders ́ meeting. The audit committee and the directors committee independently submitted to the board of directors their proposal for the election of the principal accountant for fiscal year 2016. The board of directors ́ at its meeting held on January 5, 2016 agreed to propose to the annual shareholders ́ meeting of April 13, 2016 two candidates: KPMG Auditores Consultores Ltda (“KPMG”) was proposed in first place, and Pricewaterhouse Coopers Consultores Auditores y Compañía Limitada (“PwC Chile”), in second place. At the referred annual shareholders ́ meeting held April 13, 2016, KPMG was elected as principal accountant for the fiscal year 2016. As a consequence, PwC Chile was dismissed as our independent registered public accounting firm on April 13, 2016. Such dismissal became effective upon completion by PwC Chile of its procedures on the filing of Form 20-F for the year ended


December 31, 2015, which was filed on April 29, 2016. PwC Chile served as the company ́s independent registered public accounting firm for the fiscal years 2015 and 2014.


118

---



The reports of PwC Chile on the financial statements for the fiscal years ended December 31, 2015 and 2014 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 29, 2016 (the date PwC Chile ́s dismissal became effective), there were no disagreements with PwC Chile on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of PwC Chile would have caused them to make reference thereto in their reports on the financial statements for such years. During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 29, 2016, there have been no reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F). On June 21, 2016, prior to KPMG’s acceptance of appointment as principal accountant according to U.S. regulations, KPMG informed the Company that in the process of its standard client evaluation procedures it became aware of a matter than would not allow it to be independent with respect to CCU, and concluded that it would not be able to accept the appointment of principal accountant for the fiscal year 2016. The above-mentioned shareholders’ meeting had delegated to the board of directors the power to appoint PwC Chile to the extent KPMG was not able to provide services to the Company. Accordingly, the board of directors, at a meeting held on July 5, 2016, resolved to appoint PwC Chile as the Company’s independent registered public accounting firm for the fiscal year 2016, which engagement became effective on July 5, 2016. During the period from April 13, 2016, the date of the shareholders’ election to appoint KPMG as principal accountant, until KPMG’s communication on June 21, 2016, KPMG was not engaged to, and did not provide, any services. During the fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through April 29, 2016, the date PwC Chile’s dismissal became effective, the registrant had not consulted with PwC Chile regarding any matters described in Item 16F(a)(2)(i) and Item 16F(a)(2)(ii) of Form 20-F, other than those consultations conducted in the ordinary course of the audit being performed by PwC Chile. During the period between April 29, 2016, the date PwC Chile ́s dismissal became effective, through July 5, 2016, the date PwC Chile was appointed again as the Company’s independent registered public accounting firm, the registrant had not consulted with PwC Chile regarding any matters described in Item 16F(a)(2)(i) and Item 16F(a)(2)(ii) of Form 20-F.


119

---



ITEM 16G: Corporate Governance  General summary of significant differences with regard to corporate government standards  The following paragraphs provide a brief, general summary of significant differences between corporate government practices followed by us pursuant to our home-country rules and those applicable to U.S. domestic issuers under NYSE listing standards.  Composition of the board of directors; independence.The NYSE listing standards provide that listed companies must have a majority of independent directors and that certain board committees must consist solely of independent directors. Under NYSE rule 303A.02, a director qualifies as independent only if the board affirmatively determines that such director has no material relationship with the company, either directly or indirectly. In addition, the NYSE listing standards enumerate a number of relationships that preclude independence.  Under the Chilean Corporations Act an open-stock corporation must have at least one independent director (out of a minimum of seven directors) when its market capitalization reaches or exceeds 1.5 million Unidades de Fomento (as of March 31, 2017 approximately CLP 39,708 million) and at least 12.5% of its outstanding shares with voting rights are in the possession of shareholders that individually control or possess less than 10% of such shares. In addition, the Chilean Corporations Act enumerates a number of relationships that preclude independence. Chilean law also establishes a number of principles of general applicability designed to avoid conflicts of interests and to establish standards for related party transactions. Specifically, directors elected by a group or class of shareholders have the same duties to the company and to the other shareholders as the rest of the directors, and all transactions with the company in which a director has an interest must be in the interest of and for the benefit of the company, relative in price, terms and conditions to those prevailing in the market at the time of its approval and comply with the requirements and procedures set forth in Chapter XVI of the Chilean Corporations Act. See “Item 7: Major Shareholders and Related Party Transactions”.  Furthermore, such transactions must be reviewed by the directors’ committee (as defined below); they require prior approval by the board of directors and must be disclosed at the next meeting of shareholders, unless such transactions fall within one the exemptions contemplated by the Chilean Corporations Act or, if applicable, included in the usual practice policy approved by the board of directors. See “Item 7: Major Shareholders and Related Party Transactions”. Pursuant to NYSE rule 303A.00, we may follow Chilean practices and are not required to have a majority of independent directors.  Committees.The NYSE listing standards require that listed companies have a Nominating/Corporate Governance Committee, a Compensation Committee and an audit committee. Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified by the listing standards.  Under Chilean law, the only board committee that is required is the directors’ committee (comité de directores), composed of three members, such committee having a direct responsibility to (a) review the company’s financial statements and the independent auditors’ report and issue an opinion on such financial statements and report prior to their submission for shareholders’ approval, (b) propose to the board of directors the independent accountants and the risk rating agencies, which the board must then propose to the shareholders, (c) review related party transactions, and issue a report on such transactions, (d) review the managers, principal executive officers’ and employees’ compensation policies and plans and (e) to prepare an annual report of the performance of its duties, including the principal recommendations to shareholders; (f) advise the board of directors as to the suitability of retaining non-audit services from its external auditors, if the nature of such services could impair their independence; and (g) perform other duties as defined by the company’s bylaws, by a shareholders’ meeting or by the board. Requirements to be deemed an independent director are set forth in “Item 6: Directors, Senior Management and Employees–Board Practices–Directors Committee”.  Pursuant to NYSE Rule 303A.06, we must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act by July 31, 2005. At the board of directors ́ meeting held on April 13, 2016, following


the election of a new board at the shareholders ́ meeting held the same date, the board of directors appointed directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee. Mr. Corbo and Mr. Molina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Messrs. José Miguel Barros and Francisco Pérez shall participate in the audit committee ́s meetings as observers.


120

---



Shareholder approval of equity-compensation plans.Under NYSE listing standards, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions. An “equity-compensation plan” is a plan or other arrangement that provides for the delivery of equity securities of the listed company to any employee, director or other service provider as compensation for services.  Under Chilean law, if previously approved by shareholders at an extraordinary shareholders’ meeting, up to ten percent of a capital increase in a publicly traded company may be set aside to fund equity-compensation plans for the company’s employees and/or for the employees of the company’s subsidiaries. Pursuant to NYSE rule 303A.00, as a foreign private issuer, we may follow Chilean practices and are not required to comply with the NYSE listing standards with respect to shareholder approval of equity-compensation plans.  Corporate Governance Guidelines.The NYSE listing standards provide that listed companies must adopt and disclose corporate governance guidelines with regard to (a) director qualifications standards; (b) director responsibilities; (c) director access to management and independent advisors; (d) director compensation; (e) director orientation and continuing education; (f) management succession; and (g) annual performance evaluations of the board.  Chilean law does not require that such corporate governance guidelines be adopted. Director responsibilities and access to management and independent advisors are directly provided for by applicable law. Director compensation is determined by the annual meeting of shareholders pursuant to applicable law. As a foreign private issuer, we may follow Chilean practices and are not required to adopt corporate governance guidelines. Pursuant to SVS rules, the company is only required to disclose whether or not it has adopted corporate governance guidelines regarding, among others, the matters referred to above.  Code of Business Conduct.The NYSE listing standards require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.  We have adopted a code of business conduct that applies generally to all of our executive officers and employees. A copy of the code of business conduct, as amended, is available on our website atwww.ccu.clorwww.ccuinvestor.com. The information on our website is not incorporated by reference into this document.  We have also adopted a code of conduct that applies to all members of our board of directors. A copy of this code is available on our website atwww.ccu.clorwww.ccuinvestor.com. The information on our website is not incorporated by reference into this document.  Manual of Information of Interest to the Market. In 2008, the SVS promulgated new rules which require public companies to adopt a manual regarding disclosure of information of interest to the market, board members and executives shares transactions and blackout periods for such transactions. This manual applies to our directors, the directors of our subsidiaries, our executive officers, some of our employees which may be in possession of confidential, reserved or privileged information of interest, and to our advisors. The manual took effect on June 1, 2008.A copy of themanual regarding disclosure of information of interest to the market,as amended on March 18, 2010, is available in our website atwww.ccu.clorwww.ccuinvestor.com. The information on our website is not incorporated by reference into this document.  Executive Sessions. To empower non-management directors to serve as a more effective check on management, NYSE listing standards provide that non-management directors of each company must meet at regularly scheduled executive sessions without management.


121

---



Under Chilean law, the office of director is not legally compatible with that of general manager in publicly traded companies. The board of directors exercises its functions as a collective body and may partially delegate its powers to executive officers, attorneys, a director or a board commission of the company, and for specific purposes to other persons. As a foreign private issuer, we may follow Chilean practices and are not required to comply with the NYSE listing standard for executive sessions.  Certification Requirements. Under NYSE listing standards, Section 303A.12(a) provides that 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, and Section 303A.12(b) provides that 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 applicable provisions of Section 303A.  As a foreign private issuer, we must comply with Section 303A.12(b) of the NYSE listing standards, but we are not required to comply with 303A.12(a). ITEM 16H: Mine Safety Disclosure  Not applicable. PART III ITEM 17: Financial Statements  The Company has responded to Item 18 in lieu of responding to this item. ITEM 18: Financial Statements  See Annex for the Financial Statements.


122

---



ITEM 19: Exhibits  Index to Exhibits ****  1.1Unofficial English translation of the By-laws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s registration statement on Form F-3 (File N° 333-190641) filed on August 8, 2013).  8.1Compañía Cervecerías Unidas S.A. significant subsidiaries  12.1Certification of Chief Executive Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  12.2Certification of Chief Financial Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  13.1Certification of Chief Executive Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  13.2Certification of Chief Financial Officer of Compañía Cervecerías Unidas S.A. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


123

---



SIGNATURES The Registrant certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.  Compañía Cervecerías Unidas S.A.  By: /s/ Patricio Jottar                                                                                  ___________________ Name: Patricio Jottar Title: Chief Executive Officer   Date: April 27, 2017


124

---



CCU - Management’s Report on Internal Controls over Financial Reporting   Our management, including our Chief Executive Officer and Chief Financial Officer, are responsible for establishing and maintaining adequate internal controls over financial reporting and has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 based on the criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on such criteria, our management has concluded that, as of December 31, 2016, our internal control over financial reporting is effective. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate. The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by PwC Chile, an independent registered public accounting firm, as stated in their report which appears herein. There has been no change in our internal control over financial reporting during 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.     By:/s/ Patricio Jottar Chief Executive Officer      /s/ Felipe DubernetChief Financial Officer    Dated:  February 27, 2017


125

---



COMPAÑÍA CERVECERÍAS UNIDAS S.A. AND SUBSIDIARIES

   

   CONSOLIDATED FINANCIAL STATEMENTS

   (Figures expressed in thousands of Chilean pesos)

   

   As of and for the year ended December 31, 2016


---






---






---





INDEXCONSOLIDATED STATEMENT OF FINANCIAL POSITION (ASSETS)

   5CONSOLIDATED STATEMENT OF FINANCIAL POSITION (LIABILITIES AND EQUITY)

   6CONSOLIDATED STATEMENT OF INCOME

   7CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

   8CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

   9CONSOLIDATED STATEMENT OF CASH FLOW

   10NOTE 1 GENERAL INFORMATION

   11NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   192.1

   Basis of preparation

   192.2

   Basis of consolidation

   202.3

   Financial information as per operating segments

   202.4

   Foreign currency and unidad de fomento (Adjustment unit)

   212.5

   Cash and cash equivalents

   222.6

   Other financial assets

   222.7

   Financial instruments

   222.8

   Financial asset impairment

   242.9

   Inventories

   242.10

   Biological current assets

   252.11

   Other non-financial assets

   252.12

   Property, plant and equipment

   252.13

   Leases

   262.14

   Investment property

   262.15

   Intangible assets other than goodwill

   262.16

   Goodwill

   272.17

   Impairment of non-financial assets other than goodwill

   272.18

   Assets of a disposal group held for sale

   282.19

   Income taxes

   282.20

   Employees benefits

   282.21

   Provisions

   292.22

   Revenue recognition

   292.23

   Commercial agreements with distributors and supermarket chains

   292.24

   Cost of sales of products

   302.25

   Other expenses by function

   302.26

   Distribution expenses

   302.27

   Administration expenses

   302.28

   Environment liabilities

   30NOTE 3 ESTIMATES AND APPLICATION OF PROFESSIONAL JUDGMENT

   30NOTE 4 ACCOUNTING CHANGES

   31NOTE 5 RISK ADMINISTRATION

   31NOTE 6 FINANCIAL INSTRUMENTS

   37NOTE 7 FINANCIAL INFORMATION AS PER OPERATING SEGMENTS

   43


---



NOTE 8 BUSINESS COMBINATIONS

   53NOTE 9 NATURE OF COST AND EXPENSE

   54NOTE 10 FINANCIAL RESULTS

   54NOTE 11 OTHER INCOME BY FUNCTION

   54NOTE 12 OTHER GAINS (LOSSES)

   55NOTE 13 CASH AND CASH EQUIVALENTS

   55NOTE 14 ACCOUNTS RECEIVABLES - TRADE AND OTHER RECEIVABLES

   62NOTE 15 ACCOUNTS AND TRANSACTIONS WITH RELATED COMPANIES

   65NOTE 16 INVENTORIES

   70NOTE 17 BIOLOGICAL CURRENT ASSETS

   71NOTE 18 OTHER NON-FINANCIAL ASSETS

   72NOTE 19 INVESTMENT ACCOUNTED FOR BY THE EQUITY METHOD

   72NOTE 20 INTANGIBLE ASSETS OTHER THAN GOODWILL

   76NOTE 21 GOODWILL

   78NOTE 22 PROPERTY, PLANT AND EQUIPMENT

   80NOTE 23 INVESTMENT PROPERTY

   82NOTE 24 ASSETS OF DISPOSAL GROUP HELD FOR SALE

   83NOTE 25 INCOME TAXES

   84NOTE 26 OTHER FINANCIAL LIABILITIES

   87NOTE 27 ACCOUNTS PAYABLE - TRADE AND OTHER PAYABLES

   103NOTE 28 PROVISIONS

   103NOTE 29 OTHER NON-FINANCIAL LIABILITIES

   104NOTE 30 EMPLOYEE BENEFITS

   104NOTE 31 NON-CONTROLLING INTERESTS

   108NOTE 32 COMMON SHAREHOLDERS' EQUITY

   109NOTE 33 EFFECTS OF CHANGES IN CURRENCY EXCHANGE RATE

   113NOTE 34 CONTINGENCIES AND COMMITMENTS

   117NOTE 35 ENVIRONMENT

   120NOTE 36 SUBSEQUENT EVENTS

   123


---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Consolidated Statement of Financial Position (Assets)

   (Figures expressed in thousands of Chilean pesos)
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION  ASSETS

   Notes

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Current assetsCash and cash equivalent

   13

   133,789,950

   192,554,239Other financial assets

   6

   8,406,491

   13,644,105Other non-financial assets

   18

   15,859,137

   17,654,373Accounts receivable-trade and other receivables

   14

   280,766,784

   252,225,937Accounts receivable from related companies

   15

   3,523,825

   4,788,930Inventories

   16

   199,290,678

   174,227,415Biological assets

   17

   7,948,379

   7,633,340Taxes receivables

   25

   29,423,479

   15,264,220Total current assets different from assets of disposal group held for sale

   

   679,008,723

   677,992,559Assets of disposal group held for sale

   24

   2,377,887

   6,319,316Total assets of disposal group held for sale

   

   2,377,887

   6,319,316Total current assets

   

   681,386,610

   684,311,875Non-current assetsOther financial assets

   6

   203,784

   80,217Other non-financial assets

   18

   5,369,211

   5,220,954Accounts receivable non-current

   14

   3,563,797

   -Accounts receivable from related companies

   15

   356,665

   445,938Investment accounted by equity method

   19

   64,404,946

   49,995,263Intangible assets other than goodwill

   20

   77,678,850

   71,868,007Goodwill

   21

   96,663,023

   99,490,372Property, plant and equipment (net)

   22

   903,831,702

   872,667,210Investment property

   23

   6,253,827

   6,838,002Deferred tax assets

   25

   31,864,635

   34,529,593Total non-current assets

   

   1,190,190,440

   1,141,135,556Total Assets

   1,871,577,050

   1,825,447,431


F-5

---



---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Consolidated Statement of Financial Position (Liabilities and Equity)

   (Figures expressed in thousands of Chilean pesos)
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION   LIABILITIES AND EQUITY

   Notes

   As of December 31, 2016

   As of December 31, 2015LIABILITIES

   ThCh$

   ThCh$Current liabilitiesOther financial liabilities

   26

   66,679,933

   43,973,991Accounts payable-trade and other payables

   27

   259,677,852

   227,736,803Accounts payable- to related companies

   15

   9,530,071

   11,624,218Other short-term provisions

   28

   409,164

   503,440Tax liabilities

   25

   11,806,434

   12,198,024Employee benefits provisions

   30

   22,838,228

   21,712,059Other non-financial liabilities

   29

   71,369,972

   70,942,144Total current liabilities

   

   442,311,654

   388,690,679Non-current liabilitiesOther financial liabilities

   26

   117,944,033

   136,926,545Others accounts payable

   27

   1,082,898

   1,645,098Other long-term provisions

   28

   1,323,520

   1,476,518Deferred tax liabilities

   25

   86,789,951

   90,237,843Employee benefits provisions

   30

   21,832,415

   18,948,603Total non-current liabilities

   

   228,972,817

   249,234,607Total liabilities

   

   671,284,471

   637,925,286EQUITYEquity attributable to equity holders of the parent

   32Paid-in capital

   

   562,693,346

   562,693,346Other reserves

   

   (142,973,378)

   (103,226,416)Retained earnings

   

   657,578,187

   598,349,442Total equity attributable to equity holders of the parent

   

   1,077,298,155

   1,057,816,372Non-controlling interests

   31

   122,994,424

   129,705,773Total Shareholders' Equity

   1,200,292,579

   1,187,522,145Total Liabilities and Shareholders' Equity

   1,871,577,050

   1,825,447,431


F-6



---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Consolidated Statement of Income

   (Figures expressed in thousands of Chilean pesos)
 CONSOLIDATED STATEMENT OF INCOME  CONSOLIDATED STATEMENT OF INCOME

   Notes

   For the years ended December 31.2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Net sales

   7

   1,558,897,708

   1,498,371,715

   1,297,966,299Cost of sales

   9

   (741,819,916)

   (685,075,251)

   (604,536,815)Gross margin

   

   817,077,792

   813,296,464

   693,429,484Other income by function

   11

   5,144,154

   6,577,244

   25,463,716Distribution costs

   9

   (270,835,822)

   (277,599,722)

   (240,848,630)Administrative expenses

   9

   (155,322,295)

   (128,135,799)

   (110,014,716)Other expenses by function

   9

   (195,412,109)

   (209,201,189)

   (188,109,562)Other gains (losses)

   12

   (8,345,907)

   8,512,000

   4,036,939Income from operational activities

   

   192,305,813

   213,448,998

   183,957,231Financial Income

   10

   5,680,068

   7,845,743

   12,136,591Financial costs

   10

   (20,307,238)

   (23,101,329)

   (22,957,482)Share of net loss of joint ventures and associates accounted for using the equity method

   19

   (5,560,522)

   (5,228,135)

   (898,607)Foreign currency exchange differences

   10

   456,995

   957,565

   (613,181)Result as per adjustment units

   10

   (2,246,846)

   (3,282,736)

   (4,159,131)Income before taxes

   

   170,328,270

   190,640,106

   167,465,421Income taxes

   25

   (30,246,383)

   (50,114,516)

   (46,673,500)Net income of year

   

   140,081,887

   140,525,590

   120,791,921Net income attibutable to:Equity holders of the parent

   

   118,457,488

   120,808,135

   106,238,450Non-controlling interests

   31

   21,624,399

   19,717,455

   14,553,471Net income of year

   

   140,081,887

   140,525,590

   120,791,921Net income per share (Chilean pesos) from:Continuing operations

   

   320.59

   326.95

   287.52Diluted earnings per share (Chilean pesos) from:Continuing operations

   

   320.59

   326.95

   287.52
   F-7




---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Consolidated Statement of Comprehensive Income

   (Figures expressed in thousands of Chilean pesos)
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME   CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

   Notes

   For the years ended December 31.2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Net income of year

   

   140,081,887

   140,525,590

   120,791,921Other income and expenses charged or credited againts equityCash flow hedges (1)

   32

   84,962

   80,693

   (155,258)Exchange differences of foreign subsidiaries (1)

   32

   (27,280,176)

   (29,678,944)

   (4,629,683)Gains (losses) from defined plans

   32

   (2,355,384)

   (939,433)

   (1,884,054)Income tax related with cash flow hedge (1)

   32

   (20,648)

   (17,563)

   39,470Income tax relating to defined benefit plans

   32

   659,198

   314,541

   501,689Total other comprehensive income and expense

   

   (28,912,048)

   (30,240,706)

   (6,127,836)Comprehensive income and expense

   

   111,169,839

   110,284,884

   114,664,085Comprehensive income originated by:Equity holders of the parent (2)

   

   91,752,250

   92,606,720

   97,067,296Non-controlling interests

   

   19,417,589

   17,678,164

   17,596,789Comprehensive income and expense

   

   111,169,839

   110,284,884

   114,664,085
  (1)These items will be reclassified to Consolidated Statement of Income when they are settled. (2)Corresponds to the income for the year where no income or expenses have been recorded directly against shareholder ́s equity.   F-8




---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Consolidated Statement of Changes in Equity

   (Figures expressed in thousands of Chilean pesos)
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY   STATEMENT OF CHANGES IN EQUITY

   Paid in capital

   Other reserves

   Retained earnings

   Equity attributable to equity holders of the parent

   Non-controlling interests

   Total Shareholders' EquityCommon Stock

   Currency translation difference

   Hedge reserves

   Actuarial gains and losses on defined benefit plans reserves

   Other reservesThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Balanced as of January 1, 2014

   562,693,346

   (60,084,197)

   65,109

   (348,673)

   (5,514,048)

   491,864,319

   988,675,856

   95,568,422

   1,084,244,278ChangesInterim dividends (1)

   -

   -

   -

   -

   -

   (23,278,681)

   (23,278,681)

   -

   (23,278,681)Interim dividends according to policy (2)

   -

   -

   -

   -

   -

   (36,500,001)

   (36,500,001)

   -

   (36,500,001)Other increase (decrease) in Equity (3)

   -

   -

   -

   -

   2,419

   (378,712)

   (376,293)

   (8,594,222)

   (8,970,515)Effects business combination

   -

   -

   -

   -

   -

   -

   -

   18,340,752

   18,340,752Comprehensive income and expense

   -

   (7,698,661)

   (108,479)

   (1,364,014)

   -

   106,238,450

   97,067,296

   17,596,789

   114,664,085Total changes in equity

   -

   (7,698,661)

   (108,479)

   (1,364,014)

   2,419

   46,081,056

   36,912,321

   27,343,319

   64,255,640AS OF DECEMBER 31, 2014

   562,693,346

   (67,782,858)

   (43,370)

   (1,712,687)

   (5,511,629)

   537,945,375

   1,025,588,177

   122,911,741

   1,148,499,918Balanced as of January 1, 2015

   562,693,346

   (67,782,858)

   (43,370)

   (1,712,687)

   (5,511,629)

   537,945,375

   1,025,588,177

   122,911,741

   1,148,499,918ChangesInterim dividends (1)

   -

   -

   -

   -

   -

   (24,387,190)

   (24,387,190)

   -

   (24,387,190)Interim dividends according to policy (2)

   -

   -

   -

   -

   -

   (36,016,878)

   (36,016,878)

   -

   (36,016,878)Other increase (decrease) in Equity (3)

   -

   -

   -

   -

   25,543

   -

   25,543

   (10,884,132)

   (10,858,589)Comprehensive income and expense

   -

   (27,652,528)

   40,844

   (589,731)

   -

   120,808,135

   92,606,720

   17,678,164

   110,284,884Total changes in equity

   -

   (27,652,528)

   40,844

   (589,731)

   25,543

   60,404,067

   32,228,195

   6,794,032

   39,022,227AS OF DECEMBER 31, 2015

   562,693,346

   (95,435,386)

   (2,526)

   (2,302,418)

   (5,486,086)

   598,349,442

   1,057,816,372

   129,705,773

   1,187,522,145Balanced as of January 1, 2016

   562,693,346

   (95,435,386)

   (2,526)

   (2,302,418)

   (5,486,086)

   598,349,442

   1,057,816,372

   129,705,773

   1,187,522,145ChangesInterim dividends (1)

   -

   -

   -

   -

   -

   (24,387,190)

   (24,387,190)

   -

   (24,387,190)Interim dividends according to policy (2)

   -

   -

   -

   -

   -

   (34,841,553)

   (34,841,553)

   -

   (34,841,553)Other increase (decrease) in Equity (3)

   -

   -

   -

   -

   -

   -

   -

   (14,413,649)

   (14,413,649)Comprehensive income and expense

   -

   (25,123,546)

   41,607

   (1,623,299)

   -

   118,457,488

   91,752,250

   19,417,589

   111,169,839Increase (decrease) through changes in ownership interests in subsidaries (4)

   -

   -

   -

   -

   (13,041,724)

   -

   (13,041,724)

   (11,715,289)

   (24,757,013)Total changes in equity

   -

   (25,123,546)

   41,607

   (1,623,299)

   (13,041,724)

   59,228,745

   19,481,783

   (6,711,349)

   12,770,434AS OF DECEMBER 31, 2016

   562,693,346

   (120,558,932)

   39,081

   (3,925,717)

   (18,527,810)

   657,578,187

   1,077,298,155

   122,994,424

   1,200,292,579
  (1)Related to declared dividends at December 31 of each year and paid during January of the following year, as agreed by the Board of Directors. (2)Corresponds to the differences between CCU’s policy to distribute a minimum dividend of at least 50% of the income (Note 32) based on the local statutory reported to SVS and the interim dividends declared at December 31 of each year. (3)Mainly related to dividends to Non-controlling interest. (4)In 2016, the Company, through its subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A., acquired additional interests in Manantial S.A. for an amount of ThCh$ 19,111,686, with a carrying value to ThCh$ 3,816,220, resulting in a decrease to Other reserves of ThCh$ 7,801,153 (seeNote 1 (1)). Additionally, during 2016 the Company, through its subsidiary Compañía Industrial Cervecera S.A. acquired additional interests in Los Huemules SRL. for an amount of ThCh$ 118,092, with a carrying value to ThCh$ 312,103, resulting in an increase to Other reserves of ThCh$ 194,000 (seeNote 1 (4)). Finally during 2016, joint venture Foods acquired additional interest in Alimentos Nutrabien S.A. for an amount of ThCH$ 14,352,706, with a carrying value to ThCh$ 3,497,385, resulting in a decrease of ThCh$ 5,426,209.   F-9


---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Consolidated Statement of Cash Flow

   (Figures expressed in thousands of Chilean pesos)
 CONSOLIDATED STATEMENT OF CASH FLOW  CONSOLIDATED STATEMENT OF CASH FLOW

   Notes

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Cash flows from (used in) operational activitiesCollection classes:Proceeds from goods sold and services rendered

   

   1,862,763,071

   1,770,338,769

   1,584,494,230Other proceeds from operating activities

   

   23,086,788

   20,467,143

   30,247,374Types of payments:Payments of operating activities

   

   (1,216,451,995)

   (1,120,571,275)

   (1,051,616,618)Payments of salaries

   

   (201,389,122)

   (178,915,580)

   (171,898,347)Other payments for operating activities

   

   (228,011,323)

   (220,365,087)

   (162,644,788)Dividends received

   

   34,380

   45,492

   75,169Interest paid

   

   (16,958,068)

   (19,813,502)

   (20,757,207)Interest received

   

   5,635,697

   6,476,628

   10,763,936Income tax reimbursed (paid)

   

   (47,055,951)

   (44,584,176)

   (44,208,661)Other cash movements

   12

   8,360,871

   6,432,460

   (833,425)Net cash flows from operational activities

   

   190,014,348

   219,510,872

   173,621,663Cash flows from (used in) investing activitiesCash flows used for control of subsidaries or other businesses

   13

   (641,489)

   -

   (8,369)Cash flows used in the purchase of non-controlling interests

   13

   (2,174,370)

   (1,921,245)

   (13,776,885)Collections from related entities

   

   -

   6,709,845

   -Other collections on the sale of interests in joint ventures

   24

   512,596

   -

   -Other payments to acquire interests in joint ventures

   13

   (27,043,481)

   (42,163,032)

   (1,445,478)Proceeds from sale of property, plan and equipment

   

   2,753,539

   2,776,474

   2,587,448Acquisition of property, plant and equipment

   

   (125,691,740)

   (129,668,910)

   (227,863,039)Purchases of intangibles assets

   

   (3,191,685)

   (2,062,012)

   (2,217,113)Other cash movements

   

   469,240

   518,711

   3,753,297Net cash flows used in investing activities

   

   (155,007,390)

   (165,810,169)

   (238,970,139)Cash flows from (used in) financing activitiesPayments for changes in ownership interests in subsidaries

   13

   (19,111,686)

   -

   -Proceeds from long-term loans

   

   3,804,384

   19,570,689

   15,482,763Porceeds from short-term loans

   

   19,345,325

   23,358,700

   21,882,842Total amount from loans

   

   23,149,709

   42,929,389

   37,365,605Loan payments

   

   (25,295,124)

   (54,797,023)

   (20,766,024)Payments of finance lease liabilities

   

   (1,530,851)

   (1,697,649)

   (1,745,210)Payments of loan from related entities

   

   (750,000)

   (601,494)

   (223,225)Dividends paid

   

   (69,819,729)

   (66,147,145)

   (65,315,914)Other cash movements

   

   (1,945,457)

   (2,525,569)

   (81,470,807)Net cash flows used in financing activities

   

   (95,303,138)

   (82,839,491)

   (132,155,575)Net decrease in cash equivalents, before the effect of changes in exchange rate

   (60,296,180)

   (29,138,788)

   (197,504,051)Effects of changes in exchange rates on cash and cash equivalents

   

   1,531,891

   6,918,151

   3,425,660Cash and cash equivalents, beginning of the year

   

   192,554,239

   214,774,876

   408,853,267Cash and cash equivalents, final of the year

   13

   133,789,950

   192,554,239

   214,774,876
   F-10


---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 1General Information  Compañía Cervecerías Unidas S.A. (CCU, or the Company or the Parent Company) was incorporated in Chile as an open stock company, and it is registered in the Securities Record of the Superintendencia de Valores y Seguros de Chile (Local Superintendence of Equity Securities, SVS) under No 0007, consequently, the Company is subject to Regulation by the SVS. The Company’s shares are quoted in Chile on the Santiago Stock Exchange, Electronic Stock Exchange and Valparaíso Stock Exchange. The Company is also registered with the United States of America Securities and Exchange Commission (SEC) and it quotes its American Depositary Shares (ADS) on the New York Stock Exchange (NYSE). There was an amendment to the Deposit Agreement dated December 3, 2012, between the Company, JP Morgan Chase Bank, NA and all holders of ADRs. According to this Amendment, there was an ADS ratio change from 1 ADS to 5 common shares to a new ratio of 1 ADS to 2 common shares. There was no change to CCU's underlying ordinary shares. This action was effective on December 20, 2012.  CCU is a diversified beverage company, with operations mainly in Chile, Argentina, Uruguay, Paraguay, Colombia and Bolivia. CCU is the largest Chilean brewery, the second largest brewery in Argentina, the second largest producer of soft drinks in Chile, the second-largest wine producer in Chile, the largest bottler of mineral water and nectar in Chile and one of the largest pisco producer in Chile. It also participates in the business of Home and Office Delivery (“HOD”), in a business of home delivery of purified water in bottles through the use of dispensers, and in the rum and candy in Chile. It participates in the industry of the ciders, spirits and wines in Argentina and also participates in the industry of mineral water and soft drinks and beer distribution in Uruguay, Paraguay, Colombia and Bolivia.  In Chile and abroad, CCU and its subsidiaries are the owners of a wide range of brands, under which market our products. In the domestic market, its portfolio of brands in the beer category consists among others of Cristal, Cristal Light, Cristal Cero 0°, Cristal Cero Radler, Escudo, Kunstmann, Austral, D ́olbek, Royal Guard, Morenita, Dorada, Szot, Guayacán and Stones of Lemon, Maracuyá and Apple varieties. It holds exclusive license to produce and market Heineken, Sol and Coors. In Chile, the Company is the exclusive distributor of Tecate and Blue Moon beer.  In Argentina, CCU produces beers in its plants located in the cities of Salta, Santa Fé and Luján. Its main brands are Schneider, Imperial, Palermo, Bieckert, Santa Fé, Salta, Córdoba and are the holders of exclusive license for the production and marketing of Budweiser, Heineken, Amstel and Sol. CCU also imports Kunstmann beer. Additionally, exports beer to different countries in the region mainly under the Schneider and Heineken brands. In Argentina, CCU is the exclusive distributor of the energy drink Red Bull. Besides, participates in the cider business, controlling of Saenz Briones, marketing Sidra Real, La Victoria and “1888”, brands leaders in the market. Also participates in the spirits business, which its marketed under El Abuelo brand, as well as import other liquors from Chile.  In Uruguay, the Company participates in the mineral waters and soft drinks business with Native and Nix brand, flavoured waters with the Native brand, soft drinks with the Nix and nectars with Watt ́s brand. In addition, it sells beers imported under Heineken, Schneider and Kuntsmann brand and cider Sidra Real.  In Paraguay, the Company participates in the non-alcoholic and alcoholic business. Its portfolio of non-alcoholic brands consists of Pulp, Watt's, Puro Sol, La Fuente and Zuma. These brands include own, licensed and imported. The Company in the beer business is owner of Sajonia brand and imports Heineken, Coors Light, Coors 1873, Schneider, Paulaner and Kunstmann, brands.  In Colombia, through its joint venture with Central Cervecera de Colombia S.A.S. (“CCC”), CCU participates in the business of beers and malts since November 2014. Its portfolio of beers includes licensed and imported Heineken, Amstel, Murphys and Buckler brands. Its has of exclusive license for the importation, distribution and production of Heineken. Since October 2015, it holds exclusive license to produce and market Coors and Coors Light. Subsequently, from April and July of 2016, were incorporated Tecate and Sol brands, respectively, with a license contract to produce and market these brands.  In Bolivia, through its associate Bebidas Bolivianas BBO S.A., the Company participates in the non-alcoholic and alcoholic business since May 2014. Its portfolio of non-alcoholic brands consist of Mendocina, Free cola, Sinalco, Real and Natur-all. These brands include own and licensed. The alcoholic brands consist of Real, Capital and Cordillera. It has of exclusive license for the importation and distribution of Heineken and the energy drink Monster.  Within the non-alcoholic, in Chile Operating segment, CCU has the Bilz,Pap, Kem, Kem Xtreme, Nobis, Cachantun, Más, Mas Woman and Porvenir brands. Regarding the HOD category, CCU has the Manantial brand. The Company, directly or through its subsidiaries, has license agreements with Pepsi, 7up, Mirinda, Gatorade, Adrenaline Red, Life Water, Lipton Ice Tea, Ocean Spray, Crush, Canada Dry Limón Soda, Canada Dry Ginger Ale, Canada Dry Agua Tónica, Nestlé Pure Life,Watt ́s and Frugo. In Chile,CCU is the exclusive distributor of the energy drink Red Bull and Perrier water. Besides, through a joint operation also owns the Sprim and Fructus and the licencse Vivo and Caricia brands.


F-11

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  In the spirits, in Chile Operating segment, in the category of pisco, CCU owns the brand Mistral, Campanario, Horcón Quemado,  Control C, Tres Erres, La Serena and Ruta cocktail, and their respective extensions. In rum category Company owns the brands Sierra Morena and their extensions and Cabo Viejo. The Company has the Fehrenberg brand and is exclusive distributor in Chile of Pernod Ricard’s products.  In the Wine Operating segment, through its subsidiary Viña San Pedro Tarapacá S.A. (“VSPT”), produces wines and sparkling, which are sold in the domestic and overseas markets exporting to more than 80 countries.Its main brands of Viña San Pedro are Altaïr, Cabo de Hornos, Sideral, 1865, Castillo de Molina, Épica, 35 Sur, GatoNegro, Gato, Manquehuito and San Pedro Exportación.  The brands ́s portfolio of Viña Tarapacá includes: Gran Reserva Etiqueta Azul, Gran Reserva Etiqueta Negra, Gran Reserva Etiqueta Blanca, Gran Tarapacá, León de Tarapacá and Tarapacá Varietal. The brands ́s portfolio of Viña Santa Helena includes: Parras Viejas, Selección del Directorio, Siglo de Oro, Santa Helena Varietal, Alpaca, Gran Vino and Santa Helena. VSPT also participates in Chile and international market with vines Misiones de Rengo, Viña Mar, Casa Rivas, Leyda and Finca La Celia and Tamari in Argentina.  At the end of year 2015, the joint venture in Foods Compañía de Alimentos CCU S.A. ("Foods"), who participates in the business of snacks and food in Chile, sold Calaf and Natur brands to Empresas Carozzi S.A. In addition Foods holds the brand Nutra Bien.


F-12

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The detail of the described licenses appears below:  Main brands under licenseLicenses

   Validity DateAmstel in Argentina (1)

   July 2022Amstel in Colombia (2)

   March 2028Austral in Chile (3)

   July 2018Blue Moon in Chile (4)

   December 2021Buckler in Colombia (2)

   March 2028Budweiser in Argentina

   December 2025Coors in Paraguay

   Negotiating the terms of a new contractCoors in Chile (5)

   December 2025Coors in Argentina (6)

   December 2019Coors in Colombia (6)

   December 2020Crush, Canada Dry (Ginger Ale, Agua Tónica and Limón Soda) in Chile (7)

   December 2018Gatorade in Chile (8)

   December 2018Heineken in Bolivia (9)

   December 2024Heineken in Paraguay (9)

   November 2022Heineken in Uruguay (9)

   10 years renewablesHeineken in Chile and Argentina (10)

   10 years renewablesHeineken in Colombia (11)

   March 2028Murphys in Colombia (2)

   March 2028Nestlé Pure Life in Chile (7)

   December 2017Paulaner in Paraguay

   April 2019Pepsi, Seven Up and Mirinda in Chile

   December 2043Red Bull in Argentina

   December 2017Red Bull in Chile (12)

   IndefinitelySchneider in Paraguay

   November 2017Sol in Argentina (10)

   10 years renewablesSol in Chile (10)

   10 years renewablesSol in Colombia (2)

   March 2028Té Lipton in Chile

   March 2020Tecate in Colombia

   March 2028Watt's (nectars, fruit-based drinks and other) rigid packaging, except carton in Chile

   IndefinitelyWatt's in Paraguay (6)

   May 2019
  (1)   After the initial termination date, license is automatically renewed under the same conditions (Rolling Contract), each year for a period of 10 years, unless notice of non-renewal is given. (2)   Renewable for periods of two years, subject to the compliance of the contract conditions. (3)   If Renewal criteria have been satisfied, renewable through December, 2025, thereafter shall automatically renew every year for a new term of 5 years (Rolling Contract). (4)   After the initial termination date, license is automatically renewed under the same conditions (Rolling Contract), each year for a period of 5 years, subject to the compliance of the contract conditions. (5)   License renewable for one period of 5 years, subject to the compliance of the contract conditions. (6)   License renewable for periods of 5 years, subject to the compliance of the contract conditions. (7)   Renewable for an additional period equal to the duration of the Shareholders Agreement of Bebidas CCU-PepsiCo SpA., subject to the compliance of the contract conditions. (8)   License for 10 years, automatically renewable for periods of 5 years, unless notice of non-renewal. (9)   License for 10 years, automatically renewable on the same terms (Rolling Contract), each year for a period of 10 years, unless notice of non-renewal is given. (10) After the initial termination date, License is automatically renewable each year for a period of 5 years (Rolling Contract), unless notice of non-renewal is given. (11) Indefinite contract, notice of termination 6 months in advance. The earliest possible effective date of termination is October 31, 2018. (12) Indefinite contract, subject to the compliance of the contract conditions.  The Company’s address and main office is located in Santiago, Chile, at Avenida Vitacura No 2670, Las Condes district and its tax identification number (Rut) is 90,413,000-1.


F-13

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  As of December 31, 2016 the Company had a total of  8,186 employees according to the following detail:
  Number of employesParent company

   ConsolidatedSenior Executives

   10

   16Managers and Deputy Managers

   79

   400Other employees

   276

   7,770Total

   365

   8,186
  Compañía Cervecerías Unidas S.A. is under the control of Inversiones y Rentas S.A. (IRSA), which is the direct and indirect owner of 60% of the Company shares. IRSA is currently a joint venture between Quiñenco S.A. and Heineken Chile Limitada, a company controlled by Heineken Americas B.V, each with a 50% equity participation.  The consolidated financial statements include the following direct and indirect significant subsidiaries where the percentage of participation represents the economic interests at the consolidated level:  Subsidiary

   Tax ID

   Country of origin

   Functional currency

   Share percentage direct and indirectAs of December 31, 2016

   As of December 31, 2015Direct

   Indirect

   Total

   TotalCervecera CCU Chile Limitada

   96,989,120-4

   Chile

   Chilean Pesos

   99.7500

   0.2499

   99.9999

   99.9999Embotelladora Chilenas Unidas S.A. (3)

   99,501,760-1

   Chile

   Chilean Pesos

   99.0670

   0.9164

   99.9834

   99.9338Cía. Cervecerías Unidas Argentina S.A. (4)

   0-E

   Argentina

   Argentine pesos

   -

   99.9923

   99.9923

   99.9923Viña San Pedro Tarapacá S.A. (*)

   91,041,000-8

   Chile

   Chilean Pesos

   -

   64.6980

   64.6980

   64.6980Compañía Pisquera de Chile S.A.

   99,586,280-8

   Chile

   Chilean Pesos

   46.0000

   34.0000

   80.0000

   80.0000Transportes CCU Limitada

   79,862,750-3

   Chile

   Chilean Pesos

   98.0000

   2.0000

   100.0000

   100.0000CCU Investments Limited

   0-E

   Cayman Islands

   Chilean Pesos

   99.9999

   0.0001

   100.0000

   100.0000Inversiones INVEX CCU DOS Limitada

   76,126,311-0

   Chile

   Chilean Pesos

   99.8516

   0.1484

   100.0000

   99.9999CRECCU S.A.

   76,041,227-9

   Chile

   Chilean Pesos

   99.9602

   0.0398

   100.0000

   100.0000Fábrica de Envases Plásticos S.A.

   86,150,200-7

   Chile

   Chilean Pesos

   90.9100

   9.0866

   99.9966

   99.9966Southern Breweries Limited (5)

   0-E

   Cayman Islands

   Chilean Pesos

   61.2146

   38.7804

   99.9950

   99.9553Comercial CCU S.A.

   99,554,560-8

   Chile

   Chilean Pesos

   50.0000

   49.9866

   99.9866

   99.9866CCU Inversiones S.A.

   76,593,550-4

   Chile

   Chilean Pesos

   98.8398

   1.1339

   99.9737

   99.9732Millahue S.A.

   91,022,000-4

   Chile

   Chilean Pesos

   99.9621

   -

   99.9621

   99.9621Aguas CCU-Nestlé Chile S.A. (1)

   76,007,212-5

   Chile

   Chilean Pesos

   -

   50.0669

   50.0669

   50.0669CCU Inversiones II Limitada (2)

   76,349,531-0

   Chile

   Chilean Pesos

   98.6709

   1.3290

   99.9999

   99.9946Compañía Cervecera Kunstmann S.A.

   96,981,310-6

   Chile

   Chilean Pesos

   50.0007

   -

   50.0007

   50.0007Inversiones INVEX TRES Limitada

   76,248,389-0

   Chile

   Chilean Pesos

   99.0000

   0.9884

   99.9884

   99.9884Milotur S.A.

   0-E

   Uruguay

   Uruguayan pesos

   100.0000

   -

   100.0000

   100.0000Coralina S.A.

   0-E

   Uruguay

   Uruguayan pesos

   100.0000

   -

   100.0000

   100.0000Marzurel S.A.

   0-E

   Uruguay

   Uruguayan pesos

   100.0000

   -

   100.0000

   100.0000Bebidas del Paraguay S.A. (2)

   0-E

   Paraguay

   Paraguayan guarani

   50.0050

   -

   50.0050

   50.0050Distribuidora del Paraguay S.A. (2)

   0-E

   Paraguay

   Paraguayan guarani

   49.9590

   -

   49.9590

   49.9590Los Huemules S.R.L.

   0-E

   Argentina

   Argentine pesos

   -

   75.4931

   75.4931

   26.9680Bebidas Ecusa SpA. (3)

   76,517,798-7

   Chile

   Chilean Pesos

   -

   99.9338

   99.9338

   99.9338
 (*)Public Company.


F-14

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
    In addition to the table presented above, below are the percentages of participation with voting rights, in each of the subsidiaries as of December 31, 2016 and December 31, 2015, respectively. Each shareholder has one vote per share which he owns or represents. The percentage of participation with voting rights represents the sum of the direct participation and indirect participation via subsidiary.
    Subsidiary

   Tax ID

   Country of origin

   Functional currency

   Share percentage with voting rightsAs of December 31, 2016

   As of December 31, 2015%

   %Cervecera CCU Chile Limitada

   96,989,120-4

   Chile

   Chilean Pesos

   100.0000

   100.0000Embotelladora Chilenas Unidas S.A. (3)

   99,501,760-1

   Chile

   Chilean Pesos

   99.9834

   99.9338Cía. Cervecerías Unidas Argentina S.A. (4)

   0-E

   Argentina

   Argentine pesos

   100.0000

   100.0000Viña San Pedro Tarapacá S.A.

   91,041,000-8

   Chile

   Chilean Pesos

   64.6980

   64.6980Compañía Pisquera de Chile S.A.

   99,586,280-8

   Chile

   Chilean Pesos

   80.0000

   80.0000Transportes CCU Limitada

   79,862,750-3

   Chile

   Chilean Pesos

   100.0000

   100.0000CCU Investments Limited

   0-E

   Cayman Islands

   Chilean Pesos

   100.0000

   100.0000Inversiones INVEX CCU DOS Limitada

   76,126,311-0

   Chile

   Chilean Pesos

   100.0000

   100.0000CRECCU S.A.

   76,041,227-9

   Chile

   Chilean Pesos

   100.0000

   100.0000Fábrica de Envases Plásticos S.A.

   86,150,200-7

   Chile

   Chilean Pesos

   100.0000

   100.0000Southern Breweries Limited (5)

   0-E

   Cayman Islands

   Chilean Pesos

   100.0000

   100.0000Comercial CCU S.A.

   99,554,560-8

   Chile

   Chilean Pesos

   100.0000

   100.0000CCU Inversiones S.A.

   76,593,550-4

   Chile

   Chilean Pesos

   99.9737

   99.9737Millahue S.A.

   91,022,000-4

   Chile

   Chilean Pesos

   99.9621

   99.9621Aguas CCU-Nestlé Chile S.A. (1)

   76,007,212-5

   Chile

   Chilean Pesos

   50.1000

   50.1000CCU Inversiones II Limitada (2)

   76,349,531-0

   Chile

   Chilean Pesos

   100.0000

   100.0000Compañía Cervecera Kunstmann S.A.

   96,981,310-6

   Chile

   Chilean Pesos

   50.0007

   50.0007Inversiones INVEX TRES Limitada

   76,248,389-0

   Chile

   Chilean Pesos

   100.0000

   100.0000Milotur S.A.

   0-E

   Uruguay

   Uruguayan pesos

   100.0000

   100.0000Coralina S.A.

   0-E

   Uruguay

   Uruguayan pesos

   100.0000

   100.0000Marzurel S.A.

   0-E

   Uruguay

   Uruguayan pesos

   100.0000

   100.0000Bebidas del Paraguay S.A. (2)

   0-E

   Paraguay

   Paraguayan guarani

   50.0050

   50.0050Distribuidora del Paraguay S.A. (2)

   0-E

   Paraguay

   Paraguayan guarani

   49.9590

   49.9590Los Huemules S.R.L.

   0-E

   Argentina

   Argentine pesos

   100.0000

   24.9680Bebidas Ecusa SpA. (3)

   76,517,798-7

   Chile

   Chilean Pesos

   99.9338

   99.9338
  The main movements in the ownership of the subsidiaries included in these consolidated financial statements are the following:  (1) Aguas CCU-Nestlé Chile S.A.  On January 29, 2016  the subsidiaries Aguas CCU-Nestlé Chile S.A. (“Aguas”) and Embotelladoras Chilenas Unidas S.A. (“ECUSA”) have acquired 48.07% and 0.92% of the shares of Manantial S.A. (“Manantial”) respectively, exercising the call option granted in the Shareholders’ Agreement of Manantial. As a consequence, Compañía Cervecerías Unidas S.A. is currently the indirect owner of 100% of the shares of Manantial, remaining as the only direct shareholders of Manantial: (i) Aguas with 99.08% of the capital stock, and (ii) ECUSA with 0.92% of the capital stock. The total amount of this transaction was ThCh$ 19,111,686.


F-15

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 (2) CCU Inversiones II Limitada  On December23,2013, the Company acquired 50.005% and 49.959% of the stock of Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A., respectively. This transaction allows the Company, participates in the beer distribution business, and production and marketing of non-alcoholic drinks, waters and nectars. The total amount of this transaction was ThCh$ 11,254,656. Subsequently, on June 9, 2015, the Company paid a committed capital of ThCh$ 7,414,290and this transaction does not change the percentage of participation.  Bebidas del Paraguay S.A. (BdP) and Distribuidora del Paraguay S.A. (DdP) are considered as an economic group that share operational and financial strategy. BdP manufactures products with different brands of its property. DdP is sole and exclusive customer, which is responsible for the distribution and marketing of its products, reason why BdP is it consolidates DdP, and accordingly is presented in the consolidated financial statements of CCU.  As explained inNote 8, on March 31, 2016, through its subsidiary Bebidas del Paraguay S.A., acquired 51% of the stock rights of paraguayan company Artisan SRL. The amount of this transaction was ThCh$ 641,489 (equivalents to US$ 1,000,000). At the date of issuance of these consolidated financial statements the fair value is still preliminary and that the Company is not expecting that the final fair value to be significantly different.  Addittionaly, as explained inNote 19, the Company participates of 50% of shares of Central Cervecera de Colombia S.A.S.  (3) Embotelladoras Chilenas Unidas S.A.  On November 16, 2015,formed a new company calledBebidas ECUSA SpA.,where the subsidiary Embotelladoras Chilenas Unidas S.A. has the 100% of shares. The purpose of this companyis the distribution, transport, import, export and marketing in general, on all types of soft drinks.  As explained inNote 1 (1)before mentioned, on January 29, 2016, Embotelladoras Chilenas Unidas S.A. acquired 0.92% of the stock rights of Manantial S.A.  (4) Compañía Cervecerías Unidas Argentina S.A.  On January 7, 2016, throgh the argentinian subsidiary Compañía Industrial Cervecera S.A. (CICSA), the Company acquired 50.99% of the stock rights of Los Huemules SRL, after Mr. Juan Javier Negri declared its commitment character of CICSA and notified such situation to Los Huemules SRL. As a consequence of the above mentioned the shareholders of Los Huemules SRL. are Compañía Cervecera Kunstmann S.A. and CICSA with 49.01% and 50.99%, respectively. The final amount of this transaction was ThCh$ 118,092.  (5) Southern Breweries Limited  On August 26, 2016, the subsidiaries Saint Joseph Investments Limited and South Investments Limited was merged in CCU Cayman Limited, latter being the continuing legal entity.  Besides, on October 2016, Southern Breweries Establishment, subsidiary of CCU in Liechtenstein, changed its named to "Southern Breweries Aktiengesellschaft" and on October 18, 2016 re-domiciling it to Cayman Islands. Subsequently, on November 2016, was modified the statutes of such subsidiary and changed its name by the "Southern Breweries Limited". Finally, starting December 1, 2016, the subsidiary CCU Cayman Limited before mentioned was merged in Southern Breweries Limited, latter being the continuing legal entity. Transactions mentioned above had no significant effects on the results of the Company.


F-16

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Below we briefly describe the companies that qualify as joint operations:  (a) Promarca S.A.  Promarca S.A. is a closed stock company with its main activity being the acquisition, development and administration of trademarks and their corresponding licenses to their operators.  OnDecember 31, 2016, Promarca S.A. recorded a profit of ThCh$ 4,812,696 (ThCh$ 4,708,318 in 2015 and ThCh$ 4,646,620 in 2014), which in accordance with the Company ́s policies is 100% distributable.  At the Extraordinary Shareholders ́ Meetings of Promarca S.A. held on June 2016, agreed to increase the Paid-in capital (jointly the "Capital Increase"). The Capital Increase was subscribed by the subsidiary New Ecusa S.A. and Watt ́s Dos S.A.in equal parts, and who maintained its current 50% of the stock rights, through the Paid-in capital of ThCh$ 8,199,240 and 100% of stock rights of the company the Promarca Internacional SpA. (which its main activity are the exploitation and development of Watt ́s brands in Argentina, Paraguay, Uruguay and Bolivia). From June 2016, Promarca Internacional SpA., it became a subsidiary in a 100% of Promarca S.A. During June 30, 2016, for this joint operation has determined the following fair values of assets and liabilities:  Assets and Liabilities

   Fair ValueThCh$Intangible assets other than goodwill

   11,229,149Total non-current assets

   11,229,149Total Assets

   11,229,149Deferred tax liabilities

   3,029,909Total current liabilities

   3,029,909Net identifiable assets acquired

   8,199,240Amount paid

   8,199,240
  As a result of the fair values determined previously and in according to rights on the joint operation, have been generated intangibles for an amount of ThCh$ 5,614,575 described inNote 20.  (b) Compañía Pisquera Bauzá S.A.  On December 2, 2011, the subsidiary Compañía Pisquera de Chile S.A. (CPCh) signed a license agreement for the commercialization and distribution of the pisco brand Bauzá in Chile. In addition, this transaction included the acquisition by CPCh of 49% of Compañía Pisquera Bauzá S.A. (CPB), owner of the brand Bauzá in Chile. The family Bauzá owns 51% of that company and all of its productive assets, thereby continuing the link to the production of pisco Bauzá maintaining its quality, origin and premium character.  On December 31, 2015, CPB recorded a profit of ThCh$ 82,663 (ThCh$ 109,207 in 2014), which in accordance with the Company ́s policies is 100% distributable.  On January 7, 2016, CPCh sold its interest of 49% to Agroproductos Bauzá S.A. (agroproductos Bauzá). At the end of December 31, 2015 this joint operation was classified to Assets of disposal group held for sale (seeNote 24).  (c) Bebidas CCU-Pepsico SpA.  On October 23, 2013, Bebidas CCU-PepsiCo SpA (BCP) was incorporated, which is qualifies as an joint operation, where the subsidiary Embotelladoras Chilenas Unidas S.A. has the 50% of participation. The capital of this entity amounts to ThCh$ 1,000. The purpose of this company is the manufacture, production, processing, transformation, transport, import, export, purchase, sale and in general comercialization of all type of concentrates. Its operations commenced on January 1, 2014.  On December 31, 2016, BCP recorded a profit of ThCh$ 1,066,005 (ThCh$ 802,418 in 2015 and ThCh$ 789,648 in 2014), which in accordance with the Company ́s policies is 100% distributable.


F-17

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  (d) Bebidas Carozzi CCU SpA.  On November 26, 2015, the Company, through its subsidiary ECCUSA, entered into a joint arrangement that qualifies as a joint operation, in the company called Bebidas Carozzi CCU SpA. (BCCCU) where CCU and Empresas Carozzi S.A. participate as only shareholders in equal parts. The purpose of this company is the production, marketing and distribution of instant beverage powder in the national territory. The total disbursement by ECCUSA in this transaction was an amount of ThCh$ 21,846,500. Its operations commenced on December 1, 2015. During year 2016for this joint operation has determined the following fair values of assets and liabilities:  Assets and Liabilities

   Fair ValueThCh$Cash and cash equivalent

   1Total current assets

   1Intangible assets other than goodwill

   15,495,163Total non-current assets

   15,495,163Total Assets

   15,495,164Deferred tax liabilities

   4,181,760Total current liabilities

   4,181,760Net identifiable assets

   11,313,404Non-controlling interests

   (5,656,702)Goodwill

   16,189,798Amount paid

   21,846,500
   As a result of the fair values determined previously and in according to rights on the joint operation, have been generated intangibles and goodwill for an amount ofThCh$ 7,747,581 and ThCh$ 16,189,798, respectively (seeNote 20 and 21).  As of December 31, 2015, the Company was in the process of assessing of the fair values of acquisitions above mentioned, so it was recorded under Other non-financial non-current assets for an amount of ThCh$ 21,846,500,however for comparison purposes of this Consolidated Financial Statements, the Company have been reclassified from Other non-financial non-current assets to Intangibles, Goodwill and Deferred taxes as is shown below:  Non-current assets

   Balances presented at 12.31.2015

   Reclassification

   Balances 31.12.2015ThCh$

   ThCh$

   ThCh$Other non-financial assets

   

   27,067,454

   (21,846,500)

   5,220,954Intangible assets other than goodwill

   

   64,120,426

   7,747,581

   71,868,007Goodwill

   

   83,300,573

   16,189,799

   99,490,372Non-current liabilities

   Balances presented at 12.31.2015

   Reclassification

   Balances 31.12.2015ThCh$

   ThCh$

   ThCh$Deferred tax liabilities

   

   88,146,963

   2,090,880

   90,237,843
  On December 31, 2016, BCCCU recorded a profit of ThCh$ 797,268 (ThCh$ 402,228 in 2015), which in accordance with the Company ́s policies is 100% distributable.


F-18

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  The companies mentioned above (letter a) to d)) meet the conditions stipulated in IFRS 11 to be considered "joint operations", as the primary assets in both entities are trademarks, the contractual arrangements establishes that the parties to the joint arrangement share all interests in the assets relating to the arrangement in a specified proportion and their income is 100% royalty charged to the joint operators from the sale of products using these trademarks.  Note 2Summary of significant accounting policies  Significant accounting policies adopted for the preparation of these consolidated financial statements are described below: 2.1Basis of preparation  The accompanying consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board (IASB), which have been applied uniformly to the periods presented.  The consolidated financial statements cover the following periods: Statement of Financial Position as ofDecember 31, 2016, 2015and 2014, Statement of changes in Equity, Statement of Income, Statement of Comprehensive Income and Statement of Cash Flow for the years ended December 31, 2016, 2015 y 2014.  The amounts shown in the attached financial statements are expressed in thousands of Chilean pesos, which is the Company’s functional currency. All amounts have been rounded to thousand pesos, except when otherwise indicated.  The consolidated financial statements have been prepared on the historical basis, as modified by the subsequent valuation of financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss.  The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires that management uses its professional judgment in the process of applying the Company’s accounting policies. SeeNote 3for disclosure of significant accounting estimates and judgments.  All IFRS standards, amendments and enhancements whose adoption was required by January 1, 2016, have been adopted by the Company, without significant impacts in the financial statements as of December 31, 2016.  At the date of issuance of these consolidated financial statements the following Standars, Amendments, Improvements and Interpretations to existing IFRS standards have been published. These standards are required to be applied as following:  New Standards, Amendments, Improvements andInterpretations

   Mandatory for years beginning in:Amendments to IAS 7

   Disclosure Initiative.

   January, 1, 2017Amendments to IAS 12

   Recognition of Deferred Tax Assets for Unrealised Losses.

   January, 1, 2017Improvement to IFRS 12

   Disclosure of Interest in Other Entities.

   January, 1, 2017Amendments to IFRS 2

   Classification and Measurement of Share-based Payment Transactions.

   January, 1, 2018IFRIC Interpretation 22

   Foreign Currency Transactions and Advance Consideration.

   January, 1, 2018Amendments to IAS 40

   Transfers of Investment Property.

   January, 1, 2018Improvement to IAS 28

   Investment in Associates and Joint Ventures: Measuring an associate or joint venture at fair value.

   January, 1, 2018IFRS 9

   Financial Instruments.

   January, 1, 2018IFRS 15

   Revenue fro Contracts with Customers.

   January, 1, 2018IFRS 15

   Clarifications to IFRS 15 Revenue fro Contracts with Customers.

   January, 1, 2018IFRS 16

   Leases.

   January, 1, 2019
   As of December 31, 2016, the company is in the process of evaluating the impact of adopting the IFRS 9, IFRS 15 and IFRS 16. These standards will not be early adopted. For the rest of the standards mentioned in the table above, the Company does not expect a material impact on the consolidated financial statements upon initial application.


F-19

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 2.2Basis of consolidation  Subsidiaries  Subsidiaries are the entities over which the Company is empowered to direct financial and operational policies, which is generally the result of ownership of over half the voting rights. Subsidiaries are consolidated as from the date on which control was obtained by the Company, and they are excluded from consolidation as of the date the Company loses such control.  The acquisition method is used for the accounting of acquisition of subsidiaries. The acquisition cost is the fair value of the assets delivered, of the equity instruments issued and of the liabilities incurred or assumed as of the exchange date. The identifiable assets acquired, as well as the identifiable liabilities and contingencies assumed in a business combination are initially valued at their fair value on the acquisition date, independently from the scope of minority interests.Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized as income.  Joint operations  As explained inNote 1, in those joint arrangements that qualify as joint operations, the Company recognises theassets, liabilities, gains (losses) from operational activities respect of its interest in the joint operations in accordance with IFRS 11.  Intercompany transaction  Intercompany transactions, balances and unrealized gains from transactions between the Group’s entities are eliminated during consolidation. Unrealized losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Whenever necessary, the subsidiaries accounting policies are amended to ensure uniformity with the policies adopted by the Company.  Non-controlling Interest  The non-controlling interest is presented in the Equity section of the Statement of Financial Position. The net income attributable to equity holder of the parent and the non-controlling interest are each disclosed separately in the Consolidated Statement of Income after net income.  Investments accounted by the equity method  Joint ventures and associates  The Company maintains investments in joint arrangements that qualify as joint ventures, which correspond to a contractual agreement by which two or more parties carry out an economic activity that is subject to joint control, and normally involves the establishment of a separate entity in which each party has a share based on a shareholders’ agreement. In addition the Company maintains investments in associates which are defined as those entities that investor has significant influence and is not a subsidiary or is a joint venture.  The Company accounts for its participation in joint arrangement that qualify as joint ventures and associates using the equity method. The financial statements of the joint ventures are prepared for the same year, under accounting policies consistent with those of the Company. Adjustments are made to conform any difference in accounting policies that may exist to the Company ́s accounting policies.  Whenever the Company contributes or sells assets to the companies under joint control or associate, any part of the income or loss originated by the transaction is recognized based on how the asset is realized. Whenever the Company purchases assets of such companies, it does not recognize its share in the income or loss of the joint venture as regards to such transaction until the asset is sold or realized by the joint venture.


F-20

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  2.3Financial information as per operating segments  The Company has defined three operating segments which are essentially defined with respect to its revenues in the geographic areas of commercial activity: 1.- Chile, 2.- International business and 3.- Wine.




These operating segments mentioned are consistent with the way the Company is managed and how results will be reported by CCU. These segments reflect separate operating results which are regularly reviewed by chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance
(SeeNote 7).



The segments performance is measured according to several indicators, of which OR (Adjust Operating Result), OR before Exceptional Items (EI), ORBDA (Adjust Operating Result Before Depreciation and Amortization), ORBDA before EI, ORBDA margin (ORBDA’s % of total revenues for the operating segment), the volumes and Net sales. Sales between segments are conducted using terms and conditions at current market rates.



The Company defined the Adjusted Operating Result as the Net incomes (losses) before Other gains (losses), Net financial cost, Equity and income from joint ventures and associates, Foreign currency exchange differences, Results as per adjustment units and Income tax, and the ORBDA, for the Company purposes, is defined as Adjusted Operating Result before Depreciation and Amortization.



MSD&A, included Marketing, Selling, Distribution and Administrative expenses.



Exceptional Items are income or expenses that do not occur regularly as part of the normal activities of the Company. It’s presented separately because its important items for the understanding the normal operations of the Company due to importance or nature.



OR before exceptional items (EI) and ORBDA before EI are defined as OR plus exceptional items and ORBDA plus exceptional items, respectively.



Corporate revenues and expenses are presented separately within the other.
 
 2.4  Foreign currency and unidad de fomento (Adjustment unit)




Presentation and functional currency



The Company uses the Chilean peso ($ or CLP) as its functional currency and for the presentation of its financial statements. The functional currency has been determined considering the economic environment in which the Company carries out its operations and the currency in which the main cash flows are generated. The functional currency of the Argentine, Uruguayan and Paraguayan subsidiaries is the Argentine peso, Uruguayan peso and Paraguayan guarani, respectively. The functional currency of the joint venture an associates in Colombia and Bolivia are Colombian peso and Boliviano, respectively.



Transactions and balances



Transactions in foreign currencies and adjustment units (“Unidad de Fomento” or “UF”) are initially recorded at the exchange rate of the corresponding currency or adjustment unit as of the date on which the transaction occurs. The Unidad de Fomento (UF) is a Chilean inflation-indexed peso-denominated monetary unit. The UF rate is set daily in advance based on changes in the previous month’s inflation rate. At the close of each Consolidated Statement of Financial Position, the monetary assets and liabilities denominated in foreign currencies and adjustment units are translated into Chilean pesos at the exchange rate of the corresponding currency or adjustment unit. The exchange difference arising, both from the liquidation of foreign currency transactions, as well as from the valuation of foreign currency monetary assets and liabilities, is included in statement of income, in Foreign currency exchange differences, while the difference arising from the changes in adjustment units are recorded in the statement of income as Result as per adjustment units.



For consolidation purposes, the assets and liabilities of the subsidiaries whose functional currency is different from the Chilean peso are translated into Chilean pesos by using the exchange rates valid as of the date of the consolidated financial statements, and the exchange differences originated by the translation of the assets and liabilities are recorded in Equity Reserve, under the Currency Translation Reserves item. The income and expense are translated at the monthly average exchange rate for the corresponding terms as differences since there have not been significant fluctuations in the exchange rates during each month.








F-21

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The exchange rates of the primary foreign currencies and adjustment units used in the preparation of the consolidated financial statements as ofDecember 31, 2016, 2015 y 2014are as follows:  Chilean Pesos as per unit of foreign currency or adjustable unit

   As of December 31, 2016

   As of December 31, 2015

   As of December 31, 2014Ch$

   Ch$

   Ch$Foreign currenciesUS Dollar

   USD

   669.47

   710.16

   606.75Euro

   EUR

   705.60

   774.61

   738.05Argentine Peso

   ARG

   42.13

   54.46

   70.96Uruguayan Peso

   UYU

   22.82

   23.71

   24.90Sterling Pound

   GBP

   826.10

   1,053.02

   944.21Paraguayan guarani

   PYG

   0.12

   0.12

   0.13Bolivians

   BS

   97.59

   103.67

   88.45Colombian Peso

   COP

   0.22

   0.22

   0.25Adjustment UnitsUnidad de fomento*

   UF

   26,347.98

   25,629.09

   24,627.10
  * The Unidad de Fomento (UF) is a Chilean inflation-indexed, peso-denominated monetary unit. The UF rate is set daily in advance based on changes in the previous month ́s inflation rate.  2.5Cash and cash equivalents  Cash and cash equivalents includes cash available, bank balances, time deposits at financial entities, investments in mutual funds and financial instruments acquired under re-sale agreements, as well as short-term investments with a high liquidity, all at a fixed interest rate, normally with an original maturity of up to three months.  2.6Other financial assets  Other financial assets include market securities, derivatives contracts and time deposits at financial entities with a maturity over 90 days. 2.7Financial instruments  Financial assets  The Company recognizes a financial asset in its Consolidated Statement of Financial Position according to the following:  As of the date of the initial recognition, Management classifies its financial assets (i) at fair value through profit and loss and (ii) collectible credits and accounts, depending on the purpose for which the financial assets were acquired. For those instruments not classified at fair value through income, any cost attributable to the transaction is recognized as part of the asset value.  The fair value of the instruments that are actively quoted in formal markets is determined by the quoted price as of the financial statement closing date. For those investments without an active market, the fair value is determined using valuation technique including (i) the use of recent market transactions, (ii) references to the current market value of another financial instrument of similar characteristics, (iii) discounted cash flow and (iv) other valuation models.  After the initial recognition the Company values the financial assets as described below:  Accounts receivable  Trade receivable credits or accounts are recognized according to their invoice value.


F-22

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The Company acquires loan insurances covering approximately 90% and 99% of the individually significant accounts receivable balances, for the domestic market and the international market, respectively, of the total of accounts receivable, net of a 10% deductible.  An impairment of accounts receivable balances is recorded when there is an objective evidence that the Company not will be capable to collect amounts according to the original terms. Some indicators that an account receivable has impairment are the financial problems, initiation of a bankruptcy, financial restructuring and age of the balances of our customers.  Estimated losses from bad debts are determined by applying different percentages, taking into account maturity factors, until reaching 100% of the balance in most of the debts older than 180 days, with the exception of those cases that in accordance with current policies, losses are estimated due to partial deterioration based on a case by case analysis.  Current trade receivable credits and accounts are initially recognized at their nominal value and are not discounted because they do not differ significantly from their fair value. The Company has determined that the calculation of the amortized cost is not materially different from the invoiced amount because the transactions do not have significant associated costs.  Financial liabilities  The Company recognizes a financial liability in its Consolidated Statement of Financial Position according to the following:  Debts and financial liabilities that accrue interests  Loans and financial obligations accruing interest are initially recognized at the fair value of the resources obtained, less costs incurred directly attributable to the transaction. After initial recognition, loans and obligations accruing interest are measured at their amortized cost. The difference between the net amount received and the value to be paid is recognized in the Consolidated Statement of Income during the term of the loan, using the effective interest rate method.  Interest paid and accrued related to debts and obligations used in a financing operations appear under financial cost.  Loans and obligations accruing interest with a maturity within twelve month period are classified as current liabilities, unless the Company has the unconditional right to defer the payment of the obligation for at least a twelve month period after the financial statement closing date.  Trade accounts payable and other payables  Accounts payable and other accounts payable are initially recognized at their nominal value because they do not differ significantly from fair value. The Company has determined that no significant differences exist between the carrying value and amortized cost using the effective interest method.  Derivative Instruments  All derivative financial instruments are initially recognized at fair value as of the date of the derivative contract and subsequently re-measured at their fair value. Gains and losses resulting from fair value measurement are recorded in the Statement of Income as gains or losses due to fair value of financial instruments, unless the derivative instrument is designated as a hedging instrument.  The Financial Instruments at fair value through profit and loss include financial assets classified as held for trading and financial assets which have been designated as such by the Company. Financial assets are classified as held for trading when acquired with the purpose of selling them within a short term. The fair value of derivative financial instruments that do not qualify for hedge accounting are immediately recognized in the consolidated statement of income under Other gains (losses) .  The fair value of these derivatives are recorded under Other financial assets y Other financial liabilities.  Derivative instruments are classified as held for trading unless they are classified as hedge instruments.  Derivative instruments classified as hedges are accounted for as cash flow hedges.  In order to classify a derivative as a hedging instrument for accounting purposes, the Company documents (i) as of the transaction date or at designation time, the relationship or correlation between the hedging instrument and the hedged item, as well as the risk management purposes and strategies, (ii) the assessment, both at designation date as well as on a continuing basis, whether the derivative instrument used in the hedging is highly transaction effective to offset changes in


inception  cash flows of the hedged item. A hedge is considered effective when changes in the cash flows of the underlying directly attributable to the risk hedged are offset with the changes in fair value, or in the cash flows of the hedging instrument with effectiveness between 80% to 125%.


F-23

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  The total fair value of hedging derivatives are classified as assets or financial liabilities in Other non-current if the maturity of the hedged item is more than 12 months and as other assets or current liabilities if the remaining maturity of the hedged item is less than 12 months. The ineffective portion of these instruments can be viewed in Other gains (losses) of the Consolidated Statements of Income. The effective portion of the change in the fair value of derivative instruments that are designated and qualified as cash flow hedges are initially recognized in Cash Flow Hedge Reserve in a separate component of Equity. The income or loss related to the ineffective portion is immediately recognized in the Statement of Income. The amounts accumulated in Equity are reclassified in Income during the same period in which the corresponding hedged item is reflected in the Statement of Income. When a cash flow hedge ceases to comply with the hedge accounting criteria, any accumulated income or loss existing in Equity remains in Equity and is recognized when the expected transaction is finally recognized in the Statement of Income. When it is estimated that an expected transaction will not occur, the accumulated gain or loss recorded in Equity is immediately recognized in the Statement of Income.  Deposits for returns of bottles and containers  Deposits for returns of bottles and containers corresponds to the liabilities registered by the guarantees of money received from customers for bottles and containers placed at their disposal and represents the value that will be returned to the customer when it returns the bottles to the Company in good condition along with the original invoice. This value is determined by the estimation of the bottles and containers in circulation that are expected to be returned to the Company in the course of time based on the historic experience, physical counts held by clients and independent studies over the quantities that are in the hands of end consumers, valued at the average weighted guarantees for each type of bottles and containers.  The Company does not intend to make significant repayment of these deposits within the next 12 months. Such amounts are classified within current liabilities, under the line Other financial liabilities, since the Company does not have the legal ability to defer this payment for a period exceeding 12 months. This liability is not discounted, since it is considered a payable on demand, with the original invoice and the return of the respective bottles and containers and it does not have adjustability or interest clauses of any kind in its origin.  2.8Financial asset impairment  At each financial statement date the Company assesses if a financial asset or financial group of assets is impaired.  The Company assesses impairment of accounts receivable collectively by grouping the financial assets according to similar risk characteristics, which indicate the debtor’s capacity to comply with their obligations under the agreed upon conditions. When there is objective evidence that a loss due to impairment has been incurred in the accounts receivable, the loss amount is recognized in the Consolidated Statement of Income, as Administrative expenses.  In the event that during subsequent periods the impairment loss amount decreases and such decrease may be objectively related to an event occurring after impairment recognition, the impairment loss previously recognized is reversed.  Any subsequent impairment reversal is recognized in Income provided that the book value of the asset does not exceed its value as of the date the impairment was recognized.  2.9Inventories  Inventories are stated at the lower of cost acquisition or production cost and net realizable value. The production cost of finished products and of products under processing includes raw material, direct labor, indirect manufacturing expenses based on a normal operational capacity and other costs incurred to place the products at the locations and in the conditions necessary for sale, net of discounts attributable to inventories.  The net realizable value is the estimated sale price in the normal course of business, less marketing and distribution expenses. When market conditions cause the production cost to be higher than its net realizable value, an allowance for


assets deterioration is registered for the difference in value. This allowance for inventory deterioration also includes amounts related to obsolete items due to low turnover, technical obsolescence and products withdrawn from the market.


F-24

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  The inventories and cost of products sold, is determined using the Weighted Average Cost (WAC). The Company estimates that most of the inventories have a high turnover.  The materials and raw materials purchased from third parties are valued at their acquisition cost; once used, they are incorporated in finished products using the WAC methodology. 2.10Biological current assets  Under the Biological current assets, the Company includes the costs associated with agricultural activities (grapes), which are capitalized up to the harvest date, at which time they become part of inventory cost for subsequents processes. The Company considers that the costs associated with agricultural activities represent a reasonable approximation to fair value. 2.11Other non-financial assets  Other non-financial assets mainly includes advance payments associated with advertising related to contracts regarding the making of commercials which are work in progress and have not yet been shown (current and non-current), payments to insurances and advances to suppliers in relation with certain purchases of property, plant and equipment. Additionally it includes disbursements related to tax payments to be recovered from subsidiaries in Argentina, guarantees paid related with leases and materials to be consumed related to industrial security tools. 2.12Property, plant and equipment  Property, plant and equipment are recorded at their historic cost, less accumulated depreciation and impairment losses. The cost includes both the disbursements directly attributable to the asset acquisition or construction, as well as the financing interest directly related to certain qualified assets, which are capitalized during the construction or acquisition period, as long as these assets qualify for these purposes considering the period necessary to complete and prepare the assets to be operative. Disbursements after the purchase or acquisition are only capitalized when it is likely that the future economic benefits associated to the investment flow towards the Company, and costs may be reasonably measured. Subsequent disbursements related to repairs and maintenance are recorded as expense when incurred.  Property, plant and equipment depreciation, including the assets under financial lease, is calculated on a straight line basis over the estimated useful life of the fixed assets, taking into account their estimated residual value. When an asset is formed by significant components with different useful lives, each part is separately depreciated. Property, plant and equipment useful lives and residual values estimates are reviewed and adjusted at each financial statement closing date, if necessary.  Property, plant and equipment estimated useful lives are as follows:  Type of Assets

   Number of yearsLand

   IndefiniteBuildings and Constructions

   20 to 60Machinery and equipment

   10 to 25Fumiture and accesories

   5 to 10Other equipment (coolers and mayolicas)

   5 to 8Glass containers, and plastic containers

   3 to 12Vines in production

   30
  Gainsand losses resulting from the sale of properties, plants and equipment are calculated comparing their book values against the related sales proceeds and are included in the Consolidated Statement of Income.


F-25

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Biological assets held by Viña San Pedro Tarapacá S.A. (VSPT) and its subsidiaries consist of vines under formation and under production. The harvested grapes are used for the later production of wines.  Vines under production are valued at the historic cost, less depreciation and any impairment loss.  Depreciation of under production vines is recorded on a straight-line basis based on the 30-years average estimated production useful life, which is periodically assessed. Vines under formation are not depreciated until they start production.  Costs incurred in acquiring and planting new vines are capitalized.  When the book value of an asset of property, plant and equipment exceeds its recoverable amount, this is reduced immediately to its recoverable amount(See Note 2, 2.17).  During year 2015, the Company has early adopted the amendment of IAS 16 and 41, therefore vines under formation and under production are recorded in Properties, plant and equipment. 2.13Leases  Lease agreements are classified as financial leases when the agreement transfers to the Company substantially all the risks and rewards inherent to the asset ownership, according to International Accounting Standard No. 17 “Leases”. For those agreements that qualify as financial leases, at the initial date an asset and a liability are recognized at a value equivalent to the lower of the fair value of the asset and the present value of future lease payments. Subsequently, lease payments are allocated between the financial expense and the obligation reduction, so that a constant interest rate on the obligation balance is obtained.  Lease agreements that do not qualify as financial leases are classified as operating leases. Lease payments of operating leases are charged to income on a straight line basis over the life of the lease.  2.14Investment property  Investment property consists of land and building held by the Company with the purpose of generating appreciation and are not used in the normal course of business, and are recorded at historic cost less impairment loss, if any. Investment property depreciation is calculated on a straight line basis over the estimated useful life of such property, taking into account the estimated residual value of such property. 2.15Intangible assets other than goodwill  Commercial Trademarks  The Company’s commercial trademarks correspond to intangible assets with an indefinite useful life that are presented at their historic cost, less any impairment loss. The Company believes that through marketing investments trademarks maintain their value, consequently they are considered as having an indefinite useful life and they are not amortizable. Such assets are subject to impairment tests on a yearly basis, or when factors exist indicating a likely loss of value (Note 2, 2.17).  Software Program  Software Program licenses acquired are capitalized at the value of the costs incurred for their acquisition and preparation for the use of the specific programs. Such costs are amortized over their estimated useful lives (4 to 7 years). The maintenance costs of the software programs are recognized as expense in the year during which they are incurred.  Water Rights  Water Rights acquired by the Company correspond to the existing exploitation rights of water from natural sources, and they are recorded at their attributed cost as of the transition date to IFRS. Given that such rights are perpetual they are not amortizable, nevertheless they are annually subject to impairment assessment, or when factors exist that indicate a likely loss of value (See Note 2, 2.17).


F-26

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Distribution Rights  Corresponds to rights acquired to distribute different products. These rights are amortised over their estimated useful lives.  Research and development  Research and development expenses are recognized in the period incurred. 2.16Goodwill  Goodwill represents the excess of the consideration transferred the amount of any non-controlling interes in the acquiree and the acquisition date fair vale of any previous equity interest in the acquiree over the fair value of the net idetificable assets acquiree, and is accounted for at its cost value less accumulated impairment losses. Goodwill related to joint venture acquisitions is included in the investment accounting value.  For the purposes of impairment tests, goodwill is assigned Cash Generating Units (CGU) that are expected to benefit from the synergies of a business combination. Each unit or group of units (CGU -See Note 21) represents the lowest level inside the Company at which goodwill is monitored for internal administration purposes, which is not larger than a business segment. The cash generating units to which the goodwill is assigned are tested for impairment annually or with a higher frequency, when there are signs indicating that a cash generating unit could experience impairment or some of the significant market conditions have changed.  Goodwill in the acquisition of joint ventures is assessed for impairment as part of the investment, provided that there are signs indicating that the investment may be impaired.  An impairment loss is recognized for the amount that the book value of the cash generating unit exceeds its recoverable value, the recoverable value being the higher of the fair value of the cash generating unit, less costs to sell and its value in use.  An impairment loss is first assigned in goodwill to reduce its book value, and then to other assets in the cash generating unit. A recognized impairment loss is not reversed in the following years.  2.17Impairment of non financial assets other than goodwill  The Company annually assesses the existence of impairment indicators on non-financial assets. When indicators exist, the Company estimates the recoverable amount of the impaired asset. In case it is not possible to estimate the recoverable amount of the impaired asset at an individual level, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs.  For indefinite useful life intangible assets, which are not amortized, the Company performs all required test to ensure that the carrying amount does not exceed recoverable value.  The recoverable amount is defined as the higher of the fair value, less cost to sell and the value in use. The value in use is determined by estimating future cash flows associated with the asset or with the cash generating unit, discounted from its current value by using interest rates before taxes, which reflect the time value of money and the specific risks of the asset. In the event the asset book value exceeds its recoverable amount, the Company records an impairment loss in the Statement of Income.  For other non-financial assets different than goodwill and intangibles with indefinite useful life, the Company assesses the existence of impairment indicators when some event or change in business circumstances indicate that the book value of the asset may not be recoverable and impairment is recognised when the book value is higher than its recoverable value.  The Company annually assesses if impairment indicators of non-financial assets for which impairment losses were recorded during prior years have disappeared or decreased. In the event of such situation, the recoverable amount of the specific asset is recalculated and its book value increased, if necessary. Such increase is recognized in the Statement of Income as reversal of impairment losses. The increase in the value of the previously impaired asset is recognized only when it is originated by changes in the assumptions used to calculate the recoverable amount. The asset amount increase


resulting from the reversal of the impairment loss is limited to the amount that would have been recorded had impairment not occurred.


F-27

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 2.18Assets of a disposal group held for sale  Property, plant and equipment expected to be recovered primarily through sale rather than through continuing use, for which active sale negotiations have begun and it is estimated that they will be sold within twelve months following the closing date are classified as assets of a disposal group held for sale.  These assets are measured at the lower of their book value and the estimated fair value, less costs to sell. From the moment in which the assets are classified as assets of a disposal group held for sale they are no longer depreciated. 2.19Income taxes  Income taxes are composed by the legal obligations and the deferred taxes recognized according to International Accounting Standard No 12 – Income Taxes. Income tax is recognized in the Statement of Income, except when it is related to entries directly recorded in Equity, in which case the tax effect is also recognized in Equity.  Income Tax Obligation  Income tax obligations are recognized in the financial statements on the basis of the best estimates of the taxable profits as of the financial statement closing date, and the income tax rate valid as of that date in the countries where the Company operates.   Deferred Tax  Deferred taxes are those the Company expects to pay or to recover in the future, due to temporary differences between the book value of assets and liabilities (carrying amount for financial reporting purposes) and the corresponding tax basis of such assets and liabilities used to determine the profits subject to taxes. Deferred tax assets and liabilities are generally recognized for all temporary differences, and they are calculated at the rates that will be valid on the date the liabilities are paid or the assets realized.  Deferred tax is recognized for temporary differences arising from investments in subsidiaries and associates, except in those cases where the Company is able to control the date on which temporary differences will be reversed, and it is likely that they will not be reverted in the foreseeable future. Deferred tax assets, including those originated by tax losses are recognized provided it is likely that in the future there are taxable profits against which deductible temporary differences may be charged.  Deferred tax assets and liabilities are offset when there is a legal right to offset tax assets against tax liabilities, and the deferred tax is related to the same taxable entity and the same taxing authority. 2.20Employees benefits  Employees Vacation  The Company accrues the expense associated with staff vacation when the employee earns the benefit.  Employees Bonuses  The Company recognizes a liability and an expense for bonuses when it’s contractually obligated, it is estimated that, depending on the income requirement at a given date, bonuses will be paid out at the end of the year.  Severance Indemnity  The Company recognizes a liability for the payment of irrevocable severance indemnities, originated from the collective and individual agreements entered into with employees. Such obligation is determined based on the actuarial value of the accrued cost of the benefit, a method which considers several factors in the calculation, such as estimates of future continuance, mortality rates, future salary increases and discount rates. The determined value is shown at its present value by using the accrued benefits for years of service method. The discount rates are determined by reference to market interest rates curves. The current losses and gains are directly recorded in Income.


F-28

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  According to the amendment of IAS 19, the actuarial gains and losses are recognized directly in Other Comprehensive Income, under Equity and, according to the accounting policies of the Company, financial costs related to the severance indemnity are directly recorded under Financial cost in the Consolidated Statement of Income. 2.21Provisions  Provisions are recognized when: (i) the Company has a current obligation, legal or implicit, as a result of past events, (ii) it is probable that monetary resources will be required to settle the obligation and (iii) the amounts can be reasonably established. The amounts recognized as provisions as of financial statements closing date, are Management ́s best estimates, and consider the necessary disbursements to liquidate the obligation.  The concepts by which the Company establishes provisions against Income correspond to civil, labour and taxation proceedings that could affect the Company (See Note 28). 2.22Revenue recognition  Revenues are recognized when it is likely that economic benefits flow to the Company and can be measured reliably. Income is measured at the fair value of the economic benefits received or to be received, and they are presented net of valued added taxes, specific taxes, returns, discounts and rebates.  Sales of goods are recognized after the Company has transferred to buyer all the risks and benefits inherent in the ownership of such goods, and it does not hold the right to dispose of them; in general, this means that sales are recorded at the transfer of risks and benefits to clients, pursuant to the terms agreed in the commercial agreements.  Sale of products in the domestic market  The Company obtains its revenues, both in Chile and Argentina, mainly from the sales of beers, soft drinks, mineral waters, purified water, juices, wines, cider and spirits, products that are distributed through retail establishments, wholesale distributors and supermarket chains. None of which act as commercial agents of the Company. Such revenues in the domestic markets, net of the value added tax, specific taxes, returns, discounts and rebates to clients, are recognized when products are delivered, together with the transfer of all risks and benefits related to them.  Exports  In general, the Company ́s delivery conditions for sale are the basis for revenue recognition related to exports.  The structure of revenue recognition is based on the grouping of Incoterms, mainly in the following groups:  •              "FOB (Free on Board) shipping point", by which buyer organizes and pays for transportation, consequently the sales occur and revenue is recognized upon the delivery of merchandise to the transporter hired by buyer.  •              “CIF (Cost, Insurance & Freight) and similar", by which the Company organizes and pays for external transportation and some other expenses, although CCU ceases being responsible for the merchandise after delivering it to the maritime or air company in accordance with the relevant terms. The sales occur and revenue is recognized upon the delivery of the merchandise at the port of destination.  In the case of discrepancies between the commercial agreements and Incoterms, the first one will prevail. 2.23Commercial agreements with distributors and supermarket chains  The Company enters into commercial agreements with its clients, distributors and supermarkets through which they establish: (i) volume discounts and other client variables, (ii) promotional discounts that correspond to an additional rebate on the price of the products sold by reason of commercial initiatives development (temporary promotions), (iii) services payment and rendering of counter-services (advertising and promotion agreements, use of preferential spaces and others)


and (iv) shared advertising, which corresponds to the Company’s participation in advertising campaigns, promotion magazines and opening of new sales locations.


F-29

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  Volume discounts and promotional discounts are recognized as a reduction in the sales price of the products sold. Shared advertising contributions are recognized when the advertising activities agreed upon with the distributor have been carried out, and they are recorded as marketing expenses incurred, under Other expenses by function.  The commitments with distributors or importers in the exports area are recognized on the basis of existing trade agreements. 2.24Cost of sales of products  The costs of sales include the production cost of the products sold and other costs incurred to place inventories in the locations and under the conditions necessary for the sale. Such costs mainly include raw material costs, packing costs, production staff labour costs, production-related assets depreciation, returnable bottles depreciation, license payments, operational costs and plant and equipment maintenance costs.  2.25Other expenses by function  Other expenses by function include, mainly advertising and promotion expenses, depreciation of assets sold, selling expenses, marketing costs (sets, signs, neon signs at client’s facilities) and marketing and sales staff remuneration and compensations. 2.26Distribution expenses  Distribution costs include all the necessary costs to deliver products to clients. 2.27Administration expenses  Administration expenses include the support units staff remuneration and compensation, depreciation of offices, equipment, facilities and furniture used for these functions, non-current assets amortization and other general and administration expenses.  2.28Environment liabilities  Environmental liabilities are recorded based on the current interpretation of environmental laws and regulations, or when an obligation is likely to occur and the amount of such liability can be calculated reliably.  Disbursements related to environmental protection are charged to the Consolidated Statements of Income as incurred, except, investments in infrastructure designed to comply with environmental requirements, are recorded following the accounting policies for property, plant and equipment.   Note 3Estimates and application of professional judgment  Financial statement preparation requires estimates and assumptions from Management affecting the amounts included in the consolidated financial statements and their related notes. The estimates made and the assumptions used by the Company are based on the historical experience, changes in the industry and the information supplied by external qualified sources. Nevertheless, final results could differ from the estimates under certain conditions.  Significant estimates and accounting policies are defined as those that are important to correctly reflect the Company’s financial position and income, and/or those that require a high level of judgment by Management.


F-30

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  The primary estimates and professional judgments relate to the following concepts:  •              The valuation of goodwill acquired to determine the existence of losses due to potential impairment(Note 2, 2.16 and Note 21). •              The valuation of commercial trademarks to determine the existence of potential losses due to potential impairment(Note 2, 2.17 and Note 20). •              The assumptions used in the current calculation of liabilities and obligations to employees(Note 2, 2.20 and Note 30). •              Useful life of property, plant and equipment(Note 2, 2.12 and Note 22)and intangibles(Note 2, 2.15 and Note 20). •              The assumptions used for the calculation of fair value financial instruments(Note 2, 2.7 and Note 6). •              The occurrence likelihood and the estimates amount in an uncertain or contingent manner***(Note 2, 2.21 and Note 28)***. •              The valuation of Biological current assets(Note 2, 2.10 and Note 17).  Such estimates are based on the best available information of the events analysed to date in these consolidated financial statements. However, it is possible that events that may occur in the future that result in adjustments to such estimates, which would be recorded prospectively.  Note 4Accounting changes  During the year ended on December 31, 2016, there have been no significant changes in the use of accounting principles or relevant changes in any accounting estimates with regard to previous years that have affected these consolidated financial statements.   Note 5Risk Administration  Risk administration  In those companies without a significant non-controlling interest, the Company’s Administration and Finance Officer provides a centralized service for the group’s companies to obtain financing and administration of exchange rate, interest rate, liquidity, inflation, raw material and loan risks. Such activity operates according to a policies and procedures framework, which is regularly reviewed to comply with the purpose of administrating the risk originated by the business needs.  In those companies with a significant non-controlling interest (VSPT, CPCh, Aguas CCU-Nestlé, Bebidas del Paraguay S.A. and Cervecera Kunstmann) each Administration and Finance Officer exercises such responsibility. When necessary, the Board of Directors has the final responsibility for establishing and reviewing the risk administration structure, as well as for the review of significant changes made to the risk administration policies.  According to the financial risk policies, the Company uses derivative instruments only for the purpose of covering exposures to the interest rate and exchange rate risks originated by the Company’s operations and its financing sources. The Company does not acquire derivative facilities with speculative or investment purposes nevertheless, some derivatives are not treated as hedges for accounting purposes because they do not qualify as such. Transactions with derivative instruments are exclusively carried out by staff under the Finance Management and Internal Audit Management regularly reviews the control environment of this function. The relationship with Credit Rating Agencies and the monitoring of financial restrictions (covenants) are also administered by Finance Management.  The Company’s main risk exposure is related to the exchange rates, interest rates, inflation and raw material prices (commodities), taxes, client’s accounts receivable and liquidity. For the purpose of managing the risk originated by such exposures, several financial instruments are used.  For each of the following, where applicable, sensitivity analysis developed are for illustrative purposes, since in practice the sensitized variables rarely change without affecting each other and without affecting other factors that were considered as constants.


F-31

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Exchange rate risk  The Company is exposed to exchange rate risks originated by: a) its net exposure to foreign currency assets and liabilities, b) exports sales, c) the purchase of raw material, products and capital investments effected in foreign currencies, or indexed in such currencies, and d) the net investment of subsidiaries in foreign countries. The Company’s greatest exchange rate exposure is the variation of the Chilean peso as compared to the US Dollar, Euro, Argentine Peso, Uruguayan Peso, Paraguayan Guarani, Bolivian Peso and Colombian Peso.  As ofDecember 31, 2016, the Company maintained foreign currency obligations amounting to ThCh$ 49,694,209 (ThCh$ 49,785,548 in 2015), mostly denominated in US Dollars. Foreign currency obligations (ThCh$ 6,352,391 in 2016 and ThCh$ 16,626,496 in 2015) represent 4% (10% in 2015) of the total of Other financial liabilities. The remaining 96% (90% in 2015) is mainly denominated in inflation-indexed Chilean pesos (see inflation risk section). In addition, the Company maintains foreign currency assets for ThCh$ 66,435,330 (ThCh$ 72,887,721 in 2015) that mainly correspond to exports accounts receivable.  Regarding the foreign subsidiaries operations, the net exposure assets in US Dollars and other currencies amounts to ThCh$ 3,806,184 (ThCh$ 1,368,068 in 2015).  To protect the value of the net foreign currency assets and liabilities position of its Chilean operations, the Company enters into derivative agreements (currency forwards) to ease any variation in the Chilean peso as compared to other currencies.  As ofDecember 31, 2016, the Company’s mitigate net asset exposure in foreign currencies in Chile, after the use of derivative instruments, is a asset amounting to ThCh$ 3,808,526 (liability amounting to ThCh$ 757,256 in 2015).  As of December 31, 2016,of the Company’s total sales, both in Chile and abroad, 8% (8% in 2015 and 8% in 2014) corresponds to export sales made in foreign currencies, mainly US Dollars and Euro and of the total costs 63% (54% in 2015 and 55% in 2014) corresponds to raw materials and products purchased in foreign currencies, or indexed to such currencies. The Company does not hedge the eventual variations in the expected cash flows from such transactions.  The Company is also exposed to movements in exchange rates relating to the conversion from Argentine Pesos, Uruguayan Pesos, Paraguayan Guaranis, Bolivians and Colombian Pesos to Chilean Pesos with respect to assets, liabilities, income and expenses of its subsidiaries in Argentina, Uruguay and Paraguay, associated in Bolivia and joint ventures in Colombia. The Company does not cover the risks associated with the conversion of its subsidiaries,which effects are recorded in Equity.  As of December 31, 2016, the net investment in foreign subsidiaries, associated and joint ventures amounted to ThCh$ 135,001,540, ThCh$ 8,249,048 and ThCh$ 35,449,038 respectively (ThCh$ 133,554,918, ThCh$ 6,628,484 and ThCh$ 18,718,832 in 2015).  Exchange rate sensitivity analysis  The exchange rate differences effect recognized in the Consolidated Statement of Income for the year ended as ofDecember 31, 2016, related to the foreign currency denominated assets and liabilities, was an income of ThCh$ 456,996 (income of ThCh$ 957,565 in 2015 and a loss of ThCh$ 613,181 in 2014). Considering the exposure as ofDecember 31, 2016, and assuming a 10% increase (or decrease) in the exchange rate, and maintaining constant all other variables, such as interest rates, it is estimated that the effect over the Company’s income would be an income after taxes of ThCh$ 289,448 (a loss of ThCh$ 58,687 in 2015 and a loss of ThCh$ 204,456 in 2014).  Considering that approximately 8% of the Company’ sales relates to export sales carried out in Chile (8% in 2015 and 8% in 2014), in currencies different from the Chilean Peso, and in approximately 63% (54% in 2015 and 55% in 2014) of the Company’s direct costs are indexed to the US Dollar and assuming that the functional currencies will be appreciated or (depreciated) by 10% as compared to the set of foreign currencies, when maintaining constant the rest of the variables the hypothetical effect on the Company’s income would be loss after taxes of ThCh$ 13,908,457 (loss of ThCh$ 10,380,193 in 2015 and ThCh$ 10,004,379 in 2014).  The Company can also be affected by the variation of the exchange rate of where the foreign subsidiaries operate, since the result is converted to Chilean Pesos at the average rate of each month. The result of the operations in the foreign subsidiaries during the year 2016 were an income of ThCh$ 32,507,630(ThCh$32,141,475in 2015 andThCh$ 29,235,462 in 2014). Therefore, a depreciation (or appreciation) of 10% in the exchange rate of the Argentine Peso, the UruguayanPeso and the Paraguayan Guarani against the Chilean Peso, would be a loss (income) before tax of ThCh$ 3,250,763 (ThCh$ 3,214,147 in 2015 and ThCh$ 2,923,546 in 2014).


F-32

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  The net investment in foreign subsidiaries, associated and joint ventures amounted to ThCh$ 135,001,540, ThCh$ 8,249,048 and ThCh$ 35,449,038, respectively (ThCh$ 133,554,918, ThCh$ 6,628,484 and ThCh$ 18,718,832 in 2015). Assuming a 10% increase or decrease in theArgentine Peso, Uruguayan Peso, Paraguayan Guarani, Bolivians and Colombian Peso against the Chilean Peso, and maintaining constant all the rest of the variables, the increase (decrease) would hypothetically result in income (loss) of ThCh$ 17,869,963 (ThCh$ 16,655,069 in 2015) recorded as a credit (charge) against Equity.  The Company does not cover the risks associated with the currency conversion of the financial statements of its subsidiaries that have other functional currency, whose effects are reported in Equity.  Interest rates risk  The interest rate risk mainly originated from the Company’s financing sources. The main exposure is related to London Inter Bank Offer Rate (“LIBOR”) and Buenos Aires Deposits of Large Amount Rate (“BADLAR”) variable interest rate indexed obligations.  As of December 31, 2016, the Company had a total ThCh$ 10,142,841 in debt indexed to variable interest rates (ThCh$ 20,206,608 in 2015). Consequently, as of December 31, 2016, the company’s financing structure is made up (without considering the effects of cross currency swaps effect) of approximately 6% (12% in 2015) in debt with variable interest rates, and 94% (88% in 2015) in debt with fixed interest rates.  To administer the interest rate risk, the Company has a policy that intends to reduce the volatility of its financial expense, and to maintain an ideal percentage of its debt in fixed rate instruments. The financial position is mainly set by the use of short-term and long-term debt, as well as derivative instruments such as cross currency interest rate swaps and cross interest rate swaps.  As of December 31, 2016, after considering the effect of interest rates and currency swaps, approximately 97% (97% in 2015) of the Company’s long-term debt has fixed interest rates.  The terms and conditions of the Company’s obligations as of December 31, 2016, including exchange rates, interest rates, maturities and effective interest rates, are detailed inNote 26.  Interest rates sensitivity analysis  The total financial expense recognized in the Consolidated Statement of Income for the twelve month ended as of December 31, 2016, related to short-term and long-term debts amounted to ThCh$ 20,307,238 (ThCh$ 23,101,329 in 2015 and ThCh$ 22,957,482 in 2014). Assuming a reasonably possible increase of 100 bps in variable interest rates and maintaining constant all the rest of the variables, the increase would hypothetically result in a loss before tax of ThCh$ 48,700 (ThCh$ 42,664 in 2015). Inflation risk  The Company maintains a series of Unidad de Fomento* (UF) indexed agreements with third parties, as well as UF indexed financial debt, which means that the Company is exposed to the UF fluctuations, generating increases in the value of the agreements and inflation adjustable liabilities, in the event it experiences growth. This risk is mitigated by the Company’s policy of keeping the unitary net sales in UF constant, as long as the market conditions allow it.  * The Unidad de Fomento (UF) is a Chilean inflation-indexed, peso-denominated monetary unit. The UF rate is set daily based on changes in the previous month ́s inflation rate.  Inflation sensitivity analysis  The income for total adjustment unit recognized in the Consolidated Statement of Comprehensive Income for the twelve month ended as of December 31, 2016, related to UF indexed short-term and long-term debt, and resulted in a loss of


ThCh$ 2,246,846 (ThCh$ 3,282,736 in 2015 and ThCh$ 4,159,131 in 2014). Assuming a reasonably possible increase (decrease) of the Unidad de Fomento by approximately 3% and maintaining constant all the rest of the variables, such as interest rates, the aforementioned increase (decrease) would hypothetically result in a loss (income) of ThCh$ 3,065,645 (ThCh$ 3,065,747 in 2015 and ThCh$ 3,035,371 in 2014) in the Consolidated Statement of Income.


F-33

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Raw material price risk  The main exposure to the raw material price variation is related to barley and malt used in the production of beer, concentrates, sugar and plastic containers used in the production of soft drinks and bulk wine and grapes for the manufacturing of wine and spirits.  Barley, malt and cans  In Chile, the Company obtains its barley and malt supply both from local producers and the international market. Long-term supply agreements are entered into with local producers where the barley price is set annually according to market prices, which are used to determine the malt price according to the agreements. The purchases commitments made expose the Company to a raw material price fluctuation risk. During 2016, the Company purchased 13,914 tons (46,620 tons in 2015) of barley and 61,753 tons (53,890 tons in 2015) of malt. CCU Argentina acquires mainly malt from local producers. Such raw materials represent approximately 7% (9% in 2015 and 12% in 2014) of the direct cost of Chile Operating segment.  Of the cost of Chile Operating segment, the cost of cans represents approximately 15% of the direct cost (12% in 2015 and 12% in 2014). Meanwhile in the International Business Operating segment the cans cost represent approximately 34% of the direct cost of raw materials in 2016 (30% in 2015 and 20% in 2014).  Concentrates, Sugar and plastic containers  The main raw materials used in the production of non-alcoholic beverages are concentrates, which are mainly acquired from licensees, sugar and plastic resin for the manufacturing of plastic bottles and containers. The Company is exposed to price fluctuation risks of these raw materials, which jointly represent approximately 30% (29% in 2015 and 29% in 2014) of the direct cost of Chile Operating segment. The company does not engage in hedging the purchases of raw materials.  Grapes and wine  The main raw material used by the subsidiary VSPT for wine production are harvested grapes from own production and grapes and wines acquired from third parties through long term and spot contracts. For the last 12 months, approximately 26% (31% in 2015) of the total wine of VSPT supply comes from its own vineyards. In the export business the own supply for 2016 was 40% (48% for 2015).  The remaining 74% (69% in 2015) supply is purchased from third parties through long term and spot contracts. During 2016, the subsidiary VSPT acquired 64% (55% in 2015) of the necessary grapes and wine from third parties through spot contracts. It also acquired 11% of its grape needs in 2016 from long term agreements (14% in 2015).  We must consider that as of December 31, 2016, the wine represents 56% (57% in 2015) of the total direct cost of the Wine Operating Segment, meaning that the supply purchased to third parties represents 36% of the direct cost (31% in 2015).  Raw material price sensitivity Analysis  The total direct cost in the Consolidated Statement of Income for 2016 amounts to ThCh$ 540,692,963 (ThCh$ 485,391,583 in 2015 and ThCh$ 433,749,832 in 2014). Assuming a reasonably possible increase (decrease) in the direct cost of each Operating segment of 8% and maintaining constant all the rest of the variables, such as exchange rates, the aforesaid increase (decrease) would hypothetically result into a loss (income) before taxes of ThCh$ 28,076,333 (ThCh$ 24,078,370 in 2015 and ThCh$ 21,875,405 in 2014) for Chile Operating segment, ThCh$ 8,089,082 (ThCh$ 8,444,331 in 2015 and ThCh$ 5,925,786 in 2014) for International Business Operating segment, ThCh$ 7,222,786 (ThCh$ 6,736,734 in 2015 and ThCh$ 6,414,035 2014) for Wine Operating segment.


F-34

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Credit risk  The credit risk to which the Company is exposed originates from: a) the commercial accounts receivable maintained with retail clients, wholesale distributors and supermarket chains of domestic markets; b) accounts receivable from exports; and c) financial facilities maintained with Banks and financial institutions, such as demand deposits, mutual funds investments, facilities acquired under resale commitments and derivatives.  Domestic market  The credit risk related to commercial collectible accounts of domestic markets is administered by the Loan and Collection Administration Officer, and it is monitored by the Loan Committee of each business unit. The Company has a wide client base that is subject to the policies, procedures and controls established by the Company. The loan limits are established for all clients on the basis of an internal qualification and payment performance. Outstanding commercial accounts receivable are regularly monitored. In addition, the Company acquires loan insurances covering 90% of the individually significant accounts receivable balances, a coverage that as of December 31, 2016, amounts to 88% (88% in 2015) of the total accounts receivable.  Overdue but not impaired commercial accounts receivable corresponds to clients that show delays of less than 33 days (21 days in 2015).  As of December 31, 2016, the Company had approximately 1,078 clients (998 clients in 2015) indebted in over Ch$ 10 million each that together represent approximately 84% (85% in 2015) of the total commercial accounts receivable. There were 224 clients (217 clients in 2015) with balances over Ch$ 50 million each, representing approximately 74% (74% in 2015) of the total accounts receivable. The 91% (93% in 2015) of such accounts receivable are covered by the loan insurance.  The Company believes that no additional credit risk provisions are needed to the individual and collective provisions determined at December 31, 2016, as a large percentage of these are covered by insurance.  Exports market  The loan risk related to accounts receivable for exports is administered by VSPT Head of Loan and Collection, and it is monitored by VSPT Administration and Finance Officer. The Company has a large client base, in over eighty countries, which are subject to the policies, procedures and controls established by the Company. In addition, the Company acquires loan insurance covering 90% (89% in 2015) of the total accounts receivable. Pending payment of commercial accounts receivable is regularly monitored. Apart from the loan insurance, having diversified sales in different countries decreases the loan risk.  As of December 31, 2016, there were 76 clients (69 clients in 2015) indebted for over ThCh$ 65,000 each, which represent 91% (88% in 2015) of the total accounts receivable of the export market.  Overdue, but not impaired, commercial accounts receivable corresponds to clients that show delays of less than 32 days (25 days in 2015).  The Company estimates that no loan risk provisions are necessary in addition to the individual and collective provisions determined as of December 31, 2016. See analysis of accounts receivables maturities and losses due to impairment of accounts receivables (Note 14).  The Company has policies limiting the counterparty loan risk exposure with respect to financial institutions, and such exposures are frequently monitored. Consequently, the Company does not have significant risk concentration with any specific financial institutions as of December 31, 2016.  Financial investments and derivative instruments  The financial investments correspond to time deposits, investments in mutual funds and financial instruments acquired under re-sale agreements, as well as short-term investments with high liquidity, all at a fixed interest rate, normally with an original maturity of up to three months, which they are not exposed to significant risks of market. With respect to financial derivative instruments, these are valued at fair value and contracted only in the Chilean market.


F-35

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Liquidity risk  The Company administers liquidity risk at a consolidated level. The cash flows originated from operational activities being the main liquidity source. Additionally, the Company has the ability to issue debt and equity instruments in the capital market according to our needs.  To manage short-term liquidity, the Company considers projected cash flows for a twelve months moving period and maintains cash and cash equivalents available to meet its obligations.  Based on the current operational performance and its liquidity position, the Company estimates that cash flows originated by operating activities and the cash available shall be sufficient to finance working capital, capital investments, interest payments, dividend payments and debt payment requirements for the next 12-month period and the foreseeable future.  A summary of the Company’s financial liabilities with their maturities as of December 31, 2016 and 2015, based on the non-discounted contractual cash flows appears below:  As of December 31, 2016

   Book value (*)

   Contractual cash flows maturities0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Other financial liabilities no derivativeBank borrowings

   68,685,959

   8,567,124

   34,661,755

   31,604,772

   626,411

   -

   75,460,062Bond payable

   74,086,739

   1,108,143

   4,551,720

   13,401,920

   19,666,590

   56,878,538

   95,606,911Financial leases obligations

   17,716,869

   368,052

   1,050,810

   2,603,315

   2,305,704

   28,638,952

   34,966,833Deposits for return of bottles and containers

   13,015,723

   -

   13,015,723

   -

   -

   -

   13,015,723Sub-Total

   173,505,290

   10,043,319

   53,280,008

   47,610,007

   22,598,705

   85,517,490

   219,049,529DerivativeDerivative financial instruments

   11,118,676

   11,118,676

   -

   -

   -

   -

   11,118,676Sub-Total

   11,118,676

   11,118,676

   -

   -

   -

   -

   11,118,676Total

   184,623,966

   21,161,995

   53,280,008

   47,610,007

   22,598,705

   85,517,490

   230,168,205
   As of December 31, 2015

   Book value (*)

   Contractual cash flows maturities0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Other financial liabilities no derivativeBank borrowings

   76,050,091

   18,531,305

   30,981,974

   32,627,707

   3,135,314

   -

   85,276,300Bond payable

   74,508,233

   1,077,908

   4,529,040

   10,909,363

   17,346,078

   64,742,891

   98,605,280Financial leases obligations

   17,559,874

   418,380

   1,087,320

   2,709,603

   2,439,335

   28,871,228

   35,525,866Deposits for return of bottles and containers

   12,503,170

   -

   12,503,170

   -

   -

   -

   12,503,170Sub-Total

   180,621,368

   20,027,593

   49,101,504

   46,246,673

   22,920,727

   93,614,119

   231,910,616DerivativeHedging derivatives

   107,698

   61,543

   46,333

   -

   -

   -

   107,876Derivative financial instruments

   171,470

   167,701

   3,770

   -

   -

   -

   171,471Sub-Total

   279,168

   229,244

   50,103

   -

   -

   -

   279,347Total

   180,900,536

   20,256,837

   49,151,607

   46,246,673

   22,920,727

   93,614,119

   232,189,963
  (*) View current and non-current book value inNote 6.


F-36

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 6Financial Instruments  Financial instruments categories  The following are the book values of each financial instrument category at the closing of each year:  As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Cash and cash equivalents

   133,789,950

   -

   192,554,239

   -Other financial assets

   8,406,491

   203,784

   13,644,105

   80,217Accounts receivable - trade and other receivable (net)

   280,766,784

   3,563,797

   252,225,937

   -Acoounts receivable from related companies

   3,523,825

   356,665

   4,788,930

   445,938Total financial assets

   426,487,050

   4,124,246

   463,213,211

   526,155Bank borrowings

   39,079,561

   29,606,398

   27,714,998

   48,335,093Bonds payable

   3,250,023

   70,836,716

   3,155,239

   71,352,994Financial leases obligations

   215,950

   17,500,919

   321,416

   17,238,458Derivative financial instruments

   11,118,676

   -

   171,470

   -Hedging derivatives

   -

   -

   107,698

   -Deposits for return of bottles and containers

   13,015,723

   -

   12,503,170

   -Total other non-financial liabililities (*)

   66,679,933

   117,944,033

   43,973,991

   136,926,545Account payable- trade and other payable

   259,677,852

   1,082,898

   227,736,803

   1,645,098Accounts payable to related entities

   9,530,071

   -

   11,624,218

   -Total financial liabilities

   335,887,856

   119,026,931

   283,335,012

   138,571,643
  (*) SeeNote 26 - Other financial liabilities.  Financial instruments fair value  a)Composition of financial assets and liabilities:  The following tables show the fair values, based on the financial instrument categories, as compared to the book value included in the Consolidated Statements of Financial Position:  As of December 31, 2016

   As of December 31, 2015Book Value

   Fair Value

   Book Value

   Fair ValueThCh$

   ThCh$

   ThCh$

   ThCh$Cash and cash equivalents

   133,789,950

   133,789,950

   192,554,239

   192,554,239Other financial assets

   8,610,275

   8,610,275

   13,724,322

   13,724,322Accounts receivable - trade and other receivable (net)

   284,330,581

   284,330,581

   252,225,937

   252,225,937Acoounts receivable from related companies

   3,880,490

   3,880,490

   5,234,868

   5,234,868Total financial assets

   430,611,296

   430,611,296

   463,739,366

   463,739,366Bank borrowings

   68,685,959

   69,668,649

   76,050,091

   77,380,452Bonds payable

   74,086,739

   81,769,096

   74,508,233

   80,087,449Financial leases obligations

   17,716,869

   30,154,204

   17,559,874

   29,104,078Derivative financial instruments

   11,118,676

   11,118,676

   171,470

   171,470Hedging derivatives

   -

   -

   107,698

   107,698Deposits for return of bottles and containers

   13,015,723

   13,015,723

   12,503,170

   12,503,170Total other non-financial liabililities (*)

   184,623,966

   205,726,348

   180,900,536

   199,354,317Account payable- trade and other payable

   260,760,750

   260,760,750

   229,381,901

   229,381,901Accounts payable to related entities

   9,530,071

   9,530,071

   11,624,218

   11,624,218Total financial liabilities

   454,914,787

   476,017,169

   421,906,655

   440,360,436
 (*) SeeNote 26 - Other financial liabilities.


F-37

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The book value of current accounts receivables, cash and cash equivalents and other financial assets and liabilities approximate fair value due to the short-term nature of such facilities, and in the case of accounts receivable, due to the fact that any collection loss is already reflected in the impairment loss provision.  The fair value of non-derivative financial assets and liabilities that are not quoted in active markets are estimated through the use of discounted cash flows calculated on market variables observed as of the date of the financial statements. The fair value of derivative instruments is estimated through the discount of future cash flows, determined according to information observed in the market    or to variables and prices obtained from third parties.  The fair value of bank borrowings and Bonds payable have hierarchy level 2 of fair value.  b)Financial instruments as per category:  As of December 31, 2016

   Fair value with changes in income

   Cash and cash equivaletns and loans and accounts receivables

   Hedge derivatives

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$Financial assetsDerivative financial instruments

   479,492

   -

   309,237

   788,729Marketable securities and investments in other companies

   7,821,546

   -

   -

   7,821,546Total other financial assets

   8,301,038

   -

   309,237

   8,610,275Cash and cash equivalents

   -

   133,789,950

   -

   133,789,950Accounts receivable-trade and other receivables (net)

   -

   284,330,581

   -

   284,330,581Account receivable from to related companies

   -

   3,880,490

   -

   3,880,490Total

   8,301,038

   422,001,021

   309,237

   430,611,296
  As of December 31, 2016

   Fair value with changes in income

   Hedge derivatives

   Financial libilities measured at amortized cost

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$Financial liabilitiesBank borrowings

   -

   -

   68,685,959

   68,685,959Bonds payable

   -

   -

   74,086,739

   74,086,739Financial leases obligations

   -

   -

   17,716,869

   17,716,869Deposits for return of bottles and containers

   -

   -

   13,015,723

   13,015,723Derivative financial instruments

   11,118,676

   -

   -

   11,118,676Total others financial liabililities

   11,118,676

   -

   173,505,290

   184,623,966Account payable- trade and other payable

   -

   -

   260,760,750

   260,760,750Accounts payable to related entities

   -

   -

   9,530,071

   9,530,071Total

   11,118,676

   -

   443,796,111

   454,914,787


F-38

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As of December 31, 2015

   Fair value with changes in income

   Cash and cash equivaletns and loans and accounts receivables

   Hedge derivatives

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$Financial assetsDerivative financial instruments

   9,365,572

   -

   816,622

   10,182,194Marketable securities and investments in other companies

   3,542,128

   -

   -

   3,542,128Total other financial assets

   12,907,700

   -

   816,622

   13,724,322Cash and cash equivalents

   -

   192,554,239

   -

   192,554,239Accounts receivable-trade and other receivables (net)

   -

   252,225,937

   -

   252,225,937Account receivable from to related companies

   -

   5,234,868

   -

   5,234,868Total

   12,907,700

   450,015,044

   816,622

   463,739,366
  As of December 31, 2015

   Fair value with changes in income

   Hedge derivatives

   Financial libilities measured at amortized cost

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$Financial liabilitiesBank borrowings

   -

   -

   76,050,091

   76,050,091Bonds payable

   -

   -

   74,508,233

   74,508,233Financial leases obligations

   -

   -

   17,559,874

   17,559,874Deposits for return of bottles and containers

   -

   -

   12,503,170

   12,503,170Derivative financial instruments

   171,470

   107,698

   -

   279,168Total others financial liabililities

   171,470

   107,698

   180,621,368

   180,900,536Account payable- trade and other payable

   -

   -

   229,381,901

   229,381,901Accounts payable to related entities

   -

   -

   11,624,218

   11,624,218Total

   171,470

   107,698

   421,627,487

   421,906,655


F-39

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Derivative Instruments  The detail of maturities, number of derivative agreements, contracted nominal amounts, fair values and the classification of such derivative instruments as per type of agreement at the closing of each year is as follows:  As of December 31, 2016

   As of December 31, 2015Number of agreements

   Nominal amounts thousand

   Asset

   Liability

   Number ofagreements

   Nominal amounts thousand

   Asset

   LiabilityThCh$

   ThCh$

   ThCh$

   ThCh$Cross currency interest rate swaps CLP/USD

   1

   11,237

   53,743

   -

   -

   -

   -

   -Less than a year

   1

   11,237

   53,743

   -

   -

   -

   -

   -Cross interest rate swaps USD/USD

   -

   -

   -

   -

   1

   10,094

   -

   107,698Less than a year

   -

   -

   -

   -

   -

   10,094

   -

   107,698Cross currency interest rate swaps USD/EURO

   1

   7,889

   255,494

   -

   2

   12,353

   816,622

   -Less than a year

   -

   -

   51,710

   -

   -

   4,477

   736,405

   -Between 1 and 5 years

   -

   7,889

   203,784

   -

   -

   7,876

   80,217

   -Forwards USD

   29

   224,332

   359,254

   10,586,653

   27

   148,404

   9,276,156

   117,151Less than a year

   -

   224,332

   359,254

   10,586,653

   -

   148,404

   9,276,156

   117,151Forwards Euro

   10

   49,421

   109,164

   523,079

   7

   11,981

   57,834

   52,368Less than a year

   -

   49,421

   109,164

   523,079

   -

   11,981

   57,834

   52,368Forwards CAD

   2

   1,480

   11,074

   7,720

   4

   1,500

   18,192

   1,951Less than a year

   -

   1,480

   11,074

   7,720

   -

   1,500

   18,192

   1,951Forwards GBP

   2

   700

   -

   1,224

   3

   865

   13,390

   -Less than a year

   -

   700

   -

   1,224

   -

   865

   13,390

   -Total derivative instruments

   45

   

   788,729

   11,118,676

   44

   

   10,182,194

   279,168
  These derivative agreements have been entered into as a hedge of exchange rate risk exposure. In the case of forwards, the Company does not comply with the formal requirements for hedging designation; consequently their effects are recorded in Income, in Other gains (losses).  In the case of Cross Currency Interest Rate Swaps and the Cross Interest Rate Swaps, these qualify as cash flow hedges of the cash flows related to loans from Banco de Chile and Banco Scotiabank. See additional disclosures inNote 26.  As of December 31, 2016Entity

   Nature of risks covered

   Rights

   Obligations

   Fair value of net asset (liabilities)

   MaturityCurrency

   Amount

   Currency

   Amount

   AmountThCh$

   ThCh$

   ThCh$Scotiabank

   Interest rate and exchange rate on bank bonds

   USD

   5,335,826

   EUR

   5,080,332

   255,494

   06-18-2018Banco de Chile

   Interest rate on bank bonds

   CLP

   7,458,187

   USD

   7,404,444

   53,743

   07-03-2017


F-40

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  As of December 31, 2015Entity

   Nature of risks covered

   Rights

   Obligations

   Fair value of net asset (liabilities)

   MaturityCurrency

   Amount

   Currency

   Amount

   AmountThCh$

   ThCh$

   ThCh$Scotiabank

   Interest rate and exchange rate in bank obligations

   USD

   5,700,299

   EUR

   5,589,172

   111,127

   06-18-2018Banco de Chile

   Interest rate and exchange rate on bank bonds

   USD

   3,205,865

   EUR

   2,500,370

   705,495

   07-11-2016Banco de Chile

   Interest rate on bank bonds

   USD

   7,227,245

   USD

   7,334,943

   (107,698)

   07-07-2016
  The Consolidated Statement of Other Comprehensive Income includes under the caption cash flow hedge, for the years ended December 31, 2016, a credit before income taxes of ThCh$ 84,962 (ThCh$ 80,693 and ThCh$ 155,258, in 2015 and 2014, respectively), relating to the fair value of the Cross Currency Interest Swap and Cross Interest Rate Swap derivatives instruments.  Fair value hierarchies  The financial instruments recorded at fair value in the Statement of Financial Position are classified as follows, depending on the method used to obtain their fair values:  Level 1                  Fair values obtained through direct reference to quoted market prices, without any adjustment.  Level 2                  Fair values obtained through the use of valuation models accepted in the market and based on prices different from those of Level 1, which may be directly or indirectly observed as of the measurement date (adjusted prices).  Level 3                   Fair values obtained through internally developed models or methodologies that use information which may not be observed or which is illiquid.  The fair value of financial instruments recorded at fair value in the Consolidated Financial Statements, are as follows:  As of December 31, 2016

   Recorded fair value

   Fair value hierarchyLevel 1

   Level 2

   Level 3ThCh$

   ThCh$

   ThCh$

   ThCh$Derivative financial instruments

   479,492

   -

   479,492

   -Market securities and investments in other companies

   7,821,546

   7,821,546

   -

   -Hedging derivatives

   309,237

   -

   309,237

   -Fair value financial assets

   8,610,275

   7,821,546

   788,729

   -Derivative financial instruments

   11,118,676

   -

   11,118,676

   -Fair value financial liabilities

   11,118,676

   -

   11,118,676

   -


F-41

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As of December 31, 2015

   Recorded fair value

   Fair value hierarchyLevel 1

   Level 2

   Level 3ThCh$

   ThCh$

   ThCh$

   ThCh$Derivative financial instruments

   9,365,572

   -

   9,365,572

   -Market securities and investments in other companies

   3,542,128

   3,542,128

   -

   -Hedging derivatives

   816,622

   -

   816,622

   -Fair value financial assets

   13,724,322

   3,542,128

   10,182,194

   -Hedging derivatives

   107,698

   -

   107,698

   -Derivative financial instruments

   171,470

   -

   171,470

   -Fair value financial liabilities

   279,168

   -

   279,168

   -
  During year ended as ofDecember 31, 2016, the Company has not made any significant instrument transfer between levels 1 and 2.  Credit Quality of financial assets  The Company uses two credit assessment systems for its clients: a) Clients with loan insurance are assessed according to the external risk criteria (trade reports, non-compliance and protested documents that are available in the local market), payment capability and equity situation required by the insurance company to grant a loan coverage; b) All other the clients are assessed through an ABC risk model, which considers internal risk (non-compliance and protested documents), external risk (trade reports, non-compliance and protested documents that  are available in the local market) and payment capacity and equity situation. The uncollectible rate during the last two years has not been significant.


F-42

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 7Financial Information as per operating segments  The Company has defined three Operating segments, essentially defined with respect to its revenues in the geographic areas of commercial activity: 1. Chile, 2. International business and 3. Wine. From the fourth quarter of 2015 onwards, was created the Committee of International Business, which brings together management of the business activities regarding the geographical areas Argentina, Uruguay and Paraguay. Following this change, the Río de la Plata Operating segment (consisting of the business activities referred to) will be renamed into the International Business Operating Segment. The Committee of International Business will at the same time represent and look after the interests associated with the investments in Bolivia and Colombia, which will continue to report its results under Equity and income of JVs and associated on a consolidated basis. Starting from the third quarter of 2016, the Company has incorporated in the Chile operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.  For the year ended December 31, 2015 and 2014, revenue and expenses of the Strategic Service Units were previously reported under Others. However, for comparability purposes, these revenues and expenses have been restated and are now allocated to Chile Operating segment. These Operating segments mentioned are consistent with the way the Company is managed and how results are reported by CCU. These segments reflect separate operating results which are regularly reviewed by the chief operating decision maker in order to make decisions about the resources to be allocated to the segment and assess its performance. Operating segment

   Products and servicesChile

   Beers, non-alcoholic beverages, spirits and SSU.International Business

   Beers, cider, non-alcoholic beverages and spirits in Argentina, Uruguay and Paraguay.Wines

   Wines, mainly in export markets to more 80 countries.
  Corporate revenues and expenses are presented separately within the Other, in addition in the other presents the elimination of transactions between segments. The Company does not have any customers representing more than 10% of consolidated revenues. The detail of the segments is presented in the following tables.


F-43

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 a)Information as per operating segments for the years endedDecember 31, 2016 and 2015:  Chile(4)

   International Business

   Wines

   Others(4)

   Total2016

   2015

   2016

   2015

   2016

   2015

   2016

   2015

   2016

   2015ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Sales revenue external customers

   973,220,715

   885,769,609

   366,778,056

   400,051,022

   195,322,270

   184,169,165

   -

   -

   1,535,321,041

   1,469,989,796Other income

   15,630,481

   16,757,566

   2,783,615

   4,708,728

   5,851,015

   5,214,674

   (688,444)

   1,700,951

   23,576,667

   28,381,919Sales revenue between segments

   8,524,493

   6,932,905

   546,972

   953,967

   228,767

   131,209

   (9,300,232)

   (8,018,081)

   -

   -Net sales

   997,375,689

   909,460,080

   370,108,643

   405,713,717

   201,402,052

   189,515,048

   (9,988,676)

   (6,317,130)

   1,558,897,708

   1,498,371,715Change %

   9.7

   -

   (8.8)

   -

   6.3

   -

   -

   -

   4.0

   -Cost of sales

   (471,151,686)

   (411,375,380)

   (157,485,547)

   (162,665,341)

   (112,938,261)

   (105,956,281)

   (244,422)

   (5,078,249)

   (741,819,916)

   (685,075,251)% of Net sales

   47.2

   45.2

   42.6

   40.1

   56.1

   55.9

   -

   -

   47.6

   45.7Gross margin

   526,224,003

   498,084,700

   212,623,096

   243,048,376

   88,463,791

   83,558,767

   (10,233,098)

   (11,395,379)

   817,077,792

   813,296,464% of Net sales

   52.8

   54.8

   57.4

   59.9

   43.9

   44.1

   -

   -

   52.4

   54.3MSD&A (1)

   (373,407,847)

   (343,380,553)

   (191,413,501)

   (216,098,525)

   (52,007,092)

   (51,070,291)

   (2,714,311)

   (2,015,407)

   (619,542,751)

   (612,564,776)% of Net sales

   37.4

   37.8

   51.7

   53.3

   25.8

   26.9

   -

   -

   39.7

   40.9Other operating income (expenses)

   1,734,871

   626,889

   (394,820)

   3,315,892

   732,689

   44,823

   1,043,939

   217,706

   3,116,679

   4,205,310Adjusted operating result (2)

   154,551,027

   155,331,036

   20,814,775

   30,265,743

   37,189,388

   32,533,299

   (11,903,470)

   (13,193,080)

   200,651,720

   204,936,998Change %

   (0.5)

   -

   (31.2)

   -

   14.3

   -

   -

   -

   (2.1)

   -% of Net sales

   15.5

   17.1

   5.6

   7.5

   18.5

   17.2

   -

   -

   12.9

   13.7Net financial expense

   -

   -

   -

   -

   -

   -

   -

   -

   (14,627,170)

   (15,255,586)Share of net loss of joint ventures and associates accounted for using

   -

   -

   -

   -

   -

   -

   -

   -

   (5,560,522)

   (5,228,135)Foreign currency exchange differences

   -

   -

   -

   -

   -

   -

   -

   -

   456,995

   957,565Results as per adjustment units

   -

   -

   -

   -

   -

   -

   -

   -

   (2,246,846)

   (3,282,736)Other gains (losses)

   -

   -

   -

   -

   -

   -

   -

   -

   (8,345,907)

   8,512,000Income before taxes

   -

   -

   -

   -

   -

   -

   -

   -

   170,328,270

   190,640,106Income taxes

   -

   -

   -

   -

   -

   -

   -

   -

   (30,246,383)

   (50,114,516)Net income for year

   -

   -

   -

   -

   -

   -

   -

   -

   140,081,887

   140,525,590Non-controlling interests

   -

   -

   -

   -

   -

   -

   -

   -

   21,624,399

   19,717,455Net income attributable to equity holders of the parent

   -

   -

   -

   -

   -

   -

   -

   -

   118,457,488

   120,808,135Depreciation and amortization

   61,736,849

   56,698,871

   11,928,705

   14,334,415

   7,078,872

   7,568,991

   2,783,619

   2,964,525

   83,528,045

   81,566,802ORBDA  (3)

   216,287,876

   212,029,907

   32,743,480

   44,600,158

   44,268,260

   40,102,290

   (9,119,851)

   (10,228,555)

   284,179,765

   286,503,800Change %

   2.0

   -

   (26.6)

   -

   10.4

   -

   -

   -

   (0.8)

   -% of Net sales

   21.7

   23.3

   8.8

   11.0

   22.0

   21.2

   -

   -

   18.2

   19.1
  (1)MSD&A, included Marketing, Selling, Distribution and Administrative expenses. (2)Adjusted operating result (for management purposes we have defined as Net income before other gains (losses), net financial expense, equity and income of joint venture, foreign currency exchange differences, result as per adjustment units and income taxes). (3)ORBDA (for management purpose we have defined as Adjusted Operating Result before Depreciation and Amortization). (4)Starting from the third quarter of 2016, the Company has incorporated in the Chile operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.  As of December 2015, the revenue and expenses of the Strategic Service Units were previously  reported under Others. However for comparability purposes these revenues and expenses have been restated and are now reported under to Chile operating segment (see reconciliation in letter c) under this Note).


F-44

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 b)Information as per operating segments for the years endedDecember 31, 2015 and 2014:  Chile (5)

   International Business

   Wines

   Others (5)

   Total2015

   2014

   2015

   2014

   2015

   2014

   2015

   2014

   2015

   2014ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Sales revenue external customers

   885,769,609

   813,639,952

   400,051,022

   292,152,707

   184,169,165

   168,139,809

   -

   -

   1,469,989,796

   1,273,932,468Other income

   16,757,566

   15,562,980

   4,708,728

   3,992,902

   5,214,674

   3,918,028

   1,700,951

   559,921

   28,381,919

   24,033,831Sales revenue between segments

   6,932,905

   6,227,110

   953,967

   3,522,074

   131,209

   290,716

   (8,018,081)

   (10,039,900)

   -

   -Net sales

   909,460,080

   835,430,042

   405,713,717

   299,667,683

   189,515,048

   172,348,553

   (6,317,130)

   (9,479,979)

   1,498,371,715

   1,297,966,299Change %

   8.9

   -

   35.4

   -

   10.0

   -

   -

   -

   15.4

   -Cost of sales

   (411,375,380)

   (374,336,312)

   (162,665,341)

   (136,174,602)

   (105,956,281)

   (97,523,600)

   (5,078,249)

   3,497,698

   (685,075,251)

   (604,536,816)% of Net sales

   45.2

   44.8

   40.1

   45.4

   55.9

   56.6

   -

   -

   45.7

   46.6Gross margin

   498,084,700

   461,093,730

   243,048,376

   163,493,081

   83,558,767

   74,824,953

   (11,395,379)

   (5,982,281)

   813,296,464

   693,429,484% of Net sales

   54.8

   55.2

   59.9

   54.6

   44.1

   43.4

   -

   -

   54.3

   53.4MSD&A (1)

   (343,380,553)

   (328,766,178)

   (216,098,525)

   (154,299,739)

   (51,070,291)

   (50,284,131)

   (2,015,407)

   (2,252,954)

   (612,564,776)

   (535,603,002)% of Net sales

   37.8

   39.4

   53.3

   51.5

   26.9

   29.2

   -

   -

   40.9

   41.3Other operating income (expenses)

   626,889

   850,122

   3,315,892

   20,173,967

   44,823

   238,952

   217,706

   2,458,269

   4,205,310

   23,721,310Adjusted operating result before Exceptional Items (EI)

   155,331,036

   133,177,674

   30,265,743

   29,367,309

   32,533,299

   24,779,774

   (13,193,080)

   (5,776,966)

   204,936,998

   181,547,792Change %

   16.6

   -

   3.1

   -

   31.3

   -

   -

   -

   12.9

   -% of Net sales

   17.1

   15.9

   7.5

   9.8

   17.2

   14.4

   -

   -

   13.7

   14.0Exceptional Items (EI) (2)

   -

   (301,550)

   -

   (1,214,505)

   -

   -

   -

   (111,445)

   -

   (1,627,500)Adjusted operating result (3)

   155,331,036

   132,876,124

   30,265,743

   28,152,804

   32,533,299

   24,779,774

   (13,193,080)

   (5,888,411)

   204,936,998

   179,920,292Change %

   16.9

   -

   7.5

   -

   31.3

   -

   -

   -

   13.9

   -% of Net sales

   17.1

   15.9

   7.5

   9.4

   17.2

   14.4

   -

   -

   13.7

   14Net financial expense

   -

   -

   -

   -

   -

   -

   -

   -

   (15,255,586)

   (10,820,891)Share of net loss of joint ventures and associates accounted for using

   -

   -

   -

   -

   -

   -

   -

   -

   (5,228,135)

   (898,607)Foreign currency exchange differences

   -

   -

   -

   -

   -

   -

   -

   -

   957,565

   (613,181)Results as per adjustment units

   -

   -

   -

   -

   -

   -

   -

   -

   (3,282,736)

   (4,159,131)Other gains (losses)

   -

   -

   -

   -

   -

   -

   -

   -

   8,512,000

   4,036,939Income before taxes

   -

   -

   -

   -

   -

   -

   -

   -

   190,640,106

   167,465,421Income taxes

   -

   -

   -

   -

   -

   -

   -

   -

   (50,114,516)

   (46,673,500)Net income for year

   -

   -

   -

   -

   -

   -

   -

   -

   140,525,590

   120,791,921Non-controlling interests

   -

   -

   -

   -

   -

   -

   -

   -

   19,717,455

   14,553,471Net income attributable to equity holders of the parent

   -

   -

   -

   -

   -

   -

   -

   -

   120,808,135

   106,238,450Depreciation and amortization

   56,698,871

   48,459,588

   14,334,415

   11,194,117

   7,568,991

   7,115,790

   2,964,525

   1,838,071

   81,566,802

   68,607,566ORBDA before EI

   212,029,907

   181,637,262

   44,600,158

   40,561,426

   40,102,290

   31,895,564

   (10,228,555)

   (3,938,895)

   286,503,800

   250,155,358ORBDA (4)

   212,029,907

   181,335,712

   44,600,158

   39,346,921

   40,102,290

   31,895,564

   (10,228,555)

   (4,050,340)

   286,503,800

   248,527,858Change %

   16.9

   -

   13.4

   -

   25.7

   -

   -

   -

   15.3

   -% of Net sales

   23.3

   21.7

   11.0

   13.1

   21.2

   18.5

   -

   -

   19.1

   19.1
  (1)MSD&A, included Marketing, Selling, Distribution and Administrative expenses. (2)Exceptional Items are income or expenses that do not occur regularly as part of the normal activities of the Company. It’s presented separately because its important items for the understanding the normal operations of the Company due to importance or nature.During the year 2014, the Company has considered this result as an Exceptional Items related to different restructuring process of operating segments. (3)Adjusted operating result (for management purposes we have defined as Net income before other gains (losses), net financial expense, equity and income of joint venture, foreign currency exchange differences, result as per adjustment units and income taxes). (4)ORBDA (for management purpose we have defined as Adjusted Operating Result before Depreciation and Amortization). (5)Starting from the third quarter of 2016, the Company has incorporated in the Chile operating segment the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A.  As of December 2015, the revenue and expenses of the Strategic Service Units were previously  reported under Others. However for comparability purposes these revenues and expenses have been restated and are now reported under to Chile operating segment (see reconciliation in letter c) under this Note).


F-45

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 c)For the year ended December 31, 2015 and 2014, revenue and expenses of the Strategic Service Units were previously reported under Others. However, for comparability purposes, these revenues and expenses have been restated and are now allocated to Chile Operating segment explained in the following tables:  For the year ended as of December 31, 2015:  Chile

   Others2015

   2015Previously reported

   Adjusted

   Tight

   Previously reported

   Adjusted

   TightThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Sales revenue external customers

   885,769,609

   -

   885,769,609

   -

   -

   -Other income

   10,238,408

   6,519,158

   16,757,566

   8,220,109

   (6,519,158)

   1,700,951Sales revenue between segments

   6,013,177

   919,728

   6,932,905

   (7,098,353)

   (919,728)

   (8,018,081)Net sales

   902,021,194

   7,438,886

   909,460,080

   1,121,756

   (7,438,886)

   (6,317,130)Cost of sales

   (420,297,983)

   8,922,603

   (411,375,380)

   3,844,354

   (8,922,603)

   (5,078,249)% of Net sales

   46.6

   -

   45.2

   -

   -

   -Gross margin

   481,723,211

   16,361,489

   498,084,700

   4,966,110

   (16,361,489)

   (11,395,379)% of Net sales

   53.4

   -

   54.8

   -

   -

   -MSD&A (1)

   (328,488,527)

   (14,892,026)

   (343,380,553)

   (16,907,433)

   14,892,026

   (2,015,407)% of Net sales

   36.4

   -

   37.8

   -

   -

   -Other operating income (expenses)

   688,920

   (62,031)

   626,889

   155,675

   62,031

   217,706Adjusted operating result (2)

   153,923,604

   1,407,432

   155,331,036

   (11,785,648)

   (1,407,432)

   (13,193,080)% of Net sales

   17.1

   -

   17.1

   -

   -

   -Net financial expense

   -

   -

   -

   -

   -

   -Share of net loss of joint ventures and associates accounted for using

   -

   -

   -

   -

   -

   -Foreign currency exchange differences

   -

   -

   -

   -

   -

   -Results as per adjustment units

   -

   -

   -

   -

   -

   -Other gains (losses)

   -

   -

   -

   -

   -

   -Income before taxes

   -

   -

   -

   -

   -

   -Net income for year

   -

   -

   -

   -

   -

   -Net income attributable to equity holders of the parent

   -

   -

   -

   -

   -

   -Depreciation and amortization

   45,766,393

   10,932,478

   56,698,871

   13,897,003

   (10,932,478)

   2,964,525ORBDA (3)

   199,689,997

   12,339,910

   212,029,907

   2,111,355

   (12,339,910)

   (10,228,555)% of Net sales

   22.1

   -

   23.3

   -

   -

   -
  See definition of (1), (2) and (3) in information as per Operating segment letter a).


F-46

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 For the year ended as of December 31, 2014:  Chile

   Others2014

   2014Previously reported

   Adjusted

   Tight

   Previously reported

   Adjusted

   TightThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Sales revenue external customers

   813,639,952

   -

   813,639,952

   -

   -

   -Other income

   9,100,957

   6,462,023

   15,562,980

   7,021,944

   (6,462,023)

   559,921Sales revenue between segments

   7,600,483

   (1,373,373)

   6,227,110

   (11,413,273)

   1,373,373

   (10,039,900)Net sales

   830,341,392

   5,088,650

   835,430,042

   (4,391,329)

   (5,088,650)

   (9,479,979)Cost of sales

   (383,558,625)

   9,222,313

   (374,336,312)

   12,720,013

   (9,222,315)

   3,497,698% of Net sales

   46.2

   -

   44.8

   -

   -

   -Gross margin

   446,782,767

   14,310,963

   461,093,730

   8,328,684

   (14,310,965)

   (5,982,281)% of Net sales

   53.8

   -

   55.2

   -

   -

   -MSD&A (1)

   (317,765,236)

   (11,000,942)

   (328,766,178)

   (13,253,897)

   11,000,943

   (2,252,954)% of Net sales

   38.3

   1

   39.4

   -

   -

   -Other operating income (expenses)

   722,478

   127,644

   850,122

   2,585,913

   (127,644)

   2,458,269Adjusted operating result before Exceptional Items (EI)

   25,561,470

   (2,954,119)

   22,607,351

   (3,624,700)

   2,954,118

   (670,582)Change %

   -

   -

   -

   -

   -

   -% of Net sales

   0.04

   - 0.56

   0.04

   - 334.38

   - 0.56

   -Exceptional Items (EI) (2)

   -

   (301,550)

   (301,550)

   (412,995)

   301,550

   (111,445)Adjusted operating result (3)

   129,740,009

   3,437,665

   133,177,674

   (2,339,300)

   (3,437,666)

   (5,776,966)% of Net sales

   15.6

   -

   15.9

   -

   -

   -Net financial expense

   -

   -

   -

   -

   -

   -Share of net loss of joint ventures and associates accounted for using

   -

   -

   -

   -

   -

   -Foreign currency exchange differences

   -

   -

   -

   -

   -

   -Results as per adjustment units

   -

   -

   -

   -

   -

   -Other gains (losses)

   -

   -

   -

   -

   -

   -Income before taxes

   -

   -

   -

   -

   -

   -Income taxes

   -

   -

   -

   -

   -

   -Net income for year

   -

   -

   -

   -

   -

   -Non-controlling interests

   -

   -

   -

   -

   -

   -Net income attributable to equity holders of the parent

   -

   -

   -

   -

   -

   -Depreciation and amortization

   38,832,969

   9,626,619

   48,459,588

   11,464,690

   (9,626,619)

   1,838,071ORBDA before EI

   37,317,380

   (533,386)

   36,783,994

   (713,134)

   533,385

   (179,749)Change %

   -

   -

   -

   -

   -

   -% of Net sales

   0.06

   - 0.10

   0.06

   - 65.79

   - 0.10

   -ORBDA (4)

   168,572,978

   12,762,734

   181,335,712

   8,712,395

   (12,762,735)

   (4,050,340)% of Net sales

   20.3

   -

   21.7

   -

   -

   -
  See definition of (1), (2), (3) and (4) in information as per Operating segment letter b).


F-47

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Sales information by geographic location  Net sales per geographical location

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Chile (1)

   1,176,972,109

   1,081,835,420

   991,938,043Argentina (2)

   329,585,488

   366,886,701

   264,631,403Uruguay

   15,204,331

   14,432,950

   11,204,806Paraguay

   37,135,780

   35,216,644

   30,192,047Total

   1,558,897,708

   1,498,371,715

   1,297,966,299
  (1)Includes net sales correspond to Corporate Support Unit and eliminations between geographical locations. Additionally, includes net sales made in Chile of the Wines Operating segment. (2)Includes net sales made by the subisiaries Finca La Celia S.A. and Los Huemules SRL., registered under the Wines Operating segment and Chile Operating segment, respectively.  Sales information by customer  For the years ended as of December 31,Net Sales

   2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Domestic sales

   1,429,152,068

   1,374,282,584

   1,188,231,333Exports sales

   129,745,640

   124,089,131

   109,734,966Total

   1,558,897,708

   1,498,371,715

   1,297,966,299
  Sales information by product category  For the years ended as of December 31,Sales information by product category

   2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Alcoholic business

   1,041,923,724

   1,040,145,164

   880,580,817Non-alcoholic business

   493,397,317

   429,844,632

   393,351,650Others (1)

   23,576,667

   28,381,919

   24,033,832Total

   1,558,897,708

   1,498,371,715

   1,297,966,299
 (1)Others consist mainly of sales of by-products and packaging including bottles, pallets, and glasses.  Depreciation and amortization as per operating segments  Property, plant and equipment depreciation and amortization of software

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Chile Operating segment

   61,736,849

   56,698,871

   38,832,969International business Operating segment

   11,928,705

   14,334,415

   11,194,117Wines Operating segment

   7,078,873

   7,568,991

   7,115,790Others (1)

   2,783,619

   2,964,525

   11,464,690Total

   83,528,046

   81,566,802

   68,607,566
  (1)Includes depreciation and amortization corresponding to the Corporate Support Units.


F-48

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Cash flows Operating Segments  Cash flows Operating Segments

   

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Cash flows from (used in ) Operating activities

   

   190,014,348

   219,510,872

   173,621,663Chile Operating segment

   

   152,862,350

   49,531,088

   27,943,224International Business Operating segment

   

   13,065,093

   31,975,494

   10,070,867Wines Operating segment

   

   32,949,789

   30,926,463

   31,523,287Others (1)

   

   (8,862,884)

   107,077,827

   104,084,285Cash flows from (used in ) Investing Activities

   

   (155,007,390)

   (165,810,169)

   (238,970,139)Chile Operating segment

   

   (57,119,431)

   (59,046,239)

   (55,303,491)International Business Operating segment

   

   (40,032,866)

   (26,457,885)

   (31,118,042)Wines Operating segment

   

   (13,499,538)

   (9,807,177)

   (10,279,735)Others (1)

   

   (44,355,555)

   (70,498,868)

   (142,268,871)Cash flows from (used in ) Financing Activities

   

   (95,303,138)

   (82,839,491)

   (132,155,575)Chile Operating segment

   

   (90,636,820)

   21,923,989

   17,907,244International Business Operating segment

   

   18,577,556

   3,431,139

   23,525,276Wines Operating segment

   

   (18,841,106)

   (19,061,949)

   (10,447,305)Others (1)

   

   (4,402,768)

   (89,132,670)

   (163,140,790)
 (1)Others includes Corporate Support Units, due to cahs flows are managed by CCU.  Capital expenditures as per operating segments  Capital expenditures (property, plant and equipment and software additions)

   

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Chile Operating segment

   

   53,809,780

   43,771,262

   53,895,523International business Operating segment

   

   39,592,739

   27,871,662

   33,481,407Wines Operating segment

   

   14,767,858

   10,052,863

   12,686,080Others (1)

   

   20,713,048

   50,035,135

   130,017,142Total

   

   128,883,425

   131,730,922

   230,080,152
  (1)Others includes the capital investments corresponding to the Corporate Support Units.  Assets as per operating segments  Assets as per Operating segments

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Chile Operating segment

   1,125,266,274

   1,056,161,363International business Operating segment

   259,002,220

   256,319,478Wines Operating segment

   316,965,318

   308,288,465Others (1)

   170,343,238

   204,678,125Total

   1,871,577,050

   1,825,447,431
 (1)Includes assets corresponding to the Corporate Support Units.


F-49

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Assets per geographic location  Assets per geographical location

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Chile (1)

   1,600,077,453

   1,557,641,691Argentina (2)

   197,986,123

   188,897,724Uruguay

   27,327,545

   25,703,157Paraguay

   46,185,929

   53,204,859Total

   1,871,577,050

   1,825,447,431
 (1)Includes the assets corresponding to the Corporate Support Units and eliminations between geographic location. Additionally, includes part of Wines Operating segment and excludes its argentine subsidiary Finca La Celia S.A. (2)Includes the assets of the subisiaries Finca La Celia S.A. and Los Huemules SRL., registered under the Wines Operating segment and Chile Operating segment, respectively.   Liabilites as per operating segments  Liabilities as per Operating segments

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Chile Operating segment

   242,132,457

   218,651,536International business Operating segment

   100,994,174

   97,680,139Wines Operating segment

   104,147,109

   102,780,420Others (1)

   224,010,731

   218,813,191Total

   671,284,471

   637,925,286
   (1)Others includes liabilites corresponding to the Corporate Support Units.


F-50

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Operating Segment’s additional information  The Consolidated Statement of Income classified according to the Company’s operations management is as follows:  CONSOLIDATED STATEMENT OF INCOME

   Notes

   For the years ended December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Sales revenue external customers

   

   1,535,321,041

   1,469,989,796

   1,273,932,468Other income

   

   23,576,667

   28,381,919

   24,033,831Net sales

   

   1,558,897,708

   1,498,371,715

   1,297,966,299Change %

   

   4.0

   15.4

   -Cost of sales

   

   (741,819,916)

   (685,075,251)

   (604,536,815)% of Net sales

   

   47.6

   45.7

   46.6Gross margin

   

   817,077,792

   813,296,464

   693,429,484% of Net sales

   

   52.4

   54.3

   53.4MSD&A (1)

   

   (619,542,751)

   (612,564,776)

   (535,603,002)% of Net sales

   

   39.7

   40.9

   41.3Other operating income (expenses)

   

   3,116,679

   4,205,310

   23,721,310Change %

   

   (2.1)

   12.9

   -Exceptional Items (EI) (2)

   

   -

   -

   (1,627,500)Adjusted operating result (3)

   

   200,651,720

   204,936,998

   179,920,292Change %

   

   (2.1)

   13.9

   -% of Net sales

   

   12.9

   13.7

   13.9Net financial expense

   10

   (14,627,170)

   (15,255,586)

   (10,820,890)Share of net loss of joint ventures and associates accounted for using

   19

   (5,560,522)

   (5,228,135)

   (898,607)Foreign currency exchange differences

   10

   456,995

   957,565

   (613,180)Results as per adjustment units

   10

   (2,246,846)

   (3,282,736)

   (4,159,131)Other gains (losses)

   12

   (8,345,907)

   8,512,000

   4,036,939Income before taxes

   

   170,328,270

   190,640,106

   167,465,421Income taxes

   25

   (30,246,383)

   (50,114,516)

   (46,673,500)Net income for year

   

   140,081,887

   140,525,590

   120,791,921Non-controlling interests

   31

   21,624,399

   19,717,455

   14,553,471Net income attributable to equity holders of the parent

   

   118,457,488

   120,808,135

   106,238,450Depreciation and amortization

   

   83,528,045

   81,566,802

   68,607,566Change %

   

   (0.8)

   14.5

   -ORBDA (4)

   

   284,179,765

   286,503,800

   248,527,858Change %

   

   (0.8)

   15.3

   -% of Net sales

   

   18.2

   19.1

   19.1
 See definition of (1), (2), (3) and (4) in information as per Operating segment letter b).


F-51

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The following is a reconciliation of our Net income, the main comparable IFRS measure to Adjusted Operating Result for the years ended December 31, 2016, 2015 and 2014:  For the years ended December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Net income of year

   140,081,887

   140,525,590

   120,791,921Add (Subtract):Other gains (losses)

   8,345,907

   (8,512,000)

   (4,036,939)Financial Income

   (5,680,068)

   (7,845,743)

   (12,136,591)Financial costs

   20,307,238

   23,101,329

   22,957,482Share of net loss of joint ventures and associates accounted for using the equity method

   5,560,522

   5,228,135

   898,607Foreign currency exchange differences

   (456,995)

   (957,565)

   613,181Result as per adjustment units

   2,246,846

   3,282,736

   4,159,131Income taxes

   30,246,383

   50,114,516

   46,673,500Adjusted Operating result

   200,651,720

   204,936,998

   179,920,292
 Exceptional Item (EI)

   -

   -

   1,627,500AdjustedOperating result before (EI)

   200,651,720

   204,936,998

   181,547,792Depreciation and amortization

   83,528,045

   81,566,802

   68,607,566ORBDA before (EI)

   284,179,765

   286,503,800

   250,155,358Exceptional Item (EI)

   -

   -

   (1,627,500)ORBDA

   284,179,765

   286,503,800

   248,527,858


F-52

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The following is a reconciliation of the consolidated amounts presented for MSD&A with the comparable amounts presented on the face of our consolidated statement of income:  For the years ended December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Consolidated statement of incomeDistribution costs

   (270.835.822)

   (277.599.722)

   (240.848.630)Administrative expenses

   (155.322.295)

   (128.135.799)

   (110.014.716)Other expenses by function

   (195.412.109)

   (209.201.189)

   (188.109.562)Other expenses included in  ́Other expenses by function ́

   2.027.475

   2.371.934

   3.369.906Total MSD&A

   (619.542.751)

   (612.564.776)

   (535.603.002)
  Segment information by joint ventures and associates  The Administration of the Company review the financial situation and operations result of the all of their joint ventures and associated that is described inNote 19.  Note 8Business Combinations  a) Bebidas del Paraguay S.A.  Year 2016 Acquisitions  On March 31, 2016, the susbsidiary Bebidas del Paraguay S.A. acquired 51% of the stock rights of Artisan SRL (Paraguayan company). The purpose of this company is the production and marketing of Sajonia brand beer. The amount of this transaction was ThCh$ 641,489 (equivalents to US$ 1,000,000). At the date of issuance of these consolidated financial statements the Company is in the process of assessing the fair values of acquisitions above mentioned, estimating preliminarily that the effects will not be significant, so it was recorded under Other non-financial assets (seeNote 18).  It is expected that the acquisition of this company allows to transform the brand into a reference in the segment of craft beer, increases their productive capacities and distribution network, forming part of the portfolio brands of BdP. Acoording with the above mentioned, BdP begins to participate in the elaboration of beer, with its own brand and with great growth prospects.   b) Other acquisitions  On December 2015 and June 2016, The Company participates, thorough subsidiary Embotelladoras Chilenas Unidas S.A., in joint operations Bebidas Carozzi CCU SpA. and Promarca Internacional SpA., determining fair values as explained inNote 1, letter a)andd), respectively.  As of December 31, 2016, the Company has not made other business combinations.


F-53

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 9Nature of cost and expense  Operational cost and expense grouped by natural classification are as follows:  For the years ended as of December 31,Costs and expenses by nature

   2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Raw material cost

   540,692,964

   485,391,583

   433,749,832Materials and maintenance expense

   47,102,582

   43,093,939

   38,678,842Personnel expense (1)

   210,885,553

   197,915,151

   169,331,464Transportation and distribution

   230,047,942

   234,431,464

   201,371,151Advertising and promotion expense

   105,938,586

   117,921,841

   105,649,991Lease expense

   16,294,896

   13,641,122

   13,347,091Energy expense

   24,444,163

   25,178,032

   29,566,627Depreciation and amortization

   83,528,045

   81,566,802

   68,607,566Other expenses

   104,455,411

   100,872,027

   83,207,159Total

   1,363,390,142

   1,300,011,961

   1,143,509,723
  (1)SeeNote 30 Employee benefits.   Note 10Financial results  The financial income composition for the year ended as of December 31, 2016, 2015 y 2014, is as follows:  Financial Results

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Financial income

   5,680,068

   7,845,743

   12,136,591Financial cost

   (20,307,238)

   (23,101,329)

   (22,957,482)Foreign currency exchange differences

   456,995

   957,565

   (613,181)Result as per adjustment units

   (2,246,846)

   (3,282,736)

   (4,159,131)Total

   (16,417,021)

   (17,580,757)

   (15,593,203)
   Note 11Other income by function  The detail of other income by function is as follows:  Other income by function

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Sales of fixed assets

   1,882,883

   

   2,541,619

   1,978,208Lease

   382,934

   

   245,285

   364,388Sales of glass

   549,787

   

   672,203

   836,098Others

   2,328,550

   

   3,118,137

   (1)22,285,022Total

   5,144,154

   6,577,244

   25,463,716
 (1)Under this amount includes, the positive one-time effect compensations received by our Argentine subsidiary CICSA for an amount 227,245 thousands of Argentine pesos (equivalent to MUS$ 34,200), for the termination of the contract which allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina and the license for the production and distribution of Budweiser beer in Uruguay.


F-54

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 12Other Gains (Losses)  The detail of other gains (losses) items is as follows:  Other gains (losses)

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Results derivative contracts (1)

   (10,134,414)

   9,839,675

   4,152,548Marketable securities to fair value

   84,133

   36,280

   (103,306)Other

   1,704,374

   (1,363,955)

   (12,303)Total

   (8,345,907)

   8,512,000

   4,036,939
 (1)Under this concept the Company received cash flows amounting ThCh$ 9,698,871, ThCh$ 5,419,700 and ThCh$ 927,149 corresponding to 2016, 2015 and 2014, respectevily and these were recorded in the Consolidated Cash Flow Statement, under Operational activities, in line item Other cash movements.   Note 13Cash and cash equivalents  Cash and cash equivalent balances were as follows,  As of December 31, 2016

   As of December 31, 2015

   As of December 31, 2014ThCh$

   ThCh$

   ThCh$Cash

   106,203

   12,712

   12,708Overnight deposits

   1,978,738

   462,873

   1,319,399Bank balances

   41,276,555

   42,370,367

   30,853,126Time deposits

   14,955,778

   32,639,373

   99,373,117Investments in mutual funds

   24,772

   -

   -Securities purchased under resale agreements

   75,447,904

   117,068,914

   83,216,526Total

   133,789,950

   192,554,239

   214,774,876


F-55

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
   The currency composition of cash and cash equivalents atDecember 31, 2016, is as follows:  Chilean Peso

   US Dollar

   Euro

   Argentine Peso

   Uruguayan Peso

   Paraguayan Guaraní

   Others

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Cash

   100,921

   788

   -

   4,494

   -

   -

   -

   106,203Overnight deposits

   -

   1,978,738

   -

   -

   -

   -

   -

   1,978,738Bank balances

   27,164,331

   6,258,367

   786,887

   2,158,115

   1,136,782

   3,269,045

   503,028

   41,276,555Time deposits

   14,955,778

   -

   -

   -

   -

   -

   -

   14,955,778Investments in mutual funds

   -

   -

   -

   24,772

   -

   -

   -

   24,772Securities purchased under resale agreements

   75,447,904

   -

   -

   -

   -

   -

   -

   75,447,904Total

   117,668,934

   8,237,893

   786,887

   2,187,381

   1,136,782

   3,269,045

   503,028

   133,789,950
    The currency composition of cash and cash equivalents at December 31, 2015, is as follows:  Chilean Peso

   US Dollar

   Euro

   Argentine Peso

   Uruguayan Peso

   Paraguayan Guaraní

   Others

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Cash

   10,675

   39

   -

   1,998

   -

   -

   -

   12,712Overnight deposits

   -

   462,873

   -

   -

   -

   -

   -

   462,873Bank balances

   21,964,295

   4,922,732

   955,840

   5,699,756

   948,816

   7,519,619

   359,309

   42,370,367Time deposits

   32,639,373

   -

   -

   -

   -

   -

   -

   32,639,373Securities purchased under resale agreements

   117,068,914

   -

   -

   -

   -

   -

   -

   117,068,914Total

   171,683,257

   5,385,644

   955,840

   5,701,754

   948,816

   7,519,619

   359,309

   192,554,239
   The currency composition of cash and cash equivalents at December 31, 2014, is as follows:  Chilean Peso

   Unidad de Fomento

   US Dollar

   Euro

   Argentine Peso

   Uruguayan Peso

   Paraguayan Guaraní

   Others

   TotalesThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Cash

   9,939

   -

   420

   -

   2,349

   -

   -

   -

   12,708Overnight deposits

   -

   -

   1,319,399

   -

   -

   -

   -

   -

   1,319,399Bank balances

   8,790,934

   -

   4,738,935

   974,179

   11,726,073

   536,097

   3,753,420

   333,488

   30,853,126Time deposits

   90,962,579

   8,410,538

   -

   -

   -

   -

   -

   -

   99,373,117Investments in mutual funds

   -

   -

   -

   -

   -

   -

   -

   -

   -Securities purchased under resale agreements

   83,216,526

   -

   -

   -

   -

   -

   -

   -

   83,216,526Totales

   182,979,978

   8,410,538

   6,058,754

   974,179

   11,728,422

   536,097

   3,753,420

   333,488

   214,774,876


F-56

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The composition of time deposits is as follows:  As of December 31, 2016:  Financial Institution

   Issue date

   Maturity date

   Currency

   Amount

   Monthly interest rate (%)ThCh$Banco Santander

   12-27-2016

   01-05-2017

   CLP

   1,250,550

   0.33Banco Santander

   12-28-2016

   01-10-2017

   CLP

   2,400,792

   0.33Banco Santander

   12-29-2016

   01-25-2017

   CLP

   5,701,292

   0.34Banco Consorcio

   12-28-2016

   01-26-2017

   CLP

   5,401,782

   0.33Banco Francés

   12-12-2016

   01-11-2017

   $ ARG

   201,362

   1.60Total

   

   

   

   14,955,778
   As of December 31, 2015:  Financial Institution

   Issue date

   Maturity date

   Currency

   Amount

   Monthly interest rate (%)ThCh$Banco Consorcio

   11-30-2015

   01-06-2016

   CLP

   3,512,658

   0.35Banco Consorcio

   12-29-2015

   01-20-2016

   CLP

   800,181

   0.34Banco Consorcio

   12-29-2015

   01-25-2016

   CLP

   2,850,665

   0.35Banco Consorcio

   12-14-2015

   01-12-2016

   CLP

   37,568

   0.32Banco Consorcio

   12-29-2015

   01-29-2016

   CLP

   2,500,600

   0.36Banco Consorcio

   12-21-2015

   01-20-2016

   CLP

   460,521

   0.34Banco de Crédito e Inversiones

   12-15-2015

   01-08-2016

   CLP

   7,762,889

   0.33Banco Santander

   12-21-2015

   01-20-2016

   CLP

   6,407,467

   0.35Banco Santander

   12-23-2015

   01-20-2016

   CLP

   1,251,133

   0.34Banco Santander

   12-24-2015

   01-11-2016

   CLP

   1,651,271

   0.33Banco Santander

   12-28-2015

   01-25-2016

   CLP

   3,301,122

   0.34HSBC Bank Chile

   12-17-2015

   01-14-2016

   CLP

   2,103,298

   0.33Total

   

   

   

   32,639,373


F-57

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As of December 31, 2014  Financial Institution

   Issue date

   Maturity date

   Currency

   Amount

   Monthly interest rate (%)ThCh$Banco Consorcio

   11-25-2014

   01-09-2015

   CLP

   5,018,600

   0.31Banco Consorcio

   12-24-2014

   01-19-2015

   CLP

   4,002,707

   0.29Banco Consorcio

   12-22-2014

   01-20-2015

   CLP

   230,186

   0.27Banco Consorcio

   12-22-2014

   01-20-2015

   CLP

   700,588

   0.28Banco de Chile

   11-06-2014

   02-05-2015

   CLP

   3,016,500

   0.30Banco de Chile

   11-25-2014

   01-09-2015

   CLP

   8,430,240

   0.30Banco de Chile

   12-11-2014

   01-12-2015

   CLP

   2,054,168

   0.31Banco de Chile

   12-26-2014

   02-10-2015

   CLP

   2,001,000

   0.30Banco de Chile

   12-30-2014

   02-10-2015

   CLP

   3,000,300

   0.30Banco de Chile

   11-06-2014

   02-05-2015

   UF

   3,039,750

   1.60Banco de Crédito e Inversiones

   10-28-2014

   01-08-2015

   CLP

   3,472,080

   0.30Banco de Crédito e Inversiones

   12-16-2014

   01-23-2015

   CLP

   8,011,600

   0.29Banco de Crédito e Inversiones

   10-15-2014

   01-08-2015

   CLP

   10,079,567

   0.31Banco de Crédito e Inversiones

   12-26-2014

   02-10-2015

   CLP

   2,301,073

   0.28Banco Internacional

   12-16-2014

   01-23-2015

   CLP

   3,005,700

   0.38Banco Itaú

   10-29-2014

   01-27-2015

   CLP

   5,331,387

   0.28Banco Santander

   11-20-2014

   01-08-2015

   CLP

   4,518,450

   0.30Banco Santander

   11-28-2014

   01-15-2015

   CLP

   5,618,480

   0.30Banco Santander

   12-03-2014

   01-08-2015

   CLP

   2,306,440

   0.30Banco Santander

   12-24-2014

   01-19-2015

   CLP

   4,703,180

   0.29Banco Santander

   12-26-2014

   02-10-2015

   CLP

   4,002,000

   0.30Banco Santander

   12-30-2014

   02-10-2015

   CLP

   2,100,203

   0.29Banco Santander

   12-03-2014

   01-08-2015

   CLP

   150,420

   0.30Banco Santander

   12-11-2014

   01-07-2015

   CLP

   1,803,360

   0.28Banco Security

   12-22-2014

   01-23-2015

   CLP

   2,702,430

   0.30Banco Security

   12-23-2014

   01-30-2015

   CLP

   2,401,920

   0.30BancoEstado

   10-29-2014

   01-27-2015

   UF

   5,370,788

   0.28Total

   

   

   

   99,373,117


F-58

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The composition of Securities purchased under resale agreements is as follows:  As of December 31, 2016:  Financial Institution

   Securities purchased (*)

   Issue date

   Maturity date

   Currency

   Amount

   Monthly interest rate (%)ThCh$BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-28-2016

   01-04-2017

   CLP

   3,531,124

   0.32BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-28-2016

   01-04-2017

   CLP

   3,602,675

   0.32BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-28-2016

   01-04-2017

   CLP

   2,044,419

   0.32BanChile Corredores de Bolsa S.A.

   Banco Santander

   12-28-2016

   01-04-2017

   CLP

   674,935

   0.32BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-28-2016

   01-06-2017

   CLP

   1,679,525

   0.32BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-28-2016

   01-06-2017

   CLP

   1,205,429

   0.32BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-28-2016

   01-06-2017

   CLP

   1,116,326

   0.32BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-29-2016

   01-06-2017

   CLP

   1,427,025

   0.31BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-29-2016

   01-06-2017

   CLP

   1,725,807

   0.31BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-29-2016

   01-06-2017

   CLP

   5,799,890

   0.31BanChile Corredores de Bolsa S.A.

   Banco de Crédito e Inversiones

   12-29-2016

   01-06-2017

   CLP

   1,549,449

   0.31BancoEstado S.A. Corredores de Bolsa

   Scotiabank Sudamericano

   12-29-2016

   01-06-2017

   CLP

   3,916,539

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-29-2016

   01-06-2017

   CLP

   6,085,662

   0.33BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-29-2016

   01-10-2017

   CLP

   2,400,528

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco de Crédito e Inversiones

   12-29-2016

   01-10-2017

   CLP

   6,019,097

   0.33BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-29-2016

   01-10-2017

   CLP

   3,933,092

   0.33BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-30-2016

   01-10-2017

   CLP

   1,600,149

   0.28BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-30-2016

   01-10-2017

   CLP

   3,000,280

   0.28BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-29-2016

   01-10-2017

   CLP

   1,350,297

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco BICE

   12-29-2016

   01-05-2017

   CLP

   105,017

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-29-2016

   01-10-2017

   CLP

   500,110

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco Santander

   12-29-2016

   01-10-2017

   CLP

   3,500,770

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-29-2016

   01-16-2017

   CLP

   4,000,880

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-29-2016

   01-20-2017

   CLP

   1,917,467

   0.33BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-29-2016

   01-20-2017

   CLP

   82,974

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-29-2016

   01-03-2017

   CLP

   250,055

   0.33BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-29-2016

   01-05-2017

   CLP

   6,101,342

   0.33BancoEstado S.A. Corredores de Bolsa

   Banco de Crédito e Inversiones

   12-27-2016

   01-03-2017

   CLP

   925,383

   0.31BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-29-2016

   01-05-2017

   CLP

   725,160

   0.33BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-28-2016

   01-16-2017

   CLP

   872,178

   0.32BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-28-2016

   01-16-2017

   CLP

   435,612

   0.32BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-28-2016

   01-16-2017

   CLP

   1,865,909

   0.32BanChile Corredores de Bolsa S.A.

   Banco de Crédito e Inversiones

   12-28-2016

   01-16-2017

   CLP

   1,241,355

   0.32BanChile Corredores de Bolsa S.A.

   Banco Santander

   12-28-2016

   01-16-2017

   CLP

   261,444

   0.32Total

   

   

   

   

   75,447,904
  (*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


F-59

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As of December 31, 2015:  Financial Institution

   Securities purchased (*)

   Issue date

   Maturity date

   Currency

   Amount

   Monthly interest rate (%)ThCh$BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-24-2015

   01-08-2016

   CLP

   3,731,991

   0.32BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-28-2015

   01-08-2016

   CLP

   4,253,623

   0.31BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-28-2015

   01-20-2016

   CLP

   19,557

   0.30BanChile Corredores de Bolsa S.A.

   Banco de Crédito e Inversiones

   12-28-2015

   01-08-2016

   CLP

   8,828,519

   0.31BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-24-2015

   01-08-2016

   CLP

   4,674,281

   0.32BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-28-2015

   01-08-2016

   CLP

   3,923,128

   0.31BanChile Corredores de Bolsa S.A.

   BancoEstado

   12-28-2015

   01-20-2016

   CLP

   449

   0.30BancoEstado S.A. Corredores de Bolsa

   Banco BICE

   12-29-2015

   01-14-2016

   CLP

   980,345

   0.32BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-28-2015

   01-04-2016

   CLP

   4,693,648

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-29-2015

   01-08-2016

   CLP

   7,565,908

   0.32BancoEstado S.A. Corredores de Bolsa

   Banco de Chile

   12-29-2015

   01-14-2016

   CLP

   4,219,808

   0.32BancoEstado S.A. Corredores de Bolsa

   Banco de Crédito e Inversiones

   12-28-2015

   01-04-2016

   CLP

   3,999,302

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-30-2015

   01-07-2016

   CLP

   200,021

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-30-2015

   01-14-2016

   CLP

   2,749,535

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-30-2015

   01-14-2016

   CLP

   750,078

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-28-2015

   01-07-2016

   CLP

   2,600,806

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco Itaú

   12-29-2015

   01-01-2016

   CLP

   1,300,277

   0.32BancoEstado S.A. Corredores de Bolsa

   Banco Santander

   12-29-2015

   01-14-2016

   CLP

   3,079,945

   0.32BancoEstado S.A. Corredores de Bolsa

   Banco Security

   12-28-2015

   01-04-2016

   CLP

   5,779,339

   0.31BancoEstado S.A. Corredores de Bolsa

   Banco Security

   12-29-2015

   01-08-2016

   CLP

   241,899

   0.32BancoEstado S.A. Corredores de Bolsa

   Banco Security

   12-29-2015

   01-14-2016

   CLP

   1,919,498

   0.32BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-28-2015

   01-04-2016

   CLP

   4,837,882

   0.31BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-29-2015

   01-08-2016

   CLP

   140,839

   0.32BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-29-2015

   01-14-2016

   CLP

   10,702,283

   0.32BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-23-2015

   01-12-2016

   CLP

   195,156

   0.30BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-28-2015

   01-04-2016

   CLP

   1,003,626

   0.31BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-29-2015

   01-08-2016

   CLP

   353,294

   0.32BancoEstado S.A. Corredores de Bolsa

   BBVA Chile

   12-30-2015

   01-14-2016

   CLP

   9,801,762

   0.31BancoEstado S.A. Corredores de Bolsa

   Scotiabank Sudamericano

   12-29-2015

   01-14-2016

   CLP

   652,718

   0.32BancoEstado S.A. Corredores de Bolsa

   Scotiabank Sudamericano

   12-28-2015

   01-04-2016

   CLP

   2,443,254

   0.31BancoEstado S.A. Corredores de Bolsa

   BancoEstado

   12-29-2015

   01-08-2016

   CLP

   800,000

   0.32BBVA Corredores de Bolsa S.A.

   BBVA Chile

   12-22-2015

   01-11-2016

   CLP

   350,326

   0.31Valores Security S.A. C. de B.

   Banco BICE

   12-22-2015

   01-07-2016

   CLP

   110,651

   0.34Valores Security S.A. C. de B.

   Banco Central de Chile

   12-28-2015

   01-04-2016

   CLP

   4,856,917

   0.32Valores Security S.A. C. de B.

   Banco Central de Chile

   11-30-2015

   01-06-2016

   CLP

   4,053,610

   0.34Valores Security S.A. C. de B.

   Banco Consorcio

   12-28-2015

   01-04-2016

   CLP

   24,999

   0.32Valores Security S.A. C. de B.

   Banco de Crédito e Inversiones

   12-28-2015

   01-04-2016

   CLP

   119,401

   0.32Valores Security S.A. C. de B.

   Banco Itaú

   12-28-2015

   01-04-2016

   CLP

   4,234,301

   0.32Valores Security S.A. C. de B.

   Banco Security

   11-30-2015

   01-06-2016

   CLP

   1,725,673

   0.34Valores Security S.A. C. de B.

   Banco Security

   12-28-2015

   01-04-2016

   CLP

   2,707,819

   0.32Valores Security S.A. C. de B.

   Banco Security

   12-22-2015

   01-07-2016

   CLP

   14,478

   0.34Valores Security S.A. C. de B.

   BancoEstado

   11-30-2015

   01-06-2016

   CLP

   241,798

   0.34Valores Security S.A. C. de B.

   BancoEstado

   12-28-2015

   01-04-2016

   CLP

   401,100

   0.32Valores Security S.A. C. de B.

   BancoEstado

   12-22-2015

   01-07-2016

   CLP

   125,126

   0.34Valores Security S.A. C. de B.

   BBVA Chile

   12-28-2015

   01-04-2016

   CLP

   1,659,944

   0.32Total

   

   

   

   

   117,068,914
  (*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


F-60

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As of December 31, 2014:  Financial Institution

   Securities purchased (*)

   Issue date

   Maturity date

   Currency

   Amount

   Monthly interest rate (%)ThCh$BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-16-2014

   01-15-2015

   CLP

   3,004,500

   0.30BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-16-2014

   01-20-2015

   CLP

   10,015,000

   0.30BanChile Corredores de Bolsa S.A.

   Banco de Chile

   12-17-2014

   01-09-2015

   CLP

   2,002,613

   0.28BanChile Corredores de Bolsa S.A.

   Banco Santander

   12-16-2014

   01-15-2015

   CLP

   8,012,000

   0.30BanChile Corredores de Bolsa S.A.

   Banco Santander

   12-17-2014

   01-09-2015

   CLP

   2,002,613

   0.28BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-17-2014

   01-09-2015

   CLP

   1,001,307

   0.28BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-22-2014

   01-23-2015

   CLP

   1,401,176

   0.28BanChile Corredores de Bolsa S.A.

   Scotiabank Sudamericano

   12-16-2014

   01-15-2015

   CLP

   4,006,000

   0.30Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-17-2014

   01-08-2015

   CLP

   600,784

   0.28Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-19-2014

   01-08-2015

   CLP

   250,280

   0.28Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-26-2014

   01-08-2015

   CLP

   2,501,167

   0.28Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-30-2014

   01-20-2015

   CLP

   2,250,203

   0.27Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-24-2014

   01-08-2015

   CLP

   2,001,307

   0.28Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-23-2014

   01-06-2015

   CLP

   450,336

   0.28Banco Estado S.A. Corredores de Bolsa

   BancoEstado

   12-29-2014

   01-08-2015

   CLP

   650,122

   0.28BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-29-2014

   01-22-2015

   CLP

   2,900,561

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-30-2014

   02-10-2015

   CLP

   5,000,483

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-15-2014

   01-08-2015

   CLP

   2,604,021

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-16-2014

   01-08-2015

   CLP

   1,101,595

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-17-2014

   01-08-2015

   CLP

   250,338

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-18-2014

   01-08-2015

   CLP

   1,301,634

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-22-2014

   01-08-2015

   CLP

   550,479

   0.29BBVA Corredores de Bolsa Ltda.

   BBVA Banco Bhif

   12-23-2014

   01-08-2015

   CLP

   1,100,851

   0.29Valores Security S.A. C. de B.

   Banco BICE

   11-26-2014

   01-08-2015

   CLP

   87,863

   0.31Valores Security S.A. C. de B.

   Banco BICE

   12-17-2014

   01-23-2015

   CLP

   484,241

   0.28Valores Security S.A. C. de B.

   Banco BICE

   12-29-2014

   01-06-2015

   CLP

   2,920,853

   0.29Valores Security S.A. C. de B.

   Banco Central de Chile

   11-18-2014

   01-07-2015

   CLP

   288,293

   0.29Valores Security S.A. C. de B.

   Banco Central de Chile

   12-01-2014

   01-20-2015

   CLP

   1,246,441

   0.31Valores Security S.A. C. de B.

   Banco Central de Chile

   12-17-2014

   01-23-2015

   CLP

   28,349

   0.28Valores Security S.A. C. de B.

   Banco Central de Chile

   11-26-2014

   01-08-2015

   CLP

   1,166,177

   0.31Valores Security S.A. C. de B.

   Banco Central de Chile

   12-29-2014

   01-08-2015

   CLP

   1,000,193

   0.29Valores Security S.A. C. de B.

   Banco Consorcio

   12-29-2014

   01-15-2015

   CLP

   100,759

   0.28Valores Security S.A. C. de B.

   Banco Consorcio

   12-29-2014

   01-06-2015

   CLP

   400,077

   0.29Valores Security S.A. C. de B.

   Banco de Crédito e Inversiones

   11-18-2014

   01-07-2015

   CLP

   886,510

   0.29Valores Security S.A. C. de B.

   Banco Itaú

   11-18-2014

   01-07-2015

   CLP

   1,037,652

   0.29Valores Security S.A. C. de B.

   Banco Itaú

   11-26-2014

   01-08-2015

   CLP

   174,866

   0.31Valores Security S.A. C. de B.

   Banco Itaú

   12-01-2014

   01-20-2015

   CLP

   418,344

   0.31Valores Security S.A. C. de B.

   Banco Itaú

   12-17-2014

   01-23-2015

   CLP

   1,512,069

   0.28Valores Security S.A. C. de B.

   Banco Itaú

   12-29-2014

   01-15-2015

   CLP

   788,389

   0.28Valores Security S.A. C. de B.

   Banco Santander

   12-01-2014

   01-20-2015

   CLP

   413,433

   0.31Valores Security S.A. C. de B.

   Banco Security

   11-18-2014

   01-07-2015

   CLP

   3,839,782

   0.29Valores Security S.A. C. de B.

   Banco Security

   11-26-2014

   01-08-2015

   CLP

   1,180,497

   0.31Valores Security S.A. C. de B.

   Banco Security

   12-01-2014

   01-20-2015

   CLP

   630,151

   0.31Valores Security S.A. C. de B.

   Banco Security

   12-17-2014

   01-23-2015

   CLP

   3,998,068

   0.28Valores Security S.A. C. de B.

   Banco Security

   12-29-2014

   01-15-2015

   CLP

   1,318,189

   0.28Valores Security S.A. C. de B.

   Banco Security

   12-29-2014

   01-06-2015

   CLP

   577,769

   0.29Valores Security S.A. C. de B.

   BancoEstado

   11-18-2014

   01-07-2015

   CLP

   976,860

   0.29Valores Security S.A. C. de B.

   BancoEstado

   12-17-2014

   01-23-2015

   CLP

   47,422

   0.28Valores Security S.A. C. de B.

   BBVA Banco Bhif

   12-17-2014

   01-23-2015

   CLP

   438,345

   0.28Valores Security S.A. C. de B.

   BBVA Banco Bhif

   12-29-2014

   01-15-2015

   CLP

   469,734

   0.28Valores Security S.A. C. de B.

   BBVA Banco Bhif

   12-29-2014

   01-06-2015

   CLP

   1,102,267

   0.29Valores Security S.A. C. de B.

   Scotiabank Sudamericano

   12-29-2014

   01-15-2015

   CLP

   723,563

   0.28Total

   

   

   

   

   83,216,526
 (*) All financial instruments acquired under resale agreements, correspond to time deposits and are subject to a fixed interest rate.


F-61

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The total accumulated cash flows paid in business combinations and acquisitions of associates are as follows:  For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Total disbursement per business acquisitionCash flow used in the purchase of non-controling interests (1)

   

   2,174,370

   1,921,245

   13,776,885Other cahs payment to acquire interests in joint ventures (2)

   

   27,043,481

   42,163,032

   1,445,478Cahs flow used for control of subsidiaries or other business (3)

   

   19,111,686

   -

   -Payment for changes in ownership interests in subidiaries (4)

   

   641,489

   -

   8,369Total

   

   48,971,026

   44,084,277

   15,230,732
  (1)Corresponds to an increased of capital made in 2016 and 2015 and the acquisitions made during 2014 of Bebidas Bolivianas BBO S.A. (seeNote 19). (2)Corresponds to an increased of capital made in 2016, 2015 and 2014 of Central Cervecera de Colombia S.A.S.(seeNote 19)and to the amount paid in proportion to the creation of the company Promarca Internacional SpA. (SeeNote 1, letter a)).In 2015 corrsponds to the payment of 50% of the acquisitions of Bebidas Carozzi CCU SpA. (seeNote 1). (3)Corresponds to acquisition of additional interests in Manantial S.A. through its subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A. (seeNote 1, point (1)). (4)In 2016 corresponds to the payment for ownership on Artisan SRL (Paraguay) (seeNote 8, letter a)).   Note 14Accounts receivables – Trade and other receivables  The accounts receivables – trade and other receivables were as follows:  As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Accounts receivables:Chile Operating segment (1)

   145,670,490

   -

   136,203,740

   -International business Operating segment

   63,600,881

   -

   52,591,935

   -Wines Operating segment

   42,958,093

   -

   43,333,189

   -Others accounts receivables (2)

   32,375,234

   3,563,797

   24,033,944

   -Impairment loss estimate

   (3,837,914)

   -

   (3,936,871)

   -Total

   280,766,784

   3,563,797

   252,225,937

   -
  (1)From the third quarter of 2016 onwards, the Chile Operating segment incorporated in their management the business activities performed by the Strategic Service Units (SSU), which include Transportes CCU Limitada, Comercial CCU S.A., CRECCU S.A. and Fábrica de Envases Plásticos S.A. As of December 2015, the account receivables of the Strategic Service Units were disclosed under item Others for an amount of ThCh$ 47,871,339, however for comparability purposes these account receivable have been reclassifficated to the Chile Operating segment. (2)As of December 31, 2016, this item mainly includes ThCh$ 526,959 in short-term and ThCh$ 2,898,277 in long-term related to de account receivable to the sale of 49% that subsidiriary CPCh maintained in Compañía Pisquera Bauzá S.A. (seeNote 24).  The Company’s accounts receivable are denominated in the following currencies: As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Chilean Peso

   179,896,747

   158,757,937Argentine Peso

   56,773,947

   48,535,814US Dollar

   24,449,473

   25,498,590Euro

   7,025,446

   7,463,166Unidad de Fomento

   3,613,395

   7,102Uruguayan Pesos

   5,304,719

   4,074,908Paraguayan Guaraní

   6,010,193

   6,111,636Others currencies

   1,256,661

   1,776,784Total

   284,330,581

   252,225,937


F-62

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  The detail of the accounts receivable maturities as ofDecember 31, 2016, is as follows:  Total

   Current balance

   Overdue balances0 a 3 months

   3 a 6 months

   6 a 12 months

   More than 12 monthsThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Accounts receivables:Chile Operating segment

   145,670,490

   134,545,838

   8,090,616

   1,136,211

   638,417

   1,259,408International business Operating segment

   63,600,881

   55,230,423

   7,521,071

   130,299

   275,300

   443,788Wines reportable Operating segment

   42,958,093

   39,499,120

   3,028,707

   208,628

   137,671

   83,967Others accounts receivables

   32,375,234

   31,897,595

   186,213

   291,426

   -

   -Sub Total

   284,604,698

   261,172,976

   18,826,607

   1,766,564

   1,051,388

   1,787,163Impairment loss estimate

   (3,837,914)

   -

   (1,130,545)

   (478,707)

   (542,389)

   (1,686,273)Total current

   280,766,784

   261,172,976

   17,696,062

   1,287,857

   508,999

   100,890Others accounts receivables

   3,563,797

   3,563,797

   -

   -

   -

   -Total non-current

   3,563,797

   3,563,797

   -

   -

   -

   -
   The detail of the accounts receivable maturities as of December 31, 2015, is as follows:  Total

   Current balance

   Overdue balances0 a 3 months

   3 a 6 months

   6 a 12 months

   More than 12 monthsThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Accounts receivables:Chile Operating segment

   136,203,740

   124,024,627

   10,108,821

   659,670

   511,993

   898,629International business Operating segment

   52,591,935

   45,600,898

   5,839,178

   226,648

   321,512

   603,699Wines reportable Operating segment

   43,333,189

   40,022,791

   2,715,939

   193,781

   299,921

   100,757Others accounts receivables

   24,033,944

   22,204,897

   370,715

   982,963

   475,369

   -Sub Total

   256,162,808

   231,853,213

   19,034,653

   2,063,062

   1,608,795

   1,603,085Impairment loss estimate

   (3,936,871)

   -

   (888,274)

   (280,839)

   (1,168,592)

   (1,599,166)Total

   252,225,937

   231,853,213

   18,146,379

   1,782,223

   440,203

   3,919
   The Company markets its products through retail, wholesale clients, chains and supermarkets. As ofDecember 31, 2016, the accounts receivable from the three most important supermarket chains in Chile and Argentina represent 27.1% (29.1% in 2015) of the total accounts receivable.  As indicated in the Risk management note(Note 5), for Credit Risk purposes, the Company acquires credit insurance policies to cover approximately 90% and 99% of the significant accounts receivable balances domestic and export, respectively, of the total of the account receivables. Regarding amounts aged more than 6 months and for which no allowances have been constituted, they correspond mainly to amounts already covered by the credit insurance policies. In addition, there are amounts overdue within ranges for which, in accordance with current policies are only partially impaired for, based on a case by case analysis.  For the above mentioned, management estimates that it does not require establishing allowances for further deterioration, in addition to those already constituted based on an aging analysis of these balances.  The write-offs of our doubtful clients are once all pre-trial and judicial, efforts have been made and exhausted all means of payment, with the proper demonstration of the insolvency of customers. This process of punishment normally takes more than 1 year.


F-63

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
   The movement of the impairment losses provision for accounts receivable is as follows:
 As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Balance at the beginning of year

   (3,936,871)

   (3,153,132)Impairment estimate for accounts receivable

   (1,352,722)

   (1,883,258)Uncollectible accounts

   219,222

   264,618Back of unused provisions

   1,031,841

   557,106Effect of translation into presentation currency

   200,616

   277,795Total

   (3,837,914)

   (3,936,871)


F-64

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 15Accounts and transactions with related companies   Transactions between the Company and its subsidiaries occur in the normal course of operations and have been eliminated during the consolidation process.  The amounts indicated as transactions in the following table relate to trade operations with related companies, which are under similar terms than what a third party would get respect to price and payment conditions. There are no uncollectible estimates decreasing accounts receivable or guarantees provided to related companies.  Balances and transactions with related companies consist of the following:  (1)  Business operations agreed upon in Chilean Pesos. Companies not under a current trade account agreement not accrue interest and have payment terms of 30 days.  (2)  Business operations agreed upon in Chilean Pesos. The remaining balance accrues interest at 90-days active bank rate (TAB) plus an annual spread. Interests is paid or charged against the trade current account.  (3)  Business operations in foreign currencies, not covered by a current trade account, that do not accrue interest and have payment terms of 30 days. Balances are presented at the closing exchange rate.  (4)   An agreement between the subsidiary Compañía Pisquera de Chile S.A. with Cooperativa Agrícola Control Pisquero de Elqui and Limarí Ltda. due to differences resulting from the contributions made by the latter. It establishes a 3% annual interest over capital, with annual payments to be made in eight instalments of UF 1,124 each. Beginning February 28, 2007 and UF 9,995 bullet payment at the last contribution date. In accordance with the contract,Cooperativa Agrícola Control Pisquero de Elqui and Limarí Ltda.renew the contract for a period of nine years. Consequently, the UF 9,995 will pay in ten instalments of UF 1,200 each one and a final payment of UF 2,050, beginning February 28, 2015.  (5)   An agreement of grape supply between the subsidiary Compañía Pisquera de Chile S.A. with Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda. These contracts stipulate a 3% annual interest on the capital, with a term of eight years, and annual payments due on May 31, 2018 and May 31,2020.  The transaction schedule includes all the transactions made with related parties.  The detail of the accounts receivable and payable from related companies as of December 31, 2016 and 2015, is as follows:


F-65

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  Accounts receivable from related companies  Current:  Tax ID

   Company

   Country of origin

   Ref.

   Relationship

   Transaction

   Currency

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$0-E

   Bebidas Bolivianas BBO S.A.

   Bolivia

   (3)

   Associated

   Sales of products

   USD

   42,006

   78,8100-E

   Pepsi Cola Panamericana S.R.L.

   Perú

   (3)

   Associated with the controller

   Sales of products

   USD

   1,149

   1,14976,028,758-K

   Norgistics Chile S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   -

   11076,029,109-9

   Inversiones Chile Chico Ltda.

   Chile

   (1)

   Related to the controller

   Billed services

   CLP

   526

   5,35376,178,803-5

   Viña Tabalí S.A.

   Chile

   (1)

   Related to the controller

   Billed services

   CLP

   10,513

   29,81777,051,330-8

   Cervecería Kunstmann Ltda.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   120,458

   142,78977,755,610-K

   Comercial Patagona Ltda.

   Chile

   (1)

   Joint venture

   Sales of products

   CLP

   1,035,566

   738,27077,755,610-K

   Comercial Patagona Ltda.

   Chile

   (1)

   Joint venture

   Rental of cranes

   CLP

   3,215

   2,87578,780,780-1

   Operaciones y Servicios Enex Ltda.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   13,058

   90,32381,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   (5)

   Shareholder to subsidiary

   Advance purchase

   CLP

   14,393

   1,065,21481,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   (1)

   Shareholder to subsidiary

   Sales of products

   CLP

   7,450

   24,02781,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   (4)

   Shareholder to subsidiary

   Loan

   U.F.

   30,542

   29,58981,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   (5)

   Shareholder to subsidiary

   Sales of products

   U.F.

   76,620

   74,52990,081,000-8

   Compañía Chilena de Fósforos S.A.

   Chile

   (1)

   Shareholder to subsidiary

   Sales of products

   CLP

   2,575

   5,65190,160,000-7

   Compañía Sud Americana de Vapores S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   458

   52290,703,000-8

   Nestlé Chile S.A.

   Chile

   (1)

   Shareholder to subsidiary

   Sales of products

   CLP

   14,747

   -91,021,000-9

   Invexans S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   4,552

   3,72391,705,000-7

   Quiñenco S.A.

   Chile

   (1)

   Shareholder Controller

   Sales of products

   CLP

   1,937

   3,07092,011,000-2

   Empresa Nacional de Energía ENEX S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   -

   2,13692,048,000-4

   SAAM S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   1,437

   -93,920,000-2

   Antofagasta Minerals S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   3,479

   4,19894,625,000-7

   Inversiones Enex S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   258,306

   203,34996,427,000-7

   Inversiones y Rentas S.A.

   Chile

   (1)

   Controller

   Sales of products

   CLP

   -

   12,66496,536,010-7

   Inversiones Consolidadas Limitada

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   1,513

   1,40996,571,220-8

   Banchile Corredores de Bolsa S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   3,096

   1,07396,591,040-9

   Empresas Carozzi S.A.

   Chile

   (1)

   Shareholder of joint operation

   Sales of products

   CLP

   76,704

   301,88296,645,790-2

   Socofin S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   -

   1096,819,020-2

   Agrícola El Cerrito S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   30

   3096,847,140-6

   Inmobiliaria Norte Verde S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   30

   4096,919,980-7

   Cervecería Austral S.A.

   Chile

   (1)

   Joint venture

   Sales of products

   CLP

   255,330

   29,50297,004,000-5

   Banco de Chile

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   120,547

   126,43599,525,700-9

   Las Margaritas S.A.

   Chile

   (1)

   Related to the controller

   Sales of products

   CLP

   -

   4799,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Sales of products

   CLP

   73,511

   358,42899,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Transport service

   CLP

   39,669

   881,49999,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Interests

   CLP

   219,835

   219,64799,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Sales service

   CLP

   96,572

   118,29299,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Shared service

   CLP

   243,689

   182,82299,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Collection service

   CLP

   312

   49,64699,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (2)

   Joint venture

   Remittanse send

   CLP

   750,000

   -Total

   

   

   

   

   

   

   3,523,825

   4,788,930
   Non Current:  Tax ID

   Company

   Country of origin

   Ref.

   Relationship

   Transaction

   Currency

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$81,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   (4)

   Shareholder to subsidiary

   Loan

   U.F.

   190,040

   209,33081,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

   Chile

   (4)

   Shareholder to subsidiary

   Sales of products

   U.F.

   166,625

   236,608Total

   

   

   

   

   

   

   356,665

   445,938


F-66

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Accounts payable to related companies  Current:  Tax ID

   Company

   Country of origin

   Ref.

   Relationship

   Transaction

   Currency

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$0-E

   Amstel Brouwerijen B.V.

   Holanda

   (3)

   Related to the controller

   License and technical assiStance

   Euros

   64,932

   246,3340-E

   Banco Amambay S.A.

   Holanda

   (3)

   Associated

   Commissions

   PYG

   34

   -0-E

   Grafica y Editorial Intersuda S.A.

   Holanda

   (3)

   Related to the controller

   Purchase of products

   PYG

   1,604

   -0-E

   Heineken Brouwerijen B.V.

   Holanda

   (3)

   Related to the controller

   License and technical assistance

   Euros

   3,344,215

   6,568,5940-E

   Heineken Brouwerijen B.V.

   Holanda

   (3)

   Related to the controller

   Purchase of products

   Euros

   787,873

   307,1180-E

   Heineken Nederland Supply

   Francia

   (3)

   Related to the controller

   License and technical assistance

   Euros

   -

   37,7720-E

   Heineken supply chain B.V.

   Francia

   (3)

   Related to the controller

   Purchase of products

   Euros

   -

   11,6470-E

   Nestlé Waters Management & Tecnology S.A.S.

   Uruguay

   (3)

   Related to the controller

   Purchase of products

   Euros

   -

   12,1910-E

   Nestlé Waters Marketing & Distribution S.A.S.

   Chile

   (3)

   Related to the controller

   Purchase of products

   Euros

   -

   21,8610-E

   Pespsi Cola Manufacturing Co. of Uruguay S.R.L.

   Chile

   (3)

   Related to the controller

   Purchase of products

   USD

   -

   151,5780-E

   Watt's Alimentos S.A.

   Chile

   (3)

   Related to the controller

   Purchase of products

   USD

   2,196

   -76,115,132-0

   Canal 13 S.p.A.

   Chile

   (1)

   Related to the controller

   Marketing services

   CLP

   333,658

   21,10076,481,675-7

   Cerveceria Szot S.p.A.

   Chile

   (1)

   Related to the controller

   Purchase of products

   CLP

   4,930

   -77,051,330-8

   Cervecería Kunstmann Ltda.

   Paraguay

   (1)

   Shareholder to subsidiary

   Purchase of products

   CLP

   6,691

   15,70777,755,610-K

   Comercial Patagona Ltda.

   Chile

   (1)

   Joint venture

   Marketing services

   CLP

   37,889

   24,69478,105,460-7

   Alimentos Nutrabien S.A.

   Chile

   (1)

   Joint venture

   Purchase of products

   CLP

   315

   21278,259,420-6

   Inversiones PFI Chile Ltda.

   Chile

   (1)

   Shareholder to subsidiary

   Purchase of products

   CLP

   846,035

   1,195,66581,805,700-8

   Cooperativa AgrÍcola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   (1)

   Shareholder to subsidiary

   Purchase of products

   CLP

   41,667

   -84,356,800-9

   Watt ́s S.A.

   Chile

   (1)

   Shareholder of joint operation

   Purchase of products

   CLP

   -

   13,20589,010,400-2

   Alusa Chile S.A.

   Chile

   (1)

   Related to the controller

   Purchase of products

   CLP

   -

   437,88492,011,000-2

   Empresa Nacional de Energía Enex S.A.

   Chile

   (1)

   Related to the controller

   Electric service

   CLP

   124,255

   -94,058,000-5

   Servicios Aeroportuarios Aerosan S.A.

   Chile

   (1)

   Related to the controller

   Transport service

   CLP

   1,273

   19396,591,040-9

   Empresas Carozzi S.A.

   Chile

   (1)

   Shareholder of joint operation

   Purchase of products

   CLP

   1,930,063

   -96,689,310-9

   Transbank S.A.

   Chile

   (1)

   Related to the controller

   Commission

   CLP

   2,955

   25,91196,798,520-1

   Saam Extraportuarios S.A.

   Chile

   (1)

   Related to the controller

   Transport service

   CLP

   -

   1796,810,030-0

   Radiodifusion S.p.A

   Chile

   (1)

   Related to the controller

   Marketing services

   CLP

   19,018

   -96,894,740-0

   Banchile Factoring S.A.

   Chile

   (1)

   Related to the controller

   Factoring service

   CLP

   78,591

   -96,919,980-7

   Cervecería Austral S.A.

   Chile

   (1)

   Joint venture

   Purchase of products

   CLP

   1,462,888

   414,40097,004,000-5

   Banco de Chile

   Chile

   (1)

   Related to the controller

   Billed services

   CLP

   41,001

   2,43199,540,870-8

   Aguas de Antofagasta S.A.

   Chile

   (1)

   Related to the controller

   Water service

   CLP

   -

   36,87999,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Purchase of products

   CLP

   36,834

   63,21299,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Consignation sales

   CLP

   217,689

   2,015,61399,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   (1)

   Joint venture

   Discount fleet

   CLP

   143,465

   -Total

   

   

   

   

   

   

   9,530,071

   11,624,218


F-67

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Most significant transactions and effects on results: The following are the most significant transactions with related entities that are not subsidiaries of the Company and their effect on the Consolidated Statement of Income: Tax ID

   Company

   Country of origin

   Relationship

   Transaction

   For the years ended as of December 31,2016

   2015

   2014Amounts

   (Charges)/Credits (Effect on Income)

   Amounts

   (Charges)/Credits (Effect on Income)

   Amounts

   (Charges)/Credits (Effect on Income)ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$0-E

   Amstel Brouwerijen B.V

   Holanda

   Related to the controller

   License and technical assistance

   165,995

   (165,995)

   229,967

   (229,967)

   161,865

   (161,865)0-E

   Bebidas Bolivianas BBO S.A.

   Bolivia

   Associated

   Sales of products

   396,076

   150,509

   209,292

   79,531

   -

   -0-E

   Bebidas Bolivianas BBO S.A.

   Bolivia

   Associated

   Contribution of capital

   2,174,370

   -

   1,921,245

   -

   -

   -0-E

   Central Cervecera de Colombia S.A.S.

   Colombia

   Joint operation

   Contribution of capital

   22,943,861

   -

   19,941,532

   -

   -

   -0-E

   Heineken Brouwerijen B.V.

   Holanda

   Related to the controller

   License and technical assistance

   9,445,557

   (9,445,557)

   9,331,241

   (9,331,241)

   6,338,435

   (6,338,435)0-E

   Heineken Brouwerijen B.V.

   Holanda

   Related to the controller

   Billing services

   82,475

   (52,266)

   27,904

   (27,904)

   95,533

   (95,533)0-E

   Heineken Brouwerijen B.V.

   Holanda

   Related to the controller

   Purchase of products

   -

   -

   71,107

   -

   295,899

   -0-E

   Heineken Brouwerijen B.V.

   Holanda

   Related to the controller

   Sales of products

   161,220

   120,915

   -

   -

   208,932

   79,3940-E

   Nestle Waters S.A.

   Italy

   Shareholder to subsidiary

   Royalty paid

   432,535

   (432,535)

   308,527

   (308,527)

   204,010

   (204,010)76,115,132-0

   Canal 13 S.p.A.

   Chile

   Related to the controller

   Advertising

   3,427,941

   (2,661,759)

   1,554,332

   (405,349)

   3,318,107

   (1,196,948)76,178,803-5

   ViñaTabalí S.A.

   Chile

   Related to the controller

   Billed services

   52,470

   52,470

   50,787

   50,787

   64,321

   64,32176,313,970-0

   Inversiones Irsa Ltda.

   Chile

   Controller

   Dividends paid

   4,132,618

   -

   4,089,832

   -

   -

   -77,051,330-8

   Cervecería Kunstmann Ltda.

   Chile

   Shareholder to subsidiary

   Sales of products

   522,566

   418,052

   405,652

   324,522

   317,990

   254,39277,755,610-K

   Comercial Patagona Ltda.

   Chile

   Joint venture

   Sales of products

   4,259,983

   1,746,594

   2,679,985

   1,098,794

   1,410,939

   578,48578,259,420-6

   Inversiones PFI Chile Ltda.

   Chile

   Shareholder to subsidiary

   Purchase of products

   10,083,606

   -

   8,692,744

   -

   -

   -78,259,420-6

   Inversiones PFI Chile Ltda.

   Chile

   Shareholder to subsidiary

   Billed services

   3,234,158

   3,234,158

   2,649,644

   2,649,644

   -

   -78,780,780-1

   Operaciones y Servicios Enex Ltda.

   Chile

   Related to the controller

   Sales of products

   224,387

   183,997

   328,256

   262,605

   -

   -79,985,340-K

   Cervecera Valdivia S.A.

   Chile

   Shareholder to subsidiary

   Dividends paid

   633,668

   -

   489,942

   -

   511,172

   -81,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   Shareholder to subsidiary

   Loan

   28,256

   6,815

   29,589

   5,827

   27,681

   7,97581,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   Shareholder to subsidiary

   Sales of products

   76,619

   9,285

   74,529

   8,487

   71,616

   11,41181,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   Shareholder to subsidiary

   Purchase of grape

   4,255,971

   -

   6,226,156

   -

   5,027,758

   -81,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   Shareholder to subsidiary

   Sales of products

   -

   -

   8,071

   6,457

   -

   -81,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   Shareholder to subsidiary

   Dividends paid

   599,123

   -

   791,836

   -

   617,964

   -81,805,700-8

   Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

   Chile

   Shareholder to subsidiary

   Billed services

   -

   -

   181,437

   181,437

   -

   -89,010,400-2

   Alusa Chile S.A.

   Chile

   Related to the controller

   Purchase of products

   3,223,272

   -

   2,665,007

   -

   1,562,351

   -90,081,000-8

   Compañía Chilena de Fósforo S.A.

   Chile

   Shareholder to subsidiary

   Dividends paid

   1,273,753

   -

   4,055,034

   -

   1,637,775

   -90,703,000-8

   Nestlé Chile S.A.

   Chile

   Shareholder to subsidiary

   Dividends paid

   3,530,565

   -

   2,704,376

   -

   2,581,736

   -91,705,000-7

   Quiñenco S.A.

   Chile

   Shareholder to Controller

   Sales of products

   13,984

   11,186

   14,509

   14,509

   -

   -93,920,000-2

   Antofagasta Minerals S.A.

   Chile

   Related to the controller

   Sales of products

   35,532

   28,069

   -

   -

   -

   -94,625,000-7

   Inversiones Enex S.A

   Chile

   Related to the controller

   Sales of products

   1,161,918

   906,296

   636,707

   496,631

   -

   -96,657,690-7

   Inversiones Punta Brava S.A.

   Chile

   Related to the controller

   Sales of products

   -

   -

   1,587

   1,270

   -

   -96,427,000-7

   Inversiones y Rentas S.A.

   Chile

   Controller

   Office lease

   11,463

   11,463

   11,006

   11,006

   10,539

   10,53996,427,000-7

   Inversiones y Rentas S.A.

   Chile

   Controller

   Dividends paid

   32,109,822

   -

   31,777,378

   -

   32,701,972

   -96,571,220-8

   Banchile Corredores de Bolsa S.A.

   Chile

   Related to the controller

   Investments

   61,400,000

   -

   225,840,000

   -

   315,790,000

   797,95396,571,220-8

   Banchile Corredores de Bolsa S.A.

   Chile

   Related to the controller

   Investment Rescue

   170,500,000

   402,369

   231,800,000

   583,333

   -

   -96,591,040-9

   Empresas Carozzi S.A.

   Chile

   Shareholder of joint operation

   Sales of products

   311,666

   249,322

   -

   -

   -

   -96,919,980-7

   Cervecería Austral S.A.

   Chile

   Joint venture

   Sales of products

   62,444

   27,788

   36,560

   16,269

   315,650

   126,26096,919,980-7

   Cervecería Austral S.A.

   Chile

   Joint venture

   Purchase of products

   5,438,419

   -

   4,776,140

   -

   3,525,715

   -96,919,980-7

   Cervecería Austral S.A.

   Chile

   Joint venture

   Billed services

   234,327

   234,327

   425,165

   425,165

   231,038

   231,03897,004,000-5

   Banco de Chile

   Chile

   Related to the controller

   Sales of products

   87,772

   48,800

   39,148

   25,446

   60,472

   21,16597,004,000-5

   Banco de Chile

   Chile

   Related to the controller

   Derivatives

   35,318,178

   2,006,627

   105,973,453

   1,708,487

   2,595,060

   (1,637)97,004,000-5

   Banco de Chile

   Chile

   Related to the controller

   Investments

   61,400,000

   -

   204,050,000

   -

   181,200,794

   1,427,44497,004,000-5

   Banco de Chile

   Chile

   Related to the controller

   Leasing paid

   87,457

   2,266

   123,316

   (23,901)

   224,872

   (24,155)97,004,000-5

   Banco de Chile

   Chile

   Related to the controller

   Investment Rescue

   61,400,000

   247,101

   219,500,000

   770,364

   -

   -99,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   Joint venture

   Remittanse received

   -

   -

   33,298,001

   -

   31,367,766

   -99,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   Joint venture

   Remittanse send

   750,000

   -

   27,189,651

   -

   31,144,541

   -99,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   Joint venture

   Interests

   -

   -

   287,243

   287,243

   363,945

   363,94599,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   Joint venture

   Sales of products

   5,973

   2,745

   13,540

   6,223

   15,097

   9,51199,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   Joint venture

   Billed services

   1,553,943

   1,553,943

   7,633,582

   7,633,582

   6,990,442

   6,990,44299,542,980-2

   Foods Compañía de Alimentos CCU S.A.

   Chile

   Joint venture

   Consignation sales

   5,115,078

   -

   24,067,498

   -

   23,303,360

   -


F-68

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Remuneration of the Management key employees  The Company is managed by a Board of Directors comprised of 9 members, each of whom is in office for a 3-year term and may be re-elected.  The Board was appointed at the Ordinary Shareholders ́ Meeting held on April 13, 2016, being elected Messrs. Andrónico Luksic Craig, Francisco Pérez Mackenna, Pablo Granifo Lavín, Rodrigo Hinzpeter Kirberg, Marc Busain, Carlos Molina Solís, Didier Debrosse, José Miguel Barros van Hövell tot Westerflier y Vittorio Corbo Lioi, the latter independent according to article 50 bis of Law No18,046. The Chairman and the Vice Chairman, as well as the members of the Audit Committee were appointed at the Board of Directors ́ meeting held on April 13, 2016. At the same meeting, and according to article 50 bis of Law N° 18,046, the independent Director Mr. Vittorio Corbo Lioi appointed the other members of the Directors Committee, which is composed of Directors Messrs. Pérez, Molina y Corbo. Additionally, Messrs. Corbo y Molina were appointed as members of the Audit Committee, both meeting the independence criteria under the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange Rules. The Board of Directors also resolved that Directors Messrs. Pérez y Barros shall participate in the Audit Committee ́s meetings as observers.  As agreed to at the Ordinary Shareholders ́ Meeting held on April 13, 2016, the remuneration of the Directors consists on a gross monthly fee for attendance to Board Meetings of UF 100 per Director, and UF 200 for the Chairman, independent of the number of meetings held within such period, plus an amount equivalent to 3% of the distributed dividends, for the whole Board, at a rate of one-ninth for each Director and in proportion to the time each one served as such during the year 2016. If the distributed dividends exceed 50% of the net profits, the Board of Directors’ variable remuneration shall be calculated over a maximum 50% of such profits.  Additionally, those Directors that are members of the Directors Committee receive a gross remuneration of UF 34 for each meeting they attend, plus the amount that, as the percentage of the dividends, is required to complete one third of the total remuneration a Director is entitled to, pursuant to article 50 bis of Law No 18,046 and Regulation N° 1956 of the SVS. Directors that are members of the Audit Committee receive a gross monthly remuneration of UF 25.  According to the above, as of December 31, 2016, the Directors received ThCh$ 3,215,759 (ThCh$ 2,976,684 in 2015 and ThCh$ 2,746,921 in 2014) in meeting attendance fees and dividend participation. In addition, ThCh$ 212,665 (ThCh$ 191,416 in 2015 and ThCh$ 117,342 in 2014) were paid as meeting attendance fees and dividend participation to the Senior Management of the Parent Company.  As of December 31, 2016, the remuneration corresponding to the key personal was ThCh$ 7,565,658 (ThCh$ 5,497,192 in 2015 and ThCh$ 5,191,018 in 2014).The Company grants annual discretionary and variable bonuses to the top key employees, which are not subject to an agreement and are decided on the basis of the compliance with individual and corporate goals and depending on the year results.


F-69

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 16Inventories  The inventory balances were as follows:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Finished products

   76,323,417

   50,873,881In process products

   1,935,157

   1,828,386Raw material

   113,232,691

   113,716,967In transit raw material

   4,460,822

   3,707,440Materials and products

   5,675,945

   5,926,122Realizable net value estimate and obsolescence

   (2,337,354)

   (1,825,381)Total

   199,290,678

   174,227,415
  The Company wrote off a total of ThCh$ 2,012,748, ThCh$ 2,057,704 and ThCh$ 1,369,096 relating to inventory shrinkage and obsolescence for the year endedDecember 31, 2016, 2015 y 2014, respectively.  Additionally, an estimate for obsolescence inventories include amounts related to low turnover, technical obsolescence and product recalls from the market.  Movement of Realizable net value and obsolescence estimate is as follows:  As of December 31, 2016

   As of December 31, 2015

   As of December 31, 2014ThCh$

   ThCh$

   ThCh$Initial balance

   (1,825,381)

   (2,589,518)

   (1,286,695)Inventories write-down estimation

   (2,551,828)

   (1,469,233)

   (2,682,310)Inventories recognised as an expense

   2,012,748

   2,057,704

   1,369,096Business combination effect

   27,107

   175,666

   10,391Total

   (2,337,354)

   (1,825,381)

   (2,589,518)
  As ofDecember 31, 2016, 2015 and 2014, the Company does not have any inventory pledged as guarantee against financial obligations.


F-70

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 17Biological current assets  The Company recorded under Biological current assets the agricultural activities (grapes) derived from production of plantations that will be destined to be an input to the following process of the wine production.  The costs associated to the agricultural activities (grapes) are accumulated to the harvest date.  The valuation of Biological current assets is described inNote 2, 2.10.  The movement of Biological current assets were as follows:  ThCh$As of January 1, 2015Historic cost

   7,633,591Book Value

   7,633,591As of December 31, 2015Acquisitions

   18,192,939Decreases due to harvesting

   (18,193,190)Book Value

   7,633,340As of December 31, 2015Historic cost

   7,633,340Book Value

   7,633,340As of December 31, 2016Acquisitions

   19,611,307Decreases due to harvesting

   (19,296,268)Book Value

   7,948,379As of December 31, 2016Historic cost

   7,948,379Book Value

   7,948,379


F-71

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 18 Other non-financial assets  The Company maintained the following other non-financial assets:  As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Insurance paid

   3,038,856

   -

   3,512,317

   -Advertising

   5,819,736

   2,567,939

   4,822,197

   2,652,382Advances to suppliers

   5,269,826

   -

   7,438,102

   -Guarantees paid

   50,590

   227,738

   99,493

   228,749Consumables

   433,570

   -

   526,645

   -Dividends receivable

   245,073

   -

   150,343

   -Recoverable taxes (1)

   -

   1,231,414

   -

   1,303,925Cost of subsidiaries acquired (2)

   -

   641,489

   -

   -Other

   1,001,486

   700,631

   1,105,276

   1,035,898Total

   15,859,137

   5,369,211

   17,654,373

   5,220,954
  (1) Corresponds to the tax profit minimum and VAT credit exporter, both registered in the argentine subsidiaries, whose term of recovery is estimated over a year. (2)SeeNote 1, (2).   Note 19Investment accounted for by the equity method  Joint ventures and Associates  As ofDecember 31, 2016 and 2015, the Company recorded investments qualifying as joint venture and associates.  The share value of the investments in joint ventures and associates is as follows:  Percentage of participation

   As of December 31, 2016

   As of December 31, 2015%

   ThCh$

   ThCh$Cervecería Austral S.A. (1)

   50.00

   5,548,458

   5,043,071Foods Compañía de Alimentos CCU S.A. (2)

   50.00

   5,624,391

   11,582,085Central Cervecera de Colombia S.A.S. (3)

   50.00

   35,449,038

   18,718,832Total joint ventures

   

   46,621,887

   35,343,988Bebidas Bolivianas BBO S.A. (4)

   34.00

   17,281,665

   14,276,937Other companies

   

   501,394

   374,338Total associates

   

   17,783,059

   14,651,275Total

   

   64,404,946

   49,995,263


F-72

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The above mentioned values include the goodwill generated through the acquisition of the following joint venture and associate, which are presented net of any impairment loss:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Cervecería Austral S.A.

   

   1,894,770

   1,894,770Bebidas Bolivianas BBO S.A.

   

   9,032,617

   7,648,453Total

   

   10,927,387

   9,543,223
  The results accrued in joint ventures and associates are as follows:  For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Cervecería Austral S.A.

   754,326

   247,180

   157,836Foods Compañía de Alimentos CCU S.A.

   (519,536)

   (1,251,392)

   (334,771)Central Cervecera de Colombia S.A.S.

   (3,969,699)

   (2,668,179)

   -Total joint ventures

   (3,734,909)

   (3,672,391)

   (176,935)Bebidas Bolivianas BBO S.A.

   (1,805,548)

   (1,557,886)

   (1,019,011)Other companies

   (20,065)

   2,142

   -Total associates

   (1,825,613)

   (1,555,744)

   (1,019,011)Total

   (5,560,522)

   (5,228,135)

   (1,195,946)
  Changes in investments in joint ventures and associates during such periods are as follows:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Balance at the beginning of year

   49,995,263

   31,998,620Business combination effect

   25,118,232

   23,387,006Participation in the joint ventures and associates (loss)

   (5,560,522)

   (5,228,135)Dividends received

   (245,073)

   (150,343)Increase (decrease) through changes in ownership interests

   (5,426,209)

   -Others

   523,255

   (11,885)Total

   64,404,946

   49,995,263
  Following are the significant matters regarding the investments accounted by the equity method:  (1) Cervecería Austral S.A.  A closed stock company that operates a beer manufacturing facility in the southern end of Chile, being the southernmost brewery in the world.  (2) Foods Compañía de Alimentos CCU S.A.  A closed stock company devoted to the production and marketing of food products such as like cookies and other baked goods, caramels, candy and cereal, among others.  On November 26, 2015, Foods signed an agreement of sale with Empresas Carozzi S.A., under which the first sold to the second machinery, equipment and brands related to products marketed under the brands Natur and Calaf. The amount of this transaction was ThCh$ 14,931,000 and CCU recognized a net loss after taxes for an amount of ThCh$ 1,034,638, corresponding to their participation.


F-73

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 On December 16, 2016, Foods and the subsidiary CCU Inversiones S.A., proceeded to acquire 49,99999% and 0.0001%, respectively of the shares of Alimentos Nutrabien S.A. As a consequence above mentioned the only shareholders direct of that company are: (i) Food ́s with 99.99999% of the share capital, and (ii) CCU investments S.A. with a 0.0001% of the share capital, respectively. The amount of this transaction was UF 545.000, equivalent toThCh$14.352.706.  (3) Central Cervecera de Colombia S.A.S.  On November 10, 2014, CCU, directly and through its subsidiaries CCU Inversiones II Limitada, and Postobón have established a joint arrangements through a company named Central Cervecera de Colombia S.A.S. (the "Company"), in which CCU and Postobón participate as equal shareholders. The purpose of this Company is the beer and non-alcoholic drinks production, marketing and distribution based on malt. The Parties will invest in the Company an approximate amount of US$ 400,000,000, following a gradual investment plan conditioned to the fulfillment of certain milestones. Asof December 31, 2016 CCU Inversiones II Limitada paid US$ 68,078,797 (US$ 33,901,562 in 2015). The partnership involves the construction of a beer production plant, with an annual total capacity of 3,000,000 hectoliters.  Committed capital payments have been made on the following dates: November 20, 2014, for US$ 2,411,019 (equivalents to ThCh$ 1,445,478; March 25 and 7 July,  2015 forUS$ 7,749,931 and US$ 23,740,612 (equivalents to ThCh$ 4,833,244 and ThCh$ 15,108,288, respectively and on August 30, 2016 was a new increased in capital for an amount of US$ 34,177,235 (equivalents to ThCh$ 22,943,861).   (4) Bebidas Bolivianas BBO S.A.  On May 7, 2014,the Company acquired 34% of the stock rights of Bebidas Bolivianas BBOS.A. a Bolivian and a closed stock company that produces soft drinks and beers in three plants located in Santa Cruz de la Sierra and Nuestra Señora de la Paz cities.The amount of this transaction was ThCh$ 13,776,885. On December 9, 2015, the Company paid an increased of capital for an amount of US$ 2,720,000 (equivalents to ThCh$ 1,921,244). On June 8, 2016 and November 17, 2016, the Company paid an increased of capital for an amount of US$ 2,221,696 (equivalents to ThCh$ 1,510,420) and US$ 1,019,971 (equivalents to ThCh$ 663,951), respectively.   The Company does not have any contingent liabilities related to joint ventures and associates as December 31, 2016.


F-74

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The summarized financial information of these companies as ofDecember 31, 2016, 2015 and 2014 and the figures for each entity 100% of each in summary form are as follows:  Joint ventures

   Associated

   Joint ventures

   Associated

   Joint ventures

   AssociatedFor the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Income Statement (Summarized)Net sales

   63,926,397

   19,733,853

   59,187,508

   18,310,272

   46,399,652

   8,470,716Operating result

   (11,913,526)

   (4,159,093)

   (6,796,020)

   (4,039,249)

   212,503

   (2,882,721)Net income for year

   (7,287,727)

   (4,712,596)

   (6,803,143)

   (4,573,734)

   (392,427)

   (2,920,431)Other comprehensive income

   (3,451,487)

   (7,965,214)

   (2,494,511)

   -

   1,312,608

   3,719,889Depreciation and amortization

   (2,104,820)

   (2,698,849)

   (1,998,935)

   (534,485)

   (1,936,455)

   (1,091,414)As of December 31, 2016

   As of December 31, 2015

   As of December 31, 2015ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Assets and LiabilitiesCurrent assets

   64,587,798

   7,602,940

   57,908,034

   9,326,003

   15,625,609

   6,987,602Non-current assets

   50,994,744

   30,504,073

   29,453,402

   31,393,842

   39,076,178

   17,664,655Current liabilities

   23,043,784

   5,886,879

   6,233,586

   6,086,146

   17,550,702

   4,467,768Non-current liabilities

   2,350,385

   7,789,367

   3,720,129

   9,494,421

   2,725,097

   5,244,421


F-75

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 20Intangible assets other than goodwill  The intangible assets movement during the years ended as of December 31, 2015 and 2016 was as follows:  Trademarks

   Software programs

   Water rights

   Distribution rights

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$As of January 1, 2015Historic cost

   58,720,268

   21,353,252

   1,914,139

   1,046,487

   83,034,146Accumulated amortization

   -

   (14,281,717)

   -

   (95,534)

   (14,377,251)Book Value

   58,720,268

   7,071,535

   1,914,139

   950,953

   68,656,895As of December 31, 2015Additions

   -

   3,160,435

   -

   104,739

   3,265,174Additions by business combination (1)

   7,747,581

   -

   -

   -

   7,747,581Transfers (2)

   (3,266,332)

   -

   -

   -

   (3,266,332)Divestitures (cost)

   -

   (3,748)

   -

   -

   (3,748)Divestitures (amortization)

   -

   3,748

   -

   -

   3,748Amortization of year

   -

   (1,814,784)

   -

   (126,877)

   (1,941,661)Conversion effect

   (2,235,479)

   (297,814)

   -

   (247,219)

   (2,780,512)Effect of conversion (amortization)

   -

   164,652

   -

   22,210

   186,862Book Value

   60,966,038

   8,284,024

   1,914,139

   703,806

   71,868,007As of December 31, 2015Historic cost

   60,966,038

   24,212,125

   1,914,139

   904,007

   87,996,309Accumulated amortization

   -

   (15,928,101)

   -

   (200,201)

   (16,128,302)Book Value

   60,966,038

   8,284,024

   1,914,139

   703,806

   71,868,007As of December 31, 2016Additions

   40,000

   4,533,631

   219,163

   -

   4,792,794Additions by business combination (1)

   5,614,575

   -

   -

   -

   5,614,575Divestitures (cost)

   -

   (167,825)

   (42,243)

   -

   (210,068)Divestitures (amortization)

   -

   197,910

   -

   -

   197,910Amortization of year

   -

   (2,472,425)

   -

   (389,166)

   (2,861,591)Conversion effect

   (1,714,990)

   (213,166)

   -

   (140,990)

   (2,069,146)Effect of conversion (amortization)

   -

   130,442

   -

   215,927

   346,369Book Value

   64,905,623

   10,292,591

   2,091,059

   389,577

   77,678,850As of December 31, 2016Historic cost

   64,905,623

   28,364,765

   2,091,059

   763,017

   96,124,464Accumulated amortization

   -

   (18,072,174)

   -

   (373,440)

   (18,445,614)Book Value

   64,905,623

   10,292,591

   2,091,059

   389,577

   77,678,850
  (1) SeeNote 1, letter a)andd). (2) SeeNote 24, letter a).   There are no restriction or any pledge against on intangible assets.


F-76

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The detail of the Trademarks appears below:  Operating segment

   Cash Generating Unit

   As of December 31, 2016

   As of December 31, 2015(CGU)

   ThCh$

   ThCh$Chile

   Embotelladoras Chilenas Unidas S.A.

   31,476,163

   25,861,588Manantial S.A.

   1,166,000

   1,166,000Compañía Pisquera de Chile S.A.

   1,363,782

   1,363,782Compañía Cerveceria Kunstmann S.A.

   286,744

   286,518Subtotal

   34,292,689

   28,677,888International Business

   CCU Argentina S.A. and subsidiaries

   4,774,066

   6,171,061Marzurel S.A., Coralina S.A. and Milotur S.A.

   2,822,016

   2,932,762Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

   3,234,664

   3,440,608Subtotal

   10,830,746

   12,544,431Wines

   Viña San Pedro Tarapacá S.A.

   19,782,188

   19,743,719Subtotal

   19,782,188

   19,743,719Total

   

   64,905,623

   60,966,038
  Management has not identified any evidence of impairment of intangible assets. Respect to trademarks with indefinite useful life, used the same methodology which is designated inNote 21.


F-77

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 21Goodwill  The goodwill movements during the years ended as of December 31, 2016 and 2015 was as follows:  GoodwillThCh$As of January 1, 2015Historic cost

   86,779,903Book Value

   86,779,903As of December 31, 2015Additions by business combination (1)

   16,189,798Transfers (2)

   (2,856,245)Conversion effect

   (623,084)Book Value

   99,490,372As of December 31, 2015Historic cost

   99,490,372Book Value

   99,490,372As of December 31, 2016Conversion effect

   (2,827,349)Book Value

   96,663,023As of December 31, 2016Historic cost

   96,663,023Book Value

   96,663,023
  (1) SeeNote 1, letter d). (2) SeeNote 24, letter a).  Goodwill from investments acquired in business combinations is assigned as of the acquisition date to the Cash Generating Units (CGU), or group of CGUs that it is expected will benefit from the business combination synergies. The book value of the goodwill of the investments assigned to the CGUs inside the Company segments are:  Operating segment

   Cash Generating Unit

   As of December 31, 2016

   As of December 31, 2015(CGU)

   ThCh$

   ThCh$Chile

   Embotelladoras Chilenas Unidas S.A.

   25,257,686

   25,257,686Manantial S.A.

   8,879,245

   8,879,245Compañía Pisquera de Chile S.A.

   9,808,550

   9,808,550Los Huemules S.R.L.

   47,443

   47,443Subtotal

   43,992,924

   43,992,924International Business

   CCU Argentina S.A. and subsidiaries

   6,851,916

   8,864,698Marzurel S.A., Coralina S.A. and Milotur S.A.

   7,260,675

   7,701,975Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

   6,141,364

   6,514,631Subtotal

   20,253,955

   23,081,304Wines

   Viña San Pedro Tarapacá S.A.

   32,416,144

   32,416,144Subtotal

   32,416,144

   32,416,144Total

   

   96,663,023

   99,490,372


F-78

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Goodwill assigned to the CGU is subject to impairment tests annually or with a higher frequency in case there are indications that any of the CGU could experience impairment. The recoverable amount of each CGU is determined as the higher of value in use or fair value less costs to sell. To determine the value in use, the Company has used cash flow projections over a 5-year span, based on the budgets and projections reviewed by Management for the same term and with an average grown-rate of 3%. The rates used to discount the projected cash flows reflect the market assessment of the specific risks related to the corresponding CGU. The pre-tax discount rates used range from a 9.5% to 12.8%. Given the materiality of the amounts involved, it was not considered relevant to describe additional information in this Note. A reasonable change in assumptions would not result in an impairment to goodwill.  As December 31, 2016, the Company has not identified any evidence of impairment of goodwill.


F-79

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 22Property, plant and equipment  The movement of Property, plant and equipment is as follows:  Land, buildings and contruction

   Machinery and equipment

   Bottles and containers

   Other Equipment

   Assets under contruction

   Furniture, accesories and vehicles

   Assets under finance lease

   Under production vines

   TotalThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$As of January 1, 2015Historic cost

   557,500,819

   388,454,274

   189,538,674

   111,860,840

   101,859,601

   56,290,001

   16,367,167

   30,037,467

   1,451,908,843Accumulated depreciation

   (136,838,685)

   (233,259,470)

   (101,755,979)

   (73,303,551)

   -

   (39,158,230)

   (2,620,547)

   (13,716,739)

   (600,653,201)Book Value

   420,662,134

   155,194,804

   87,782,695

   38,557,289

   101,859,601

   17,131,771

   13,746,620

   16,320,728

   851,255,642As of December 31, 2015Additions

   -

   -

   -

   -

   123,581,249

   -

   -

   -

   123,581,249Transfers

   24,332,658

   53,855,456

   21,539,178

   12,777,031

   (121,954,867)

   8,596,245

   8,750

   845,549

   -Conversion effect historic cost

   (6,736,100)

   (10,797,668)

   (11,546,968)

   (4,002,063)

   (460,019)

   (511,782)

   (2,578)

   (180,003)

   (34,237,181)Write off (cost)

   (747,359)

   (289,708)

   (3,742,613)

   (1,918,945)

   -

   (1,156,594)

   (18,734)

   -

   (7,873,953)Write off (depreciation)

   394,898

   184,171

   3,456,971

   1,909,228

   -

   636,696

   12,858

   -

   6,594,822Capitalized interests

   -

   -

   -

   -

   1,086,976

   -

   -

   -

   1,086,976Depreciation

   (16,319,675)

   (23,241,987)

   (20,568,254)

   (9,738,483)

   -

   (6,504,278)

   (290,871)

   (1,009,087)

   (77,672,635)Conversion effect depreciation

   828,924

   4,905,696

   5,480,844

   2,894,015

   -

   353,900

   256

   81,519

   14,545,154Others increase (decreased)

   264,777

   368,742

   783,920

   226,420

   (2,018,429)

   150,953

   (23,262)

   -

   (246,879)Divestitures (cost)

   (416,892)

   (1,536,631)

   (11,721,918)

   (1,758,026)

   -

   (1,512,864)

   (283)

   (1,063,451)

   (18,010,065)Divestitures (depreciation)

   489,274

   1,193,606

   10,980,342

   1,624,423

   -

   965,423

   165

   629,647

   15,882,880Transfers to Assets Held for Sale (Cost)

   (2,682,692)

   -

   -

   -

   -

   -

   -

   -

   (2,682,692)Transfers to Assets Held for Sale (Depreciation)

   443,892

   -

   -

   -

   -

   -

   -

   -

   443,892Book Value

   420,513,839

   179,836,481

   82,444,197

   40,570,889

   102,094,511

   18,149,470

   13,432,921

   15,624,902

   872,667,210As of December 31, 2015Historic cost

   569,642,008

   428,398,944

   185,024,437

   117,920,217

   102,094,511

   60,844,400

   16,447,490

   29,639,562

   1,510,011,569Accumulated depreciation

   (149,128,169)

   (248,562,463)

   (102,580,240)

   (77,349,328)

   -

   (42,694,930)

   (3,014,569)

   (14,014,660)

   (637,344,359)Book Value

   420,513,839

   179,836,481

   82,444,197

   40,570,889

   102,094,511

   18,149,470

   13,432,921

   15,624,902

   872,667,210As of December 31, 2016Additions

   -

   -

   -

   -

   128,518,969

   -

   -

   -

   128,518,969Transfers

   22,834,409

   40,559,020

   26,734,419

   11,477,889

   (115,555,005)

   12,571,079

   -

   1,378,189

   -Conversion effect historic cost

   (5,161,938)

   (9,794,457)

   (10,440,956)

   (3,309,017)

   (716,066)

   (63,653)

   (1,927)

   (100,704)

   (29,588,718)Write off (cost)

   (421,820)

   (1,114,726)

   (963,296)

   (602,003)

   164,887

   (1,425,485)

   -

   -

   (4,362,443)Write off (depreciation)

   16,882

   1,045,213

   1,211,494

   557,191

   -

   809,775

   -

   -

   3,640,555Capitalized interests

   -

   -

   -

   -

   853,832

   -

   -

   -

   853,832Depreciation

   (16,446,343)

   (22,298,558)

   (20,154,538)

   (9,709,915)

   -

   (9,495,693)

   (235,007)

   (1,025,552)

   (79,365,606)Conversion effect depreciation

   1,743,342

   4,080,872

   3,082,501

   4,139,993

   -

   252,389

   578

   66,872

   13,366,547Others increase (decreased)

   (40,372)

   1,960,728

   (1,217,118)

   (313,368)

   (779,982)

   792,760

   (620,991)

   -

   (218,343)Divestitures (cost)

   (1,973,792)

   (4,671,503)

   (919,611)

   (105,417)

   -

   (479,526)

   -

   (1,480,301)

   (9,630,150)Divestitures (depreciation)

   1,366,357

   4,474,718

   699,573

   23,026

   -

   375,766

   -

   1,010,409

   7,949,849Book Value

   422,430,564

   194,077,788

   80,476,665

   42,729,268

   114,581,146

   21,486,882

   12,575,574

   15,473,815

   903,831,702As of December 31, 2016Historic cost

   584,830,357

   453,656,276

   196,174,306

   129,190,151

   114,581,146

   70,251,593

   13,926,785

   29,436,746

   1,592,047,360Accumulated depreciation

   (162,399,793)

   (259,578,488)

   (115,697,641)

   (86,460,883)

   -

   (48,764,711)

   (1,351,211)

   (13,962,931)

   (688,215,658)Book Value

   422,430,564

   194,077,788

   80,476,665

   42,729,268

   114,581,146

   21,486,882

   12,575,574

   15,473,815

   903,831,702


F-80

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The balance of the land at the end of each year is as follows:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Land

   226,136,602

   227,849,584Total

   226,136,602

   227,849,584
  Capitalized interest as of December 31, 2016, amounted to ThCh$ 853,832 (ThCh$ 1,086,976 in 2015), using an annually capitalization rate of 4.17% for both years.  The Company, through its subsidiaries Viña San Pedro Tarapacá S.A., has biological assets corresponding to vines that produce grapes. The vines are segmented into those under formation and those under production, and they are grown both on leased and owned land. The grapes harvested from these vines are used in the manufacturing of wine, which is marketed both in the domestic market and abroad.  As ofDecember 31, 2016, the Company maintained approximately 4,208 of which 3,787 hectares are for vines in production stage. Of the total hectares mentioned above, 3,455 correspond to own land and 332 to leased land.  The vines under formation are recorded at historic cost, and only start being depreciated when they are transferred to the production phase, which occurs in the majority of cases in the third year after plantation, when they start producing grapes commercially (in volumes that justify their production-oriented handling and later harvest).  During 2016, the production plant vines yield approximately 49.8 million kilos of grapes (60.1 million kilos of grapes in 2015).  As part of the risk administration activities, the subsidiaries use insurance agreements for the damage caused by nature or other to their biological assets. In addition, either productive or under formation vines are not affected by title restrictions of any kind, nor have they been pledged as a guarantee for financial liabilities.  By the nature of business of the Company, in the value of the assets it is not considered to start an allowance for cost of dismantling, removal or restoration.  In relation to the impairment losses of property, plant and equipment, the Managment has not perceived evidence of impairment with respect to these at December 31, 2016.  Assets under finance lease:  The book value of land and buildings relates to finance lease agreements for the Company and its subsidiaries. Such assets will not be owned by the Company until the corresponding purchase options are exercised.  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Land

   3,130,181

   3,037,571Buildings

   9,217,312

   9,333,443Machinery and equipment

   228,081

   1,061,907Total

   12,575,574

   13,432,921
  InNote 26, letter B)includes the detail of the lease agreements, and it also reconciles the total amount of the future minimum lease payments and their current value as regards such assets, the purchase options originated at CCU S.A., Compañía Cervecera Kunstmann S.A. and Manantial S.A.


F-81

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 23Investment Property  Changes in the movement of the investment property during the years ended as of December 31, 2015 and 2016 is as follows:  Lands

   Buildings

   TotalThCh$

   ThCh$

   ThCh$As of January 1, 2015Historic cost

   5,860,457

   2,775,205

   8,635,662Depreciation

   -

   (718,049)

   (718,049)Book Value

   5,860,457

   2,057,156

   7,917,613As of December 31, 2015Additions

   -

   4,148

   4,148Transfers from PPE (cost)

   (275,000)

   -

   (275,000)Depreciation

   -

   (60,450)

   (60,450)Conversion effect (depreciation)

   (488,315)

   (291,928)

   (780,243)Conversion effect

   -

   31,934

   31,934Book Value

   5,097,142

   1,740,860

   6,838,002As of December 31, 2015Historic cost

   5,097,142

   2,487,425

   7,584,567Depreciation

   -

   (746,565)

   (746,565)Book Value

   5,097,142

   1,740,860

   6,838,002As of December 31, 2016Additions

   -

   11,036

   11,036Divestitures

   (2,563)

   -

   (2,563)Depreciation

   -

   (41,055)

   (41,055)Conversion effect (depreciation)

   (364,940)

   (218,986)

   (583,926)Conversion effect

   -

   32,333

   32,333Book Value

   4,729,639

   1,524,188

   6,253,827As of December 31, 2016Historic cost

   4,729,639

   2,279,475

   7,009,114Depreciation

   -

   (755,287)

   (755,287)Book Value

   4,729,639

   1,524,188

   6,253,827
  Investment property includes twenty land properties, two offices and one apartment, situated in Chile, which are maintained for appreciation purposes, with one land property, two offices and one apartment of them being leased and generating ThCh$ 251,545 revenue during year 2016 (ThCh$ 172,243 in 2015 and ThCh$ 153,283 in 2014). Additionally, there are three land properties in Argentina, which are leased and generated an income for ThCh$ 131,389 for year 2016 (ThCh$ 127,093 in 2015 and ThCh$ 117,661 in 2014). In addition, the expenses associated with such investment properties amounted to ThCh$ 71,090 for the year ended as of December 31, 2016 (ThCh$ 120,340 in 2015 and ThCh$ 190,670 in 2014).  The fair value, of investment property that represent 90% of the book value, is ThCh$ 18,249,882.  Management has not detected any evidence of impairment of Investment property.  The Company does not maintain any pledge or restriction over investment property items.


F-82

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 24Assets of disposal group held for sale    a)

   Chile Operating segmentOn January 7, 2016, the shareholders of Compañía Pisquera Bauzá S.A. came to an agreement in which Compañía Pisquera de Chile S.A. (“CPCh”) (subsidiary of Compañía Cervecerías Unidas S.A.) has sold its interest of 49% to Agroproductos Bauzá S.A. The price of the transaction amounted to UF 150,000 (equivalent to ThCh$ 3,844,364 on December 31, 2015).

   

   In January 2016, the first installment was paid for an amount of UF 20,000 (equivalents to ThCh$ 512,596 on January 8, 2016).

   

   As of December 31, 2016, the balances is UF 130,000 plus interest, of which UF 20,000 with short-term maturity (equivalents to ThCh$ 526,959) and UF 110,000 with long-term maturity (equivalents to ThCh$ 2,898,277 payable in annual installments maturing in 2020 (SeeNote 14).

   

   Previously, in October 2015, the Board of Directors of CPCh agreed to instruct the Management to obtain an agreement with Agroproductos Bauzá based on the terms which were reflected in the before mentioned transaction. As a consequence of the aforementioned CPCh recorded a provision before taxes for an amount of ThCh$ 1,401,253, charged to the result of the fourth quarter of for year 2015. This amount is presented under Other gains/losses in the Consolidated Statement of Income of the quarter.      b)

   International Business Operating segment-

   During the last quarter of 2009, the Board of Tamarí S.A. (merged with Finca la Celia S.A. as of April 1, 2011)authorized the sale of fixed assets which includes the winery with facilities for processing and storage of wines as well as of acres that surround it and the guest house. This decision is based primarily on the advantage of consolidating the operations of processing and packaging of wines from the Wine Group subsidiaries VSPT facilities in Finca La Celia, generating significant synergies for the Group.-

   During 2010, the Company hired a specialist broker for such assets. Subsequently, on December 13, 2011, a sales reservation contract was signed for all of the assets. At the date of issuance of these Financial Statements this transaction is current.-

   During December 2014, the Board of subsidiary Sidra La Victoria S.A. authorized the sale of property located in Cipolletti city, Provincia de Río Negro, Argentina. During November 2015 this property was sold and a gain before tax of ThCh$ 1,977,432 was recognize under item Other income by function.-

   During September 2015, the Board of subsidiary Saenz Briones S.A. authorized the sale of property located in Luján de Cuyo city, Provincia de Mendoza, Argentina. At the date of issuance of these Financial Statements that property is the same condition.    c)

   Wine Operating segment-

   During November 2015, the Board of subsidiary Viña Valles de Chile S.A. (legal and continuing successor of Viña Misiones de Rengo S.A.) authorized the sale of certanis fixed asstes located in Rengo city, Provincia de Cachapoal, Sexta Región. On December 23, 2015 signed sale reservation contract for al fiexed assets available for the sale. At the date of issuance of these Financial Statements that  transaction is current.    As described inNote 2, 2.18, non-current assets held for sale have been recorded at the lower of carrying amount less cost to sale.


F-83

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
   AtDecember 31, 2016 and 2015, the items of assets held for sale are the following:  Assets of disposal group held for sale

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Land

   1,816,348

   1,855,980Contructions

   504,207

   544,863Machinerys

   57,332

   74,109Joint agreement (Trademarks, goodwill, net of deferred taxes) (1)

   -

   3,844,364Total

   2,377,887

   6,319,316
  (1)Under this ítem include ThCH$ 2,856,245 related to Goodwill   Note 25Income taxes  Tax accounts receivable  The detail of the taxes receivables is the following:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Refundable tax previous year

   4,436,810

   3,296,151Taxes under claim (1)

   2,141,476

   2,138,675Argentinean tax credits

   2,532,114

   3,756,333Monthly provisions

   18,860,164

   4,592,593Payment of absorbed profit provision

   75,141

   33,276Other credits

   1,377,774

   1,447,192Total

   29,423,479

   15,264,220
 (1)This item include claims for refund of first category taxes (Provisional payment of absorved profit) for an amount of ThCh$ 968,168 that was presented in April 2014 from the commercial year 2013 and claim to ThCh$ 1,173,281 presented in April 2010 from the commercial year 2009.   Taxes accounts payable  The detail of taxes payable taxes is as follows:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Chilean income taxes

   7,033,363

   7,689,139Monthly provisional payments

   4,365,187

   3,488,085Chilean unique taxes

   68,824

   224,045Estimated Argentine minimum gain subsidiaries taxes

   339,060

   796,755Total

   11,806,434

   12,198,024


F-84

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Tax expense  The detail of the income tax and deferred tax expense for the years ended as ofDecember 31, 2016, 2015 and 2014, is as follows:  For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Income as per deferred tax related to the origin and reversal of temporary differences

   (878,629)

   (454,933)

   992,342Prior year adjustments

   3,838,136

   3,204,656

   4,763,242Effect of change in tax rates

   (856,612)

   (1,066,964)

   (14,520,287)Tax benefits (loss)

   (765,292)

   248,559

   527,447Total deferred tax expense

   1,337,603

   1,931,318

   (8,237,256)Current tax expense

   (31,285,976)

   (48,168,474)

   (34,522,795)Prior period adjustments

   (298,010)

   (3,877,360)

   (3,913,449)(Loss) Income from income tax

   (30,246,383)

   (50,114,516)

   (46,673,500)
  (1)   On September 29, 2014 Act No. 20,780 was published in Chile, regarding the so called “Tax reform” which introduces amendments, among others, to the Income tax system.  The said Act provides that corporations will apply by default the "Partially Integrated System", unless a future Extraordinary Shareholders Meeting agrees to opt for the "Attributed Income Regime”. The Act provides for the "Partially Integrated System" a gradual increase in the First Category Income tax rate, going from 20% to 21% for the business year 2014, to 22.5% for the business year 2015, to 24% for the business year 2016, to 25.5% for the business year 2017 and to 27% starting 2018 business year.  The difference between assets and liabilities for deferred taxes which occur as a direct effect of the increase in the First Category Income tax rate introduced by Act No. 20,780, has been accounted against to Net income. As of December 31, 2014, the total effect registered against the Net income was an amount of ThCh$ 14,520,287.  The deferred taxes related to items charged or credited directly to Consolidated Statement of Comprehensive Income are as follows:  For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Net income from cash flow hedge

   (20,648)

   (17,563)

   39,470Actuarial gains and losses deriving from defined benefit plans

   659,198

   314,541

   501,689Charge to equity

   638,550

   296,978

   541,159
  Effective Rate  The Company’s income tax expense as ofDecember 31, 2016, 2015 y 2014represents 17.70%, 26.30% and 27.90%, respectively of income before taxes. The following is reconciliation between such effective tax rate and the statutory tax rate valid in Chile.  For the years ended as of December 31,2016

   2015

   2014ThCh$

   Rate (%)

   ThCh$

   Rate (%)

   ThCh$

   Rate (%)Income before taxes

   170,328,270

   -

   190,640,106

   -

   167,168,082

   -Income tax using the statutory rate

   (40,878,785)

   24.00

   (42,894,024)

   22.50

   (35,105,297)

   21.00Adjustments to reach the effective rateTax effect of permanent differences, net

   10,357,858

   (6.10)

   (3,202,337)

   1.70

   (133,385)

   0.10Effect of change in tax rate

   (856,612)

   0.50

   (1,066,964)

   0.50

   (14,520,287)

   8.60Effect of tax rates in Argentina and Uruguay

   (1,308,482)

   0.80

   (2,278,489)

   1.20

   2,235,676

   (1.30)Prior year adjustments

   2,439,638

   (1.40)

   (672,702)

   0.40

   849,793

   (0.50)Income tax, as reported

   (30,246,383)

   17.70

   (50,114,516)

   26.30

   (46,673,500)

   27.90


F-85

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Deferred taxes  Deferred tax assets and liabilities included in the Balance Sheet were as follows:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Movement of deferred tax assetsAccounts receivable impairment provision

   861,158

   714,251Other non-tax expenses

   11,303,607

   12,808,597Employee benefits

   2,166,999

   1,930,430Inventory impairment provision

   1,554,362

   499,611Severance indemnity

   4,937,161

   5,044,561Inventory valuation

   2,337,591

   1,454,638Amortization of intangibles

   206,616

   2,517,835Other assets

   3,536,574

   3,856,366Tax loss carryforwards

   4,960,567

   5,703,304Total assets from deferred taxes

   31,864,635

   34,529,593Deferred taxes liabilitiesFixed assets depreciation

   36,617,407

   40,338,573Capitalized software expense

   2,271,445

   1,852,161Agricultural operation expense

   5,698,674

   4,348,021Manufacturing indirect activation costs

   4,865,509

   3,867,574Intangibles

   10,054,490

   10,012,031Land

   23,726,645

   26,511,916Other liabilities

   3,555,781

   3,307,567Total liabilities from deferred taxes

   86,789,951

   90,237,843Total

   (54,925,316)

   (55,708,250)
   No deferred taxes have been recorded for the temporary differences between the taxes and accounting value generated by investments in subsidiaries; consequently deferred tax is not recognized for the Translation Adjustments or investments in Joint Ventures and Associates.  In accordance with current tax laws in Chile, taxable losses do not expire and can be applied indefinitely. Regarding Argentina, taxable losses expire after 5 years.


F-86

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  Movement of deferred tax assets

   ThCh$As of January 1, 2015

   (57,311,681)Increase in joint operation

   (1,208,970)Deferred Tax Losses Tax absorption

   (33,276)Deferred taxes from tax loss carry forwards absorption

   1,931,318Conversion effect

   503,187Deferred taxes against equity

   296,978Other deferred movements taxes

   114,194Change

   1,603,431As of December 31, 2015

   (55,708,250)As of January 1, 2016Increase in joint operation

   (1,514,955)Deferred Tax Losses Tax absorption

   (178,473)Deferred taxes from tax loss carry forwards absorption

   1,337,603Conversion effect

   245,227Deferred taxes against equity

   638,550Other deferred movements taxes

   254,982Change

   782,934As of December 31, 2016

   (54,925,316)
    Note 26Other financial liabilities  Debts and financial liabilities classified based on the type of obligation and their classifications in the consolidated balance sheet are as follows:  As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Bank borrowings (*)

   39,079,561

   29,606,398

   27,714,998

   48,335,093Bonds payable (*)

   3,250,023

   70,836,716

   3,155,239

   71,352,994Financial leases obligations (*)

   215,950

   17,500,919

   321,416

   17,238,458Deposits for return of bottles and containers

   13,015,723

   -

   12,503,170

   -Derivatives financial instruments (**)

   11,118,676

   -

   171,470

   -Hedging derivatives (**)

   -

   -

   107,698

   -Total

   66,679,933

   117,944,033

   43,973,991

   136,926,545
  (*)  SeeNote 5. (**) SeeNote 6.


F-87

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The maturities and interest rates of such obligations are as follows:  As ofDecember 31, 2016:  Maturity (*)Debtor Tax ID

   Company

   Debtor country

   Lending party Tax ID

   Creditor name

   Creditor country

   Currency

   0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   Total

   Amortization rate

   Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   

   %Bank borrowings0-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Superville

   Argentina

   USD

   136,115

   -

   -

   -

   -

   136,115

   At maturity

   3.500-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Superville

   Argentina

   USD

   135,537

   -

   -

   -

   -

   135,537

   At maturity

   3.500-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Superville

   Argentina

   USD

   217,353

   -

   -

   -

   -

   217,353

   At maturity

   3.500-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Superville

   Argentina

   USD

   -

   54,032

   -

   -

   -

   54,032

   At maturity

   4.250-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Macro

   Argentina

   USD

   -

   200,933

   -

   -

   -

   200,933

   At maturity

   1.850-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   USD

   201,628

   -

   -

   -

   -

   201,628

   At maturity

   2.700-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   USD

   -

   133,909

   -

   -

   -

   133,909

   At maturity

   2.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   1,436

   1,589

   -

   -

   -

   3,025

   Quarter

   15.250-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   433,258

   -

   -

   -

   -

   433,258

   At maturity

   36.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   228,734

   -

   -

   -

   -

   228,734

   At maturity

   29.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   340,659

   -

   -

   -

   -

   340,659

   At maturity

   28.500-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   -

   518,917

   -

   -

   -

   518,917

   At maturity

   26.750-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco San Juan

   Argentina

   $ARG

   367,243

   -

   -

   -

   -

   367,243

   Quarter

   30.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco San Juan

   Argentina

   $ARG

   9,178

   400,250

   -

   -

   -

   409,428

   Quarter

   27.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco San Juan

   Argentina

   $ARG

   425

   84,263

   -

   -

   -

   84,688

   Quarter

   23.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   BBVA

   Argentina

   $ARG

   524,538

   -

   -

   -

   -

   524,538

   At maturity

   27.500-E

   Finca La Celia S.A.

   Argentina

   0-E

   BBVA

   Argentina

   $ARG

   50,045

   -

   -

   -

   -

   50,045

   At maturity

   27.000-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   290,342

   -

   -

   -

   -

   290,342

   At maturity

   27.750-E

   Finca La Celia S.A.

   Argentina

   0-E

   Banco Patagonia

   Argentina

   $ARG

   74,763

   -

   -

   -

   -

   74,763

   At maturity

   27.5091,041,000-8

   Viña San Pedro Tarapacá S.A. (1)

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   57,821

   7,271,000

   -

   -

   -

   7,328,821

   At maturity

   4.4091,041,000-8

   Viña San Pedro Tarapacá S.A.

   Chile

   97,030,000-7

   Banco Estado

   Chile

   UF

   157,295

   -

   10,012,233

   -

   -

   10,169,528

   At maturity

   2.7091,041,000-8

   Viña San Pedro Tarapacá S.A. (1)

   Chile

   97,018,000-1

   Scotiabank

   Chile

   USD

   3,151

   -

   5,269,733

   -

   -

   5,272,884

   At maturity

   1.7999,586,280-8

   Compañía Pisquera de Chile S.A

   Chile

   97,030,000-7

   Banco Estado

   Chile

   CLP

   457,454

   16,000,000

   -

   -

   -

   16,457,454

   At maturity

   6.8696,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   UF

   16,333

   50,142

   46,143

   -

   -

   112,618

   Monthly

   4.8096,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   UF

   9,264

   28,576

   57,305

   -

   -

   95,145

   Monthly

   5.4896,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   UF

   7,599

   5,124

   -

   -

   -

   12,723

   Monthly

   5.3696,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   13,500

   40,500

   108,000

   18,000

   -

   180,000

   Monthly

   6.0096,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   19,000

   57,000

   12,667

   -

   -

   88,667

   Monthly

   7.5996,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   14,000

   42,000

   88,667

   -

   -

   144,667

   Monthly

   5.8896,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   22,500

   67,500

   180,000

   22,500

   -

   292,500

   Monthly

   5.7696,711,590-8

   Manantial S.A.

   Chile

   76,645,030-K

   Banco Itaú

   Chile

   CLP

   8,111

   25,086

   72,892

   13,047

   -

   119,136

   Monthly

   6.1296,711,590-8

   Manantial S.A.

   Chile

   97,030,000-7

   Banco Estado

   Chile

   CLP

   -

   205,849

   -

   -

   -

   205,849

   Monthly

   4.9296,711,590-8

   Manantial S.A.

   Chile

   97,030,000-7

   Banco Estado

   Chile

   CLP

   67,488

   203,111

   580,563

   -

   -

   851,162

   Monthly

   4.9296,711,590-8

   Manantial S.A.

   Chile

   97,030,000-7

   Banco Estado

   Chile

   CLP

   19,030

   58,392

   167,461

   52,210

   -

   297,093

   Monthly

   5.0296,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   37,500

   112,500

   37,510

   -

   -

   187,510

   Monthly

   5.0496,711,590-8

   Manantial S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   -

   255,037

   -

   -

   -

   255,037

   Monthly

   4.680-E

   Milotur S.A.

   Uruguay

   0-E

   Banco Itaú

   Uruguay

   UYI

   406,353

   638,554

   696,605

   -

   -

   1,741,512

   Monthly

   6.0096,981,310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   21,408

   -

   2,000,000

   -

   -

   2,021,408

   At maturity

   5.3596,981,310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97,018,000-1

   Scotiabank

   Chile

   CLP

   18,000

   2,000,000

   -

   -

   -

   2,018,000

   At maturity

   4.5096,981,310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97,004,000-5

   Banco de Chile

   Chile

   CLP

   -

   6,656

   400,000

   -

   -

   406,656

   At maturity

   4.6896,981,310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97,030,000-7

   Banco Estado

   Chile

   CLP

   190,490

   584,272

   1,672,625

   520,654

   -

   2,968,041

   Monthly

   5.020-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco BNA

   Argentina

   $ARG

   251,181

   717,375

   1,912,999

   -

   -

   2,881,555

   Monthly

   15.000-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco Macro

   Argentina

   $ARG

   34,300

   23,406

   -

   -

   -

   57,706

   Monthly

   15.250-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco BBVA

   Argentina

   $ARG

   421,179

   421,652

   -

   -

   -

   842,831

   Quarter

   26.000-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco BNA

   Argentina

   $ARG

   103,106

   303,347

   134,821

   -

   -

   541,274

   Monthly

   25.190-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco Galicia

   Argentina

   $ARG

   68,826

   789,966

   5,529,763

   -

   -

   6,388,555

   Quarter

   30.500-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco Citibank

   Argentina

   $ARG

   30,190

   -

   -

   -

   -

   30,190

   At maturity

   25.660-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco HSBC

   Argentina

   $ARG

   2,109,794

   -

   -

   -

   -

   2,109,794

   At maturity

   25.250-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco BBVA

   Argentina

   $ARG

   1,392

   -

   -

   -

   -

   1,392

   At maturity

   26.120-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco Macro

   Argentina

   $ARG

   12

   -

   -

   -

   -

   12

   At maturity

   25.530-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Santander Rio

   Argentina

   $ARG

   199,954

   -

   -

   -

   -

   199,954

   At maturity

   25.000-E

   Saenz Briones y Cía. S.A.

   Argentina

   0-E

   Banco Citibank

   Argentina

   $ARG

   1,138

   -

   -

   -

   -

   1,138

   At maturity

   26.50Sub-total

   

   

   

   

   

   

   7,778,623

   31,300,938

   28,979,987

   626,411

   -

   68,685,959
 (1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 6). (*) SeeNote 5the non-discounted contractual cash flows.


F-88

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  MaturityDebtor Tax ID

   Company

   Debtor country

   Registration or ID No. Instrument

   Creditor country

   Currency

   0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   Total

   Amortization rate

   Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   

   %Bonds payable90,413,000-1

   Compañía Cervecerías Unidas S.A.

   Chile

   388 18/10/2004 Bono Serie E

   Chile

   UF

   -

   2,612,294

   5,125,926

   5,298,895

   7,904,394

   20,941,509

   Semiannual

   4.0090,413,000-1

   Compañía Cervecerías Unidas S.A.

   Chile

   573 23/03/2009 Bono Serie H

   Chile

   UF

   637,729

   -

   2,345,596

   9,540,856

   40,621,049

   53,145,230

   Semiannual

   4.25Sub-total

   

   

   

   

   

   

   637,729

   2,612,294

   7,471,522

   14,839,751

   48,525,443

   74,086,739
  MaturityDebtor Tax ID

   Company

   Debtor country

   Lending party Tax ID

   Creditor name

   Creditor country

   Currency

   0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   Total

   Amortization rate

   Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   

   %Financial leases obligations0-E

   Finca La Celia S.A

   Argentina

   -

   Banco Supervielle

   Argentina

   $ARG

   981

   3,017

   1,464

   -

   -

   5,462

   At maturity

   17.5096,711,590-8

   Manantial S.A.

   Chile

   -

   Banco de Creditos e Inversiones

   Chile

   UF

   14,369

   3,837

   -

   -

   -

   18,206

   Monthly

   3.1396,711,590-8

   Manantial S.A.

   Chile

   -

   Banco de Chile

   Chile

   UF

   6,054

   8,072

   -

   -

   -

   14,126

   Monthly

   8.6596,711,590-8

   Manantial S.A.

   Chile

   -

   Banco Security

   Chile

   UF

   4,489

   8,755

   -

   -

   -

   13,244

   Monthly

   9.2590,413,000-1

   Compañía Cervecerías Unidas S.A.

   Chile

   -

   Consorcio Nacional de Seguros S.A

   Chile

   UF

   13,759

   42,717

   125,221

   130,838

   17,131,641

   17,444,176

   Monthly

   7.0796,981,310-6

   Compañía Cervecera Kunstmann S.A

   Chile

   97,030,000-7

   BancoEstado

   Chile

   UF

   25,436

   77,942

   98,688

   -

   -

   202,066

   Monthly

   4.3376,077,848-6

   Cervecera Belga de la Patagonia S.A.

   Chile

   97,015,000-5

   Banco Santander de Chile

   Chile

   UF

   -

   6,522

   -

   13,067

   -

   19,589

   Monthly

   6.27Sub-total

   

   

   

   

   

   

   65,088

   150,862

   225,373

   143,905

   17,131,641

   17,716,869Total

   

   

   

   

   

   

   8,481,440

   34,064,094

   36,676,882

   15,610,067

   65,657,084

   160,489,567


F-89

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As of December 31, 2015:  Maturity (*)Debtor Tax ID

   Company

   Debtor country

   Lending party Tax ID

   Creditor name

   Creditor country

   Currency

   0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   Total

   Amortization rate

   Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   

   %Bank borrowings0-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Supervielle

   Argentina

   USD

   -

   128,459

   -

   -

   -

   128,459

   At maturity

   6.000-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Patagonia

   Argentina

   $ARG

   272,706

   -

   -

   -

   -

   272,706

   At maturity

   28.000-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Patagonia

   Argentina

   $ARG

   106,222

   -

   -

   -

   -

   106,222

   At maturity

   28.500-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Patagonia

   Argentina

   $ARG

   420,665

   -

   -

   -

   -

   420,665

   At maturity

   28.000-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Patagonia

   Argentina

   $ARG

   1,857

   7,389

   3,095

   -

   -

   12,341

   At maturity

   15.250-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Patagonia

   Argentina

   $ARG

   506,450

   -

   -

   -

   -

   506,450

   At maturity

   27.500-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco San Juan

   Argentina

   $ARG

   151,260

   -

   -

   -

   -

   151,260

   At maturity

   29.000-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco San Juan

   Argentina

   $ARG

   -

   486,804

   -

   -

   -

   486,804

   Quarter

   29.000-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Patagonia

   Argentina

   $ARG

   405,927

   -

   -

   -

   -

   405,927

   At maturity

   25.000-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco BBVA

   Argentina

   $ARG

   535,283

   -

   -

   -

   -

   535,283

   At maturity

   29.500-E

   Viña San Pedro Tarapaca S.A. (1)

   Argentina

   O-E

   Banco de Chile

   Argentina

   USD

   28,782

   3,150,341

   -

   -

   -

   3,179,123

   At maturity

   1.9291.041.000-8

   Viña San Pedro Tarapaca S.A. (2)

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   USD

   66,496

   7,101,600

   -

   -

   -

   7,168,096

   At maturity

   1.9091.041.000-8

   Viña San Pedro Tarapaca S.A.

   Chile

   97.004.000-5

   Banco Estado

   Chile

   UF

   -

   56,243

   -

   9,739,054

   -

   9,795,297

   At maturity

   2.7091.041.000-8

   Viña San Pedro Tarapaca S.A. (1)

   Chile

   97.030.000-7

   Scotiabank

   Chile

   USD

   -

   2,977

   5,590,024

   -

   -

   5,593,001

   At maturity

   1.1591.041.000-8

   Compañía Pisquera de Chile S.A

   Chile

   97.018.000-1

   Banco Estado

   Chile

   CLP

   449,879

   -

   15,978,778

   -

   -

   16,428,657

   At maturity

   6.8699.586.280-8

   Manantial S.A.

   Chile

   97.030.000-7

   Banco de Chile

   Chile

   UF

   15,123

   46,470

   109,544

   -

   -

   171,137

   At maturity

   4.8096.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   UF

   8,529

   26,304

   75,692

   16,855

   -

   127,380

   Monthly

   5.4896.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   UF

   7,004

   21,588

   12,375

   -

   -

   40,967

   Monthly

   5.3696.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   CLP

   13,500

   40,500

   108,000

   72,000

   -

   234,000

   Monthly

   6.0096.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   CLP

   19,000

   57,000

   88,668

   -

   -

   164,668

   Monthly

   7.5996.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   CLP

   14,000

   42,000

   112,000

   32,667

   -

   200,667

   Monthly

   5.8896.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   CLP

   22,500

   67,500

   180,000

   112,500

   -

   382,500

   Monthly

   5.7696.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco Itaú

   Chile

   CLP

   23,690

   56,839

   -

   -

   -

   80,529

   Monthly

   6.6696.711.590-8

   Manantial S.A.

   Chile

   76.645.030-K

   Banco Itaú

   Chile

   CLP

   7,704

   23,532

   68,516

   50,621

   -

   150,373

   Monthly

   6.1296.711.590-8

   Manantial S.A.

   Chile

   76.645.030-K

   Banco Estado

   Chile

   CLP

   200,000

   -

   -

   -

   -

   200,000

   Monthly

   5.2696.711.590-8

   Manantial S.A.

   Chile

   76.645.030-K

   Banco Estado

   Chile

   CLP

   254,313

   -

   -

   -

   -

   254,313

   Monthly

   4.3896.711.590-8

   Manantial S.A.

   Chile

   97.030.000-7

   Banco Estado

   Chile

   CLP

   35,843

   36,436

   -

   -

   -

   72,279

   At maturity

   7.5696.711.590-8

   Manantial S.A.

   Chile

   97.030.000-7

   Banco Estado

   Chile

   CLP

   -

   150,000

   -

   -

   -

   150,000

   At maturity

   5.4096.711.590-8

   Manantial S.A.

   Chile

   97.030.000-7

   Banco Estado

   Chile

   CLP

   -

   255,510

   -

   -

   -

   255,510

   Monthly

   4.2296.711.590-8

   Manantial S.A.

   Chile

   97.030.000-7

   Banco Estado

   Chile

   CLP

   18,029

   55,418

   158,974

   138,117

   -

   370,538

   Monthly

   5.0296.711.590-8

   Milotur S.A.

   Chile

   97.030.000-7

   Nuevo Banco Comercial

   Chile

   USD

   25,991

   71,036

   -

   -

   -

   97,027

   At maturity

   5.5096.711.590-8

   Milotur S.A.

   Chile

   97.030.000-7

   Banco Itaú

   Chile

   UYI

   -

   344,850

   1,701,800

   -

   -

   2,046,650

   Monthly

   6.000-E

   Compañia Cervecera Kunstmann S.A.

   Uruguay

   O-E

   Banco Estado

   Uruguay

   CLP

   -

   515,083

   -

   -

   -

   515,083

   Monthly

   4.340-E

   Compañia Cervecera Kunstmann S.A.

   Uruguay

   O-E

   Banco Estado

   Uruguay

   CLP

   -

   618,100

   -

   -

   -

   618,100

   Monthly

   4.3496.981.310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97.030.000-7

   Banco de Chile

   Chile

   CLP

   -

   1,030,538

   -

   -

   -

   1,030,538

   At maturity

   4.3896.981.310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97.030.000-7

   Scotiabank

   Chile

   USD

   7,229

   453,561

   -

   -

   -

   460,790

   At maturity

   1.9096.981.310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97.004.000-5

   Banco Estado

   Chile

   CLP

   180,724

   555,208

   1,589,858

   1,378,183

   -

   3,703,973

   At maturity

   5.0296.981.310-6

   Compañia Cervecera Kunstmann S.A.

   Chile

   97.018.000-1

   Scotiabank

   Chile

   CLP

   -

   1,028,447

   -

   -

   -

   1,028,447

   At maturity

   4.0896.981.310-6

   Compañía Industrial Cervecera S.A.

   Chile

   97.030.000-7

   Banco BNA

   Chile

   $ARG

   345,777

   927,294

   2,472,784

   1,236,392

   -

   4,982,247

   Monthly

   15.0096.981.310-6

   Compañía Industrial Cervecera S.A.

   Chile

   97.018.000-1

   Banco BNA

   Chile

   $ARG

   173,166

   392,114

   697,088

   -

   -

   1,262,368

   At maturity

   25.190-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco BBVA

   Argentina

   $ARG

   560,011

   1,633,640

   1,089,584

   -

   -

   3,283,235

   Quarter

   26.000-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco Galicia

   Argentina

   $ARG

   1,272,502

   1,815,157

   5,446,285

   -

   -

   8,533,944

   Monthly

   29.400-E

   Compañía Industrial Cervecera S.A.

   Argentina

   0-E

   Banco Macro

   Argentina

   $ARG

   44,130

   136,150

   75,639

   -

   -

   255,919

   Monthly

   15.250-E

   Saenz Briones y Cía. S.A.

   Argentina

   0-E

   Banco Citibank

   Argentina

   $ARG

   65,596

   121,022

   -

   -

   -

   186,618

   Quarter

   15.25Sub-total

   

   

   

   

   

   

   6,259,888

   21,455,110

   35,558,704

   12,776,389

   -

   76,050,091
 (1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 6). (2) This obligation is hedged by a Cross Currency Rate Swap agreement(Note 6). (*) SeeNote 5the non-discounted contractual cash flows.


F-90

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  Registration or ID No. Instrument

   

   

   MaturityDebtor Tax ID

   Company

   Debtor country

   Creditor country

   Currency

   0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   Total

   Amortization rate

   Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   

   %Bonds payable90.413.000-1

   Compañía Cervecerías Unidas S.A.

   Chile

   388 18/10/2004 BONO SERIE E

   Chile

   UF

   -

   2,539,921

   4,953,915

   5,095,419

   10,251,636

   22,840,891

   Semiannual

   4.0090.413.000-1

   Compañía Cervecerías Unidas S.A.

   Chile

   573 23/03/2009 BONO SERIE H

   Chile

   UF

   615,318

   -

   -

   2,252,581

   48,799,443

   51,667,342

   Semiannual

   4.25Sub-total

   

   

   

   

   

   

   615,318

   2,539,921

   4,953,915

   7,348,000

   59,051,079

   74,508,233
   MaturityDebtor Tax ID

   Company

   Debtor country

   Lending party Tax ID

   Creditor name

   Creditor country

   Currency

   0 to 3 months

   3 months to 1 year

   Over 1 year to 3 years

   Over 3 years to 5 years

   Over 5 years

   Total

   Amortization rate

   Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   

   %Financial leases obligations0-E

   Finca La Celia S.A

   Argentina

   O-E

   Banco Supervielle

   Argentina

   $ARG

   1,267

   3,900

   6,147

   -

   -

   11,314

   Monthly

   17.5096.711.590-8

   Manantial S.A.

   Chile

   97.000.600-6

   Banco de Creditos e Inversiones

   Chile

   UF

   5,371

   16,386

   9,292

   -

   -

   31,049

   Monthly

   5.0696.711.590-8

   Manantial S.A.

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   UF

   10,764

   16,845

   13,524

   -

   -

   41,133

   Monthly

   9.3196.711.590-8

   Manantial S.A.

   Chile

   97.053.000-2

   Banco Security

   Chile

   UF

   21,598

   25,628

   12,867

   -

   -

   60,093

   Monthly

   6.8190.413.000-1

   Compañía Cervecerías Unidas S.A.

   Chile

   99.012.000-5

   Consorcio Nacional de Seguros S.A

   Chile

   UF

   12,499

   38,806

   113,757

   225,991

   16,628,473

   17,019,526

   Monthly

   7.0796.981.310-6

   Compañía Cervecera Kunstmann S.A

   Chile

   97.004.000-5

   Banco de Chile

   Chile

   UF

   42,822

   23,183

   12,799

   -

   -

   78,804

   Monthly

   5.5896.981.310-6

   Compañía Cervecera Kunstmann S.A

   Chile

   97.030.000-7

   BancoEstado

   Chile

   UF

   23,716

   72,672

   196,552

   -

   -

   292,940

   Monthly

   4.3376.077.848-6

   Cervecera Belga de la Patagonia S.A.

   Chile

   97.015.000-5

   Banco Santander de Chile

   Chile

   UF

   1,455

   4,504

   13,097

   5,959

   -

   25,015

   Monthly

   6.27Sub-total

   

   

   

   

   

   

   119,492

   201,924

   378,035

   231,950

   16,628,473

   17,559,874Total

   

   

   

   

   

   

   6,994,698

   24,196,955

   40,890,654

   20,356,339

   75,679,552

   168,118,198


F-91

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Details of the fair value of bank borrowings, financial leases obligations and bonds payable are described inNote 6.  The effective interest rates of bond obligations are as follows:   Bonds Serie A

   3.96%Bonds Serie E

   4.52%Bonds Serie H

   4.26%Bonds Serie I

   3.18%   The debts and financial liabilities are stated in several currencies and they accrue fixed and variable interest rates. The details of such obligations classified as per currency and interest type (excluding the effect of cross currency interest rate swap agreements) are as follows:  As of December 31, 2016

   As of December 31, 2015Fixed Interest Rate

   Variable Interest Rate

   Fixed Interest Rate

   Variable Interest RateThCh$

   ThCh$

   ThCh$

   ThCh$US Dollar

   1,079,507

   5,272,884

   686,276

   15,940,220Chilean Pesos

   33,822,001

   -

   25,840,175

   -Argentine Pesos

   11,515,546

   4,869,957

   17,146,915

   4,266,388Unidades de Fomento

   102,188,160

   -

   102,191,574

   -UYI

   1,741,512

   -

   2,046,650

   -Total

   150,346,726

   10,142,841

   147,911,590

   20,206,608
  The terms and conditions of the main interest accruing obligations as of December 31, 2016, were as follows:  A)Bank Borrowings  Banco Estado – Bank Loans  a)   OnJuly 27, 2012, the subsidiary Compañía Pisquera Chile S.A. (CPCh) signed a bank loan with the Banco Estado for a total of ThCh$ 16,000,000, for a period of 5 years, with maturity on July 27, 2017.  This loan accrues interest at an annual fixed rate of 6.86% and an effective rate of 7.17%. The Company amortizes interest semi-annually, and the capital amortization consists of a single payment at the end of the established term.  This obligation is subject to certain reporting obligations in addition to complying with the following financial ratios,which will be measured on the half-yearly financial statements of CPCh:  -Maintain a Financial Expense Coverage not less than 3, calculated as the relationship between Gross Margin less Marketing costs, Distribution and Administration expenses, plus Other income by function, less Other expenses by function, plus Depreciation and Amortization, divided by Financial costs.  -Maintain a debt ratio of no more than 2.5, measured as Total liabilities divided by Equity.  -Maintain an Equity higher than UF 770,000.  In addition, this loan obliges CPCh to comply with certain restrictions of affirmative nature, including maintaining insurance, maintaining the ownership of essential assets, and also to comply with certain restrictions, such as not to pledge, mortgage or grant any kind of encumbrance or real right over any fixed asset with an individual accounting value higher than UF 10,000, except under the terms established by the agreement, among other.  As of December 31, 2016, the Company was in compliance with the financial covenants and specific requirements of this loan.


F-92

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 b)   On April 25, 2012, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 500,000, maturing on April 25, 2013. Subsequently this loan was renewed for one year, maturing on April 25, 2014. It was renewed for one year, maturing on April 25, 2015. Subsequently this loan was renewed for one year, maturing on April 27, 2016.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On April 27, 2016, this loan was paid.  c)   On April 25, 2013, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 600,000, maturing on April 25, 2014. It was renewed for one year, maturing on April 25, 2015. Subsequently this loan was renewed for one year, maturing on April 27, 2016.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On April 27, 2016, this loan was paid.  d)   On June 16, 2014, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of 6,200,000 euros, maturing on June 16, 2015.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On June 17, 2015, payment of the loan was made.  e)On October 15, 2014, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of UF 380,000, maturing on October 15, 2019.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.  f)On December 3, 2014, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 1,300,000, maturing on March 31, 2015.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On May 29, 2015 the loan was renewed for a term of 3 months, maturing on July 28, 2015.  On July 17, 2015, payment of the loan was made.  g)On July 15, 2015, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Estado for a total of ThCh$ 4,000,000, maturing on July 14, 2020.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  h)On May 26, 2016, the subsidiary Aguas CCU-Nestlé Chile S.A. signed a bank loan with Banco Estado for a total of ThCh$ 5,300,000, maturing on November 22, 2016.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On November 22, 2016, payment of the loan was made.


F-93

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Banco de Chile – Bank Loans  a)On July 11, 2011, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco de Chile for a total of US$ 4,436,100, maturing on July 11, 2016.  This loan accrues interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortizes interest semi-annually, and capital amortization consists of a single payment at the end of the established term.  This debt was changed to Euros and a fixed interest rate through a currency US$-Euro and interest rate swap agreements (Cross Currency Interest Rate Swap). For details of the Company`s hedge strategies seeNote 5 and 6.  On July 11, 2016, payment of the loan was made.  b) On July 7, 2011, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco de Chile for a total of  US$ 10,000,000, maturing on July 7, 2016.  This loan accrues interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortizes interest semi-annually, and capital amortization consists of a single payment at the end of the established term.  The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`s hedge strategies seeNote 5 and 6.  On July 7, 2016, payment of the loan was made.   The aforementioned loans oblige the Company to comply with the same covenants as the Series A Bond as indicated in letter D)Restrictions in this Note.  c)   On July 7, 2016, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 7,271,000, maturing on July 2, 2017.  This loan accrued interest at an annual rate. The subsidiary amortizes interest and capital consists of a single payment at the end of the established term.  This debt was changed to Euros and a fixed interest rate through a currency CLP-US$ and interest rate swap agreements (Cross Currency Interest Rate Swap). For details of the Company`s hedge strategies seeNote 5 and 6.  d) On April 24, 2014, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 1,000,000, maturing on April 24, 2015.  This loan accrued interest at an annual rate. The subsidiary amortizes interest and capital consists of a single payment at the end of the established term.  On April 24, 2015 the loan was renewed for a term of 1 year, maturing on April 21, 2016.  On April 22, 2016, payment of the loan was made.  e)On April 24, 2015, the subsidiary Compañía Cervecera Kunstmann SA He signed a bank loan with Banco de Chile for a total of ThCh$ 600,000 for a period of three months expiring on July 24, 2015.  This loan bears interest at a fixed interest rate. The subsidiary pays the interest and principal in a single payment at the end of the deadline.  On July 24, 2015, payment of the loan was made.  f)    On April 20, 2016, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 2,000,000, maturing on April 20, 2018.  This loan accrued interest at an annual rate. The subsidiary amortizes interest and capital consists of a single payment at the end of the established term.


F-94

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  g)   On August 25, 2016, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco de Chile for a total of ThCh$ 400,000, maturing on August 24, 2018.  This loan accrued interest at an annual rate. The subsidiary amortizes interest and capital consists of a single payment at the end of the established term.  Banco Scotiabank – Bank Loans  a)  On June 21, 2013, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Scotiabank for a total of US$ 8,000,000, maturing on June 22, 2015.  This loan accrues interest at a compound floating rate Libor plus 90 days plus a fixed margin. The subsidiary amortizes interest quarterly and capital amortization consists of a single payment at the end of the established term.  The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`s hedge strategies seeNote 5 and 6.  On June 22, 2015, payment of the loan was made.  b)   On September 4, 2014, the subsidiary Compañía Cervecera Kunstmann S.A. signed a bank loan with Banco Scotiabank for a total of US$ 638,674, maturing on September 4, 2016.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.  On August 24, 2016, payment of the loan was made.  c)  On June 17, 2015, the subsidiary Viña San Pedro Tarapacá S.A. it signed a bank loan with Scotiabank for a total of US$ 7,871,500, with a term of three years maturing on June 18, 2018.  This loan bears interest at a floating interest rate composed dollar Libor at 90 days plus a fixed margin. The company pays quarterly interest and amortization of capital consists of a single payment at the end of the deadline.  The interest rate risk to which the subsidiary is exposed as result of this loan is mitigated by the use of cross interest rate swap agreements (interest rate fixed). For details of the Company`s hedge strategies seeNote 5 and6.  The aforementioned loans oblige the Company to comply with the covenants indicated in letter D) Restriction in this Note.  d)  On April 24, 2015, the subsidiary Compañía Cervecera Kunstmann SA He signed a bank loan with Scotiabank for a total of US$ 1,000,000, with a term of one year expiring at April 22, 2016.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.  On April 22, 2016, payment of the loan was made.  e)  On April 20, 2016, the subsidiary Compañía Cervecera Kunstmann SA He signed a bank loan with Scotiabank for a total of ThCh$ 2,000,000, with a term of one year expiring at April 20, 2017.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest semi-annually and capital amortization consists of a single payment at the end of the established term.


F-95

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Banco Santander Chile – Bank Loans  a)   On June 17, 2013, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Santander Chile for a total of US$ 8,000,000, maturing on June 17, 2014.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On June 17, 2014, this loan was paid.  b)   On June 17, 2013, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Santander Chile for a total of 6,200,000 Euros, maturing on June 17, 2014.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization consists of a single payment at the end of the established term.  On June 17, 2014, this loan was paid.   BBVA Banco Francés S.A.; HSBC Bank Argentina S.A.; Banco de Galicia y Buenos Aires S.A.; La Sucursal de Citibank NA established in Argentinian Republic; Banco de La Provincia de Buenos Aires – Syndicated Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)  On October 5, 2012, the subsidiary CICSA signed a syndicated bank loan for a total of 187.5 million Argentine Pesos, maturing on October 5, 2015.  The proportional participation of banks lenders is as follows:  a)BBVA Bank French S.A., with 55 million Argentine Pesos of pro rata participation.  b)Banco de la Provincia de Buenos Aires, with 54 million Argentine Pesos.  c)HSBC Bank Argentina S.A., with 43.5 million Argentine Pesos of pro rata participation.  d)Banco de Galicia y Buenos Aires S.A., with 20 million Argentine Pesos of pro rata participation.  e)Citibank NA established in Argentinian Republic, with 15 million Argentine Pesos of pro rata participation.  This loan accrues interest at an annual rate of 15.01% whose payment is made monthly. The subsidiary amortizes capital in 9 consecutive and equal quarterly quotes, once the grace period of 12 months from the date of disbursement.  This loan obliges the subsidiary to meet specific requirements and financial covenants related to their Consolidated Financial Statements, which according to agreement of the parties are as follows:  a)Maintain a capability of repayment measure at the end of each quarter less than or equal to 3, calculated as the financial debt over Adjusted EBITDA1.Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: Operating result before Interest, Income taxes, Depreciation and Amortization for the period of 12 months immediately prior to the date of calculation.  b)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 2.5, calculated as the ratio of Adjusted EBITDA (as defined in paragraph (a)) and Financial Costs account.  c)Maintain at the end of each quarter an indebtedness ratio not higher than 1.5, defined as the ratio Financial Liabilities over the Equity  meaning the Equity at the time of calculation, as it arises from their Financial Statements and in accordance with generally accepted accounting principles in the Argentinian Republic.  d)Maintain at the end of each quarter a minimum Equity of 600 million of Argentine Pesos.  1EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).


F-96

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  As of December 31, 2016, the Company was in compliance with the financial covenants and specific requirements of this loan.   Banco de la Nación Argentina – Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)  a)On December 28, 2012, CICSA signed a bank loan for a total of 140 million of Argentine pesos for a period of 7 years, maturing on November 26, 2019, and whose loan is delivered in two stages, where the first was carried out on December 28, 2012, for a total of 56 million argentine pesos and the second on June 28, 2013, for a total of 84 million of Argentine pesos.  This loan accrues interest at an annual rate of 15% fixed by first 36 months.Having completed that term, accrues interest at a compound floating rate BADLAR in pesos plus a fixed spread of 400 basis points and to this effect will be taken BADLAR rate published by the Central Bank of the Argentina Republic, corresponding to five working days prior to the start of the period, subject to the condition that does not exceed the lending rate of portfolio general of Banco de la Nación Argentina, in whose case shall apply this.  The subsidiary amortizes capital in 74 consecutive and equal, once the grace period of 10 months from the date of disbursement.  This loan is guaranteed by CCU S.A., through a Stand By issued by the Banco Estado de Chile in favor of Banco de la Nación Argentina (seeNote 34).  b)   On April 20, 2015, the subsidiary CICSA signed a bank loan for a total of 24 million of argentine pesos, maturing on April 4, 2018.  This loan accrues interestat a compound floating rate BADLAR in pesos plus a fixed spread of 500 basis points and subject to the condition that does not exceed the lending rate of portfolio general of Banco de la Nación Argentina, in whose case shall apply this.  The subsidiary amortizes capital in 30 monthly, once the grace period of 6 months from de date of disbursement.  This loan is guaranteed by CCU S.A., through a Stand By issued by the Banco Estado de Chile (seeNote 34).  c)   On June 26, 2015, the subsidiary CICSA signed a bank loan for a total of 30 million of argentine pesos, maturing on December 26, 2015.  This loan accrues a fixed interest at an annual rate of 23%. The subsidiary amortizes monthly interest and the capital amortization in 6 monthly.  Banco BBVA Francés S.A. – Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)  On June 18, 2014, the subsidiary CICSA signed a bank loan with BBVA Bank for a total of 90 million argentine pesos, maturing on June 19, 2017.  This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization quarterly.   Banco de Galicia y Buenos Aires S.A.; Banco Santander Río S.A.; – Syndicated Bank Loan with Compañía Industrial Cervecera S.A. (CICSA)  On April 20, 2015, the subsidiary CICSA signed a syndicated bank loan for a total of 150 million argentine pesos, maturing on April 20, 2018.  The proportional participation of banks lenders is as follows:  (a) Banco de Galicia y Buenos Aires S.A., with 75 million argentine pesos of pro rata participation.  (b)Banco Santander Río, with 75 million argentine pesos of pro rata participation.


F-97

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  This loan accrues interest at an annual rate of 29.4% fixed by first 12 months and thereafteraccrues interest at a compound floating rate BADLAR in pesos plus a fixed spread of 360 basis points and the payments will be quarterly. The capital amortization will payment in 9 quarterly,once the grace period of 12 months from de date of disbursement.  This loan obliges the subsidiary to meet specific requirements and financial covenants related to their Consolidated Financial Statements, which according to agreement of the parties are as follows:  a)Maintain a capability of repayment measure at the end of each quarter less than or equal to 3, calculated as the financial debt over Adjusted EBITDA2.Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: Operating result before Interest, Income taxes, Depreciation and Amortization for the period of 12 months immediately prior to the date of calculation.  b)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 2.5, calculated as the ratio of Adjusted EBITDA (as defined in paragraph (a)) and Financial Costs account.  c)Maintain at the end of each quarter an indebtedness ratio not higher than 1.5, defined as the ratio Financial Liabilities over the Equity  meaning the Equity at the time of calculation, as it arises from their Financial Statements and in accordance with generally accepted accounting principles in the Argentinian Republic.  d)Maintain at the end of each quarter a minimum Equity of 600 million of Argentine Pesos.  As of December 31, 2016, the Company was in compliance with the financial covenants and specific requirements of this loan.  B)Financial Lease Obligations  The most significant financial lease agreements are as follows:  CCU S.A.  In December, 2004, the Company sold a piece of land previously classified as investment property. As part of the transaction, the Company leased eleven floors of a building under construction on the mentioned piece of land.  The building was completed during 2007, and on June 28, 2007, the Company entered into a 25-years lease agreement with Compañía de Seguros de Vida Consorcio Nacional de Seguros S.A., for a total amount of UF 688,635.63, with an annual interest rate of 7.07%. The current value of the agreement amounted to ThCh$ 10,403,632 as of December 31, 2007. The agreement also grants CCU the right or option to acquire the assets contained in the agreement (real estate, furniture and facilities) as from month 68 of the lease. The lease rentals committed are according to the conditions prevailing in the market. For Chilean GAAP purposes, in 2004 the Company recognized a ThCh$ 3,108,950 gain for the building portion not leased by the Company, and a ThCh$ 2,276,677 liability deferred through completion of the building, when the Company recorded the transaction as financial lease.   2EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).


F-98

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Compañía Cervecera Kunstmann S.A., Manantial S.A. and Finca La Celia S.A.:  Other lease agreements are as follows:  Type

   Institution

   Contract Date

   Currency

   ThCh$

   Number of quotas

   Annual Interest

   Purchase option (UF)Compañía Cervecera Kunstmann S.A.Production Plant

   Banco de Chile

   19-04-05

   UF

   20.489

   168

   8.30%

   302Land Lote 2C

   Banco de Chile

   26-06-07

   UF

   7.716

   121

   5.80%

   85Land Lote 2D

   Banco de Chile

   25-03-08

   UF

   15.000

   97

   4.30%

   183Land Lote 13F1

   Banco Estado

   10-10-12

   UF

   22.341

   72

   4.33%

   348Manantial S.A.Dispensers

   Banco de Crédito e Inversiones

   04-01-12

   UF

   4.275

   37

   5.06%

   116Dispensers

   Banco de Chile

   05-12-11

   UF

   1.073

   37

   5.98%

   311Vehicles

   Banco de Chile

   27-08-12

   UF

   1.265

   25

   12.63%

   51Computers

   Banco Security

   23-08-11

   UF

   2.387

   37

   6.99%

   65Dispensers

   Banco Security

   09-08-11

   UF

   20.845

   37

   6.62%

   563Finca La Celia S.A.Automotor

   Banco Supervielle

   10-06-14

   $ARG

   10.814

   45

   17.50%

   6.250
  The following is a detail of future payments and the current value of the financial lease obligations as ofDecember 31, 2015:  Lease Minimum Future Payments

   As of December 31, 2016Gross Amount

   Interest

   AmountThCh$

   ThCh$

   ThCh$0 to 3 months

   368,052

   302,964

   65,0883 months to 1 year

   1,050,810

   899,948

   150,862Over 1 year to 3 years

   2,603,315

   2,377,942

   225,373Over 3 years to 5 years

   2,305,704

   2,161,799

   143,905Over 5 years

   28,638,952

   11,507,311

   17,131,641Total

   34,966,833

   17,249,964

   17,716,869


F-99

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 C)Bonds Payable  Series A Bonds – Subsidiary Viña San Pedro Tarapacá S.A.  On June 13, 2005, the subsidiary Viña San Pedro Tarapacá S.A. recorded in the Securities Record a bond issue for a total UF 1,500,000 at a 20-years term maturing on July 15, 2025. Such issue was placed in the local market on July 20, 2005, with a premium amounting to ThCh$ 227,378. This obligation accrues interest at a fixed annual rate of 3.8% and amortizes interest and capital semi-annually.  On December 17, 2010, took place the Board of Bondholders Serie A, which decided to modify the issued Contract of such bonds in order to update certain references and adapt it to the new IFRS accounting standards. The amendment of the issued Contract is dated December 21, 2010 and has the repertory No. 35739-2010 in the Notary of Ricardo San Martín Urrejola. Because of these changes, the commitment of this subsidiary is to comply with certain financial ratios that will be calculated only on the Consolidated Financial Statements. These financial ratios and other conditions are describe in letter D).  On July 21, 2011 the subsidiary made a partial prepayment for 750 Series A Bonds (of the 1,500 issued) equivalent to UF 513,750, according to Section Twelve of Clause Four for the Issue Contract Bond issued by public deed dated April 28, 2005. Additionally, the subsidiary recognized in the Consolidated Income Statement of that date an expenditure of ThCh$ 103,735, for expenses associated with the issuance of this debt.  On November 7, 2014, the subsidiary made a total prepayment for Series A Bonus for an amount of ThCh$ 9,778,759 and recognized in the Consolidated Income Statement of that date an expenditure of ThCh$ 117,200.  At the time of this total prepayment, the subsidiary was in compliance with the financial covenants required for this public issue detailed in letter D).   Series E Bonds – CCU S.A.  On October 18, 2004, under number 388 the Company recorded in the Securities Record the issue of 20-year term public bonds for a total UF 2,000,000 maturing on December 1, 2024. This issue was placed in the local market on December 1, 2004, with a discount amounting to ThCh$ 897,857. This obligation accrues interests at a fixed annual rate of 4.0%, and it amortizes interest and capital semi-annually.  On December 17, 2010, took place the Board of Bondholders Serie E, which decided to modify the issued Contract of those bonds in order to update certain references and adapt it to the new IFRS accounting standards. The amendment of the issued Contract is dated December 21, 2010 and has the repertory No. 35738-2010 in the Notary of Ricardo San Martín Urrejola. Because of these changes, the commitment of the Company is to comply with certain financial ratios that will be calculated only on the Consolidated Financial Statements. These financial ratios and other conditions are as follows:  (a)Maintain at the end of each quarter an indebtedness ratio measured over the consolidated financial statements not higher than 1.5, defined as the ratio of Total Adjusted Liabilities and Total Adjusted Equity. Total Adjusted Liabilities is defined as Total Liabilities less Dividends provisioned, according to policy included in the Statement of Changes in Equity, plus the amount of all guarantees granted by the Issuer or its subsidiaries that are cautioned by real guarantees, except as noted in the contract.  Total Adjusted Equity is defined as Total Equity plus Dividends provisioned, according to policy included in the Statement of Changes in Equity.  (b)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted EBITDA and Financial Costs account. Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded on the Note Nature of the costs and expenses.  (c)Maintain at the end of each quarter, assets free of liens for an amount equal to at least 1.2, defined as the ratio of Total Assets free of lien and Total Adjusted Liabilities free of lien. Is defined as Total Assets free of lien are defined as Total Assets less assets pledged as collateral for cautioned obligations of third parties. Total Adjusted Liabilities free of lien are defined as Total Liabilities less Dividends provisioned according to policy contained in the Statement of Changes in Equity.


F-100

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 (d)Maintain at the end of each quarter a minimum equity of ThCh$ 312,516,750, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy contained in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant and equipment to be performed by the Issuer.  (e)To maintain, either directly or indirectly, ownership over more than 50% of the subscribed and paid-up shares and over the voting rights of the following companies: Cervecera CCU Chile Limitada, Embotelladoras Chilenas Unidas S.A. and Viña San Pedro Tarapacá S.A., except in the cases and under the terms established in the agreement.  (f)To maintain, either directly or through a subsidiary, ownership of the trademark "CRISTAL", denominative for beer class 32 of the international classifier, and not to transfer its use, except to its subsidiaries.  (g)Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement.  (h)Neither sells nor transfer assets from the issuer and its subsidiaries representing over 25% of the assets total of the consolidated financial statements.  As ofDecember 31, 2016 and December 31, 2015, the Company was in compliance with the financial covenants required for this public issue.   Series H and I Bonds – CCU S.A.  On March 23, 2009, the Company recorded in the Securities Record the issue of bonds Series H and I for a combined total of UF 5 million, with 5 and 21 years terms, respectively. Emissions of both series were placed in the local market on April 2, 2009.  The issuance of the Bond I was UF 3 million  with maturity on March 15, 2014, with a discount amounting to ThCh$ 413,181, and accrues interest at an annual fixed rate of 3.0%, with amortize interest semi-annually and excluding the capital (bullet).  The issuance of the Bond H was UF 2 million  with maturity on March 15, 2030, with a discount amounting to ThCh$ 156,952, and accrues interest at an annual fixed rate of 4.25%, with amortizes interest and capital semi-annually.  By deed dated December 27, 2010 issued in the Notary of Ricardo San Martín Urrejola, under repertoires No. 36446-2010 and 36447-2010, were amended Issue Contract Series H and I, respectively, in order to update certain references and to adapt to the new IFRS accounting rules.  The current issue was subscribed with Banco Santander Chile as representative of the bond holders and as paying bank, and it requires that the Company complies with the following financial covenants on its Consolidated Financial Statements and other specific requirements:  (a)Maintain at the end of each quarter an indebtedness ratio measured over the consolidated financial statements not higher than 1.5, defined as the ratio of Total Adjusted Liabilities and Total Adjusted Equity. The Total Adjusted Liabilities are defined as Total Liabilities less Dividends provisioned, according to policy included in the Statement of Changes in Equity, plus the amount of all guarantees, debts or obligations of third parties not within the liability and outside the Issuer or its subsidiaries that are cautioned by real guarantees granted by the Issuer or its subsidiaries. Total Adjusted Equity is defined as Total Equity plus Dividends provisioned account, according to policy included in the Statement of Changes in Equity.  (b)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted EBITDA and Financial Costs account. Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded on the Note Nature of the cost and expenses.  (c)Maintain at the end of each quarter, assets free of liens for an amount equal to, at least, 1.2, defined as the ratio of Total Assets free of lien and Financial Debt free of lien. Total Assets free of lien are defined as Total Assets less assets pledged as collateral for cautioned obligations of third parties. Financial Debt free of lien is defined as the sum of lines Bank Loans, Bonds payable and Finance lease obligations contained in Note Other financial liabilities of the Consolidated Financial Statements.


F-101

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 (d)Maintain at the end of each quarter a minimum equity of ThCh$ 312,516,750, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy included in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant and equipment to be performed by the Issuer.  (e)To maintain, either directly or indirectly, ownership over more than 50% of the subscribed and paid-up shares and over the voting rights of the following companies: Cervecera CCU Chile Limitada and Embotelladoras Chilenas Unidas S.A.  (f)Maintain a nominal installed capacity for the production manufacturing of beer and soft drinks, equal or higher altogether than 15.9 million hectolitres a year, except in the cases and under the terms of the contract.  (g)To maintain, either directly or through a subsidiary, ownership of the trademark "CRISTAL", denominative for beer class 32 of the international classifier, and not to transfer its use, except to its subsidiaries.  (h)Not to make investments in facilities issued by related parties, except in the cases and under the terms established in the agreement.  On March 17, 2014, the Company paid the total Serie I Bonds, equivalent UF 3,000,000.  As ofDecember 31, 2016and December 31, 2015, the Company was in compliance with the financial covenants required for this public issue.   D) Restriction of subsidiary Viña San Pedro Tarapacá S.A.  The subsidiary Viña San Pedro Tarapacá S.A. mustcomply with certain financial ratios that will be calculated only on its Consolidated Financial Statements. These financial ratios and other conditions are as follows:  (a)Control over subsidiaries representing at least 30% of the consolidated Adjusted EBITDA of the issuer. Adjusted EBITDA. Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants and is defined as: (i) the sum of Gross Margin and Other income by function accounts; (ii) less (absolute numbers) Distribution costs, Administrative expenses and Other expenses by function accounts; and (iii) plus (absolute numbers) Depreciation and Amortization recorded in the Note Nature of the costs and expenses.  (b)Not to enter into investments in instruments issued by related parties different from its subsidiaries.  (c)Neither sells nor transfers essential assets that jeopardize the continuance of its current purpose.  (d)Maintain at the end of each quarter an indebtedness ratio measured over the consolidated financial statements not higher than 1.2, defined as the ratio of Total Adjusted Liabilities and Total Adjusted Equity. The Total Adjusted Liabilities is defined as Total Liabilities less Dividends provisioned, according to policy contained in the Statement of Changes in Equity, plus the amount of all guarantees, debts or obligations of third parties not within the liabilities and outside the Issuer or its subsidiaries that are cautioned by real guarantees granted by the Issuer or its subsidiaries. Total Adjusted Equity is defined as Total Equity plus Dividends provisioned, according to policy contained in the Statement of Changes in Equity.  (e)Maintain a Financial Expense Coverage measured at the end of each quarter and retroactively for periods of 12 months, not less than 3, calculated as the ratio of Adjusted EBITDA (as defined in paragraph (a)) and Financial Costs account.  (f)Maintain at the end of each quarter a minimum equity of ThCh$ 83,337,800, meaning Equity Attributable to Equity Holders of the Parent plus the Dividends provisioned account, according to policy included in the Statement of Changes in Equity. This requirement will increase in the amount resulting from each revaluation of property, plant and equipment to be performed by the Issuer.  As ofDecember 31, 2016and December 31, 2015, the subsidiary was in compliance with the financial covenants required for this public issue.


F-102

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 27Accounts payable – trade and other payables  As ofDecember 31, 2016 and 2015, the total Accounts payable-trade and other payables are as follows:  As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Suppliers

   210,160,789

   -

   179,926,026

   -Notes payable

   2,121,496

   1,082,898

   3,930,657

   1,645,098Withholdings payable

   47,395,567

   -

   43,880,120

   -Total

   259,677,852

   1,082,898

   227,736,803

   1,645,098
   Note 28Provisions  As ofDecember 31, 2016 and 2015, the total provisions recorded in the consolidated statement of financial position are as follows:  As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Litigation

   409,164

   839,079

   503,440

   839,934Others

   -

   484,441

   -

   636,584Total

   409,164

   1,323,520

   503,440

   1,476,518
  The following was the change in provisions during the years ended December 31, 2015 and 2016:  Litigation (1)

   Others

   TotalThCh$

   ThCh$

   ThCh$As of January 1, 2015

   

   1,023,895

   

   1,596,196

   2,620,091As of December 31, 2015Incorporated

   

   792,724

   

   888

   793,612Used

   

   (222,139)

   

   -

   (222,139)Released

   

   (31,005)

   

   (801,778)

   (832,783)Conversion effect

   

   (220,101)

   

   (158,722)

   (378,823)As of December 31, 2015

   

   1,343,374

   

   636,584

   1,979,958As of December 31, 2016Incorporated

   

   551,167

   

   22,219

   573,386Used

   

   (267,704)

   

   (14,173)

   (281,877)Released

   

   (124,336)

   

   (67,271)

   (191,607)Conversion effect

   

   (254,258)

   

   (92,918)

   (347,176)As of December 31, 2016

   

   1,248,243

   

   484,441

   1,732,684
  (1)SeeNote 34.


F-103

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The maturities of provisions at December 31, 2016, were as follows:  Litigation

   Others

   TotalThCh$

   ThCh$

   ThCh$Less than one year

   

   409,164

   

   -

   409,164Between two and five years

   

   423,863

   

   484,441

   908,304Over five years

   

   415,216

   

   -

   415,216Total

   

   1,248,243

   

   484,441

   1,732,684
  Litigation  The detail of significant litigation proceedings to which the Company is exposed at a consolidated level is described inNote 34.  Management believes based on the development of such proceedings to date, the provisions established on a case by basis are adequate to cover the eventual adverse effects that could arise from these proceedings.   Note 29Other non-financial liabilities  As ofDecember 31, 2016 and 2015, the total Other non-financial liabilities are as follows:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Parent dividend provisioned by the board

   24,387,190

   24,387,190Parent dividend provisioned according to policy

   34,841,553

   36,016,878Outstanding parent dividends

   915,585

   723,259Subsidiaries dividends according to policy

   11,192,210

   9,725,015Others

   33,434

   89,802Total

   71,369,972

   70,942,144Current

   71,369,972

   70,942,144Total

   71,369,972

   70,942,144
   Note 30Employee Benefits  The Company grants short term and employment termination benefits as part of its compensation policies.  The Parent Company and its subsidiaries maintain collective agreements with their employees, which establish the compensation and/or short–term and long-term benefits for their staff, the main features of which are described below:  i. Short-term benefits are generally based on combined plans or agreements, designed to compensate benefits received, such as paid vacation, annual performance bonuses and compensation through annuities.  ii. Long-term benefits are plans or agreements mainly intended to cover the post-employment benefits generated at the end of the labour relationship, be it by voluntary resignation or death of personnel hired.  The cost of such benefits is charged against income, in the “Personnel Expense” item.


F-104

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 As ofDecember 31, 2016 and 2015, the total staff benefits recorded in the Consolidated Statement of Financial Position is as follows:  Employees’ Benefits

   As of December 31, 2016

   As of December 31, 2015Current

   Non current

   Current

   Non currentThCh$

   ThCh$

   ThCh$

   ThCh$Short term benefits

   22,517,220

   -

   21,617,103

   -Employment termination benefits

   321,008

   21,832,415

   94,956

   18,948,603Total

   22,838,228

   21,832,415

   21,712,059

   18,948,603
  Employees’ Bonuses  Short-term benefits are mainly comprised of recorded vacation (on accruals basis), bonuses and share compensation. Such benefits are recorded when the obligation is accrued and are usually paid within a 12-month periods, consequently, they are not discounted.  As ofDecember 31, 2016 and 2015, the total short-term benefits recorded in the Consolidated Statement of Financial Position are as follows:  Short-Term Employees’ Benefits

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Vacation

   9,405,040

   8,442,610Bonus and compensation

   13,112,180

   13,174,493Total

   22,517,220

   21,617,103
  The Company records the staff vacation cost on an accrual basis.  Severance Indemnity  The Company records a liability for the payment of an irrevocable severance indemnity, originated by collective and individual agreements entered into with certain groups of employees. Such obligation is determined by means of the current value of the benefit accrued cost, a method that considers several factors for the calculation such as estimates of future continuance, mortality rates, future salary increases and discount rates. The Company periodically evaluates the above-mentioned factors based on historical data and future projections, making adjustments that apply when checking changes sustained trend. The so-determined value is presented at the current value by using the severance benefits accrued method. The discount rate is determined by reference to market interest rates curves for high quality entrepreneurial bonds. The discount rate in Chile was 5.52% (6.36% in 2015) and in Argentina 31.88% (39.26% in 2015).  As ofDecember 31, 2016, the obligation recorded for severance indemnity is as follows:  Severance Indemnity

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Current

   321,008

   94,956Non-current

   21,832,415

   18,948,603Total

   22,153,423

   19,043,559


F-105

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The change in the severance indemnity during the year ended as of December 31, 2015 and 2016 was as follows:  Severance Indemnity

   Severance IndemnityThCh$Balance as of January 1, 2015

   17,437,221Current cost of service

   1,023,969Interest cost

   1,703,107Actuarial loss

   947,153Paid-up benefits

   (1,700,491)Past service cost

   131,204Others

   (498,604)Movements of the year

   1,606,338As of December 31, 2015

   19,043,559Current cost of service

   1,650,484Interest cost

   1,702,662Actuarial loss

   2,342,336Paid-up benefits

   (2,490,851)Past service cost

   342,039Conversion effect

   (670,709)Others

   233,903Movements of the year

   3,109,864As of December 31, 2016

   22,153,423
  The figures recorded in the Consolidated Statement of Income as ofDecember 31, 2016, 2015 y 2014, are as follows:  Expense recognized for severance indemnity

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Current cost of service

   1,650,484

   1,023,969

   601,053Past service cost

   342,039

   131,204

   1,090,429Non-provided paid benefits

   7,851,201

   4,377,570

   5,916,192Other

   1,114,112

   646,502

   335,808Total expense recognized in Consolidated Statement of Income

   10,957,836

   6,179,245

   7,943,482


F-106

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Actuarial Assumptions  As mentioned inNote 2.20– Employees’ Benefits, the severance payment obligation is recorded at its actuarial value. The main actuarial assumptions used for the calculation of the severance indemnity obligation as ofDecember 31, 2016 and 2015, are as follows:  Actuarial Assumptions

   Chile

   ArgentinaAs of December 31,

   As of December 31,

   As of December 31,

   As of December 31,2016

   2015

   2016

   2015Mortality table

   RV-2014

   RV-2004

   Gam '83

   Gam'83Annual interest rate

   5.52%

   6.36%

   31.88%

   39.26%Voluntary employee turnover rate

   1.9%

   1.9%

   “ESA 77 Ajustada - 50%”

   “ESA 77 Ajustada - 50%”Company’s needs rotation rate

   5.3%

   5.3%

   “ESA 77 Ajustada - 50%”

   “ESA 77 Ajustada - 50%”Salary increase (*)

   3.7%

   3.7%

   26.25%

   33.32%Estimated retirement age for (*)

   Officers

   

   60

   60

   60

   60Other

   Male

   65

   65

   65

   65Female

   60

   60

   60

   60
  Sensitivity Analysis  The Following is a sensitivity analysis based on increased (decreased) of 1 percent on the discount rate:  Sensitivity Analysis

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$1% increase in the Discount Rate (Gain)

   1,421,484

   1,164,1651% decrease in the Discount Rate (Loss)

   (1,649,255)

   (1,344,213)
  Personnel expense  The amounts recorded in the Consolidated Statement of Income for the years ended as ofDecember 31, 2016, 2015 and 2014, are as follows:  Personnel expense

   For the years ended as of December 31,2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Salaries

   145,766,757

   138,359,074

   119,623,310Employees’ short-term benefits

   23,189,206

   24,693,325

   18,128,043Employments termination benefits

   10,957,836

   6,179,245

   7,943,482Other staff expense

   30,971,754

   28,683,507

   23,636,629Total (1)

   210,885,553

   197,915,151

   169,331,464
  (1)SeeNote 9.


F-107

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 31Non-controlling Interests  The detail of Non-controlling Interests is the following:  a.Equity  Equity

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Viña San Pedro Tarapacá S.A.

   75,092,267

   72,512,897Bebidas del Paraguay S.A.

   17,828,260

   20,403,140Aguas CCU-Nestlé Chile S.A.

   16,440,129

   19,891,176Compañía Cervecera Kunstmann S.A.

   5,740,305

   4,979,490Compañía Pisquera de Chile S.A.

   4,717,811

   4,699,612Manantial S.A. (1)

   -

   3,767,028Saenz Briones & Cía. S.A.

   799,111

   962,286Distribuidora del Paraguay S.A.

   2,197,241

   1,949,490Los Huemules S.R.L. (1)

   -

   395,469Other

   179,300

   145,185Total

   122,994,424

   129,705,773
 (1)SeeNote8.     b.Result  For the years ended as of December 31,Result

   2016

   2015

   2014ThCh$

   ThCh$

   ThCh$Aguas CCU-Nestlé Chile S.A.

   8,377,672

   7,052,867

   5,408,750Viña San Pedro Tarapacá S.A.

   9,887,477

   9,182,843

   6,003,439Compañía Cervecera Kunstmann S.A.

   1,636,906

   1,267,335

   966,212Manantial S.A.

   -

   861,072

   684,427Compañía Pisquera de Chile S.A.

   790,152

   592,506

   889,482Saenz Briones & Cía. S.A.

   11,184

   128,407

   (58,433)Distribuidora del Paraguay S.A.

   255,683

   1,144,911

   429,527Bebidas del Paraguay S.A.

   576,986

   (486,790)

   253,516Los Huemules S.R.L.

   -

   (45,370)

   (48,171)Sidra La Victoria S.A.

   -

   -

   175Other

   88,339

   19,674

   24,547Total

   21,624,399

   19,717,455

   14,553,471


F-108

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 c.Summarized financial information of non controlling interest:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Assets and LiabilitiesCurrent assets

   601,165,755

   566,432,064Non-current assets

   716,889,536

   727,700,381Current liabilities

   368,293,544

   336,696,932Non-current liabilities

   146,234,462

   218,031,963Dividends paid

   9,803,978

   5,956,500
  The main significant Non-controlling interest is represented by Viña San Pedro Tarapacá S.A. with the following balances:  As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Assets and LiabilitiesCurrent assets

   145,866,023

   142,945,036Non-current assets

   171,099,295

   165,343,429Current liabilities

   70,351,438

   70,099,022Non-current liabilities

   33,795,671

   32,681,398Net sales

   201,402,052

   189,515,048Net income of year

   28,021,996

   26,024,999  Dividends paid by Viña San Pedro amounted to ThCh$ 17,682,375, ThCh$ 13,474,959, and ThCh$ 5,436,350, for the years ended December 31, 2016; 2015, and 2014, respectively.  Note 32Common Shareholders’ Equity  Subscribed and paid-up Capital  As of December 31, 2016 and December 31, 2015, the Company’s capital shows a balance of ThCh$ 562,693,346, divided into 369,502,872 shares of common stock without face value, entirely subscribed and paid-up. The Company has issued only one series of common shares. Such common shares are registered for trading at the Santiago Stock Exchange, the Chilean Electronic Stock Exchange and the Valparaíso Stock Exchange, and at the New York Stock Exchange /NYSE), evidenced by ADS (American Deposcitary Shares), with an equivalence of two shares per ADS (SeeNote 1).  The Company has not issued any others shares or convertible instruments during the period, thus changing the number of outstanding shares as of December 31, 2016 and 2015.  Capital Management  The main purpose, when managing shareholder’s capital, is to maintain an adequate credit risk profile and a healthy capital ratio, allowing the access of the Company to the capitals market for the development of its medium and long term purposes and, at the same time, to maximize shareholder’s return.


F-109

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Consolidated Statement of Comprehensive Income  As of December 31, 2016, 2015 and 2014, the detail of the comprehensive income and expense of the term is as follows:  Other Income and expense charged or credited against net equity

   Gross Balance

   Tax

   Net BalanceThCh$

   ThCh$

   ThCh$Cash flow hedge (1)

   84,962

   (20,648)

   64,314Conversion differences of subsidiaries abroad (1)

   (27,280,176)

   -

   (27,280,176)Actuarial gains and losses on defined benefit plans reserves

   (2,355,384)

   659,198

   (1,696,186)Total comprehensive income as of december 31, 2016

   (29,550,598)

   638,550

   (28,912,048)Other Income and expense charged or credited against net equity

   Gross Balance

   Tax

   Net BalanceThCh$

   ThCh$

   ThCh$Cash flow hedge (1)

   80,693

   (17,563)

   63,130Conversion differences of subsidiaries abroad (1)

   (29,678,944)

   -

   (29,678,944)Actuarial gains and losses on defined benefit plans reserves

   (939,433)

   314,541

   (624,892)Total comprehensive income as of december 31, 2015

   (30,537,684)

   296,978

   (30,240,706)Other Income and expense charged or credited against net equity

   Gross Balance

   Tax

   Net BalanceThCh$

   ThCh$

   ThCh$Cash flow hedge (1)

   (155,258)

   39,470

   (115,788)Conversion differences of subsidiaries abroad (1)

   (4,629,683)

   -

   (4,629,683)Actuarial gains and losses on defined benefit plans reserves

   (1,884,054)

   501,689

   (1,382,365)Total comprehensive income As of December 31, 2014

   (6,668,995)

   541,159

   (6,127,836)
 (1)These concepts will be reclassified to the Statement of Income when its settled.  The movement of comprehensive income and expense is as follows:  a)As of December 31, 2016:  Changes

   Currency translation difference

   Hedge reserves

   Actuarial gains and losses on defined benefit plans reserves

   Total other reservesThCh$

   ThCh$

   ThCh$

   ThCh$Increase (Decrease)

   (27,280,176)

   (399,558)

   (2,355,384)

   (30,035,118)Deferred taxes

   -

   89,982

   659,198

   749,180Reclassification to the result by function

   -

   484,521

   -

   484,521Reclassification of deferred taxes related to other reserves

   -

   (110,631)

   -

   (110,631)Total changes in equity

   (27,280,176)

   64,314

   (1,696,186)

   (28,912,048)Equity holders of the parent

   (25,123,546)

   41,607

   (1,623,299)

   (26,705,238)Non-controlling interests

   (2,156,630)

   22,707

   (72,887)

   (2,206,810)Total changes in equity

   (27,280,176)

   64,314

   (1,696,186)

   (28,912,048)


F-110

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 b)As of December 31, 2015:  Changes

   Currency translation difference

   Hedge reserves

   Actuarial gains and losses on defined benefit plans reserves

   Total other reservesThCh$

   ThCh$

   ThCh$

   ThCh$Increase (Decrease)

   (29,678,944)

   593,993

   (939,433)

   (30,024,384)Deferred taxes

   -

   (145,800)

   314,541

   168,741Reclassification to the result by function

   -

   (513,298)

   -

   (513,298)Reclassification of deferred taxes related to other reserves

   -

   128,235

   -

   128,235Total changes in equity

   (29,678,944)

   63,130

   (624,892)

   (30,240,706)Equity holders of the parent

   (27,652,528)

   40,844

   (589,731)

   (28,201,415)Non-controlling interests

   (2,026,416)

   22,286

   (35,161)

   (2,039,291)Total changes in equity

   (29,678,944)

   63,130

   (624,892)

   (30,240,706)
  Income per share  The basic income per share is calculated as the ratio between the net income (loss) of the term corresponding to shares holders and the weighted average number of valid outstanding shares during such term.  The diluted earnings per share is calculated as the ratio between the net income (loss) for the period attributable to shares holders and the weighted average additional common shares that would have been outstanding if it had become all ordinary potential dilutive shares.  As of December 31, 2016, 2015 y 2014, the information used for the calculation of the income as per each basic and diluted share is as follows:  Income per share

   For the years ended as of December 31,2016

   2015

   2014Equity holders of the controlling company (ThCh$)

   118,457,488

   120,808,135

   106,238,450Weighted average number of shares

   369,502,872

   369,502,872

   369,502,872Basic income per share (in Chilean pesos)

   320.59

   326.95

   287.52Equity holders of the controlling company (ThCh$)

   118,457,488

   120,808,135

   106,238,450Weighted average number of shares

   369,502,872

   369,502,872

   369,502,872Diluted income per share (in Chilean pesos)

   320.59

   326.95

   287.52
   As of December 31, 2016, 2015 y 2014, the Company has not issued any convertible or other kind of instruments creating diluting effects.  Distributable net Income  In accordance with Circular No 1945 from the SVS on November 4, 2009, the Board of Directors agreed that the net distributable profit for the year 2009 will be that reflected in the financial statements attributable to equity holders of the parents,without adjustment it. The above agreement remains in effect for the year ended December 31, 2016.


F-111

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Dividends  The Company’s dividend policy consists of annually distributing at least 50% of the net distributable profit of the year.  As of December 31, 2016, 2015 and 2014, the Company has distributed the following dividends:  Dividend No

   Payment Date

   Type of Dividend

   Dividends per Share

   Related to FY247

   17-04-2014

   Final

   103.48857

   2013248

   09-01-2015

   Interim

   63.0000

   2014249

   23-04-2015

   Final

   98.78138

   2014250

   08-01-2016

   Interim

   66.0000

   2015251

   22-04-2016

   Final

   97.47388

   2015252

   05-01-2017

   Interim

   66.0000

   2016
  On April 9, 2014, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 247, amounting to ThCh$ 38,239,323 corresponding to $ 103.48857 per share. This dividend was paid on April 17, 2014.  On April 15, 2015, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 249, amounting to ThCh$ 36,500,004 corresponding to $ 98.78138 per share. This dividend was paid on April 23, 2015.  On April 13, 2016, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 250, amounting to ThCh$ 36,016,878 corresponding to $ 97.47388 per share. This dividend was paid on April 22, 2016.   Other Reserves  The reserves that are a part of the Company’s equity are as follows:  Currency Translation Reserves: This reserve originated mainly from the translation of foreign subsidiaries’ financial statements which functional currency is different from the presentation currency of the Consolidated Financial Statements. As of December 31, 2016, it amounts to a negative reserve of ThCh$ 120,558,932 (ThCh$ 95,435,386 in 2015 and ThCh$ 67,782,858 in 2014).  Hedge reserve: This reserve originated from the hedge accounting application of financial liabilities for. The reserve is reversed at the end of the hedge agreement, or when the transaction ceases qualifying hedge accounting, whichever is first. The reserve effects are transferred to income. As of December 31, 2016, it amounts to a negative reserve of ThCh$ 39,081 (ThCh$ 2,526 in 2015 and ThCh$ 43,370 in 2014), net of deferred taxes.  Actuarial gains and losses on defined benefit plans reserves:This reserve originates from January 1, 2013, due application of the amendment to IAS 19. The amount recorded is a negative reserve of ThCh$ 3,925,717 (ThCh$ 2,302,418 in 2015 and ThCh$ 1,712,687 in 2014), net of deferred taxes.  Other reserves: As of December 31, 2016, 2015 y 2014 the amount is a negative reserve of ThCh$ 18,527,810, ThCh$ 5,486,086 and ThCh$ 5,511,629, respectively. Such reserves relate mainly to the following concepts:  -              Adjustment due to re-assessment of fixed assets carried out in 1979 (increased ofr ThCh$ 4,087,396). -              Price level restatement of paid-up capital registered as of December 31, 2008, according to SVS Circular Letter Na456 (decreased for ThCh$ 17,615,333). -              Difference in purchase of shares of the subsidiary Viña San Pedro Tarapacá S.A. made during year 2012 and 2013 (Note 1) (decreased for ThCh$ 9,779,475). -              Difference in purchase of shares of the subsidiary Manantial S.A. made during year 2016 (Note 1) (decreased for ThCh$ 7,801,153). -              Difference in purchase of shares of the Alimentos Nutrabien S.A. made during year 2016 (Note 1) (decreased for  ThCh$5,426,209).


F-112

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  Note 33Effects of changes in currency exchange rate  Current assets are denominated in the following currencies:  CURRENT ASSETS

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Current assetsCash and cash equivalents

   133,789,950

   192,554,239CLP

   117,668,934

   171,683,257USD

   8,237,893

   5,385,644Euros

   786,887

   955,840$ARG

   2,187,381

   5,701,754UYU

   1,136,782

   948,816PYG

   3,269,045

   7,519,619Other currencies

   503,028

   359,309Other financial assets

   8,406,491

   13,644,105CLP

   548,700

   1,052,312USD

   7,604,996

   12,495,117Euros

   160,875

   57,833PYG

   80,846

   7,261Other currencies

   11,074

   31,582Other non-financial assets

   15,859,137

   17,654,373CLP

   11,994,895

   12,083,128UF

   139,776

   29,882USD

   683,933

   972,718Euros

   85,753

   723,216$ARG

   2,641,862

   3,780,430UYU

   86,842

   7,789PYG

   226,076

   57,210Accounts receivable - trade and other receivables

   280,766,784

   252,225,937CLP

   179,861,356

   158,757,937UF

   676,843

   7,102USD

   24,449,473

   25,498,590Euros

   7,025,446

   7,463,166$ARG

   56,347,636

   48,535,814UYU

   5,304,719

   4,074,908PYG

   5,844,650

   6,111,636Other currencies

   1,256,661

   1,776,784Accounts receivable from related companies

   3,523,825

   4,788,930CLP

   3,373,508

   4,604,853UF

   107,162

   104,118USD

   43,155

   79,959Inventories

   199,290,678

   174,227,415CLP

   168,749,946

   147,189,195USD

   287,776

   2,474,304Euros

   25,634

   237,848$ARG

   25,104,485

   18,850,888UYU

   1,590,709

   1,645,888PYG

   3,532,128

   3,829,292Biological assets

   7,948,379

   7,633,340CLP

   7,370,852

   7,130,962$ARG

   577,527

   502,378Tax receivables

   29,423,479

   15,264,220CLP

   26,525,628

   11,080,218$ARG

   2,897,851

   4,184,002Non-current assets held for sale

   2,377,887

   6,319,316CLP

   2,046,179

   5,890,543$ARG

   331,708

   428,773Total current assets

   681,386,610

   684,311,875CLP

   518,139,998

   519,472,405UF

   923,781

   141,102USD

   41,307,226

   46,906,332Euros

   8,084,595

   9,437,903$ARG

   90,088,450

   81,984,039UYU

   8,119,052

   6,677,401PYG

   12,952,745

   17,525,018Other currencies

   1,770,763

   2,167,675Total current assets by currencies

   681,386,610

   684,311,875


F-113

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Non-Current assets are denominated in the following currencies:  NON-CURRENT ASSETS

   As of December 31, 2016

   As of December 31, 2015ThCh$

   ThCh$Non-current assetsOther financial assets

   203,784

   80,217Euros

   203,784

   80,217Accounts receivable non-current

   3,563,797

   -CLP

   35,391

   -UF

   2,936,552

   -$ARG

   426,311

   -PYG

   165,543

   -Other non-financial assets

   5,369,211

   5,220,954CLP

   3,177,139

   3,034,450USD

   669,470

   80,137$ARG

   1,519,236

   1,839,876PYG

   3,366

   266,491Accounts receivable from related companies

   356,665

   445,938UF

   356,665

   445,938Investments accounted for using the equity method

   64,404,946

   49,995,263CLP

   64,005,129

   49,884,870$ARG

   399,817

   110,393Intangible assets different than goodwill

   77,678,850

   71,868,007CLP

   64,981,854

   57,749,615$ARG

   5,508,504

   7,039,283UYU

   3,247,094

   3,296,510PYG

   3,941,398

   3,782,599Goodwill

   96,663,023

   99,490,372CLP

   76,382,543

   76,382,543USD

   13,402,038

   14,216,606$ARG

   6,878,442

   8,891,223Property, plant and equipment (net)

   903,831,702

   872,667,210CLP

   787,734,139

   763,339,926USD

   26,072

   -Euros

   971,382

   -$ARG

   82,920,719

   76,412,324UYU

   15,436,334

   13,747,872PYG

   16,743,056

   19,167,088Investment property

   6,253,827

   6,838,002CLP

   5,015,603

   4,401,400$ARG

   1,238,224

   2,436,602Deferred tax assets

   31,864,635

   34,529,593CLP

   29,547,881

   29,392,503$ARG

   2,108,426

   5,032,803UYU

   156,714

   10,801PYG

   51,614

   93,486Total non-current assets

   1,190,190,440

   1,141,135,556CLP

   1,030,879,679

   984,185,307UF

   3,293,217

   445,938USD

   14,097,580

   14,296,743Euros

   1,175,166

   80,217$ARG

   100,999,679

   101,762,504UYU

   18,840,142

   17,055,183PYG

   20,904,977

   23,309,664Total non-current assets by currencies

   1,190,190,440

   1,141,135,556


F-114

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Current liabilities are denominated in the following currencies:  CURRENT LIABILITIES

   As of December 31, 2016

   As of December 31, 2015Until 90 days

   More the 91 days until 1 year

   Until 90 days

   More the 91 days until 1 yearThCh$

   ThCh$

   ThCh$

   ThCh$Current liabilitiesOther financial liabilities

   19,600,116

   47,079,817

   7,223,935

   36,750,056CLP

   946,301

   39,944,625

   1,239,182

   17,035,281UF

   892,328

   2,843,982

   764,199

   2,888,550USD

   11,280,437

   388,874

   303,416

   10,957,905Euros

   523,079

   -

   52,368

   -$ARG

   5,542,674

   3,263,782

   4,862,819

   5,523,470UYI

   406,353

   638,554

   -

   344,850Other currencies

   8,944

   -

   1,951

   -Account payable - trade and other payables

   258,298,853

   1,378,999

   226,844,826

   891,977CLP

   166,920,713

   303,060

   148,162,838

   303,060UF

   30,798

   -

   9,933

   -USD

   18,281,460

   937,822

   17,676,381

   566,572Euros

   8,160,258

   -

   6,402,517

   -$ARG

   59,603,954

   -

   47,686,146

   -UYU

   3,309,074

   -

   2,607,826

   -PYG

   1,638,181

   138,117

   3,874,709

   22,345Other currencies

   354,415

   -

   424,476

   -Accounts payable to related companies

   9,530,071

   -

   11,624,218

   -CLP

   5,329,217

   -

   4,267,123

   -USD

   2,196

   -

   151,578

   -Euros

   4,197,020

   -

   7,205,517

   -PYG

   1,638

   -

   -

   -Other short-term provisons

   339,072

   70,092

   382,152

   121,288CLP

   -

   70,092

   -

   121,288$ARG

   339,072

   -

   382,152

   -Tax liabilities

   7,544,398

   4,262,036

   3,664,162

   8,533,862CLP

   5,316,283

   4,262,036

   3,487,812

   5,802,277USD

   22,183

   -

   -

   26,747$ARG

   1,966,866

   -

   -

   2,704,838UYU

   239,066

   -

   176,350

   -Employee benefits provisions

   22,255,693

   582,535

   21,388,736

   323,323CLP

   16,579,716

   582,535

   16,558,870

   323,323$ARG

   5,367,378

   -

   4,437,159

   -UYU

   308,599

   -

   392,707

   -Other non-financial liabilities

   24,421,940

   46,948,032

   28,440,259

   42,501,885CLP

   24,388,426

   46,948,032

   28,350,457

   42,501,885$ARG

   33,514

   -

   89,802

   -Total current liabilities

   341,990,143

   100,321,511

   299,568,288

   89,122,391CLP

   219,480,656

   92,110,380

   202,066,282

   66,087,114UF

   923,126

   2,843,982

   774,132

   2,888,550USD

   29,586,276

   1,326,696

   18,131,375

   11,551,224Euros

   12,880,357

   -

   13,660,402

   -$ARG

   72,853,458

   3,263,782

   57,458,078

   8,228,308UYU

   3,856,739

   -

   3,176,883

   -PYG

   1,639,819

   138,117

   3,874,709

   22,345UYI

   406,353

   638,554

   -

   344,850Other currencies

   363,359

   -

   426,427

   -Total current liabilities by currency

   341,990,143

   100,321,511

   299,568,288

   89,122,391


F-115

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Non-Current liabilities are denominated in the following currencies:  NON-CURRENT LIABILITIES

   As of December 31, 2016

   As of December 31, 2015More than 1 year until 3 years

   More than 3 year until 5 years

   More than 5 years

   More than 1 year until 3 years

   More than 3 year until 5 years

   More than 5 yearsThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$

   ThCh$Non-current liabilitiesOther financial liabilities

   36,676,882

   15,610,067

   65,657,084

   40,890,654

   20,356,339

   75,679,552CLP

   5,320,385

   626,411

   -

   18,284,794

   1,784,088

   -UF

   17,811,112

   14,983,656

   65,657,084

   5,523,414

   17,335,859

   75,679,552USD

   5,269,733

   -

   -

   5,590,024

   -

   -$ARG

   7,579,047

   -

   -

   9,790,622

   1,236,392

   -UYI

   696,605

   -

   -

   1,701,800

   -

   -Other accounys payable

   1,082,898

   -

   -

   1,098,985

   546,113

   -CLP

   808,160

   -

   -

   808,161

   404,081

   -UF

   6,950

   -

   -

   6,760

   -

   -USD

   267,788

   -

   -

   284,064

   142,032

   -Other long term provisions

   507,259

   401,054

   415,207

   712,806

   410,073

   353,639CLP

   -

   49,996

   -

   -

   49,996

   15,000$ARG

   258,278

   351,058

   415,207

   396,987

   360,077

   338,639UYU

   248,981

   -

   -

   314,991

   -

   -PYG

   -

   -

   -

   828

   -

   -Deferred tax liabilities

   26,487,686

   7,963,522

   52,338,743

   21,787,421

   8,622,777

   59,827,645CLP

   26,183,335

   7,767,522

   48,824,727

   21,175,080

   8,219,255

   53,911,744$ARG

   287,582

   191,721

   2,048,919

   601,313

   400,875

   4,288,716UYU

   -

   -

   1,015,197

   -

   -

   1,154,787PYG

   16,769

   4,279

   449,900

   11,028

   2,647

   472,398Employee benefits provisons

   335,925

   -

   21,496,490

   643,905

   -

   18,304,698CLP

   -

   -

   18,481,842

   -

   -

   15,369,150$ARG

   -

   -

   3,014,648

   -

   -

   2,935,548PYG

   335,925

   -

   -

   643,905

   -

   -Total non-current liabilities

   65,090,650

   23,974,643

   139,907,524

   65,133,771

   29,935,302

   154,165,534CLP

   32,311,880

   8,443,929

   67,306,569

   40,268,035

   10,457,420

   69,295,894UF

   17,818,062

   14,983,656

   65,657,084

   5,530,174

   17,335,859

   75,679,552USD

   5,537,521

   -

   -

   5,874,088

   142,032

   -$ARG

   8,124,907

   542,779

   5,478,774

   10,788,922

   1,997,344

   7,562,903UYU

   248,981

   -

   1,015,197

   314,991

   -

   1,154,787PYG

   352,694

   4,279

   449,900

   655,761

   2,647

   472,398UYI

   696,605

   -

   -

   1,701,800

   -

   -Total non-current liabilities by currency

   65,090,650

   23,974,643

   139,907,524

   65,133,771

   29,935,302

   154,165,534


F-116

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 34Contingencies and Commitments  Operating lease agreements  The total amount of the Company’s obligations to third parties relating to lease agreements that may not be terminated is as follows:  Lease Agreements not to be terminated

   As of December 31, 2016ThCh$Within 1 year

   175,604,322Between 1 and 5 years

   272,442,932Over 5 years

   34,053,398Total

   482,100,652
  Purchase and supply agreements  The total amount of the Company’s obligations to third parties relating to purchase and supply agreements as of December 31, 2016 is as follows:  Purchase and supply agreements

   Purchase and supply agreements

   Purchase and contract related to wine and grapeThCh$

   ThCh$Within 1 year

   128,703,020

   8,713,649Between 1 and 5 years

   292,815,491

   9,521,391Over 5 years

   44,412,317

   157,459Total

   465,930,828

   18,392,499
  Capital investment commitments  As of December 31, 2016, the Company had capital investment commitments related to Property, Plant and Equipment and Intangibles (software) for approximately ThCh$ 54,115,404.  Litigation  The following are the most significant proceedings faced by the Company and its subsidiaries, including all thosepresent a possible risk of occurrence and causes whose committed amounts, individually, are more than ThCh$ 25,000.Those losses contingencies for which an estimate cannot be made have been also considered.


F-117

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Proceedings and claim  Subsidiary

   Court

   Number

   Description

   Status

   Estimated accrued loss contingencyViña Tarapacá Ex Zavala, Viña Misiones de Rengo

   14th Civil Court of Santiago

   28869-2007

   Breach of contract

   Appeal of first instance verdict

   ThCh$ 50,000Compañía Industrial Cervecera S.A. (CICSA)

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 31,000Compañía Industrial Cervecera S.A. (CICSA)

   Supreme Court of Tucuman

   -

   Intempestive breach of distribution contract

   Supreme Court review

   US$ 35,000Compañía Industrial Cervecera S.A. (CICSA)

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 32,000Compañía Industrial Cervecera S.A. (CICSA)

   Appeals court

   -

   Intempestive breach of distribution contract

   On execution phase

   US$ 37,000Compañía Industrial Cervecera S.A. (CICSA)

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On execution phase

   US$ 36,000Compañía Industrial Cervecera S.A. (CICSA)

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 50,000Compañía Industrial Cervecera S.A. (CICSA)

   -

   -

   City Council ́s Administrative Claim related to advertising and publicity fees

   The process is in pre-trial administrative phase

   US$ 506,000Saenz Briones y Cía. S.A.

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 67,000


F-118

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
  Subsidiary

   Court

   Number

   Description

   Status

   Estimated accrued loss contingencySaenz Briones y Cía. S.A.

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 168,000Saenz Briones y Cía. S.A.

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 63,000Saenz Briones y Cía. S.A.

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 167,000Saenz Briones y Cía. S.A.

   Court of first instance in Argentina

   -

   Labor trial for layoff

   On evidentiary phase

   US$ 61,000
  The Company and its subsidiaries have established provisions to allow for such contingencies for ThCh$ 1,248,243 and ThCh$ 1,343,374, as of December 31, 2016 and 2015, respectively (SeeNote 28).  Tax processes  At the date of issue of these consolidated financial statements, there are notax litigation that involve significant passive or taxes in claim different to mentioned inNote 25.  Guarantees  As of December 31, 2016, the subsidiary Viña San Pedro Tarapacá S.A. (VSPT) has not granted direct guarantees as part of its common financing operations. Nevertheless, its VSPT has entered into indirect guarantees as joint guarantors of financing operations by Finca La Celia S.A. subsidiary, in the Republic of Argentina.  A summary of the main terms of the guarantees granted appears below:  The subsidiary Finca La Celia S.A. maintains financial debt with local banks in Argentina, guaranteed by VSPT through stand-by letters issued by Banco Estado de Chile, according to the following detail:  Institution

   Amount

   Due dateBanco Santander Río

   USD 1,100,000

   August 20, 2017Banco Patagonia

   USD 1,600,000

   March 31, 2017Banco Patagonia

   USD 1,600,000

   July 7, 2017Banco San Juan

   USD 1,200,000

   April 28, 2017Banco BBVA Francés

   USD 1,500,000

   February 20, 2017
  The mentioned stand-by letters were issued by VSPT according to the maturity of the financial debts negotiated with the Argentine banks, and they are within the financing policy framework approved by VSPT Board of Directors.


F-119

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The loan obtained by the subsidiary CICSA in Argentina, as described inNote 27, is guaranteed by CCU S.A. through a stand- by unrestricted, 1 year term, renewable for equal period during the term of the loan.  Institution

   Amount

   Due dateBanco de la Nación Argentina S.A.

   USD 9,000,000

   December 31, 2017
  On July 11, 2013, the subsidiary in Argentina Saenz Briones & Cía. S.A. (SB) has signed a loan agreement with the Citibank Bank of Argentina, which restricted its ability to distribute profits in each year. The loan was by 10,000,000 argentine pesos and whose return was agreed in 9 (nine) quotes with different maturities. Until SB not pay this loan, plus interest or commissions, fees and expenses, may not make any payment to its shareholders (including, without limitation, distribution of profits or dividends, advances, withdrawals from account or similar, as well as any payment made in connection with rebuy it, rescue or redemption of all or part of its shares) for an amount that exceeds the 50% of the profits that the SB is legally empowered to distribute as dividends with regard to each of its years. It should be noted, for the purposes of the above restriction, that the last date of maturity of the loan is July 11, 2016.  Note 35Environment  Distribution of CCU ́s main environmental costsin the Industrial Units, accumulated to September 2016: -Industrial Waste Water Treatment (IWWT):52,8% These expenses are mainly related to the maintenance and control of the respective Industrial Waste Water Treatment Plants (IWWT).  -Solid Industrial Residues (SIR):33,4% These expenses are related to the handling and disposal of Solid Industrial Residues (SIR), including hazardous Waste (ResPel) and valorisation of recyclable residues.  -Gas Emission Expenses:1,2% These expenses are related to the calibration and verification of monitoring and operational instrumentation of stationary sources (mainly industrial boilers and electric generators) and their respective emissions, in order to provide compliance to rules and central and local government regulations.  -Other Environmental Expenses:12,6% These expenses are related to the verification and compliance of Food Safety, Environmental Management and Operational Health & Safety Management Standards (ISO 22.000, ISO 14.001 and ISO 18.001 OHSAS respectively) in CCU ́s industrial sites and distribution centers, which are in different stages of implementation and certification. The implementation and certification of those three standards is a corporate goal of CCU S.A.


F-120

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The main expensesof each year, detailed by project, are the following:  Company that made the disbursement

   Project

   Expenses

   For the years ended as of December 31,2016

   2015ThCh$

   ThCh$CCU Chile Ltda.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   1,319,489

   1,160,516SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   666,781

   607,091Gases

   Management of atmospheric emissions

   21,655

   26,031Others

   Management of internal and external regulatory compliance.

   233,364

   173,115CCU Argentina S.A.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   820,999

   1,089,788SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   560,710

   602,247Gases

   Management of atmospheric emissions

   21,847

   2,857Others

   Management of internal and external regulatory compliance.

   141,379

   167,668Cía. Cervecera Kunstmann S.A.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   86,515

   87,069SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   40,150

   10,633Others

   Management of internal and external regulatory compliance.

   45,876

   45,781Cía. Pisquera de Chile S.A.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   237,994

   224,045SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   43,059

   78,746Others

   Management of internal and external regulatory compliance.

   12,582

   15,628Transportes CCU Limitada

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   9,792

   18,687SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   288,856

   196,114Gases

   Management of atmospheric emissions

   13,356

   17,297Others

   Management of internal and external regulatory compliance.

   141,138

   130,044VSPT S.A.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   454,828

   381,893SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   165,697

   172,089Others

   Management of internal and external regulatory compliance.

   10,916

   5,227Embotelladora Chilenas Unidas S.A.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   593,414

   665,990SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   421,771

   53,539Gases

   Management of atmospheric emissions

   156,295

   96,019Others

   Management of internal and external regulatory compliance.

   14,305

   10,233Aguas CCU-Nestlé Chile S.A.

   IWWT

   Maintenance and control of the Industrial Waste Water Treatment Plants (IWWT).

   35,550

   29,057SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   3,910

   3,661Others

   Management of internal and external regulatory compliance.

   69,330

   50,904Fábrica de Envases Plásticos S.A.

   SIR

   Solid waste (SIR) and hazardous waste (ResPel) management.

   21,410

   19,326Gases

   Management of atmospheric emissions

   129,487

   137,359


F-121

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 The main disbursements (investment) of each year, detailed by by project, are the following:  Company that made the disbursement

   Project

   Concept

   Status [Finished, In process]

   As of December 31, 2016

   As of December 31, 2015Disbursements made

   Amount committed future periods

   Estimated Completion Date Disbursements

   Disbursements madeThCh$

   ThCh$

   ThCh$CCU Chile Ltda.

   IWWT

   IWWT Temuco Stage II; IWWT expansion (Screw) Temuco

   Processing

   2,854,428

   156,383

   Dec - 17

   181,077SIR

   Changing and increasing containers for glass and rubbish

   Finished

   37,602

   -

   Finished

   194,875Gases

   Change Fuel FO6 to GNL Temuco, Upgrade Odor Control, Thermal Plant Improvements Quilicura, Videoconferencing rooms.

   Processing

   265,248

   103,093

   Dec - 17

   35,728Others

   DS 10 and RE 43 compliance; Emergency Brigade and Anti Fire Protection System

   Processing

   108,188

   352,424

   Dec - 17

   124,162CCU Argentina S.A.

   IWWT

   IWWT Stage 2 and 3, Salta

   Processing

   217,401

   134,386

   Dec - 17

   60,003Gases

   Boiler 1 Economizer, Luján

   Finished

   227,079

   29,780

   Finished

   -Others

   Fire Network in Distribution Center SV; Compromises ISO 22 K/14K/18 K OSHAS Luján

   Processing

   32,360

   25,076

   Dec - 17

   56,131Cía. Cervecera

   IWWT

   New IWWT PTR – IC Technology

   Processing

   2,050,705

   548,710

   Dec - 17

   2,958,767Kunstmann S.A.

   Others

   DIA; Increase installed power; Equipment protection structures

   Processing

   33,835

   278,000

   Dec - 17

   -Cía. Pisquera de Chile S.A.

   IWWT

   IWWT, Change of Hidroeyectors, Water plant and dam, IWWT improvement in Salamanca and Sotaquí, New Sewer Plant, Water process meters.

   Finished

   133,879

   6,864

   Finished

   9,712SIR

   Improved sludge system; Containers for glass

   Finished

   20,224

   1,610

   Finished

   -Others

   Requirement for ISO Standards in Salamanca, Monte Patria, Sotaquí and Pisco Elqui; DS 10 compliance in Salamanca and Montepatria

   Processing

   268,003

   379,547

   Dec - 17

   -Transportes CCU Limitada

   SIR

   Ceiling of waste area in Distribution Center Llay Llay

   Processing

   -

   57,224

   Dec - 17

   -Gases

   LED lightning in Distribution Center Talca

   Processing

   81,355

   43,939

   Dec - 17

   -Others

   Access to DC Copiapó and Acoustic closure in DC Cervecería Stgo.

   Processing

   138,743

   103,057

   Dec - 17

   -VSPT S.A.

   IWWT

   Sewage plant; Degassing Pond Improvement

   Finished

   76,285

   -

   Finished

   50,356SIR

   Solid Packing Separator

   Finished

   3,128

   -

   Finished

   -Gases

   Electric Power Generator to IWWT, Power Meters

   Finished

   19,296

   -

   Finished

   -Others

   Fire network Molina, DS 10 compliance, Standardization 5 dining rooms, Autonomous Breathing Equipment

   Finished

   220,005

   -

   Finished

   85,825Embotelladora Chilenas Unidas S.A.

   Gases

   Condensate recovery, Meters and Monitoring of Consumption, Mantle Insulation of Boilers, Heat recovery compressor discharge, Upgrade exhaust gas analyzer, Upgrade System Control and Installation System Lighting.

   Processing

   54,282

   29,402

   Dec - 17

   33,684Others

   Safety Acid Injection; Standardization Kitchen ECCUSA; Autonomous Breathing Equipment to Stgo. and Antofagasta

   Processing

   112,904

   27,843

   Dec - 17

   5,992Aguas CCU-Nestlé Chile S.A.

   IWWT

   IWWT Coinco

   Processing

   559,569

   410,347

   Dec - 17

   27,756Gases

   Lighting lines 1, 2 y 3, Steam networks, Solar Lighting

   Finished

   21,425

   -

   Finished

   -Others

   Warehouse Flammable Coinco, RE 43 and DS 594 compliance.

   Processing

   28,694

   222,221

   Dec - 17

   12,600Fábrica de Envases Plásticos S.A.

   Gases

   Control of electrical variables, change of lighting.

   Processing

   187,373

   22,404

   Dec - 17

   47,711Others

   Risk Mitigation, Reduction weight of PET Bottles, Bathroom Expansion, Various SIG -OCA, Ammonia Sensors

   Processing

   158,522

   47,436

   Dec - 17

   61,401


F-122

---



Compañía Cervecerías Unidas S.A. and subsidiaries

   Notes to the Consolidated Financial Statements

   December 31, 2016
 Note 36Subsequent Events   a)The Consolidated Financial Statements of CCU S.A. have been approved by the Board Directors on February 27, 2017.  b)There are no others subsequent events between the closing date and the filing date of these Financial Statements (February 27, 2017) that could significantly affect their interpretation.


F-123