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

X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                        December 31, 20132016

OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIESEXCHANGESECURITIES

     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 number                                                      0-20486

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.cl  Vitacura 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.

__________

*    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.

YES   X  NO____

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

YES  NOX 

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

YES X NO_____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Webweb 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).

YES NO__

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definitiondefinitions of “accelerated filerfiler”, “large accelerated filer”, and large accelerated filer”“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X Accelerated filer  Non-accelerated filer____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. GAAP      International Financial Reporting Standards as issued     ��         Other____

by the International Accounting Standards Board   X 

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 17 ITEM 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).

YES  NOX 

Table of Contents

Page 

Introduction

In this annual report on Form 20-F, all references to “we,” “us,”“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, 2011, 20122014, 2015 and 2013.2016. 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”). These are the Company’s fifth annual consolidated financial statements prepared in accordance with IFRS as issued by the IASB and IFRS 1 “First Time Adoption of International Financial Reporting Standards.” Until and including our financial statements for the year ended December 31, 2008, we prepared our consolidated financial statements in accordance with Chilean generally accepted accounting principles (“Chilean GAAP”), which differs in certain important respects from IFRS, and were required to reconcile our financial statements to U.S. generally accepted accounting principles (“US GAAP”). Following the Company’s adoption of IFRS, as issued by the IASB, we are no longer required to reconcile our financial statements to US GAAP. See the notes to our consolidated financial statements included in pages F-1 through F-109F-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:

CCU has historically estimated its market shares in Chile and Argentina using different sources of information, depending on the category.

i

The sources for the respective categories are:

1.Nielsen (Retail Index): carbonated soft drinks, water, nectars, pisco, rum, domestic wine in Chile and cider in Argentina.

2.Internal Estimates: beer Chile, beer Argentina, and as a reference for carbonated soft drinks, water and pisco.

3.Exporters Association: wine exports.

We had previously decided to use internal estimates in some categories in order to account for relevant sales that were not captured by Nielsen as a result of its sampling methodology. As further described below, we believe that Nielsen underestimates our market share in some categories and overestimates it in others. However, we recently concluded that our internal estimates have been gradually losing accuracy over time as a result of industry players providing less information to the market. The lack of information has made it difficult to check our internal estimates with real data from the industry.  Accordingly, starting in 2014, we will only report the information from Nielsen for market share.

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,”Act”, and Section 21E of the Securities and Exchange Act of 1934, which we refer to as the “Exchange Act.”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;”“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,”Factors”, “Item 4: Information on the Company” and “Item 5: Operating and Financial Review and Prospects.”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, 2013, 20122016, 2015 and 20112014 which has been derived from our consolidated financial statements prepared in accordance with IFRS and included elsewhere in this annual report, and as ofDecember 31, 2014, 2013 and 2012,and for the years ended December 31, 20102013 and 20092012 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 notesand “Item 5: Operating and Financial Review and Prospects” included elsewhere in this annual report.

3

D.Risk Factors

RISKS RELATING TO CHILE

We are substantially dependent on economic conditions in Chile, which may adversely impact ourthe results of our operations and financial condition.

We are predominantly engaged in business in Chile and 68.0%Chile.64% of our sales revenues in 2013 were2016 was generated from our Chilean operations, 23.3%Chile Operating segment,24% came from operations inthe International Business Operating segment, which includes Argentina, 0.8% inParaguay and Uruguay, and 7.9%13% came from exports outthe Wine Operating segment. Thus, the results of Chile.  Thus, our results of 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 of 5.3%3.4% between 20092006 and 2013,2016, and 4.1%1.6% in 2013.2016. 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 2009the past by the disruption in the global financial markets in 2009 and catastrophic events such as earthquakes in 2010 by an earthquake, and therefore the2015. Therefore growth raterates of the 2009-2013 period is not necessarily indicative ofpast 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 can possiblycould have a negative impact on the demand for our products as well as products of third parties with whom we conduct business. On August 5, 2011, Standard & Poor’s Ratings Group, Inc., Any combination of lower consumer confidence, disrupted global capital markets and/or Standard & Poor’s, lowered its long term sovereign credit ratingreduced international economic conditions could have a negative impact on the United States from AAAChilean 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 AA+.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 ADSsAmerican Depositary Shares (“ADSs”) and adversely impact a holder’s ability to sell any shares of our common stock withdrawn from our ADRAmerican 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$266.0 209.9 billion as of December 31, 2013,2016, while The New York Stock Exchange (“NYSE”) had a market capitalization of approximately US$17.9526.5 trillion and the NASDAQ National Market (“NASDAQ”) had a market capitalization of approximately US$6.097.78 trillion 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.”Listing”.

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, 2012 to December 31, 2013, the daily average value of the Chilean peso relative to the U.S. dollar increased by 1.7% in nominal terms, whereas the year end value decreased by 9.6% based on the observed exchange rate for U.S. dollars on those dates. See “Item 3: Key Information–Selected Financial Data–Exchange Rates.”

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 otherdistribution 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.”

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 significant operations in Argentina, and economic conditions there have adversely affected ourthe results of our operations in the past and may do so in the future.

In addition to our operations in Chile, we maintain substantialWe have significant assets in Argentina and derivewe have generated significant revenueincome from our operations in Argentina. In 2013, we derived CLP279,343 million, or 23.3%, of our revenues from our Argentine operations, and, as of December 31, 2013, CLP195,931 million, or 11.3%, of our assets were located in Argentina. this country.

As local demand for alcoholic and non-alcoholic beverages is usually correlated with economic conditions prevailing in thatthe 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. CurrentlyAlthough the economic situation in Argentina has improved since the economic crisis of 2002, we have been observing a slowdownslowdowns of the economy, and accordinglytherefore, 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. See “Item 5: Operating and Financial Review and Prospects – Trend Information.”

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 the first quarter of 2014results.In 2016 Argentina experienced aan average devaluation of the Argentine peso versus the U.S. dollar of 22.9% while devaluation peaked in January by 23.1%. Whereas the economic situation in Argentina has stabilized and the Argentine government has been taking actions to protect foreign currency reserves, we cannot assure you that the Argentine economy will recover or that it will not face a recession, or predict what effect such a recession would have on our operations in Argentina.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. ThoseThe results are calculated in said currencyArgentine 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 theprevious Argentine governmentgovernments to address the country’s economic situationcrisis of 2002 severely affected the Argentine financial system’s stability and have had a materially negative impact on its reputation and lately, on the Company’s business. Recently, Argentina has been increasing restrictions on foreign exchange transactions.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. The unpredictability, timing and scope of possible measures adopted by the Argentine government, including expropriations, higher taxes and exchange control measures, could adversely affect our operations in Argentina and our future results of operations.

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.

Michelle Bachelet,Changes such as the current Presidentnew Chilean tax reform (the “Tax Reform Act”) that became effective on October 1, 2014, and implemented a series of Chile, who started her four-year term on March 11, 2014 has submitted a proposalchanges to the Chilean parliament for their approval to increasetax rates and tax policies, increasing among other things the existing “ad valorem” tax on beer, wine and liquor products, which would significantly increase the price of our alcoholic products sold in Chile. If enacted, the proposal would charge an 18% excise tax onfor alcoholic and sugar-containing beverages plus an additional 0.5%in Chile, forced us to implement price increases for each 1%certain categories, leading to a possible decline in volume.

Furthermore, the Tax Reform Act establishes that as of alcohol content.  For example, the ad valorem excise tax would increase from 15% to 20.5% on regular beer with 5% alcohol content, from 15% to 24%2017 Open Stock Corporations should calculate their taxes based on the typical wine with 12% alcohol content, and from 27%“Partially Integrated System” without the possibility to 35.5% on pisco with 35% alcohol content. Furthermore,opt for the proposal includes analternative “Attributed Income Regime”. The "Partially Integrated System" provides for a gradual increase in the taxation on non-alcoholic sugar containing beverages, from 13% to 18%. In addition, Ms. Bachelet has also submitted a proposal for approval by the parliament to increase the statutory corporateFirst Category Income tax rate, going from 20% to 25%, being staggered through21% 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 as well as make other changesbusiness year, and to income tax rates and other existing tax rules.

These proposals are expected to be debated27% starting in the Chilean Congress in the coming months, and will require a simple majority for approval.  Based on our experience having looked at the four prior alcohol tax proposals during the last 14 years, which had failed to materialize, we expect that the congressional debate process will take about 3-7 months. 2018 business year.

Implementation of these or similar future reforms in Chile,that we are not aware of nor foresee, might adversely affect our businessesbusiness, our operating result and accordingly, we cannot assure you that we will be able to maintain our current levels of sales or cash flows.

Our products are taxed with different duties, 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 15% for beer and wine, 27% for spirits, and 13% for non-alcoholic sugar containing beverages. An increase in the rate of these or any other tax could negatively affect our sales and profitability.financial position.

Fluctuations in the cost of our raw materials may adversely impact our profitability if we are unable to pass those costs alongon 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 determinedbydetermined 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.

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.

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.

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.

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.

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 whichthat adversely affect the value of a holder’s ADSs or common stock.

As of March 31, 2014,2017, 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.

Competition inChilean economic policies, currency fluctuations, exchange controls and currency devaluations may adversely affect the Chilean beer market may erode our market share and lower our profitability.

In 2013, our market share of the Chilean beer market by volume was approximately 77.5%.  Our largest competitor in the Chilean beer market by volume is Cervecería Chile S.A. (“Cervecería Chile”), a subsidiary of Anheuser-Busch InBev (“AB Inbev”). We estimate that Cervecería Chile had a market share by volume in Chile of approximately 11.6% in 2013. In the past, Cervecería Chile had engaged in aggressive pricing, through maintaining a consistent price gap,  and several promotional activities. If Cervecería Chile were to amplify its aggressive price discounting practices in the future, we cannot assure you, 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.

In 2013, AB Inbev finalized the acquisition of Grupo Modelo, owner of the Corona brand, which is currently distributed in Chile by Distribuidora Errázuriz S.A. (“DESA”). In the future this brand could be transferred to Cervecería Chile, thus potentially growing in distribution, which implies a potential risk to our market share and profitability. Another source of risk is the strengthening of Cervecería Chile´s brand portfolio due to the transfer of the Budweiser brand, currently produced in Argentina and distributed in Chile by CCU. Budweiser may be transferred to Cervecería Chile by the end of 2015 due to the expiration the distribution agreement.

Additionally, if business conditions in the beer market continue to be relatively favorable in Chile, more enterprises may attempt to enter the Chilean beer market, either by producing beer locally or through imports.  While we expect per capita beer consumption in Chile to continue to increase, mitigating the effect of competition, the entry into the market of additional competitors could further erode our market share or lead to price discounting.

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 soft drinks.

Beer consumption in Chile may be influenced by changes in domestic wine, spirits and/or other non-alcoholic beverages’ relative prices.  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 profitability could beadversely affected if beverage consumers were to shift their consumption from beer to either wine, spirits or soft drinks.

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 not have the opportunitybe able to exercise a right to vote at all.  Additionally,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 not receive copies of all reports from us orbe required to surrender its ADRs, withdraw the ADS depositary.  A holdershares of our common stock represented by its ADSs, may have to arrange withand vote the ADS depositary’s offices to inspect any reports issued.

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..S.A. We were incorporated in the Republicare a public corporation (sociedad anónima abierta) organized by means of Chile ina public deed dated January 8, 1902, as an open stock corporation, 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 the port of(in Valparaíso.so). 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 Argentina.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.

In 1994 we diversified our operations both inpurchased 48.4% of the domestic and international markets.  In that year, we purchased a 48.4% interest inequity of the Chilean wine producer Viña San Pedro S.A. (“VSP”, today, “VSPT”). Since December 31, 2008, that interest has reached 64.72% as 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 date of this annual report.  In November 1994, welocal stock market. Furthermore, in October 1998 and Buenos Aires Embotelladora S.A. (“BAESA”), (the PepsiCo bottler in Chile at that time) merged to create Embotelladoras Chilenas Unidas S.A. (“ECUSA”), for the production, bottling, distribution and marketing of soft drinks and mineral water products in Chile.  In Novemberduring 1999, we purchased BAESA’sadditional 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 ECUSACompañía Cervecerías Unidas Argentina S.A. (“CCU Argentina”). The agreement involved two different contracts: an investment and thereafter have controlled 100% of that company.

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 subsequent capital increases, the last one in June 2008,resolution of certain labor issues, we began the production of the Córdoba brand at our interest in CCU Argentina reached 95.96%, with Anheuser-Busch Incorporated’s (“Anheuser-Busch”) interest at 4.04%.

In addition to our acquisitions in Argentina, we signed a license agreement with Anheuser-Busch in 1995 granting usSanta Fe plant from the exclusive right to produce, market, sell and distribute the Budweiser beer brand in Argentina. In 2008 the license agreement was extended until December 31, 2025.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, VSPT,VSP, through its subsidiary Finca La Celia S.A. (“FLC”), acquired the winery Finca La Celia in Mendoza, Argentina, initiating its international expansion, allowing VSPTVSP 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.

To increase our presence in the premium beer segment, in November 2000 we acquired a 50% stake in Cervecería Austral S.A., located in the city of Punta Arenas, with an annual production capacity of 6.1 millionliters.  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 August 2003, VSPTVSP 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 January 2004, we entered the sweet snacks business by means of a joint venture between our subsidiary ECUSA and Industria Nacional de Alimentos S.A, a subsidiary of Quiñenco, withSeptember 2007, VSP bought a 50% interest each in CalafViña Altaïr S.A. (which has been renamed Foods Compañíwhich belonged to Château Dassault, in line with our strategy of focusing on premium wines. As a de Alimentos S.A., or “Foods”), a corporation that acquired the trademarks, assetsconsequence, VSP owns 100% of said company. Between April and know-how, among other things,June 2007, VSP’s capital was increased by approximately CLP 13,692 million, of Calaf S.A.I.C. and Francisca Calaf S.A., traditional Chilean candy makers, renowned for more than a century.

In December 2006, we signed a joint venture agreement with Watt’s S.A. (“Watt’s”), a local fruit related company, under which we participate in equal parts in Promarca S.A. (“Promarca”).  This new company owns the brands “Watt’s,” “Watt’s Ice Frut ,” “Yogu Yogu” and “Shake a Shake” in Chile.  Promarca granted both of its  shareholders, for an indefinite period, the exclusive licenses for the production and sale of the different product categories.  Therefore, we now participate in new product categories such as 100% fruit juices and fruit, soy and dairy based beverages.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. SinceIn June 2010 CPCh purchased Fehrenberg, a small, but well-recognized spirits brand produced in Chile. In July 2011 our international strategy has focused on exportsCPCh 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 Argentina, the United States and Asia, including Russia.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 CLP24,439CLP 24,439 million. On September 30, 2009 in extraordinary shareholders’ meetings, Aguas CCU and Nestlé Waters Chile S.A. (“Waters Chile”) approved the merger of Nestlé Waters ChileandChile S.A. and Aguas CCU. The presentcurrent shareholders of Aguas CCU are ECUSA (50.10%), and Nestlé Chile S.A. (49.401%) and Comercializadora de Productos Nestlé S.A. (0.499%(49.90%).

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.

In August 2008, Foods bought 50% of Alimentos Nutrabien S.A., a company specializing in muffins and other high quality home-made products. The Nutrabien brand complements our sweet snacks portfolio which includes the Calaf and Natur brands, the latter acquired in 2007. Moreover, with this acquisition we expanded the sweet snacks business from the traditional candy category to the nutritional cereal bars, cookies and muffins categories.

InOn 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 affiliatemerged company was renamednamed 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 intereststake in CCU Argentina from Anheuser-Busch Investment, S.L. As a result,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)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, CCU and CICSA entered into the cider business by acquiring, directly and indirectly, controllingacquired equity interests in SáenzSaénz Briones y Cía. S.A.I.C.a SAIC and Sidra La Victoria S.A., two Argentinian Through this transaction, CICSA became the controlling shareholder of these companies. These companies engagedown the assets used in the production, packaging and marketing of cider business.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 DecemberAugust 2011, the joint ventureboard of directors of VSPT agreed to spin-off Viña Valles de Chile S.A. (“VDC”) was split, 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 remained in VDC. After would remain within VDC) and ARN would remain the 100% owner of Viña sharesTabalí (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 100%subsidiary of VSPT that is, directly and indirectly, controlled subsidiary of100% owned by VSPT.

In December 2011, our subsuidiary Compañía Pisquera de Chile S.A. (“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., owner of the brand in Chile.

In September 2012, CCU acquired 100% of the shares of the Uruguayan companies Milotur S.A. (“Milotur”), Marzurel S.A., Milotur (“Marzurel”) and Coralina S.A., (“Coralina”) and, Carolina S.A. and became the majority shareholder and controllerindirectly, of Andrimar S.A..S.A. (“Andrimar”), a wholly-owned subsidiary of Milotur. These companies own the assets of a business developed in Uruguay engagedthat engages in the production and marketing of mineral and flavored bottled mineral waterswater under the Nativa brand, and carbonated softdrinkssoft 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, the subsidiary Aguas CCU-Nestlé Chile S.A.CCU completed an acquisition of 51%51.01% of the company Manantial S.A. (“Manantial”), an “HOD”,a Home and Office Delivery (“HOD”) business of purified water in bottles with the use of dispensers. The partnership will enableenabled Aguas CCU-Nestlé Chile S.A.CCU to participate in a new business category,category. The shareholders agreement of which until todayManantial included a call option to purchase the company has had a very small presence.remaining shares.

Furthermore, in 2013, CCU increased its stake in VSPT to 64.72% by acquiring an additional stake of the outstanding sharesas a financial investment opportunity.

On June 18, 2013 the Extraordinary Shareholders´ Meetingextraordinary 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, raisingaraising 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 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 through licensessubsidiary of Promarca S.A.

In March 2016, we acquired 51% of Sajonia Brewing Company SRL (formerly Artisan SRL) which produces and imported.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

Thecash 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 CLP 77,847230,080 million, , CLP 117,645131,731 million and CLP 124,559128,883 million, respectively, , totaling CLP 320,050490,694 million of which CLP 87,940389,750 million was invested in beer operations in Chile CLP 70,717 million in beer operations in Argentina , CLP 69,269 million in our non-alcoholic operations, CLP 22,287 million in our wine operations, CLP 5,250 million in our spirits operations and CLP 64,587 100,945million in other investments , primarily in warehouses and bottle molds, during the years mentioned above. 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 to upgrade our management information systems,the integration of new operations, among others.

In 2011 we dedicated 30%During 2014,85% of our capital expenditurecash flows related to the Chile beer division, with a significant amount invested in the improvement of the environment with a waste water treatment plant, in addition to the necessary investments in packaging, machinery and equipment. CCU Argentina made investments in the beer packing division and dedicating resources to replace and increase production capacity. Resources devoted to expand our network of storage facilities amounted to 10% of total capital expenditure in 2011.

During 2012, 24% of our capital expenditure was onin Chile. These investments were required to increase marketing assets, bottling capacity and new packaging, mostly in our soft drink operations.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 salesour categories experienced in 2011. Additionally, our Chile beer division required significant2014, with investments related to increaseincreasing 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 2013 we invested 33%2016, 69% of cash flows related to our capital expendituresexpenditure was in our Chile beer division.Chile. These investments were required to support the increased sales volume experienced during 2012 and 2013. 22% of our capital expenditures were directedcategories experienced in 2015, with investments related to our soft drinks due to significant investments to increaseincreasing bottling capacity, new packaging,lines, replacement of obsolete lines and marketing assets. It wasWe also necessary to investinvested in the construction of new warehouseswarehouse adaptation and stores throughout Chile in order to optimize the distribution of our products to supportand new technologies.categories.

OurThe cash flow related to our major capital expenditureexpenditures for the period 2011-20132014 - 2016 are shown in the following table. See “Item 5: Operating and Financial Review and Prospects –Liquidity– Liquidity and Capital Resources – Capital Expenditures Commitments”Expenditures” for the 2014-20172017 - 2020 period.

B.Business Overview

Summary

We are

CCU is a multi-category brandeddiversified beverage company operating in Chile, Argentina, UruguayBolivia, Colombia, Paraguay and since December 2013 Paraguay, with an extensive wine export business to more than 80 countries. Based on our estimates, we are, by market share based on volume,Uruguay. CCU is the largest Chilean brewer, the second-largest brewer in Argentina,Chilean carbonated soft drinks producer, the largest Chilean water and nectar producer, and the largest pisco producer. It is the second-largest Chilean soft drink producer, the third largest wine producerArgentine brewer, and participates in the domesticbeer, water and soft drinks industries in Uruguay, Paraguay and Bolivia, and in the beer industry in Colombia. CCU is one of the largest Chilean market,wine producers, and the second-largest Chilean wine exporter, the largest Chilean bottled water and nectars producer, the largest Chilean pisco producer and distributor and the second-largest Chilean juices producer. We also participate in the home and office bottled water delivery, rumexporter. The Company´s principal licensing, distribution and confectionary industries in Chile. In Uruguay, we participate in the bottled mineral water and carbonated soft drinks industries. In Paraguay, we participate in the soft drinks, water and juices industries and beer distribution. We have licensing and// or distributionjoint venture agreements withinclude Heineken Brouwerijen B.V., Anheuser-Busch International Inc., Cervecera Austral S.A., Cervecería Modelo S.A. de C.V.,Incorporated, PepsiCo Inc., Stokely Van Camp Inc., Pepsi LiptonSeven-up International, Limited, Seven-Up International (a division of The Concentrate Manufacturing Company of Ireland), Schweppes Holdings Limited, Promarca S.A., Arthur Guinness Son & Company (Dublin) Limited and Guinness Overseas Limited, Nestlé S.A., Société des Produits Nestlé S.A., Nestec S.A., Pernod Ricard Chile S.A., Compañía Pisquera BauzáWatt´s S.A., Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A.Coors Brewing Company.

As we have mentioned in press releases during 2013, CCU determined that starting in 2014 it will reportreports its consolidated results pursuant to the following operatingOperating segments, essentially defined with respect to its revenues in the geographic areas of commercial activity: Chile,^[1], Río de la Plata^[2] International Business and Wine^[3]. Corporate revenues and expenses are presented separately within the Other segment.

Wine. These operatingOperating 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 makerChief 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.

We will evaluate

In 2015 the performanceCommittee 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 segmentsbusiness 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 several indicators, including OR (Operating Result)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”), ORBDA (Operating Result Before Depreciationwhich include Transportes CCU Limitada (“Transportes CCU”), Comercial CCU S.A. (“Comercial CCU”), CRECCU S.A. and Amortization), ORBDA margin (%Fábrica de Envases de Plásticos S.A. (“Plasco”). This change enables us to capture additional efficiencies and improve the service level of ORBDA of total revenues forour logistics operation.

In 2016 the segment), volumes and sales revenues. Sales between segments are conducted using terms and conditions at current market rates.

^[1] Chile: This segment commercializes Beers, Non Alcoholic Beverages and SpiritsCompany took important steps in the Chilean market.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.

^[2] Rio de la Plata: This segment commercializes Beers, Ciders, Non Alcoholic Beverages and Spirits in the Argentine, Uruguayan and Paraguayan market.

^[3] Wine: This segment commercializes wine, mainly in the export market reaching over 80 countries.