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, 20142016

 

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 SECURITIESEXCHANGESECURITIES

     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.

 

 Name of each exchange

Title of each classon which registered

 American Depositary Shares                   New York Stock Exchange

                   Representing Common Stock

                   Common Stock, without par value           New York Stock Exchange*

Title of eachclass

American Depositary Shares

Representing Common Stock

Common Stock, without par value         

Name of each exchange
on which registered
New York Stock Exchange

New 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.

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 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).

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 
Forward Looking Statements ii 
PART I 
ITEM 1: Identity of Directors, Senior Management and Advisers 
ITEM 2: Offer Statistics and Expected Timetable 
ITEM 3: Key Information 
ITEM 4: Information on the Company 16 15 
ITEM 4A: Unresolved Staff Comments 6156 
ITEM 5: Operating and Financial Review and Prospects 6156 
ITEM 6: Directors, Senior Management and Employees 8175 
ITEM 7: Major Shareholders and Related Party Transactions 9186 
ITEM 8: Financial Information 9792 
ITEM 9: The Offer and Listing 99 94 
ITEM 10: Additional Information 10196 
ITEM 11: Quantitative and Qualitative Disclosures about Market Risk 116110 
ITEM 12: Description of Securities Other than Equity Securities 120115 
PART II 122116 
ITEM 13: Defaults, Dividend Arrearages and Delinquencies 122116 
ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds 121216 
ITEM 15: Controls and Procedures 122116 
ITEM 16A: Audit Committee Financial Expert 121317 
ITEM 16B: Code of Ethics 123117 
ITEM 16C: Principal Accountant Fees and Services 123118 
ITEM 16D: Exemptions from the Listing Standards for Audit Committees 124118 
ITEM 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers 124118 
ITEM 16F: Change in Registrant’sRegistrant's Certifying Accountants 124118 
ITEM 16G: Corporate Governance 124120 
ITEM 16H: Mine Safety Disclosure 127122 
PART III 127122 
ITEM 17: Financial Statements 127122 
ITEM 18: Financial Statements 127122 
ITEM 19: Exhibits 127123 

 


 
 

 

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, 2012, 20132014, 2015 and 2014.2016. 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 sixth 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-104F-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 liters

1 liter = 0.008522 US beer barrels

1 US beer barrel = 117.34 liters

1 liter = 0.1761 soft drink unit cases (8 oz cans)

1 soft drink unit case (8 oz cans) = 5.6775 liters

1 liter = 0.1174 beer unit cases (12 oz cans).

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

1 hectoliter = 100 liters

1 liter = 0.01 hectoliters

1 US beer barrel = 31 gallons

1 gallon = 0.0323 US beer barrels

1 hectare = 2.4710 acres

1 acre = 0.4047 hectares

1 mile = 1.6093 kilometers

1 kilometer = 0.6214 miles

 

 

CCU has historically estimated its weighted volumes market shares in Chile, Rio de la Plata and Wines using different sources of information.

i

When estimating weighted volume market share, 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. 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, for weighted volume market share we will use the following external sources of market share information: Nielsen for Chile, Domestic Wine and Argentina, ID Retail for Uruguay and Viñas de Chile for Export Wine. Figures are updated annually and weighted by internal market size estimates.

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,”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, 2014, 20132016, 2015 and 20122014 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, 20112013 and 20102012 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.

 

 

IFRS

 

2010

2011

2012

2013

2014

1. Income Statement Data:

(million ofCLP)(1)

 

Net sales

838,258

969,551

1,075,690

1,197,227

1,297,966

 

Gross margin

456,714

521,689

582,603

660,530

693,429

 

Operating Result(2)

163,891

192,818

181,188

188,266

179,920

 

Other gains (losses)

6,136

3,010

-4,478

959

4,037

 

Net financing expenses

-8,286

-7,324

-9,362

-15,830

-10,821

 

Results as per adjustment units

-5,076

-6,728

-5,058

-1,802

-4,159

 

Foreign currency exchange differences

-1,401

-1,079

-1,003

-4,292

-613

 

Income taxes

-27,853

-45,196

-37,133

-34,705

-46,674

 

 

 

 

 

 

 

 

 

Net income for the year:

119,937

134,802

123,977

132,905

120,792

 

Attributable to:

 

 

 

 

 

 

Equity holders of the Parent Company

110,700

122,752

114,433

123,036

106,238

 

Non-controlling interests

9,237

12,051

9,544

9,869

14,553

 

 

 

 

 

 

 

 

 

Basic and Diluted Income per share

347.56

385.40

359.28

370.81

287.52

 

Basic and Diluted Income per ADS(3)

695.12

770.80

718.57

741.61

575.04

 

Dividend per share (4)

173.8

192.7

179.6

166.5

161.8

 

Dividend per ADS in US$(3)(4)

0.73

0.78

0.76

0.61

0.52

 

Weighed average shares outstanding (000)

318,503

318,503

318,503

331,806

369,503

        
        

 

 

 

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

1,558,898

 

Gross margin

582,603

660,530

693,429

813,296

817,078

 

Other income by function

5,585

5,509

25,464

6,577

5,144

 

Other expenses(2)

-1,756

-1,260

-1,743

-2,372

-2,027

 

Exceptional Items (EI)(3)

-

-2,989

-1,628

-

-

 

MSD&A(4)

 

-405,243

-473,524

-535,603

-612,565

-619,543

 

Adjusted Operating Result(5)

181,188

188,266

179,920

204,937

200,652

 

Other gains (losses)

-4,478

959

4,037

8,512

-8,346

 

Net financing expenses

-9,362

-15,830

-10,821

-15,256

-14,627

 

Results as per adjustment units

-5,058

-1,802

-4,159

-3,283

-2,247

 

Equity and income from joint ventures

-177

309

-899

-5,228

-5,561

 

Foreign currency exchange differences

-1,003

-4,292

-613

958

457

 

Income taxes

 

-37,133

-34,705

-46,674

-50,115

-30,246

 

 

 

 

 

 

 

 

 

Net income for the year:

123,977

132,905

120,792

140,526

140,082

 

Attributable to:

 

 

 

 

 

 

Equity holders of the Parent Company

114,433

123,036

106,238

120,808

118,457

 

Non-controlling interests

9,544

9,869

14,553

19,717

21,624

 

 

 

 

 

 

 

 

 

Basic and Diluted Income per share

359.28

370.81

287.52

326.95

320.59

 

Basic and Diluted Income per ADS(6)

718.57

741.61

575.04

653.90

641.17

 

Dividend per share (7)

179.6

166.5

161.8

163.5

176.3

 

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

0.76

0.61

0.52

0.47

0.53

 

Weighted average shares outstanding (000)

318,503

331,806

369,503

369,503

369,503

 

Shares outstanding as of December 31st (000)

318,503

369,503

369,503

369,503

369,503

 

 

3



 

 

YearEnded December 31,

IFRS

 

2010

2011

2012

2013

2014

IFRS

 

2012

2013

2014

2015

2016

2. Balance Sheet Data:

2. Balance Sheet Data:

(million ofCLP)(1)

2. Balance Sheet Data:

(Million of CLP)(1)

 

 

 

 

 

 

 

 

 

Total assets

1,151,689

1,298,365

1,328,710

1,727,720

1,768,901

Total assets

 

1,328,710

1,727,720

1,768,901

1,825,447

1,871,577

Total non-current liabilities

299,657

251,026

303,662

234,347

242,070

Total non-current liabilities

303,662

234,347

242,070

249,235

228,973

Total Financial debt (5)

232,967

258,969

263,997

263,251

199,853

Total Financial debt (8)

263,997

263,251

199,853

180,901

184,624

Capital stock

231,020

231,020

562,693

562,693

Capital stock

 

231,020

562,693

562,693

562,693

Subtotal Equity attributable to equity holders of the parent company

505,655

568,976

613,220

988,676

1,025,588

Subtotal Equity attributable to equity holders of the parent company

613,220

988,676

1,025,588

1,057,816

1,077,298

Total shareholders' equity

615,074

684,786

710,518

1,084,244

1,148,500

Total shareholders' equity

710,518

1,084,244

1,148,500

1,187,522

1,200,293

3. Other Data

3. Other Data

 

 

 

3. Other Data

 

 

Sales volume (in millions of liters):

 

 

Sales volume (in millions of liters):

 

Total volume

1,729.8

1,839.7

1,990.9

2,191.6

2,289.5

Total volume

1,990.9

2,191.6

2,289.8

2,392.7

2,478.3

Chile Operating segment(6)

1,195.1

1,260.4

1,384.4

1,557.0

1,621.4

Rio de la Plata Operating segment(7)

414.2

458.1

478.9

507.1

537.5

Wine Operating segment(8)

120.5

121.2

127.6

127.4

130.6

(1)

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

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

(2)

Defined, for management purposes, as earnings 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. Please see “Item 5: Operating and Financial Review and Prospects—OPERATING RESULT” for more details regarding Operating Result and a reconciliation of the most directly applicable IFRS measure to Operating Result.

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

(3)(5)

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

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.

(4)(6)

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.

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.

(5)(7)

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

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.

(6)(8)

Includes sales of beer, non-alcoholic beverages and spirits in Chile.

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

 

 

(7)

Includes sales of beer, non-alcoholic beverages and spirits in Argentina, Paraguay and Uruguay.

(8)

Includes domestic and export sales to more than 80 countries. Excludes bulk wine sales.

 

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.

 

On April 10, 2008, the Central Bank of Chile announced a program to buy US$8 billion in the local exchange market between April and December 2008. On March 24, 2009, the Central Bank of Chile published an agreement allowing the sale of dollars. On January 3, 2011, the Central Bank of Chile announced a program to buy US$12 billion starting January 5, 2011 with purchases of up to US$50 million per day.

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.

 

4


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 March 31, 2015,April 3, 2017 the U.S. dollar observed exchange rate relating to March 31, 2017 was CLP626.87CLP 663.97 per U.S. dollar, which is explained by the current excess of foreign currency.dollar.

 


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 20102012 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)

 

 

 

 

 

2010

468.01

549.17

510.21

468.01

2011

455.91

533.74

483.57

519.20

2012

469.65

519.69

486.58

479.96

2013

466.50

533.95

495.53

524.61

2014

524.61

621.41

570.50

606.75

October 2014

576.50

598.64

588.41

576.50

November 2014

580.62

605.46

593.91

605.46

December 2014

606.75

621.41

612.74

606.75

January 2015

612.47

632.03

622.11

632.03

February 2015

616.86

632.19

622.95

618.76

March 2015

617.38

642.18

628.86

626.58

 

 Source: 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.

 

Daily Observed Exchange Rate(1)

 

(CLP per USD)

 

Low(2)

High (2)

Average(3)

Period-end(4)

 

 

 

 

 

2012

469.65

519.69

486.58

479.96

2013

466.50

533.95

495.53

524.61

2014

524.61

621.41

570.50

606.75

2015

597.10

715.66

654.79

710.16

2016

645.22

730.31

676.70

669.47

October 2016

651.18

670.88

663.78

651.18

November 2016

650.72

679.24

667.18

673.54

December 2016

649.40

677.11

666.48

669.47

January 2017

646.19

673.36

660.51

646.19

February 2017

638.35

648.88

643.34

648.88

March 2017

650.98

669.52

661.86

663.97

 

 

 

 

 

Source: 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 April23, 2015, 17, 2017, the latest practicable date, was CLP618.12  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 ourthe results of our operations and financial condition.

 

We are predominantly engaged in business in Chile.64% of our sales revenues in 20142016 was generated from our Chile Operating segment,2324% came from the Rio de la PlataInternational Business Operating segment, which includes Argentina, Paraguay and 13%Uruguay, and13% came from the Wine Operating segment. Thus, ourthe 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 of4.13.4% between 20102006 and 2014,2016, and1.7% 1.6% in 2014.2016. 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 2010-2014 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. 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 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$233.0  209.9 billion as of December 31, 2014,2016, while The New York Stock Exchange (“NYSE”) had a market capitalization of approximately US$26.97 26.5trillion and the NASDAQ National Market (“NASDAQ”) had a market capitalization of approximately US$7.53 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.”Listing”.

 


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.

 

6


 

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.

 

We have significant assets in Argentina and we have generated significant income from our operations in this country.

As local 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. 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.

 

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 20142016 Argentina experienced aan average devaluation of the Argentine peso versus the U.S. dollar of 31.2%approximately 60% year on year, while in the first quarter of 2014 devaluation peaked in January by 23.1% year on year.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.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, as well as 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 higher taxes and exchange control measures, could adversely affect our operations in Argentina and our future results of operations.

SinceIn 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. In 2013 formal measures were implemented to freeze prices in Argentina, and the government may continue to do so in the future.

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. Formal andde facto measures that are purely based on economic governmental policies may continue affecting our operationsThis situation has changed following the installation of the new government in Argentina, as we need to regularly import raw materials and finished products into Argentina.December 2015. We cannot assure you that these and other unpredictable measures adopted by the current or future Argentine governmentgovernments will not have an adverse effect onimplement legal and economic measures that could adversely affect our operations in Argentina.

 


RISKS RELATING TO OUR BUSINESS

RecentPotential changes to Chilean tax rules may result in an increase in the prices of our products and a corresponding decline in sales volumes.

7


 

OnChanges such as the new Chilean tax reform (the “Tax Reform Act”) that became effective on October 1, 2014, new Chilean tax reforms became effective, bringingand implemented a series of changes to the tax rates and tax schemes. There has been an increase inpolicies, increasing among other things the excise taxestax for alcoholic and sugar-containing beverages in Chile. The new ad valorem excise taxes are as follows: Beer and Wine increased from 15.0%Chile, forced us to 20.5%, Spirits increased from 27.0%implement price increases for certain categories, leading to 31.5%, sugar containing nonalcoholic beverages containing more than 15 gr./240ml. of sugar  increased from 13.0% to 18.0% and non-sugar containing non-alcoholic beverages with 15 gr./240ml. or less of sugar decreased from 13.0% to 10.0%. Accordingly, we have made price adjustments to some of the affected categories.a possible decline in volume.

 

Furthermore, the regarding tax reform introduces amendments, among others, toTax Reform Act establishes that as of 2017 Open Stock Corporations should calculate their taxes based on the Income tax system. The said Act provides that corporations will apply by default“Partially Integrated System” without the "Partially Integrated System", unless a future Extraordinary Shareholders Meeting agreespossibility to opt for the "Attributedalternative “Attributed Income Regime”.The Act provides for 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, 2014, to 22.5% for the 2015 business year, 2015, to 24% for the 2016 business year, 2016, to 25.5% for the 2017 business year, 2017 and to 27% starting in the 2018 business year.

 

Implementation of these or similar future reforms in Chilethat 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.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 piscococktails, 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.


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 S.A. (“Cervecería Chile”), a subsidiary of Anheuser-Busch InBev (“AB Inbev”).Chile. In the past and during 2016, Cervecería Chile hadhas engaged in aggressive pricing, through maintaining pricing. Additionally, during 2016 Cervecería consistent price gap, and several promotional activities.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, 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 given the current environment.share.

 

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.

8


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.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’ relative prices.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 soft drinks.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 Industrial S.A. (“Quilmes”) and from CerveceríCASA Isenbeck, which as a Argentina S.A. Isenbeck (“CASA Isenbeck”), a former subsidiaryresult of Warsteiner Brauerei Hans Cramer GmbH & Co. (“Warsteiner”), which was acquired by SABMiller Plc on November 24, 2010.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 of beer throughout Argentina.distribution. Therefore, we cannot assure you that we will be able to grow or maintain our current market share ofin the Argentine beer market.

 

Consolidation in the beer industry may impact our market share.

In 2005, SABMiller Plc merged with Grupo Empresarial Bavaria, a Colombian brewer with operations in Colombia, Peru, EcuadorSubstitution of fossil fuels by natural gas and Panama, forming the then second-largest brewer in the world.  In 2010SABMiller Plc acquired CASA Isenbeck, the third-largest brewer in Argentina.

In March 2004, Compania 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.  Inbev and Anheuser-Busch Companies, Inc. (“Anheuser-Busch”) merged in November 2008, creating AB Inbev, the world’s global beer leader. In Chile, Quilmes sells its beer through Cervecería Chile S.A. (“Cervecería Chile”), a subsidiary of ABInbev. In 2013, AB Inbev finalized the acquisition of Grupo Modelo.

Consolidation in the beer industry has resulted in larger and more competitive participants, whichtaxes on carbon dioxide emissions could change the current market conditions under which we operate.

Restrictions in the gas supply from Argentina have increasedincrease our energy costs, and higher oil prices have increased our distribution expenses.costs.

 

Since 2005,In line with the Argentine government has restrictedsustainability 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 exports toin our industrial facilities. Taxes on carbon dioxide emissions in Chile due to domestic supply problems. This has increasedwill go into effect in 2017, and the cost of operating our production plantsthese 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 Chile and Argentina. Gas supplies are currently stable, reducing the risk of further cost increases. However, these restrictions have increased electrical power costs. Because our boilers can be operated with gas or with alternative fuels, such as diesel oil or butane gas, we do not anticipate the need for additional investments. The Chilean government is presently implementing a strategy to diversify the country’s energy supply. The construction in Quintero of the first plant to process imported LNG (liquefied natural gas), which started its operation in August 2009, brought relief to the gas supply.  However,2018, but we cannot assure you that the supply of energy or the cost thereofwe will not experience further fluctuations as a result of these policies.  be able to meet this goal.

Electric power costs in Chile have increased significantly in the last yearspast mainly due to hydroelectric plants having lower water reservoir levels, which was exacerbated by the absence of new installed capacity at lower costs. Furthermore, the riseIncreases in oil prices have led to increases in our distribution costs.  If these trends were to continue, the resulting increases in energy prices mayor unfavorable hydric conditions could reduce our margins if we are unable to improve efficiencies or increase our prices to offset them.

9


 

Changes in the labor market in the countries in which we operate may affect margins in our business.

 

In 2014, Chile’s unemployment rateAugust 2016, labor reform Law 20,940 was relatively low, which hadapproved in Chile, and went into effect as of April 2017. The labor reform has resulted in a direct impact onmore 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.


·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 expense given the resulting competition for workers. In Argentina, given labor unions pressures related to country’s high level of inflation, we have also faced pressure with respect to our salary expenses.

On December 29, 2014 the executive branch of the Chilean government, led by President Michelle Bachelet, signed an extensive labor reform bill which was sent to the Chilean Congress for parliamentary proceedings and approval. In light of the executive branch of the Chilean government having majority support at both houses of the Chilean Congress, we expect that the proposed bill will be approved as drafted or under some amended form following debate of the bill in both houses.

Under the current draft the proposed bill contemplates several amendments to the existing labor framework in Chile, including, among other points:

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

·unions are recognized as the only party entitled to exercise the right to collectively bargain on behalf of the workers.

·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 financial situation of the company or business as of the date of discussions for a new agreement would not have any bearing on ongoing negotiations.

·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 and replaced with an obligation from unions to provide the personnel required to comply with “minimum services” through “emergency teams.”

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

·unions may annually request from large companies information regarding the remunerations and duties associated with each category of employees.

Approval and implementation of the proposed bill, which increases the collective bargaining power of labor unions, or similar reforms may have adverse effects on our overall employment and operating costs and may increase the likelihood of business disruptions on our various activities in Chile, which could negatively affect our financial results and our ability to grow our business.

 

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 you 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.

10


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. The importance of supermarkets to our business operations is disclosed in the discussion of each of our Operating segments.

 

Additionally, and despite having insurance coverage, this supermarket chain consolidation has the effect of increasing our exposure to counterparty credit risk, suchgiven the fact that we have more exposure in the event one of these large customers fails to honorfulfill its payment obligations to us for any reason.

 

Dependence on onea single supplier for some important raw materials.

 

In the case of cans, both in Chile and Argentina we purchase from a single supplier, Rexam,Ball, which has production plants in each country.both countries. However, cans maycould also be imported from other RexamBall 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 may notcannot assure you we will be able to obtain replacement supplies at favorable pricing or advantageous terms, which may adversely affect our results. In the case of one waypolyethylene terephthalate resins (“PET”), we purchase from several suppliers located in China, Mexico and the U.S. and in the past we have also bought from Argentina.

 

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 establishes,provides, among others, for a new regime of temporary entitlements for water rights, onwhich will apply to future water rights to be granted, while introducingthat are granted. The bill would also introduce a system of revocation of water rights, for those not in use. TheThis bill is subject to revisioncould undergo modifications during the course of its discussion and it isin 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 unclear what final form it will take if enacted.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 among uswithin the Company and with our clients, suppliers and also among 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 restrictions on the saleregulations for labeling materials and promotion of alcoholic beverages and other food products in Chile could adversely affect us.

 

SenatorsOn 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 congressmen from different political partiesenforces 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 submitted tobeen classified as being “high” in calories or any of the Chilean Congress proposed bills to restrictdefined critical nutrients, such as sodium, sugar and saturated fats. Additionally on November 13, 2015 Law N° 20,869 regarding the consumption, sale and promotion of alcoholic beverages.  The principalmodifications proposedfood products was published, restricting the time of day promotions for products high in these bills are the incorporation of warnings on product labelscalories or any of the possible dangers of excessive alcohol consumption on human health, similar to those required in the United States, restrictionsdefined critical nutrient can be aired on television and radio advertisingin the cinema. This regulation change came into force on June 27, 2016 and restrictions on advertising at sports, cultural or related events.

11


On March 15, 2012 Law N° 20,580 was enacted by the Chilean Congress. This law amended the limit for blood alcohol content while driving by reducing the limit from less than 0.5 gr/lt. to less than 0.3 gr/lt., which has already hadaffected 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 levelthird phase of consumptionbeing 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 consequentlypromotion 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 business.alcohol beverages portfolio and certain marketing activities.

 

On September 16, 2014, an amendment to Law N°20,580 was enacted. This amendment further decreased the maximum permissible blood alcohol level when driving and toughened the penalties and punishments when driving under the influence of alcohol.

Also, subject to further health regulations, which have not yet been approved due to delays, new food labeling rules are expected to take effect. These new regulations, to be complied with by manufacturers, will gradually toughen rules and restrictions on the labeling, packaging information, and food advertising, among others.

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.

                                    

CCU places special careModifications introduced by this law and dedicates constant efforts tothose incorporated in the compliance with environmental regulations. Modifications to the existing regulation mightregulations will involve new costs and investments by the Company.

 

Our products are taxed with different duties,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 15 gr.15gr./240ml. of sugar and 10% for non-alcoholic beverages containing 15 gr.15gr./240ml. or less of sugar. An increase in the rate of these or any other tax could negatively affect our sales and profitability.

Currency fluctuations may affect our profitability.

Because we purchase some of our supplies at prices set in U.S. dollars, and export wine in U.S. dollars, euros and pounds, we are exposed to foreign exchange risks that may adversely affect our financial condition and results of operations.  Therefore, any future changes in the value of the Chilean peso, or any other functional currencies in the geographies we operate, against said currencies would affect the revenues of our wine export business, as well as the cost of several of our raw materials, especially in the beer and soft drink businesses where raw materials are indexed to the U.S dollar price. The effect of the exchange rate variation on export revenues would have an inverse effect on the cost of raw materials expressed in Chilean peso terms.

 

Catastrophic events in the marketsregions in which we operate could have a material adverse effect on our financial condition.

12


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 results. For example, onposition.

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 27, 2010, an 8.8 magnitude earthquake struck central Chile, followed by a subsequent tsunami. The earthquake epicenter was located 200 miles southwest of Santiago and 70 miles north of Concepción, Chile’s second largest city.

On April 1, 2014, an 8.2 magnitude earthquake struck the northern part of Chile, but2017. These events did not have a significant effect on our operations. During March 2015, large floods and mudflows affected several towns of the Antofagasta, Atacama and Coquimbo regions, but did not haveoperations, however, a significant effect on our operations. A future earthquake, tsunami or other natural disaster, however,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, 2015,2017, 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, 20132015 to December 31, 2014,2016, the daily average value of the Chilean peso relative to the U.S. dollar increased by15% 3.5%in nominal terms, whereas the year end value decreased by 16%6% based on the observed exchange rate for U.S. dollars on those dates. See “Item 3: Key Information – Selected Financial Data – Exchange Rates.”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. IftheIf 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.”Dividends”.

13


 

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.

 

A holderHolders 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.

 

In order to vote at shareholders’ meetings, ifADS 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 holder is not registered on the booksnotice of the ADS depositary, the holder of our ADSs is required to transfer their ADSs for a certain number of days before a shareholders’ meeting into a blocked account established for that purpose by the ADS depositary.  Any ADSs transferred to this blocked account will not be available for transfer during that time.  If a holder of our ADSs is registered on the books of the ADS depositary, it must give instructions to the ADS depositary not to transfer its ADSs during this period before the shareholders’ meeting.  A holder of our ADSs must therefore receive voting materials 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 depositary sufficiently in advance in orderholders than for direct common stock holders, who are able to make these transfersexercise 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 these instructions. There can be no guarantee that a holder of ourdiscretionary proxy to a person designated by us to vote their ADSs willon their behalf. Furthermore, ADS holders may not receive voting materials in time to instruct the ADS depositary on howDepositary to vote. It is possible thatAccordingly, ADS holders may not be able to properly exercise their voting rights.


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.

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 the repatriation of the 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.

 

The rights of a holder of our ADSs to force us to purchase its underlying shares of our common stock pursuant to Chilean corporate law upon the occurrence of certain events may be limited.

In accordance with Chilean laws and regulations, any shareholder that votes against certain corporate actions or does not attend the meeting at which certain corporate actions are approvedand communicates to the corporation its dissent in writing within the time period established by law may exercise a withdrawal right, tender its shares to the company and receive cash compensation for its shares, provided that the shareholder exercises its rights within the prescribed time periods.  See “Item 10: Additional Information–Memorandum and Articles of Association–Rights, preferences and restrictions regarding shares.”  In our case, the actions triggering a right of withdrawal include the approval of:

14


·our transformation into a different type of legal entity;

·our merger with and/or into another company;

·the transfer of 50% or more of our 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 our charter which otherwise would render it null and void or any modification of our bylaws that 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 controller 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.

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 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 its 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.

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 usour Company may be diluted.

 

15


TheLey sobre Sociedades Anónimas N° 18,046 (“Chilean Corporations Act”) and theReglamento de Sociedades Anónimas, which we refer to in this document collectively as the “Chilean Corporations Act”, requiresrequire 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 IncomeTaxFederalIncomeTax Considerations – Taxation of Capital Gains.”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.


 

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 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(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 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.

 

16


Our principal executive offices are located at Avenida Vitacura 2670, 23rd floor, Santiago, Chile. Our telephone number in Santiago is (56-2) 2427-3000, our fax number is (56-2) 2427-3333 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.

 

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.”

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. 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. 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.

 

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 million liters.  Further, in May 2002, we acquired a 50% stake in Compañía Cervecera Kunstmann S.A., located in the city of Valdivia.

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 a 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.

Prior to November 1994, we independently produced, bottled and distributed carbonated and non-carbonated soft drinks in Chile. We have produced and sold soft drinks in Chile since 1902 and spirits since 2003.  In November 1994, we merged our soft drink and mineral water businesses with the one owned by BAESA (BuenosBuenos 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 (currently Pepsi, Pepsi Light, Seven Up, Seven Up Light, Mirinda, Gatorade and Lipton Ice Tea).license. We have had control of ECUSA since January 1998, when the shareholders agreement was amended, and have owned 99.94% of ECUSA’s shares since ouramended. On November 29, 1999 purchase ofwe purchased 45% of ECUSA’s shares owned by BAESA for approximately CLP54,118CLP 54,118 million. We currently own 99.93% of ECUSA’s shares. In January 2001, ECUSA and Schweppes Holdings Ltd. signedansigned an agreement to continue bottling Crush and Canada Dry brands. See “– Production and Marketing – Chile Operating segment.”segment”.

17



 

 

In October 2013, CCU, together with its subsidiary Embotelladoras Chilenas Unidas1994 we purchased 48.4% of the equity of the Chilean wine producer Viña San Pedro S.A. (“ECUSA”VSP”), executed a series for approximately CLP 17,470 million. During the first half of contracts and agreements with PepsiCo Inc. and affiliates, that allowed them to expand their current relationship1995, 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 non-alcoholic beverages segment with specific focus on carbonated soft drinks, as well as extending its long term duration. The performance of ECUSA as PepsiCo Inc.’s bottler has been recognized bylocal stock market. Furthermore, in October 1998 and during 1999, we purchased additional shares in VSP through the latter on several occasions including the award granted to ECUSA last June in Bangkok as Bottler of the Year for the Latin America Region. In 2014, ECUSA received the distinction of “PepsiCo Global Bottler of the Year” from over 200 bottlers worldwide.

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, 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 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.

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),stock exchanges for an indefinite period, the exclusive licenses for the production and saleamount of the different product categories.

In December 2007, we entered into an agreement with Nestlé Chile S.A. and Nestlé Waters Chile S.A., the latterapproximately CLP 5,526 million. From March through June 1999, VSP’s capital was increased by approximately CLP 17,464 million, 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 CLP24,439contributed approximately CLP 10,797 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%).

In December 2012, the subsidiary Aguas CCU-Nestlé Chile S.A. completed an acquisition of 51% of the company Manantial S.A., an “HOD,” Home and Office Delivery, business of purified water in bottles with the use of dispensers. The partnership enabled Aguas CCU-Nestlé Chile S.A. to participate in a new business category, of which until today the company has had a very small presence.

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 CompañíaPisquera 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%. 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. Since 2011, our international strategy has focused on exports to Argentina, the United States and Asia, including Russia. In December 2011, our subsidiary 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. Furthermore, during 2011 CPCh began the distribution of Pernod Ricard products in Chile.

18


 

In December 1995, we entered into a joint venture agreement pursuant to which Anheuser-Busch Incorporated acquired a 4.4% interest in Compañía Cervecerías Unidas Argentina S.A. (“CCU Argentina.Argentina”). The agreement involved two different contracts: an investment and a licensing contract. In 2008, the licensing contract was extended until 2025 and grants Compañía Cervecerías Unidas Argentina S.A. (“CCU Argentina”) the exclusive right to produce, package, market, sell and distribute Budweiser beer in Argentina.  After subsequent capital increases, the last one in June 2008, Anheuser-Busch Incorporated reduced its interest in CCU Argentina to 4.04% and we increased our participation to 95.96%. 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 for the distribution of the brand in Chile).Currently, CCU´s subsidiaries Inversiones Invex CCU Ltda. and Inversiones Invex CCU Dos Ltda. own 95% and 5%, respectively, of CCU Argentina´s share capital. 

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% interestin 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.


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%).


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 December 27, 2010, CICSA acquired equity interests in Saénz Briones S.A. 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, including Sidra Real and Sidra La Victoria. In 2011, we started to export Schneider beer to Paraguay. In 2012 we signed an agreement by virtue of which we have the exclusive right to produce Heineken beer in Argentina and distribute it in Paraguay. Together, both brands represented 0.8% of the total beer sales volume of CCU Argentina in 2013. Exports to Paraguay represented 46.2% of CCU Argentina’s total exports in 2013. As of June 6, 2014, CICSA reached agreements with Cervecería Modelo S. de R.L. de CV. 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 US$34.2 million.

19


In September 2012, CCU acquired 100% of the shares of the Uruguayan companies Marzurel S.A., Milotur S.A. and Coralina S.A. and, indirectly, of Andrimar S.A., a wholly-owned subsidiary of Milotur S.A. These companies own the assets of a business developed in Uruguay that engages in the production and marketing of bottled mineral waters under the Nativa brand, and carbonated soft drinks under the Nix brand. This acquisition is in line with the Company’s strategic plan, which seeks to expand its activities into new markets. Milotur, our afilliate in Uruguay, also commercializes Schneider and Heineken beer brands, the latter due to an amendment to the trademark license agreement in force with Heineken Brouwerijen BV.

 

In December 2013, CCU S.A. acquired 50.005% of Bebidas del Paraguay S.A. and 49.96% of Distribuidora del Paraguay S.A., entering the Paraguayan market with the production, marketing and distribution of alcoholic and non-alcoholic beverages under various brands, both proprietary and licensed.

In 1994 we purchased 48.4% of the equity of the Chilean wine producer Viña San Pedro S.A. (“VSP”, today, “VSPT” as described below) for approximately CLP17,470 million.  During the first half of 1995, VSPT’s capital was increased by approximately CLP14,599 million, of which we contributed approximately CLP7,953 million.  From August through October 1997, VSPT’s capital was increased again by approximately CLP11,872 million, of which we contributed approximately CLP6,617 million, plus approximately CLP191 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 VSPT through the local stock exchanges for an amount of approximately CLP5,526 million.  From March through June 1999, VSPT’s capital was increased by approximately CLP17,464 million, of which we contributed approximately CLP10,797 million. During 2000, VSPT, through its subsidiary Finca La Celia S.A. (“FLC”), acquired the winery Finca La Celia in Mendoza, Argentina, initiating its international expansion, allowing VSPT to include fine quality Argentine wines into its export product portfolio. In December 2001, Viña Santa Helena (“VSH”) created its own commercial and productive winemaking operation, distinct from its parent, VSPT, under the Viña Santa Helena label in the Colchagua Valley. Between November 2000 and March 2001, VSPT’s capital was increased by approximately CLP22,279 million, of which we contributed approximately CLP13,402 million. In August 2003, VSPT 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 October 2004, VSPT acquired the well-known Manquehuito Pop Wine brand, a sparkling fruit-flavored wine with low alcohol content, broadening its range of products. At VSPT’s extraordinary shareholders meeting held on July 7, 2005, the shareholders voted to increase the number of board members from 7 to 9 and approved a capital increase that was to be partially used for stock option programs. During October and November 2005, VSPT’s capital was increased by approximately CLP346 million. We did not participate in this capital increase.

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, VSPT 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, VSPT owns 100% of said company.

Between April and June 2007, VSPT’s capital was increased by approximately CLP13,692 million, of which we contributed approximately CLP5,311 million.  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 “ViñViña San PedroTarapacáPedro Tarapacá S.A.” (VSPT) (“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 Viña TarapacáVT at a ratio of 1,480.30828 new VSPT shares per each share of the absorbed company.

20


 

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 toto spin-off Viña Valles de Chile S.A. (VDC)(“VDC”), a corporation owned, in equal parts, by VSPT and Agrícola y Ganadero Río Negro Limitada (ARN)(“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. Furthermore, in 2013,

In September 2012, CCU through its subsidiary CCU Inversiones S.A., increased its stake in VSPT to 64.72% by acquiring an additional stakeacquired 100% of the outstanding shares of VSPT. Asthe Uruguayan companies Milotur S.A. (“Milotur”), Marzurel S.A. (“Marzurel”) and Coralina S.A. (“Coralina”) and, indirectly, of December 2014, our total ownership interestAndrimar S.A. (“Andrimar”), a wholly-owned subsidiary of Milotur. These companies own the assets of a business developed in VSPT was 64.72%.VSPT is formed by the wineries San Pedro, Tarapacá, Santa Helena, Misiones de Rengo, Altaïr, Viña Mar, Casa Rivas, FLC, Bodega Tamarí, and Viña Valles de Chile (Viña Leyda).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 leadersUruguay that engages in the domestic market. Furthermore, VSPT’s Viña San Pedro Tarapacá winery was awardedproduction and marketing of mineral and flavored bottled water under the “Winery ofNativa brand, and carbonated soft drinks under the Year 2014” distinction by Wines of Chile.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.

 

On April 3, 2013, Andronico Luksic assumed the roleIn December 2012, Aguas CCU completed an acquisition of Chairman51.01% of the Board, after his brother, Guillermo Luksic passed away.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.


 

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 CLP331,718,929,410.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 SeptemberDecember 2013, CCU developed its “Strategic Plan 2014-2016,” which aims to move decisively towards building a regional company, focusing on multi-category beersacquired 50.005% of Bebidas del Paraguay S.A. (“Bebidas del Paraguay”), and soft drinks. In December 2013, twelve CCU managers retired early and were replaced by executives currently working in CCU, all49.959% of which was effective as of January 31, 2014. At the same time, by the end of 2013, CCU enteredDistribuidora del Paraguay S.A. (“Distribuidora del Paraguay”), entering the Paraguayan market with the production, marketing and distributionsale of alcoholicnon-alcoholic beverages, such as soft drinks, juices and non-alcoholic beverageswater, and import, marketing and sale of beer, under various brands, both owned through licensesproprietary 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 intothe Bolivian market through a partnership through which participates in the businesswith Grupo Monasterio, acquiring 34% of Bebidas Bolivianas BBO S.A. (“BBO”), which involves the production, marketing. BBO produces and multi-category sales ofcommercializes alcoholic beverages and soft drinksnon-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 asunder joint ventureventures and associates.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,Corona andNegra 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 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 have 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.SS.A.S. (“Central Cervecera”CCC”)., in whichCCUwhich CCU and Postobón participate in as equal shareholders. This transaction included the following contracts and agreements: an Investment Framework Agreement;Agreement, a Shareholders Agreement;Agreement, a long-term logistics and distribution contract and a sales contract governing services to be provided by Postobón to the Central Cervecera de Colombia S.A.S.;CCC, a trademark license agreements granted to Central CerveceraCCC by CCU and Postobon ;Postobón, a shared services agreement governing services to be provided by Postobón to Central Cervecera de Colombia S.A.S;CCC, and an exclusive license granted by Heineken to Central Cervecera de Colombia S.A.S an exclusive contractCCC for the import, production and distribution of Heineken products in Colombia. Central Cervecera de ColombiaAs 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 accounted for as a Joint venturein charge of the production of the respective products, and associates.

21ECUSA will be in charge of its distribution.



 

 

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 capital 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 capital expenditures for the last three years were CLP 117,645 million, CLP 124,559 million and CLP230,080 million, respectively totaling CLP472,283 million of which CLP209,070 million was invested in the Chile Operating segment, CLP90,204 million in the Rio de la Plata Operating segment, CLP26,664 million in the Wine Operating segment and CLP146,346 million in the Others Operating segment. 

In recent years, 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 2012,45% of our capital expenditure was on our Chile Operating segment. These investments were required to support the increased sales volume of our categories experienced in 2011, 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 2013 we invested 57% of our capital expenditures in our Chile Operating segment. These investments were required to support the increased sales volume experienced during 2012 and 2013. 22% of our capital expenditures were directed to increasing bottling capacity, new packaging, and marketing assets. It was also necessary to invest in the construction of new warehouses and stores throughout Chile in order to optimize the distribution of our products.

During 2014,37% of our capital expenditure was on our Chile Operating segment. 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 (shown under Others).

Our major capital expenditures for the period 2012-2014 are shown in the following table. See “Item 5: Operating and Financial Review and Prospects –Liquidity and Capital Resources – Capital Expenditures Commitments” for the 2015-2018 period.

22


Operating segment

2012

2013

2014

  

(CLP Millions)

     

Chile

 

52,723

70,441

85,905

 

As a percentage of Total

44.8%

56.6%

37.3%

 

Machinery and equipment

26,269

48,631

50,730

 

Packaging

14,748

12,611

15,987

 

Marketing assets

7,574

8,317

11,253

 

Software and hardware

40

49

256

 

Others

4,093

833

7,679

 

 

 

 

 

Rio de la Plata

26,945

29,779

33,481

 

As a percentage of Total

22.9%

23.9%

14.6%

 

Machinery and equipment

16,224

14,632

11,476

 

Packaging

7,720

11,438

14,070

 

Marketing assets

2,748

2,617

6,122

 

Software and hardware

67

441

512

 

Others

185

650

1,301

 

 

 

 

 

Wine

 

9,138

4,840

12,686

 

As a percentage of Total

7.8%

3.9%

5.5%

 

Machinery and equipment

6,461

1,735

4,139

 

Packaging

1,127

1,360

1,483

 

Marketing assets

20

15

36

 

Software and hardware

24

63

114

 

Others

1,505

1,668

6,914

     

Others

 

28,839

19,498

98,008

 

As a percentage of Total

24.5%

15.7%

42.6%

     

Total

 

117,645

124,559

230,080

Business Overvie

Summary

CCU is a diversified beverage company operating principally in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. CCU is the largest Chilean brewer, the second-largest Chilean soft drinks producer and the largest Chilean water and nectar producer, the second-largest Argentine brewer, the second-largest Chilean wine producer and the largest pisco distributor. It also participates in the HOD, rum and confectionery industries in Chile, in the beer, water and soft drinks industries in Uruguay, and in the soft drinks, water and nectar industries and beer distribution in Paraguay and Bolivia. The Company has licensing and / or distribution agreements with Heineken Brouwerijen B.V., Anheuser-Busch Incorporated, PepsiCo Inc., Schweppes Holdings Limited, Guinness Brewing Worldwide Limited, Société des Produits Nestlé S.A., Pernod Ricard, Compañía Pisquera Bauzá S.A. and Coors Brewing Company.

23


As mentioned in press releases during 2013, CCU determined that starting in 2014 it will report its consolidated results pursuant to the following Operating segments, essentially defined with respect to its revenues in the geographic areas of commercial activity: Chile, Río de la Plata and Wine. Corporate revenues and expenses are presented separately within the Other segment. 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.

We evaluate the performance of the segments based on several indicators, including OR (Operating Result), ORBDA (Operating Result Before Depreciation and Amortization), ORBDA margin (% of ORBDA of total revenues for the segment), volumes and sales revenues. Sales between segments are conducted using terms and conditions at current market rates.

Overview.

Chile Operating segment

We estimate that our weighted volume market share for the Chile Operating segment was approximately 37.8%, 39.6% and 40.8% in 2012, 2013 and 2014 respectively. Weighted volume market share includes all categories in which CCU participates excluding wines and HOD, according to Nielsen figures.

We carry a wide portfolio of products which includes premium, mainstream and convenience brands of alcoholic and non-alcoholic beer, which are primarily marketed under ten different proprietary brands and five licensed brands, with Cristal as our flagship brand in Chile. In addition, we are the exclusive producer and distributor of Heineken beer; the exclusive distributor of imported Sol beer and Budweiser beer (until December 2015) and we distribute and produce Kunstmann and Austral beer in Chile via distribution or license agreements. With our four production plants in Santiago, Temuco, Valdivia (Kunstmann) and Punta Arenas (Austral), we are the only brewery in Chile with a nationwide production and distribution network.

We also produce and sell non-alcoholic beverages in Chile, which includes carbonated soft drinks (both cola and non-cola), nectars and juices, sports and energy drinks, ice tea and waters (including mineral, purified bottled water and home and office delivery or “HOD”) with proprietary and licensed brands across our categories. Our line of soft drink products includes proprietary brands, in addition to brands produced under license from PepsiCo (for soft drinks, functional drinks and iced teas), Schweppes Holdings (for soft drinks) and Promarca (nectars and fruit beverages), which are produced in three production plants: Santiago, Temuco and Antofagasta. We have been in the bottled mineral water business 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 Nestlé,and distribute the imported brand Perrier.

In 2003, we added a new product to our beverage portfolio: pisco, which is produced by our subsidiary Pisconor S.A. who entered into an association agreement in 2005 with the second-largest pisco producer in Chile, Control, creating a new subsidiary, CPCh. In May 2007, CPCh entered the rum category through our proprietary brand “Sierra Morena.” 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, Beefeater and Absolut among others) through the traditional channel, which excludes supermarkets with centralized distribution. Furthermore, during December 2011, CPCh acquired 49% of Compañía Pisquera Bauzá S.A., and signed a license agreement for the commercialization and distribution of the Bauzá brand of pisco in Chile. We operate five productive plants and own 80% of CPCh, while the remaining 20% is owned by Control.

24


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 sales, distribution, marketing, G&A and production.

Rio de la Plata Operating segment

We estimate that our weighted volume market share for the Río de la Plata Operating segment was approximately 15.9%, 17.2% and 17.3% in 2012, 2013 and 2014, respectively, including Beer and ciders in Argentina according to Nielsen, and CSD and Mineral water in Uruguay according to IDRetail.

We entered the Argentine beer market in 1995 by acquiring two breweries and their brands, CICSA and CSF. Under a joint venture agreement entered into with Anheuser-Busch in 1995, we began importing, selling and distributing Budweiser beer in Argentina in March 1996. We began production and distribution of locally produced Budweiser beer in Argentina in December 1996. Additionally, in 1998, we bought the brands and assets of Cervecería Córdoba S.A. In April 2008, we bought ICSA and as a result added to our portfolio the brands Palermo, Bieckert and Imperial. In Argentina, we are the exclusive producer and distributor of Heineken, Amstel and Sol beers and the exclusive distributor in Argentina of import Kunstmann and Guinness beer brands. Additionally, we export beer under the Schneider, Heineken and Budweiser brands. We have beer operations located in Salta, Santa Fe and Luján.

In December 2010, CICSA, our subsidiary in Argentina, acquired control of Sáenz Briones y Cía. S.A.I.C and Sidra La Victoria S.A., entering the cider and spirits businesses in that country. These two operations are the largest in a very fragmented market and own traditional, well-recognized brands, with operating plants in Neuquén (Allen), Mendoza (Chacras de Coria), and Buenos Aires (Pilar and Ciudadela). The most important cider and spirits brands are Real, La Victoria, Saenz Briones 1888 and in spirits, El Abuelo. We also produce and distribute the cider brand Apple Storm.

In September 2012, CCU acquired 100% of the shares of the Uruguayan companies Marzurel S.A., Milotur S.A., and Coralina S.A., and indirectly Andrimar S.A., a wholly-owned subsidiary of Milotur S.A. These companies own the assets of a business developed in Uruguay engaged in the production and marketing of bottled mineral and flavored waters under the Nativa brand, and carbonated soft drinks under the Nix brand. We also distribute Heineken, Schneider and Kunstmann imported beers.

By the end of 2013, CCUacquired 50.005% of Bebidas del Paraguay S.A. and 49.96% of Distribuidora del Paraguay S.A. andentered the Paraguayan market with the production, marketing and distribution of alcoholic and non-alcoholic beverages under various brands, both proprietary and under license. Bebidas del Paraguay S.A. is the owner of the brands Pulp for carbonated soft drinks, Puro Sol for juices and La Fuente for waters, and has been granted the license to produce and distribute nectars under the Watt’s brand. Additionally, Bebidas del Paraguay S.A. has the license to distribute beer under the Heineken, Coors, Paulaner, Schneider and Kunstmann brands.

On June 6, 2014, CICSA reached agreements with Cervecería Modelo S. de R.L. de CV. 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 US$34.2 million.

 

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

25


market share was 17.3%, 17.6% and 18.5% in 2012, 2013 and 2014, respectively. In 2014 VSPT’s sales amounted to approximately 28.8% of total measured domestic industry sales by volume in Chile, according to Nielsen, and 13.6% 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, San Fernando, Isla de Maipo and Casablanca, and also in Mendoza, Argentina.

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.

Others

CCU participates in the sweet snacks business through Foods Compañía de Alimentos CCU S.A. (“Foods”) which produces candies, cookies, cereals and baked products under the Calaf, Natur and Nutrabien brands; CCU also has a strategic alliance with Fini. Foods has three production centers: Santiago, Talagante and Talca.

Comercial CCU S.A. 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 Ltda. (“TCCU”). 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.

Inorganic Growth

In May 2014, CCU entered the bolivian market through a partnership with Bebidas Bolivianas BBO S.A., 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 3 plants located in the cities of Santa Cruz de la Sierra and Nuestra Señora de La Paz.

In November 2014, CCU, entered intodirectly and through its subsidiary CCU Inversiones II Ltda., signed a series of contracts and agreements with the Colombian entity PostobonPostobón S.A. (“Postobón”), by which the partieswe agreed to initiate a joint agreementventure for the manufacturing, commercialization and distribution of beer and malt based non-alcoholic beverages in Colombia. Heineken has grantedThe 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 contractlicense granted by Heineken to CCC for the import, production and distribution of Heineken products in Colombia.

As of September 2015 CCC also has anThe Beverage Market 

Chile Operating segment

We estimate that annual beer consumption in Chile was 730 million liters in 2014 or approximately 41 liters per capita. The following table shows our estimates for total and per capita consumption levels for beer in Chileexclusive contract for the years 2010 - 2014:import, production and distribution of Coors Light in Colombia.

 

26


Year

Total Sales Volume(1)

Per Capita

 

(in millions of liters)

(liters)

2010

633

37

2011

667

39

2012

681

39

2013

723

41

2014

730

41

(1) Source: Canadean, Global Beverage Forecast of February 2015.Figures have been rounded

The four major Chilean beer manufacturers are us, Cervecería Chile, Cervecería Kunstmann and Cervecería Austral, whose principal brands of beer in Chile are Cristal, Becker, Kunstmann and Austral, respectively.  In November 2000, we acquired a 50% stake in Cervecería Austral, located in the city of Punta Arenas. In October 2001, Cervecería Austral2015, ECUSA entered into a licensejoint operation agreement with our subsidiary Cervecera CCU Chile Ltda.Empresas Carozzi S.A. (“CCU Chile”Carozzi”) to produce and sell our brand Cristal, as well as any other brand owned by or licensed to CCU Chile in the southern part of Chile.  During 2003, Cervecería Austral beganfor the production, commercialization, and saledistribution of ourinstant powder drinks under the brands Cristal, EscudoSprim, Fructus, Vivo and Dorada. In May 2002, weCaricia. This joint operation is carried out by Bebidas Carozzi CCU SpA (“Bebidas Carozzi CCU”), of which ECUSA acquired a 50% ownership interest in Compañía Cervecera Kunstmann S.A., a microbrewery located in the southern city of Valdivia, with an annual production capacity of 3 million liters at that time.  Since June 2003, our beer division began selling Kunstmann nationwide.  In November 2006, we acquired additional shares of Kunstmann that allowed us to consolidate this subsidiary into our financial statements since that month.

The non-alcoholic beverages market in Chile consists of both carbonated and non-carbonated beverages. The principal types of carbonated beverages are colas and non-colas. The principal non-carbonated beverages are fruit nectars and fruit based soft drinks. 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:

 

Non-Alcoholic Beverage Sales

 

Total Sales Volume(1)

 

liters Per Capita(1)

 

(in millions of liters)

  

Year

CarbonatedSoft Drinks

Nectar &Juices

Waters(2)

 

CarbonatedSoft Drinks

Nectar &Juices

Waters(2)

 

2010

2,220

312

342

 

129

18

20

2011

2,285

358

371

 

132

21

21

2012

2,376

426

416

 

136

24

24

2013

2,411

469

464

 

137

27

26

2014

2,321

486

499

 

131

27

28

(1)  Source: Canadean, Global Beverage Forecast of February 2015.

(2) Includes HOD.

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

2012

2013

2014

 

   

Colas

58%

55%

55%

Non-colas

42%

45%

45%

Total

100%

100%

100%

The bottled water market in Chile is comprised of both carbonated and non-carbonated mineral water, and purified water.  As with the soft drink market, approximately 94.5% of all mineral water in Chile isprocessed and marketed by two entities, us and Vital Aguas S.A., a subsidiary of the two licensed companies of TCCC in Chile. Our mineral water products have been produced by ECUSA since November 1994.

27


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. We estimate that annual pisco consumption in Chile was  38.9 million liters, or approximately 2.2 liters per capita in 2014. Rum is the second most popular spirit in Chile, we estimate that annual rum consumption in Chile was 14.4 million in 2014.

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)

Spirits per Capita

 

(in millions of liters)

(liters)

2010

76.8

4.5

2011

87.5

5.1

2012

93.7

5.4

2013

96.8

5.5

2014

99.5

5.6

(1) Source: Canadean, Global Beverage Forecast of February 2015.

 

On October 1, 2014, new Chilean Tax reforms 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 Tax

Beer

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 15 gr./240ml of sugar

  

(2) With 15 gr./240ml. or less of sugar

  

Rio de la Plata Operating segment

The Argentine beer market is estimated by us to be almost 2.5 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 1,798 million liters in 2014 or approximately 43liters per capita, reflecting a 2.5% industry decrease for 2014.

The table below sets forth our estimates of beer consumption in Argentina during each of the last five years:

28


 

Argentina

 

Total Sales Volume

 

liters Per Capita

 

(in millions of liters)

 

(Liters)

 

Year

Beer

Functional Drinks

Spirits

Cider

 

Beer

Functional Drinks

Spirits

Cider

2010

1,803

79

115

81

 

45

2.0

2.8

2.0

2011

1,871

89

124

85

 

46

2.2

3.0

2.1

2012

1,870

98

128

94

 

46

2.4

3.1

2.3

2013

1,844

107

129

97

 

44

2.6

3.1

2.3

2014

1,798

107

130

94

 

43

2.6

3.1

2.3

Source: Canadean, Global Beverage Forecast of February 2015.

 

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

1999 Excise Taxes

 

Current Excise Taxes

Non-Alcoholic Beverages

   

Flavored soft drinks, mineral water and juices

0% - 4%

 

4.17% - 8.7%

    

Alcoholic Beverages

   

Beer

4%

 

8.7%

Whisky

12%

 

25%

10-29% alcohol content

6%

 

25%

30% or more alcohol content

8%

 

25%

Wine-cider

6%

 

0%

The integration of the operations of Paraguay and Uruguay are progressing in line with plans, and we are expanding our portfolio of categories of soft drinks and beer. As of 2014, we participate in the production and marketing of bottled mineral and flavored waters, carbonated soft drinks, nectars and juices; and in the distribution of beer. The tables below set forth our estimates of beer and non-alcoholic categories consumption in Uruguay and Paraguay:

 

Uruguay

 

 

Total Sales Volume(1)

 

 

liters Per Capita(1)

 

 

(in millions of liters)

 

 

(liters)

 

Year

Beer

CSD

Nectar & Juices

Water(1)

 

Beer

CSD

Nectar & Juices

Water(1)

2010

93

367

29

198

 

28

109

9

59

2011

101

389

38

219

 

30

115

11

65

2012

100

392

47

240

 

29

116

14

71

2013

99

404

52

273

 

29

119

15

80

2014

99

409

54

283

 

29

120

16

83

Source: Canadean, Global Beverage Forecast of February 2015.

 

 

 

(1) Includes HOD.

 

 

 

 

 

 

 

 

29


 

Paraguay

 

 

Total Sales Volume(1)

 

 

liters Per Capita(1)

 

 

(in millions of liters)

 

 

(liters)

 

Year

Beer

CSD

Nectar & Juices

Water(1)

 

Beer

CSD

Nectar & Juices

Water(1)

2010

274

523

30

175

 

42

81

5

27

2011

283

534

54

186

 

43

81

8

28

2012

280

571

62

210

 

42

85

9

31

2013

277

555

60

224

 

41

82

9

33

2014

280

555

62

245

 

41

80

9

35

Source: Canadean, Global Beverage Forecast of February 2015.

(1) Includes HOD.

Wine Operating segment

We estimate wine consumption in Chile was to approximately 13 liters per capita in 2014.  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 Ganadero, or “SAG”) is the entity in charge of wine industry regulation and principally oversees inventory records and product quality.  We estimate that the formal market wineries sold approximately 225 million liters of wine during 2014.

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)

2010

237

14

2011

232

13

2012

226

13

2013

227

13

2014

225

13

(1) Source: Canadean, Global Beverage Forecast of February 2015.

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.

Production and Marketing.

Chile Operating segment

The production, marketing and sales of beverages in Chile generated Net sales of CLP 676,529 million, CLP 765,196 million, and CLP 830,341million, or 62.8%, 63.9% and 64.0% of our total Net sales, in 2012, 2013 and 2014, respectively.  Our sales by volume in Chile increased 4.1% in 2014.

30


Under each license agreement, we have the exclusive right to produce, 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.

On April 28, 2003, through our subsidiaries CCU Chile 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 International 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 agreementsshare capital. Carozzi 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.

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 Lemon Stones a lemon flavored sweetened beer, with 2.5% alcohol content. From time to time, we introduce innovations in our most relevant brands. Somecharge of these innovations include Cristal Cer0,0°, Cristal Light, the 1.2 liter returnable bottle, Escudo Negra and Escudo Triple X, amongst others.

In October 2001, we signed a license agreement with Cervecería Austral S.A. for the production of the Austral brand by our beer division. This agreement is currently renewable for periods of two years, subject to compliance with the contract conditions. Our investmentrespective products, and ECUSA will be in Cervecería Austral S.A., the production of the Austral brand by our beer division; the investment in Compañía Cervecera Kunstmann S.A. (Kunstmann is a specialty beer produced in a variety of versions); and the production of Heineken beer since June 2003, among other initiatives, are part of our strategy to increase our presence in the premium segment of the Chilean beer market.

On April 30, 2010, FEMSA announced the closing of the transaction pursuant to which FEMSA agreed to exchange 100%charge of its beer operations for a 20% economic interest in the Heineken Group. Since then, Heineken introduced the Sol brand to its portfolio, and during 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. 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.

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.

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

31distribution.


Premium

Mainstream

Convenience

beer brands

beer brands

beer brands

Royal Guard

Cristal

Dorada

Royal Guard Black Label

Cristal Cer0,0°

Heineken (1)

Cristal Light

Budweiser(2)

Escudo

Austral(1)

Escudo Negra

Kunstmann

Escudo XXX

D'olbek

Morenita

Sol(2)

Lemon Stones

Coors(2)

(1) Produced under license

(2) Imported

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 and Temuco. The Temuco plant commenced production in November 1999, replacing the closed Concepción and Osorno plants.

During the last three years we sold our beer products in Chile in the following containers:

Percentage of Total Beer Products Sold

Container

2012

2013

2014

 

 

 

 

Returnable(1)

49%

47%

44%

Non-returnable(2)

47%

50%

52%

Returnable kegs(3)

4%

3%

3%

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

2012

2013

2014

Premium

15%

16%

18%

Mainstream

81%

80%

78%

Convenience

4%

4%

4%

Total

100%

100%

100%

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, TCCC 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 TCCC 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 executedbetween 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.

32



 

 

 

In August, 2002,2015 we began importing, sellingsold the brands Calaf and distributing Gatorade,Natur to Carozzi, leaving Foods only with its 50% participation in Alimentos Nutrabien S.A. During 2016, Foods acquired the world’s number one isotonic drink. In March 2006, a new exclusive bottling agreement was executed betweenremaining 50% stake of Alimentos Nutrabien S.A. 

On January 29, 2016 Aguas CCU and ECUSA exercised the call option, acquiring 48.07% 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 duration0.92% of the Shareholders Agreementshares of Bebidas CCU-PepsiCo Spa, subject toManantial respectively. As a consequence, Compañía Cervecerías Unidas S.A. is currently the complianceindirect owner of 100% of the shares of Manantial, remaining as the only direct shareholders of Manantial: (i) Aguas CCU with 99.08% of the contract conditions. Since October 2006, we have been producing Gatorade locally.capital stock, and (ii) ECUSA with 0.92% of the capital stock.

 

In November 2007, ECUSA signed an exclusive bottling agreement with Pepsi Lipton International Limited, authorizing ECUSA to produce, sellFebruary 2016 CCU 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 are 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”,Watt´s, among others, entered into an “International Association Agreement” in Chile.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. 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 February 2005, we launched a new Cachantun product, under the trademark Mas, a sugar free product made of mineral water, calcium and citric flavor, creating a new category of flavored water.

 

In December 2007,March 2016, we entered into an agreement with Nestlé Chile S.A. and Nestlé Waters Chile S.A., the latteracquired 51% of Sajonia Brewing Company SRL (formerly Artisan SRL) which acquired a 20% interest in our subsidiary Aguas CCU, the company that owns the assets through which we develop our bottled water business in Chile.  As part of this new association, Aguas CCU produces and sells 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.  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 the notification from Nestlé Waters Chile S.A. exercising its irrevocable option to buy 29.9% of Aguas CCU equity, within the scope of the contract. Since the conclusion of the sale, ECUSA holds 50.10% of the ownership interests of Aguas CCU. CCU owns directly or indirectly 99.94% of ECUSA’s equity.commercializes Sajonia craft beer.

 

In December 2012,2016 CCC acquired the subsidiary Aguas CCU-Nestlé Chilebrand and assets related to the craft beer brand “3 cordilleras” of Artesana Beer Company S.A. acquired a 51% ownership interest in the company Manantial S.A. which carries out the business of homeCCC is reported under Joint ventures and office delivery of purified water in bottles with the use of dispensers. Additionally, a shareholder’s agreement with Manantial S.A. was entered into in connection with the acquisition.associated companies.

 

On October 2013, CCU together with its subsidiary ECUSA executed a series of contracts and agreements with PepsiCo Inc. and its affiliates that will allow the parties to expand their current relationship in the non-alcoholic beverages segment with specific focus on the carbonated soft drinks,as well as extending the duration of their long-term relationship. 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.

33


Aligned with our innovation process: during 2002 we launched Bilz Light, Pap Light, Agua Tónica Light and Gatorade. In April 2003, we introduced to the market Kem Xtreme, a soft drink with a high level of caffeine. In September 2004, we launched Canada Dry Ginger Ale Light, and in October 2004, we re-launched Nobis, a traditional proprietary soft drink brand, to be used strategically against discount brands.  In September 2006, we launched Canada Dry Limón Soda Light. In January 2007, we introduced two new products into the market: (i) Slice by Kem, a tropical fruit flavored soft drink, and (ii) SoBe Adrenaline Rush, an energy drink sold under the PepsiCo license. In November 2007, we entered into a new product category, ice tea, with the brand Lipton Ice Tea, produced by us under the PepsiCo license. During 2008 we introduced Watt’s Soya from Promarca (50% owned by us), and Nestlé Pure Life from Aguas CCU, a well-known purified water brand, in order to place ourselves in a leading position in the healthy foods market. In 2009, the Company introduced Mas Woman by Cachantun, a beverage made from Cachantun mineral water, in a variety of flavors, targeted towards women. In addition, in the same year, the Company began to import the renowned mineral water Perrier. In 2011 we introduced several new product offerings including Pop from Bilz and Pap, Kem Xtreme Girl, the first zero calorie energy soft drink developed specifically for women, Slice by Kem, Lipton Feel Green in two flavors and powder Gatorade. During 2014 we continued our innovation strategy launching brands like Adrenaline Red, a locally produced energy drink that replaced SoBe Adrenaline Rush, Sobe Waters and Ocean Spray (all licensed by PepsiCo), Kem Rio Guaraná and Kem Xtreme Sugar Free.

The following table shows the soft drink and water brands produced and/or sold by us through our non-alcoholic subsidiary ECUSA, during 2014:

34


Brand

Product

Category

Affiliation(1)

Bilz

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Pap

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Bilz Light

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Bilz Zero

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Pap Light

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Pap Zero

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Pop Candy

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Kem

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Kem Xtreme

Soft Drink

Functional

CCU Proprietary

Kem Xtreme Sugar Free

Soft Drink

Functional

CCU Proprietary

Kem Xtreme Ice

Soft Drink

Functional

CCU Proprietary

Kem Zero

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Kem Rio Guaraná

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Nobis

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Canada Dry Ginger Ale

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Canada Dry Ginger Ale Light

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Canada Dry Agua Tónica

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Canada Dry Agua Tónica Light

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Canada Dry Limón Soda

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Canada Dry Limón Soda Light

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Crush

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Crush Light

Soft Drink

Non-Cola Licensed

Schweppes Holdings Ltd.

Pepsi

Soft Drink

Cola Licensed

PepsiCo

Pepsi Light

Soft Drink

Cola Licensed

PepsiCo

Seven-Up

Soft Drink

Non-Cola Licensed

PepsiCo

Seven-Up Light

Soft Drink

Non-Cola Licensed

PepsiCo

Lipton Ice Tea

Ice Tea

Non-Cola Licensed

PepsiCo

Mirinda

Soft Drink

Non-Cola Licensed

PepsiCo

Gatorade

Isotonic

Functional

PepsiCo

Ocean Spray

Nectars

Licenced

Pepsico

Adrenaline Red

Energy

Licensed

PepsiCo

SOBE LIFE WATER

Functional Drink

Licensed

Pepsico

Frugo

Soft Drink

Licensed

Promarca

Watt’s

Nectars

Licensed

Promarca

Watt’s Light

Nectars

Licensed

Promarca

Watt's Clear

Nectars

Licensed

Promarca

Cachantun

Mineral Water

Proprietary

Aguas CCU-Nestlé

Mas de Cachantun

Mineral Water based beverage

Proprietary

Aguas CCU-Nestlé

Mas Woman

Mineral Water based beverage

Proprietary

Águas CCU-Nestlé

Porvenir

Mineral Water

Proprietary

Aguas CCU-Nestlé

Perrier

Mineral Water

Licensed

Nestlé Waters M&D

Nestlé Pure Life

Purified Water

Licensed

Nestlé S.A.&others

Manantial

HOD

Proprietary

Manantial S.A.(2)

(1)CCU owns directly or indirectly 50% of Promarca and 50.1% of Aguas CCU-Nestlé.

(2)Aguas CCU-Nestlé owns 51% of Manantial S.A.

35


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

 

Carbonated Soft Drinks, Nectars and Juices

 

Mineral and Purified Water

Container

2012

2013

2014

 

2012

2013

2014

Returnable(1)

31%

29%

28%

 

5%

28%

28%

Non-returnable(2)

67%

69%

70%

 

95%

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

2012

2013

2014

Colas

 

 

 

 

Licensed

15%

16%

16%

Non-colas

 

 

 

 

Proprietary

38%

36%

36%

 

Licensed

28%

27%

27%

Nectars

 

 

 

 

 

Licensed

20%

21%

22%

Soft drinks total

100%

100%

100%

Mineral water

 

 

 

 

Proprietary

85%

66%

64%

 

Licensed

0%

0%

0%

Purified water

 

 

 

 

Proprietary

3%

0%

0%

 

Licensed

9%

7%

8%

HOD

 

3%

27%

28%

Total Bottled Water

100%

100%

100%

The following table shows the sales mix of our non-alcoholic beverages by affiliation during each of the last three years:

36


Affiliation

2012

2013

2014

Soft drinks

 

 

 

Proprietary

29%

26%

25%

Schweppes

18%

16%

15%

PepsiCo

15%

15%

15%

 

 

 

 

Promarca (1)

15%

16%

15%

 

 

 

 

Water

 

 

 

Proprietary(2)

20%

25%

27%

Nestlé Waters

2%

2%

2%

Total

100%

100%

100%

(1) CCU owns 50% of the rights to the Watt’s brand (nectar), currently held through our affiliate Promarca.

(2) CCU owns 50.1% of the rights to all the water brands held through the affiliate Aguas CCU.Includes HOD.

After the completion of the CPCh transaction with Control, we expanded our proprietary brand portfolio considerably, adding brands such as Campanario in the mainstream and cocktail categories, as well as Control C, Mistral Nobel, Mistral Gran Nobel, 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.

In the rum market, our proprietary brands are Cabo Viejo in the popular-priced segment, Sierra Morena Dorado and Sierra Morena Añejo in the medium-priced segment, Sierra Morena5 Años in the premium segment and Sierra Morena Imperial in the ultra-premium segment. Also, during 2011 CPCh began the distribution of Pernod Ricard products (Chivas Regal, Ballantine’s, Havana Club, Beefeater and Absolut among others) through the traditional channel.

During 2014, 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.

Through our subsidiary CPCh (Compañía Pisquera de Chile) we produce and market ultra-premium, premium, medium-priced and popular-priced pisco brands in Chile, as well as rum.  The following table shows our principal pisco brands:

37


Ultra premiumCAP

Premium

Medium-priced

Medium-priced

Popular-priced

pisco brands

pisco brands

pisco brands

RTD brands

pisco brands

Control C

3RRR

Campanario

Campanario Sour

La Serena

Mistral Nobel

Mistral

Mistral Ice

Campanario Sour Light

Mistral Gran Nobel

Bauzá(1)

Bauza Ice(1)

Campanario Pica

MOAI

Campanario Chirimoya

Horcón Quemado

Campanario Cola de Mono

Campanario Dulce de Leche

Campanario Lúcuma

Campanario Mango

Campanario Piña Colada

Ruta Sour

Ruta Sour Light

Ruta Sour Pica

Ruta Mango

Bauza Sour(1)

Bauza Mango(1)

(1) Distribution License

Rio de la Plata Operating segment

Our operation in Rio de la Plata generated Net sales of CLP 253,826 million, CLP 282,435 million and CLP 299,668 million, representing 23.6%, 23.6% and 23.1% of our total Net sales in the last three years, respectively. 

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 Chile and 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, 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.  Under the license agreement, CCU Argentina is obligated to purchase certain raw materials from Anheuser-Busch or from suppliers approved by Anheuser-Busch.  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 agreementwas modified due to regulatory reasons under the context of the merger between Anheuser-Busch and Inbev. As a result, certain contractual restrictions were released, and rights granted to Anheuser-Busch waived, both in favor of CCU Argentina. During the third quarter 2000, we and Anheuser-Busch signed an export agreement to supply Budweiser from Argentina to Paraguay and Chile.  At the end of 2011, the agreement to supply Budweiser from Argentina to Paraguay was ended.

38


In November 2011, we signed an addendum to the import and distribution contract with Cervecería Modelo S.A., including a clause that specifies the automatic renewal of the contract for a period of four years at the end of 2014 provided that CICSA meets certain minimum purchases goal. In that case, the agreement will last until December 31, 2018.

In 2012, the Company began 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.

In September 2012, CCU acquired 100% shares of the Uruguayan companies Marzurel S.A., Milotur S.A., and Coralina S.A. and indirectly Andrimar S.A., a wholly- owned subsidiary of Milotur S.A.

On November 29, 2012, CICSA and Heineken Brouwerijen B.V. executed a trademark license agreement by virtue of which we produce, sell and distribute, through Bebidas del Paraguay S.A., Heineken beer in Paraguay. This agreement has an initial term of 10 years, to be automatically renewed for 5 years.

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 June 2013 CICSA and Milotur S.A., our subsidiary in Uruguay, entered into a trademark license agreement with Heineken which provides (i) CICSA with the exclusive right to produce Heineken beer and export it to Uruguay; and (ii) Milotur S.A.  with the exclusive right to commercialize the Heineken brand in Uruguay. The contract´s term is similar to those in force for Argentina and Chile.

By the end of 2013, CCU executed various agreements and contracts with Cartes Group in Paraguay, in virtue of which acquired 50.005% of Bebidas del Paraguay S.A. (owner of productive assets and brands through which it develops the business consisting of the production, marketing and sale of alcoholic and non-alcoholic drinks, such as soft drinks, juices, water, beer and cane, under various brands, both proprietary and under licensees and imported) and 49.96% of Distribuidora del Paraguay S.A., a company which distributes the products of the above-mentioned company.

In June 2014, our subsidiary Compañía Industrial Cervecera S.A. reached agreements with Cervecería Modelo S. de R.L. de CV. and Anheuser-Busch LLC, for the termination of the contract which allows CICSA to import and distribute on an exclusive basis,Corona andNegra Modelo beersinbeers in Argentina, and the license for the production and distribution ofBudweiser 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.


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

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 CLP230,080 million,CLP 131,731 million and CLP 128,883 million, respectively, totaling CLP490,694 million of which CLP389,750 million 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 million201420152016
Chile196,599103,86089,291
Abroad33,48127,87239,593
Total230,080131,731128,883


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.


Overview

Chile Operating segment

We estimate that our weighted volume market share1 for 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 share1 for 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.


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.


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


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

39

2013

723

41

2014

745

42

2015

767

43

2016

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

28

2013

2,376

425

53

556

 

135

24

3

32

2014

2,296

429

56

596

 

129

24

3

33

2015

2,270

417

67

638

 

126

23

4

35

2016

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

2016

Colas

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.


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

4

2013

68

4

2014

70

4

2015

71

4

2016

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 Tax

Beer

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:

 

Argentina

 

Total Sales Volume

 

Per Capita

 

(in millions of liters)

 

(liters)

Year

Beer

Functional Drinks

Spirits

Cider

 

Beer

Functional Drinks

Spirits

Cider

2012

1,870

105

128

94

 

45

3

3

2

2013

1,849

112

129

97

 

44

3

3

2

2014

1,833

117

130

94

 

43

3

3

2

2015

1,875

124

130

93

 

43

3

3

2

2016

1,812

118

134

87

 

42

3

3

2

Source: Canadean, Global Beverage Forecast of March 2017.

 


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 Taxes

Non-Alcoholic Beverages

Flavored soft drinks, mineral water and juices

4.17% - 8.7%

Alcoholic Beverages

Beer

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:

 

Uruguay

 

Total 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

78

2013

100

395

29

305

 

29

115

9

89

2014

104

395

31

329

 

30

114

9

95

2015

106

386

33

360

 

31

111

10

104

2016

107

373

32

387

 

31

107

9

111

Source: 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:

 

Paraguay

 

Total 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

33

2013

285

543

59

231

 

44

83

9

35

2014

289

554

60

261

 

43

83

9

39

2015

290

541

62

284

 

43

80

9

42

2016

296

535

65

302

 

43

78

9

44

Source: 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.Theleading 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.


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

13

2013

227

13

2014

225

13

2015

231

13

2016

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.


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.


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

Premium

Mainstream

Convenience

Royal Guard

Cristal

Dorada

Heineken(1)

Cristal Cer0,0°(2)

Austral(1)

Escudo

Kunstmann

Morenita

D'olbek

Stones

Sol(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 Sold

 

Container

2014

2015

2016

 

 

 

 

Returnable(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

2016

Premium

18%

20%

21% 

Mainstream

78%

76%

75% 

Convenience

4%

4%

 4%

Total

100%

100%

100%


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).


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 Proprietary

Pap

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Pop Candy

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Kem

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Nobis

Soft Drink

Non-Cola Proprietary

CCU Proprietary

Canada Dry Ginger Ale

Soft Drink

Non-Cola Licensed

Schweppes

Canada Dry Agua Tónica

Soft Drink

Non-Cola Licensed

Schweppes

Canada Dry Limón Soda

Soft Drink

Non-Cola Licensed

Schweppes

Crush

Soft Drink

Non-Cola Licensed

Schweppes

Pepsi

Soft Drink

Cola Licensed

PepsiCo

Seven-Up

Soft Drink

Non-Cola Licensed

PepsiCo

Lipton Ice Tea

Ice Tea

Non-Cola Licensed

PepsiCo

Mirinda

Soft Drink

Non-Cola Licensed

PepsiCo

Gatorade

Isotonic

Functional

PepsiCo

Ocean Spray

Nectars

Licensed

PepsiCo

Adrenaline Red

Energy

Licensed

PepsiCo

Life Water

Functional Drink

Licensed

PepsiCo

Red Bull

Energy

Licensed

Red Bull

Frugo

Soft Drink

Licensed

Promarca

Watt’s

Nectars

Licensed

Promarca

Watt’s Selección

Nectars

Licensed

Promarca

Cachantun

Mineral Water

Proprietary

Aguas CCU

Mas

Flavored Water

Proprietary

Aguas CCU

Mas Woman

Flavored Water

Proprietary

Aguas CCU

Porvenir

Mineral Water

Proprietary

Aguas CCU

Perrier

Mineral Water

Licensed

Nestlé

Nestlé Pure Life

Purified Water

Licensed

Nestlé & others

Manantial

HOD

Proprietary

Manantial

Vivo

Ready-to-mix

Licensed

Bebidas Carozzi CCU

Fructus

Ready-to-mix

Proprietary

Bebidas Carozzi CCU

Sprim

Ready-to-mix

Proprietary

Bebidas Carozzi CCU

Caricia

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.


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

 

Soft drinks

 

Mineral, purified and flavored water

Container

2014

2015

2016

 

2014

2015

2016

Returnable(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

2016

Carbonated soft drinks

 

 

 

Colas

 

 

 

Licensed

16%

15%

16% 

Non-colas

 

 

 

Proprietary

36%

35%

34% 

Licensed

23%

23%

22% 

Non-carbonated soft drinks

 

 

 

Nectars

 

 

 

Licensed

22%

22%

22% 

Others

 

 

 

Licensed

3%

4%

6%

 

 

 

 

Soft drinks total

100%

100%

100% 

Mineral water

 

 

 

Proprietary

44%

43%

41% 

Licensed

0%

0%

0% 

Purified water

 

 

 

Licensed

8%

11%

12% 

Flavored water

 

 

 

Proprietary

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:


Premium

Mainstream

Convenience

Control C

Campanario

La Serena

Mistral

Mistral Ice

MOAI

Bauzá Ice(1)

Horcón Quemado

Ruta

Tres Erres

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


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.

39


 

In September 2014, CICSA began with the exclusive distribution in Argentina of imported Sol beer; the Sol beer brand is owned by Heineken, initiating local production in November 2014. For Sol brand in Argentina, we have the licenseHeineken. This licensing agreement is for a period for 10 years in Argentina, automatically renewable on the same terms (Rolling Contract)(rolling contract), each year for a period of 10 years, unless notice of non-renewal is given.

 

AlignedOn 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 innovation strategy, during 2014 we launchedown facilities as of May 2017.

In addition, CCU Argentina participates in the cider business, with the leading Real brand extentionsand other brands such as Imperial WeissbierLa Victoria and Santa Fe Stout,1888. Also, we participate in the liquor business, under the El Abuelo brand, in addition to importing other liquors from Chile.


On June 4, 2013, CICSA, Milotur and introducedHeineken 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 brand. Additionally,beer, as well as the cider brand Real.

In Paraguay we beganparticipate 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 1 liter one way packaging for Heineken and Schneider in Uruguay as well as entering intoacquisition of the flavored mineral water categories throughcraft brewery related to the Nativa brand.beer brand Sajonia.

 

Escribe texto o la dirección de un sitio web, o bien,traduce un documento.

At present we produce and market super-premium, premium, medium-priced and popular-priced beer brands in the Rio de la PlataInternational Business Operating segment, which includes Argentina, Uruguay and Paraguay. The following table shows our principal brands produced, and imported, commercialized and/or distributed under license in Argentina in 2014:2016:

 

Super-premium

Premium

Medium-pricedMainstream

Popular-pricedConvenience

beer brands

beer brands

beer brands

beer brands

Guinness (2)

Heineken (1)

Budweiser(1)

Córdoba

Negra ModeloSol(2)(3)(1)

Imperial

Salta

Palermo

CoronaKunstmann(2)(3)

Amstel(1)

Santa Fe

Bieckert

Sol(1)(2)

Imperial

Schneider

 

KunstmannAmstel(2)(1)

Otro Mundo

(1) Produced under license

 

 

Guinness(2)(3)

Negra Modelo(2)(3)

Corona(2)(3)

Otro Mundo(4)

Miller(5)

(1) Produced under license.

(2) ImportedImported.

(3) Up to June 20142014.

(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

Argentina

Argentina

2012

2013

2014

2014

2015

2016

Super-premium

2.6%

2.1%

1.2%

Premium

14.7%

15.6%

17.0%

18%

19%

21%

Medium-priced

61.8%

62.0%

61.7%

Popular-priced

21.0%

20.3%

20.1%

Mainstream

62%

62%

Convenience

20%

19%

17%

Total

100%

100%

100%

 


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 Uruguay and Paraguay in the following packaging formats:

 

40


Container

Percentage of Total Beer Sold in Argentina

 

2012

2013

2014

Returnable(1)

80%

79%

81%

Non-returnable(2)

19%

20%

18%

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.

Container

Percentage of Total Beer Sold in Uruguay

Percentage of Total Beer Sold in Argentina

 

2013

2014

2014

2015

2016

Returnable(1)

83%

42%

81%

76%

72% 

Non-returnable(2)

17%

58%

18%

23%

27% 

Returnable kegs(3)

1%

1% 

Total

100%

100%

100%

(1) Returnable beer containers include glass bottles of various sizes.

(1) Returnable beer containers include glass bottles of various sizes.

(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.

(2) Non-returnable beer containers include glass bottles and aluminum cans, both of assorted 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.

(3)Returnable kegs refer to stainless steel containers in assorted sizes.

 

 

Percentage of Total Beer Sold in Paraguay

Container

2014

Returnable(1)

10%

Non-returnable(2)

90%

Total

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.

 

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 149,557172,349 million, CLP 152,255189,515 million and CLP 172,349201,402 million or 13.9%13.3%, 12.7%12.6% and 13.3%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 1,0711,064 hectares. As of December 31, 2014,2016, VSPT’s vineyards covered an aggregate of 3,5153,489 hectares in Chile, distributed among ten10 different plantations. The winery also has 318339 hectares under long-term leases. In Argentina, we have another 374379 planted hectares located in the province of Mendoza.

 

The following table indicates the breakdown of VSPT’sWine Operating segment’s volume in the domestic and export markets, including sales from FLC and Tamarí in Argentina:

41


Year

DomesticVolume

ExportVolume(1)

Total Volume

 

 

(in millions of liters)

 

2012

60

72

132

2013

61

70

131

2014

62

71

133

2015

62

76

138

2016

64

78

142

(1) Includes Argentinian operations and bulk sales.

 

Year

Domestic Volume

Export Volume

Total Volume(1)

 

(in millions of liters)

2010

60.0

70.0

130.0

2011

60.0

67.1

127.1

2012

61.2

70.6

131.8

2013

61.8

69.6

131.4

2014

62.4

70.3

132.7

(1) Includes bulk sales exports in Chile and Argentina

According to Nielsen, VSPT’sthe Wine Operating segment’s share by volumevalue of Chile’s formal wine market was approximately 26.7%27.2% in 2012, 27.3%2014, 27.4% in 20132015 and 28.8%28.7% in 2014.2016. According to the Wines of Chile Association, VSPT’sWine Operating segment’s share of Chile’s total wine export sales by volume was 13.1%13.6%, 13.1%13.5% and 13.6%12.9% in the last three years, respectively.

 

Viña San Pedro, Viña Tarapaca,Tarapacá, Viña Leyda, Viña Santa Helena, Viña Misiones de Rengo, Viña Mar, Viña LeydaCasa Rivas in Chile and Finca La Celia and Tamarí in Argentina, produce and market premium, varietal and popular-priced wines. Thewines.The principal brands are set forth below:

 

42



 

 

Brand

 

Icon

Premium

Varietal

Popular-Priced

Viña San Pedro Tarapacá

 

 

 

 

Altaïr

X

Sideral

X

Cabo de Hornos

X

 

 

 

 

Kankana del Elqui

X

 

 

 

 

Tierras Moradas

X

 

 

 

 

1865

 

X

 

 

 

Castillo de Molina

 

X

 

 

 

Épica

 

X

 

 

 

35 South Reserva

X

35 South

 

 

X

 

 

Urmeneta

 

 

X

 

 

Gato Negro

 

 

X

 

 

Gato

 

 

 

X

 

Manquehuito Pop Wine

 

 

 

X

 

Etiqueta DoradaSan Pedro Exportación

 

 

 

X

Viña Tarapacá

 

 

 

 

 

Tarapakay

X

 

 

 

 

Gran Reserva Etiqueta Azul

X

 

 

 

 

Gran Reserva Etiqueta Negra

X

 

 

 

Tarapacá Gran Reserva

 

X

 

 

 

Gran Tarapacá

X

Tarapacá Terroir

 

X

 

 

 

Tarapacá Reserva

 

X

 

 

 

Tarapacá Varietal

 

 

X

 

 

León de Tarapacá

X

 

Viña Santa Helena

 

 

 

 

 

Parras Viejas

X

 

 

 

 

Vernus

X

 

 

 

Selección del Directorio

 

X

 

 

 

Santa Helena VarietalSiglo de Oro

 

 

X

 

 

Siglo de OroSanta Helena Varietal

 

 

X

 

 

Alpaca

 

 

X

 

 

Gran Vino

 

 

 

X

 

Santa Helena

 

 

 

X

Viña Misiones de Rengo

 

 

 

 

Misiones de Rengo Cuvée

 

X

 

 

 

Misiones de Rengo Reserva

 

X

 

 

 

Misiones de Rengo Varietal

X

Misiones de RengoEspumante

X

X

Viña Mar

 

 

 

 

 

Viña Mar

X

X

Viña Mar Espumante

X

X

Casa Rivas

Casa Rivas Reserva Especial

 

X

 

 

Viña MarLeyda

Leyda Lot

X

Leyda Reserva

X

Leyda Single Vineyard

X

La Celia

La Celia Supremo

X

La Celia

X

La Consulta

X

La Finca

X

Eugenio Bastos

X

Tamari

Tamarí Zhik

X

Tamarí Reserva

 

X

 

 

 

Viña Mar Espumante

X

Casa Rivas

Casa Rivas Reserva

X

Viña Leyda

Leyda Lot

X

Leyda Reserva

X

Leyda Single Vineyard

X

Finca la Celia

La Celia Supremo

X

La Celia

X

Tamari

     

Tamarí Zhik

X

La Consulta

X

Tamarí Reserva

X

La Finca

X

43



 

 

The following table presents our breakdown of total sales volume in thousands of liters by category of VSPT’s winesthe Wine Operating segment during 2014:2016:

 

 

Category

Domestic

Export

Total

 

(in thousands of liters)

Premium(1)

5,388

6,796

12,184

Varietal

6,889

6,146

13,035

Popular-Priced

49,926

52,187

102,113

Bulk

0

1,807

1,807

Total

62,203

66,936

129,138

(1) Includes Icon category.

Category

Domestic

Export(1)

Total

(in thousands of liters)

Premium

6,496

8,303

14,799

Varietal

7,256

58,129

65,386

Popular-Priced

50,718

7,911

58,629

Bulk

0

3,583

3,583

Total

64,470

77,927

142,397

(1) IncludesArgentinean operations and bulk wine

 

As of December 31, 2014, VSPT’s storage capacity totaled 91.2 million liters and its peak bottling and packaging capacity totaled 77,000 liters per hour.

 

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 Domestic
Wine Sold in Chile

 

2012

2013

2014

Carton

61%

56%

54%

Glass Bottles

39%

44%

46%

Bag-in-Box

0%

0%

0%

Total

100%

100%

100%

Container

Percentage of Total DomesticWine Sold in Chile

 

 

2014

2015

2016

Carton

54%

51%

49%

Glass Bottles

46%

49%

51%

Bag-in-Box

    -    

    -    

    -    

Total

100%

100%

100%

 

Beer is a substitute product for wine in Chile. In addition, our wine products may also compete with other alcoholic beverages, such as spirits (mainly pisco), and with non-alcoholic beverages, such as soft drinks and juices.

The average price for our domestic wine customers was CLP1,911 and CLP 2,008 per liter in 2013 and 2014, respectively, experiencing a growth of 5.0%. Our wine price policy is mainly determined as a consequence of four factors: a) market prices, b) change in sales mix, c) inflation rate and d) desired profit margin in relation to costs of raw materials.

 

Export Market.According to industry sources, exports of Chilean wine increased from approximately 43 million liters in 1990 to 801908 million liters in 2014,2016, at a compounded annual growth rate of 13.0%12%. During 20132015 and 2014,2016, Chilean wine exports reached 879877 million liters and 801908 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 71from Chile 68 million liters in 2012, 702014, 73 million liters of wine in 2013,2015, and 7074 million liters of wine in 2014.2016. During 2014,2016, VSPT exported wine to more than 80 countries worldwide. Exports accounted for Net sales of CLP85,937CLP 108,064 million, CLP85,730CLP 123,544 million and CLP 102,272131,168 million, in the last three years, respectively. In 2014,2016, 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:

 

44

Container

Percentage of Total ExportWine Volume from Chile

2014

2015

2016

Glass 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.



 

Container

Percentage of Total Export
Wine Volume from Chile

 

2012

2013

2014

Glass Bottles (1)

83%

81%

85%

Bulk

4%

5%

3%

Bag in box

12%

14%

13%

Total

100%

100%

100%

(1)    Includes jugs.

   

 

Raw Materials and other Supplies.Supplies

 

The main raw materials we use are sugar, soft drink concentrates, fruit pulps, malt, rice, hops, grapes glass bottles, aluminum cans, PET bottles, hops and water. We purchase ourThe sugar requirements both imported and fruit pulps we use are from local supply.and international origin suppliers. We obtain our supply of malt through long term contracts with malt suppliers from Chile Argentina and other sources.Argentina. Rice is sourced mainly from local and international suppliers in spot transactions as sugar. We pre-treat rice in order to ensure that it meets our standards of quality. 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 sourcessprings 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.

 

We generally purchase all ofThe 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 glassmain 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/Rigolleau S.A, Cattorini Hnos S A I C F E I, and CristalerÍas RosarioOwens Illinois Argentina S.A. in Argentina. During 2014,2016, all of our requirements for aluminum cans were purchased from a global supplier, Rexamsuppliers, Ball Chile S.A. and RexamBall Argentina S.A., but if price We buy our labels, films and delivery conditions are favorable, cans can be imported. We obtain the labels for our productscorrugated cartons mainly from local suppliers. Plastic capsThe majority of our PET resins are mainly purchased from three suppliers in Chile (including PLASCO), and crowns are currently imported from Mexico.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 BudwiserBudweiser beer are periodically sent to Hollandthe Heineken facilities in The Netherlands and to Anheuser-Busch facilities in the United States, respectively, to verify the quality of the product, samplesproduct. 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.

 

We believe that all of the contracts or other agreements between us and third-party suppliers, with respect to the supply of raw materials, contain standardStandard and customary commercial terms and conditions. We do not believe weconditions are dependent on any onewidely used in all our contracts and supply agreements. Strategic alliances and supplier fordiversification allow us to ensure low dependency from a significant portionsingle supplier of our 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.

45


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 37%40.0% of the grapes used for export wines from itsour own vineyards during 2014.2016. Of the wine sold in the domestic market, 8%9.7% are grapes from our vineyardsIn 2014,vineyards.In 2016, approximately 81%40.7% of the wine used in domestic and export sales was purchased from ten local producers: AgricolaVinícola Patacón SpA, Agrícola y Comercial Bodegas de las Mercedes Ltda, Vinicola Patacón SPA, VitivinicolaLtda., Vitivinícola Melior Ltda,Ltda., Anatolio Segundo Albornoz Vargas, Aguilera y Barrios Ltda, Cooperativa Agrícola y Pisquera Elqui Ltda, Sociedad Agroindustrial Cerrillos Ltda, SociedadLtda., Viña Santa Blanca Ltda,edos y Vinos S.A., Corretajes Torres y Cia Ltda., Comercial y Agrícola S.A, RR Wine Ltda., Viña Ventisquero Ltda, and Montes S.A.edos 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 Saint Gobain;Verallia; however, when prices have been favorable, VSPT has purchased bottles from other local and international suppliers. Carton containers are purchased either from Tetra Pak de Chile Comercial Ltda. or from SIG Combibloc Inc. and are assembled in VSPT’s own automated packing lines.

 


Sales, Transportation and Distribution.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 3925 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 CerveceraCervecería Austral S.A. and is responsible for the sales and distribution of our products and those of CerveceraCervecería Austral S.A. 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 beverage and sweet snack products,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 CommercialComercial 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.

 

In 2014, we had a dedicated sales forceAs of approximately 554 salespeople, responsible for salesAugust 2016, following the restructuring in Chile that encompassed combining the route-to-market of our productsthe beer and non-alcoholic categories in the territorieswhole 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 orwe have dedicated sales forces. Together with Comercial Patagona Limitada. ThisCCU we have a total sales force uses a pre-sell system, like the rest of CCU’s sales platform, and covers approximately 38,959 clients, including 73 supermarket chains, which represent 1,4331,044 persons, reaching 127,062 points of sales.

As of December 31, 2014, we had more than 116,606 customers insale, related to the Chile for our products

Operating segment. None of our customers accounted for more than 1.2%2.2% of our total sales by volume, with the exception of three large supermarket chains that represented in the aggregate 11.6%27.6% of our total sales by volume. During 2014, the Chilean supermarket industry continued to consolidate, increasing the importance and purchasing power of a few supermarket chains.

 

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 3028 days from the date of delivery. Credit sales accounted for 39%40.0%, 39%39.8% and 40%40.8% of our sales in Chile during 2012, 20132014, 2015 and 2014,2016, respectively. Losses on credit sales in Chile have not been significant.

46


 

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 subsidiary Transportes CCU Ltda.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. chains


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 Sold

Percentage of Total Products Sold

Percentage of Total Products Sold

Distribution Channels

2012

2013

2014

2014

2015

2016

Off-premise retail

38%

41%

41%

40% 

On-premise retail

15%

14%

10%

10%

11%

 12%

Wholesalers

14%

13%

14%

14%

 14%

Supermarkets

33%

32%

35%

35%

34%

 34%

Total

100%

100%

100%

 100%

 

Rio de la PlataInternational Business Operatingsegment

AfterIn 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 300,000159,197 points of sale in Argentina with our direct and indirect sales force. HalfWe have six owned or leased warehouses. Approximately 54% of our beer in Argentina is sold andand/or distributed through third-party sales and distribution chains.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, 2014,2016, we had a direct sales force and four logistics operators which sold our beer products to approximately 132,00036,099 customers within the Salta, San Juan, San Luis, Mendoza, Córdoba, Santa Fé, Córdoba, Rosario, the Federal Capital and its outlying metropolitan area,Buenos Aires City, in addition to 8177 regional and national supermarket chains throughout the country. None of our customers individually accounted for more than 3%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 withfrom direct sales to wholesalers within the exception of Coca Cola bottlers that represented in the aggregate 18.8% of our total sales by volume.outer Buenos Aires Metropolitan Area.

 

In Argentina, though most beer is sold tothrough 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:

 

Argentina

Argentina

 

Distribution Channels

2012

2013

2014

2014

2015

2016

Wholesalers

52%

54%

50%

Wholesalers/distributors

50%

49%

 54%

Retailers

32%

31%

33%

33%

31%

 28%

Supermarkets

16%

17%

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.


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:

 

Uruguay

 

Distribution Channels

2014

2015

2016

Indirect

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:

 

Paraguay

 

Distribution Channels

2014

2015

2016

Indirect

27%

30%

 31%

Retailers

50%

48%

48%

Supermarkets

23%

22%

 21%

Total

100%

100%

100%

Our Rio de la PlataInternational 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 715 days from the date of delivery to wholesalers, and an average of 6071 days of delivery tosupermarkets. Credit sales in Argentina accounted for 87%88% of total sales during 2014,2016, while in Uruguay and Paraguay they accounted for 93%100% and 55%35% of total sales, respectively.

47


 

Wine Operating segment

Domestic.After production, bottling, and packaging, wine is either stored at the production facilities or transported to one of our 3925 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.

 


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

 

Distribution Channels

2012

2013

2014

Off-premise retail

33%

34%

34%

On-premise retail

5%

5%

5%

Wholesalers

26%

24%

22%

Supermarkets

36%

37%

39%

Total

100%

100%

100%

Distribution Channels

2014

2015

2016

Off-premise retail

34%

33%

31%

On-premise retail

5%

5%

5%

Wholesalers

22%

24%

25%

Supermarkets

39%

38%

39%

Total

100%

100%

100%

 

We sellreach a total of 29,339 points of sale with our wine products directly to approximately 7,900 customers, nonededicated sales force of which accounted for more than 10% of our total wine sales by volume,72 persons, together with the exceptionsales force of four supermarket chains that represented in the aggregate 28% of our total wine sales by volume.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, VSPT haswe 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 HollandThe 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.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 segment

Year

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%

48



 

 

Seasonality Chile Operating segment

 

 

Year

Quarter

Sales Volume

% of Annual

(millions of liters)

Sales Volume

 

 

2012

1st quarter

389.5

28%

 

2nd quarter

281.2

20%

 

3rd quarter

296.7

21%

 

4th quarter

417.0

30%

 

Total

1384.4

100%

 

 

 

 

2013

1st quarter

427.3

27%

 

2nd quarter

314.1

20%

 

3rd quarter

341.5

22%

 

4th quarter

474.2

30%

 

Total

1557.0

100%

 

 

 

 

2014

1st quarter

455.4

28%

 

2nd quarter

334.7

21%

 

3rd quarter

354.7

22%

 

4th quarter

476.6

29%

 

Total

1621.4

100%

Rio de la PlataInternational 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. The following table shows the annual sales volume for the Rio de la PlataInternational Business operating segment, including exports, during each quarter in the last three years:

    

Seasonality International Business Operating segment

Year

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%

49



 

 

Seasonality Rio de la Plata Operating segment

 

Year

Quarter

Sales Volume(*)

% of Annual

(millions of liters)

Sales Volume

    

2012

1st quarter

126.3

26.4

 

2nd quarter

77.9

16.3

 

3rd quarter

101.4

21.2

 

4th quarter

173.3

36.2

 

Total

478.9

100

    

2013

1st quarter

142.4

28.1

 

2nd quarter

87.3

17.2

 

3rd quarter

109.1

21.5

 

4th quarter

168.3

33.2

 

Total

507.1

100

    

2014

1st quarter

149.5

27.8

 

2nd quarter

96.7

18.0

 

3rd quarter

114.9

21.4

 

4th quarter

176.5

32.8

 

Total

537.5

100.0

    

(*) Includes Uruguay since September 2012 and Paraguay since January 2014

    

Geographical Markets.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 40%41% of the population of Chile and accounted for approximately 41%40% of our sales in Chile by volume in 2014.2016. We also have one additional beer and non-alcoholic production facility in Temuco and two other beer facilities, in Valdivia (Kuntsmann)(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 VSPT’sWine Operating segment’s exports from Chile and Argentina during 20142016 by geographical markets:

 

Market

Volume(1)

Percentage of
Total Exports

 

(thousands of liters)

Europe

23,736

36%

Latin America

18,668

29%

USA and Canada

9,216

14%

Others

13,509

21%

Total

65,129

100%

(1) Excludes bulk exports

 

 

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 bulkwine

 

The Metropolitan Region represented approximately 4138%of total domestic sales of VSPTWine Operating segment products by volume in 2014.2016.

 

50



 

 

Competition.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 6%4.4% over the last ten years.

 

Our largest competitor in the beer business is Cervecería Chile (a subsidiary of Anheuser BuschAB 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.

 

OtherAnother relevant playersplayer in the beer market in Chile include DESA, which, in addition to Cervecería Chile, distributes the Corona beer brand in Chile, andis 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 (“TCCC”) and its affiliates. The two principal soft drinks players in Chile are the licensees of TCCCThe Coca-Cola Company and us. TCCCThe 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.

 

Fruit nectars under the trade name “Watt’s” face competition from other soft drinks, which are sold by a number of local companies. Our principal competitor in the mineral water business is Vital S.A. (a subsidiary of Embotelladora Andina S.A., one of TCCCThe Coca-Cola Company licensees in Chile).

TCCC’s products are produced, bottled and distributed in Chile through two separate licensees which market soft drinks under the Coca-Cola, Coca-Cola Light, Coca-Cola Zero, Fanta, Fanta Light, Sprite, Sprite Zero, Quatro Light, Nordic Mist, Taí, Andina nectars and juices, and Kapo juice brand names. 

 

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.

Given the high percentage of soft drink sales volumes in returnable containers coupled with the high cost of transportation to Chile, the market for imported soft drinks in Chile is not significant in 2014.  While there are no legal barriers to entry, we believe that the existing returnable bottle system and high transportation costs may continue to deter potential competitors from exporting soft drinks to Chile.

 

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.

While there are currently no significant legal or regulatory barriers In January 2016 CPCh divested its interest in Compañía Pisquera Bauzá S.A. Following this change, Bauzá became a relatively small competitor compared to entering the Chilean beverages market, substantial investment would be required to establish or acquire production and distribution facilities and bottles for use in Chile’s proprietary returnable bottling system, and to establish a critical mass in sales volumes. Nevertheless, if long-term economic conditions in Chile continue to befavorable, other enterprises may be encouraged to attempt to enter the Chilean market. In addition, our brands in Chile may face increased competition from other beverages, produced or marketed by other parties.Capel.

51


 

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 segmentVolumemarket share

 

Chile Operating segment Volume market share(1)

2010

37.5%

2011

37.8%

2012

37.8%

38.1%

2013

39.6%

40.0%

2014

40.8%

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.


Rio de la PlataInternational 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 Warsteiner (owner of CASA Isenbeck, subsidiary of SABMiller).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 Rio de la PlataInternational Business Operating segment (including Beer and Cider (since 2011) in Argentina, CSDbeer, carbonated soft drinks, nectar, mineral and Mineral Waterflavored water in Uruguay) forUruguay, 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

Rio de la Plata Operating segment Volume market share

International Business Operating segment Volume market share (1)

2010

16.3%

2011

16.8%

2012

15.9%

10.9%

2013

17.2%

11.6%

2014

17.3%

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, 2014,2016, Quilmes had five breweries in Argentina with an estimated total annual production capacity of 16001,600 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 SABMiller)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 inexchangein 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 InbevInBev 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.

52



 

 

 

In 2010 SABMillerSAB 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 2014,2016, Concha y Toro and Santa Rita had a volume market share of approximately 27%28.0% and 31%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 14%12.9% in 2014,2016, excluding bulk wine. Our other principal Chilean competitors, namely Concha y Toro, Santa Rita and Santa Carolina had market shares of 32%33.6%, 4%4.9% and 5%4.5%, respectively.

 

The following table shows estimates of the volume market share of our Wine Operating segment (including export and domestic sales, excluding(excluding bulk wine sales) for the last five years according to Nielsen figures for domestic wine sales volumes and Viñas de Chile figures for export sales volumes.figures.

 

Year

Wine Operating segment Volume market share

Wine Operating segment Volume market share(1)

2010

16.5%

2011

16.0%

2012

17.3%

17.3%

2013

17.6%

17.6%

2014

18.5%

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.

 

 

Other

53



 

 

Distribution NetworkIn Chile, we have an extensive and integrated distribution network for the sale and distribution of beer, soft drinks, mineral water, purified water, functional beverages, nectars, wine, pisco, rum, whiskey, vodka and sweet snacks products with capacity to reach approximately 116,606 points of sale. The network includes a total of 39 owned or leased warehouses and a network of independent transportation companies handled by Transportes CCU. Sales are performed by category-specific sales forces and by Comercial CCU S.A. (“Comercial CCU”) which has a sales force of approximately 427 people who sell our products to approximately 37,189 customers in the northern area of Chile from Arica to Copiapó/Vallenar and in the mid-south area from Curicó/Talca through Coyhaique, except for Concepción. In the far south of Chile, in Punta Arenas, Comercial Patagona Limitada does the selling for all our products, reaching 590 customers. In the central parts of the country and in the City of Concepción, there are dedicated sales forces that focus on single lines of products. Product distribution is carried out by Transportes CCU throughout the country or by Comercial Patagona Limitada in its territory.

In Argentina we have the capacity to reach 300,000 points of sale. Our network of sales and distribution for our products consists of 6 owned or leased warehouses, a direct sales force and 10 logistics operators serving approximately 132,000 customers and more than 80 supermarket chains stores. Approximately 19% of beer sales volume is served by two independent Coca Cola bottlers (mainly in the north and south of the country).

Plastic Bottles.Through our subsidiary Fábrica de Envases Plásticos S.A., or PLASCO, we own and operate a plastic factory in Renca which supplies most of the pre-forms, returnable and non-returnable bottles and caps, primarily used by us in the packaging of our soft drinks and water products. Additionally, PLASCO has three blowing bottle machines in ECUSA at Santiago facilities and two in Antofagasta.

The manufacturing of both returnable and non-returnable plastic bottles involves a two-step process. The first step consists of an injection molding process, which manufactures pre-forms from PET resin. The second step involves blowing plastic bottles from the molded pre-forms. We purchase resin and complete the two-step process in order to fulfill the majority of our bottling requirements. In some cases, we purchase pre-forms manufactured by third party suppliers and complete only the bottle-blowing step at our own facilities.

The manufacturing of plastic caps for carbonated soft drinks and water also involves a two-step process. The first consists of a compress molding process, which manufactures caps from PP resin. The second step is the decoration of plastic caps with an offset printing process. For juices and Gatorade we produce caps in a one step process with another raw material (HDPE).

Sweet Snacks.In January 2004, we entered the sweet snacks business by means of a joint venture between our subsidiary ECUSA (currently, this investment belongs to our subsidiary CCU Inversiones S.A.) and Empresas Lucchetti S.A. (currently, Industria Nacional de Alimentos S.A.), a subsidiary of Quiñenco, with a 50% interest each in Calaf S.A. (today, 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 August 2005, Calaf S.A. acquired the assets and know-how of Bortolaso S.A., a cookie factory with more than 50 years of existence in the country, enabling Calaf S.A. to increase its presence in the most important segment of the sweet snacks business. In October 2007, Calaf acquired the traditional cereal brand Natur, allowing Calaf S.A. to enter and commence growing in the quickly developing healthy foods category. In August 2008, Foods bought 50% of Alimentos Nutrabien S.A. the leading company in home-made sweet snacks products. The three brands–Calaf, Natur and Nutrabien–have niche products aimed at specific market segments. This niche segmentation along with enhancement in formula and raw materials is expected to improve the company’s brand equity. 

As of January 13, 2015, we informed the “Superintendencia de Valores y Seguros” that we were negotiating the sale of the assets associated with the Calaf and Natur confectionery and cerealbusinesses, which includes trademarks, machines and inventories, to Empresas Carozzi S.A. As of March 2015, we are still undergoing negotiations with Empresas Carozzi S.A.

54


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.”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.

 

On January 19, 2004According to Law N°19,925 was published,enacted in 2004, which amended and restated the Act on Sale and Consumption of Alcoholic Beverages (former Law N°17,105).

All, 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 new 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 AgricolaAgrícola 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 (theReglamento Sanitario de los Alimentos)Alimentos).

 

55Non-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, which was enacted in 2004, and fully operative by February 2004,2006, established a newthe structure and powers for the current Sanitary Authority, and became effective on January 1, 2005 and was fully operative by February 2006.Authority. TheServicios de Salud (“Health Services”)were replaced by the Ministry of Health’s Regional Offices, which constitute the new Sanitary Authorities, which 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.


 

The production and distribution of mineral water is also subject to a 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 LawN°Law N° 18,284 (the Argentine Food Code, or the “Food Code”) regulates the manufacturing, packaging, import, export and packagingmarketing 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, establishedregulates 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 lawLaw, 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.

 

56Government 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.



 

 

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.

B.C.  Organizational Structure

 

Ownership Structure as of March 31, 20142017

 

 

 


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. OnIn 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 (the second-largest bank(a leading financial institution in Chile), Invexans S.A. (the largest shareholder of the French cable producer Nexans and Techpack S.A.), Empresa Nacional de Energía leading manufacturer of flexible packaging and aluminum-based products), ENEXEnex S.A. (the second-largest retail fuel distributor)distributor in Chile), CSAV (theCompañía Sud Americana de Vapores S.A. (main shareholder of Hapag-Lloyd A.G., one of the largest shipping company in America and fourth largestcontainer ship operators worldwide), and SM SAAM (largestS.A. (one of the main port operatoroperators in LatinSouth 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 76,13673,500 employees worldwide. Heineken group’s beer volume was 181.3200.1 million hectoliters during 2014,2016, and its principal brands are Heineken and Amstel.


 

The following table provides our significant subsidiaries as of December 2014:

2016:

 

Subsidiaries

Country

Total Ownership Interest

Cervecería CCU Chile

Chile

100.00%

CCU Argentina

Argentina

100.00%99.99%

ECUSA

Chile

99.94%

Aguas CCU-Nestlé

Chile

50.10%99.98%

VSPT

Chile

64.72%

CPCh

Chile

80.00%64.70%

57


C.

D.  Property, PlantPlants and Equipment

 

Set forth below is information concerning our production facilities as of December 31, 2014,2016, all of which are owned and operated by us or our subsidiaries.

 

For the Chile Operating segment, we had an aggregated Supply Capacity per month1 of 322.8339.6 million liters with a Utilized Capacity during peak month2 of 54.9%.The60.72%. The annualNominal Installed Capacity for our two main businesses in Chile (beer and soft drinks)this segment is 25.037.4 million hectoliters.

Our Chile Operating segment total facilities size is 587,765 square meters (total built area including warehousing logistics activities)activities related to the production process).

 

Set forth below is a list of our principal production facilities.facilities:

 

 

Chile Operating segment

Plant

Type of Plant

Santiago

Beer

Santiago

Non-alcoholic beverages

Temuco

Mixed

Valdivia

Beer

Punta Arenas(*(1))

Beer

Antofagasta

Non-alcoholic beverages

Coinco

Non-alcoholic beverages

Casablanca

Non-alcoholic beverages

Manantial

Non-alcoholic beverages

Pisco Elqui

Spirits

Sotaquí

Spirits

Monte Patria

Spirits

Salamanca

Spirits

Ovalle

Spirits bottling

(1)(*) Production in the Punta Arenas facility is under licensing agreements and, accordingly, we do not consolidate this facility.

For the Rio de la Plata Operating segment, we had an aggregated Supply Capacity per month of 79.1 million liters with a Utilized Capacity during peak month of 76.1%.

Our Rio de la Plata Operating segment total facilities size is 232,194 square meters (total built area including warehousing logistics activities).

 


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.Theday. 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 plantplant.

58



 

 

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.facilities:

 

 

Rio de la PlataInternational Business Operating segment

Plant

Type of Plant

Santa Fe

Beer

Salta

Beer

Luján

Beer

LujanRío Negro

Beer

Mendoza

Cider

Pilar

Cider

Ciudadela

Cider

Pan de Azúcar

San Antonio

CiderNon-alcoholic beverages

Non-alcoholic beverages

 

For the Wine Operating segment, we had an aggregated Nominal FilingFilling Capacity of 77,00073,320 liters per hour and ana Storage Capacity in Tanks and Barrels of 91.289.3 million liters.

The total facilities size is 150,946153,706 square meters.

 

Set forth below is a list of our principal production facilities.and storage facilities:

 

WiWinene Operating segment

Plant

Type of Plant

Lontué

Molina

Wine Production

MolinaTotihue

Wine Production

TarapacáIsla de Maipo

Wine Production

Finca La Celia

Wine Production

Lontué

Wine Storage

Viña Mar

Wine Storage

Finca la Celia

Wine Production

 

D.


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. Our latest executed projects have been successfully submitted to this system and the environmental public entity has given the respective authorizations.

 

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.

59


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,Metropolitan Area, the relevant authorities have implemented a decontamination plan, which includes different levelstypes of measures depending on the air quality and certain measures thatlevels, some ofwhich 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 areaMetropolitan Area in all material respects.


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 Aguas or 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 are beinghave 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 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. ManyExamples of thesenew laws and regulations have been recently enacted are: (i) the National Register of Chemical Substances (Decree 900/12), which was implemented in January 2014 and little precedent exists asaims to their scope.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.

 


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.

The main features of our wastewater treatment plants are their production of biogas which is used as boiler fuel, their minimum space requirements and its low electric power consumption. Also, all of CCU’s major operations facilities have been awarded theCertificado de Aptitud Ambiental(Environmental Aptitude Certificate) which is the main document endorsing the company’s environmental management in each provincial state.

60


 

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

CCU is a diversified beverage company operating principally in Chile, Argentina, Bolivia, Colombia, Paraguay and Uruguay. CCU is the largest Chilean brewer, the second-largest Chilean soft drinks producer and the largest Chilean water and nectar producer, the second-largest Argentine brewer, the second-largest Chilean wine producer and the largest pisco distributor. It also participates in the HOD, rum and confectionery industries in Chile, in the beer, water and soft drinks industries in Uruguay, and in the soft drinks, water and nectar industries and beer distribution in Paraguay and Bolivia. The Company has licensing and/or distribution agreements with Heineken Brouwerijen B.V., Anheuser-Busch Incorporated, PepsiCo Inc., Schweppes Holdings Limited, Guinness Brewing Worldwide Limited, Société des Produits Nestlé S.A., Pernod Ricard and Compañía Pisquera Bauzá S.A.

 

We face certain key challenges and risks associated with our business. These risks include competition within the marketplace, managing operating costs and the integration and expansion 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.

In 2014, we reached new historical records in sales volumes and Net sales revenues, obtaining consolidated Net sales of CLP1,297,966 million, of which 64% was accounted for from the Chile Operating segment; the Rio de la Plata Operating Segment accounted for 23%; 13% was accountedfor by sales of our Wine Operating Segment, and the remainder was accounted for by sales of other products and/or consolidation eliminations. Our Net sales revenues increased 8.4% over the prior year as we increased sales of existing products and had a higher average price per product.

61


 

Changes in Consolidation Scope and Circular Letter N° 856

As of 2012, CCU has adopted the application of the International Financial Reporting Standards (IFRS) No. 11 Joint Arrangements. This change in accounting policy implies that investments held in joint agreements with Promarca S.A. and Compañía Pisquera Bauzá S.A., in which we have 50% and 49% ownership interests, respectively, are changed from the equity method to accounting for assets, liabilities, revenues and expenses relating to our ownership share in a joint operation. The effects of this accounting change in the consolidation scope have had an impact at the Operating Result level, but no effect on Net income or Equity.

On September 29, 2014 Act No. 20,780 was published in Chile, regarding the so called “Tax reform”Tax Reform Act which introducesintroduced amendments, among others, to the Incomeincome tax system. The saidTax Reform Act providesestablishes that corporations will apply by defaultas of 2017 Open Stock Corporations should calculate their taxes based on the "Partially“Partially Integrated System", unless a future extraordinary shareholders´ meeting agreesSystem” without the possibility to opt for the "Attributedalternative “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 whichthat occur as a direct effect of the increase in the First Category Income tax rate introduced by Act No. 20,780 and according to the Circular Letter N°856 (“Oficio Circular”(Oficio Circular N°856) of the Chilean Superintendency of Securities and Insurance ("SVS"),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.

 


Consequently, as ofsince December 31, 2014, in addition to the financial statements issued to comply with the rules and instructions of the SVS, the Company will issueissues 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, will beis registered against income in order to comply with IFRS as issued with the IASB.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, as it isand reflects a subtotal in our Consolidated Statement of Income.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 earningsNet 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)".

 

Our managementThe 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 our 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.

62


 

“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: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.

 


 

 

Year Ended December 31,

 

2012

 

2013

 

2014

 

(in millions of CLP, except percentages)

Net sales

 

 

 

 

 

 

 

 

Chile Operating segment

676,529

62.9%

 

765,196

63.9%

 

830,341

64.0%

Rio de la Plata Operating segment

253,826

23.6%

 

282,435

23.6%

 

299,668

23.1%

Wine Operating segment

149,557

13.9%

 

152,255

12.7%

 

172,349

13.3%

Other

-4,223

-0.4%

 

-2,660

-0.2%

 

-4,391

-0.3%

Total

1,075,690

100.0%

 

1,197,227

100.0%

 

1,297,966

100.0%

Operating Result

 

 

 

 

 

 

 

 

Chile Operating segment

138,221

76.3%

 

147,367

78.3%

 

129,740

72.1%

Rio de la Plata Operating segment

28,057

15.5%

 

26,693

14.2%

 

28,152

15.6%

Wine Operating segment

11,053

6.1%

 

12,913

6.9%

 

24,780

13.8%

Other

3,857

2.1%

 

1,292

0.7%

 

-2,752

-1.5%

Total

181,188

100.0%

 

188,266

100.0%

 

179,920

100.0%

 

Year Ended December 31,

 

 

2014

 

2015

 

2016

 

(in millions of CLP, except percentages)

Net sales

 

 

 

 

 

 

 

 

 

Chile 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%

 

 

 

 

 

 

 

 

 

 

Volume

 

 

 

 

 

 

 

 

 

Chile 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.

 

 

63

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

140,082

Add (Subtract):

 

 

 

 

 

Other gains (losses)

4,478

-959

-4,037

-8,512

8,346

Financial Income

-7,693

-8,254

-12,137

-7,846

-5,680

Financial costs

17,055

24,084

22,957

23,101

20,307

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

177

-309

899

5,228

5,561

Foreign currency exchange differences

1,003

4,292

613

-958

-457

Result as per adjustment units

5,058

1,802

4,159

3,283

2,247

Income taxes

37,133

34,705

46,674

50,115

30,246

Adjusted Operating result(1)

181,188

188,266

179,920

204,937

200,652

Exceptional Item (EI)

-

2,989

1,628

-

-

Adjusted Operating result before (EI)

181,188

191,255

181,548

204,937

200,652

Depreciation and amortization

54,760

64,246

68,608

81,567

83,528

ORBDA before (EI)

235,948

255,502

250,155

286,504

284,180

Exceptional 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.



 

 

The following is a reconciliation of our gains (losses) from operational activities, the most directly comparable IFRS measure to Operating Result for the years ended December 31, 2010, 2011, 2012, 2013 and 2014, and by operating segment for the years ended December 31, 2012, 2013 and 2014.

 

For the Years Ended December 31,

 

 

 

 

 

 

 

2010

2011

2012

2013

2014

(millions of CLP)

 

Gain (losses) from operational activities

163,236

195,828

176,710

189,225

183,957

Add (Subtract):

 

 

 

 

 

Results Derivative Contracts

1,048

(2,459)

4,030

(2,390)

(4,153)

Marketable Securities to Fair Value

(392)

227

(92)

108

103

Other

(1)

(778)

540

1,324

12

Exceptional Items (EI)(1)

(6,791)

(12,905)

-

2,989

1,628

Operating Result before EI

157,100

179,913

181,188

191,255

181,548

Exceptional Items (EI)(1)

6,791

12,905

-

(2,989)

(1,628)

Operating Result(2)

163,891

192,818

181,188

188,266

179,920

 

 

 

 

 

 

(1)   2010 EI corresponds to the result of the sale of a land in Perú; 2011 EI corresponds to the earthquake inssurance compensation in Chile and the restructuring charges of cider business in Argentina; 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 paymen og incentives to the leaving and remaining personnel; 2014 EI corresponds to the effect of CLP 1,627 million associated with restructuring processes across Operating segments

(2)   After Exceptional Items

Chile Operating Segment

For the Years Ended December 31,

    
 

2012

2013

2014

(millions of CLP)

   

Gain (losses) from operational activities

138,200

147,020

129,704

Add (Subtract):

   

Results Derivative Contracts

27

-5

118

Marketable Securities to Fair Value

-

-

-

Other

-5

352

-82

Exceptional Items (EI)

-

780

-

Operating Result before EI

138,221

148,147

129,740

Exceptional Items (EI)

-

-780

0

Operating Result(1)

138,221

147,367

129,740

(1) After Exceptional Items

   

64


Rio de la Plata Operating Segment

For the Years Ended December 31,

    
 

2012

2013

2014

(millions of CLP)

   

Gain (losses) from operational activities

28,057

26,693

27,847

Add (Subtract):

   

Results Derivative Contracts

-

-

-

Marketable Securities to Fair Value

-

-

-

Other

-

-

304.94

Exceptional Items (EI)

-

543

1,215

Operating Result before EI

28,057

27,236

29,367

Exceptional Items (EI)

-

-543

-1,215

Operating Result(1)

28,057

26,693

28,152

(1) After Exceptional Items

   

Wine Operating Segment

For the Years Ended December 31,

    
 

2012

2013

2014

(millions of CLP)

   

Gain (losses) from operational activities

11,617

13,246

24,559

Add (Subtract):

   

Results Derivative Contracts

-501

-333

221

Marketable Securities to Fair Value

-

-

-

Other

-63

-

-

Exceptional Items (EI)

-

276

-

Operating Result before EI

11,053

13,189

24,780

Exceptional Items (EI)

-

-276

-

Operating Result(1)

11,053

12,913

24,780

(1) After Exceptional Items

   

Other Operating Segment

For the Years Ended December 31,

    
 

2012

2013

2014

(millions of CLP)

   

Gain (losses) from operational activities

- 1,164

2,265

1,846

Add (Subtract):

-

-

 

Results Derivative Contracts

4,504

-2,052

- 4,492

Marketable Securities to Fair Value

-92

108

103

Other

608

971

- 210

Exceptional Items (EI)

-

1,390

413

Operating Result before EI

3,857

2,683

- 2,339

Exceptional Items (EI)

-

-1,390

-413

Operating Result(1)

3,857

1,293

- 2,752

(1) After Exceptional Items

   

The following table presents our Income statement in millions of pesos 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.

65



 

 

 

Year Ended December 31,

 

2012

 

2013

 

2014

 

(millions of CLP, except percentages)

Net sales

1,075,690

100.0%

 

1,197,227

100.0%

 

1,297,966

100.0%

Cost of sales

-493,087

45.8%

 

-536,697

44.8%

 

-604,537

46.6%

Gross margin

582,603

54.2%

 

660,530

55.2%

 

693,429

53.4%

Other operating income/(expenses)

3,828

0.4%

 

4,249

0.4%

 

23,721

1.8%

MSD&A

-405,243

37.7%

 

-473,524

39.6%

 

-535,603

41.3%

Operating Result(1)

181,188

16.8%

 

188,266

15.7%

 

179,920

13.9%

Net financing expenses

-9,362

0.9%

 

-15,830

1.3%

 

-10,821

0.8%

Results as per adjustment units

-5,058

0.5%

 

-1,802

0.2%

 

-4,159

0.3%

Exchange rate differences

-1,003

0.1%

 

-4,292

0.4%

 

-613

0.0%

Equity and income from joint ventures

-177

0.0%

 

309

0.0%

 

-899

0.1%

Other gains/(losses)

-4,478

0.4%

 

959

0.1%

 

4,037

0.3%

Income before taxes

161,110

15.0%

 

167,609

14.0%

 

167,465

12.9%

Income taxes

-37,133

3.5%

 

-34,705

2.9%

 

-46,674

3.6%

Net income for the year

123,977

11.5%

 

132,905

11.1%

 

120,792

9.3%

Attributable to:

 

 

 

 

 

 

 

 

Equity Holders of Parent Company

114,433

10.6%

 

123,036

10.3%

 

106,238

8.2%

Non controlling interest

9,544

0.9%

 

9,869

0.8%

 

14,553

1.1%

         

(1) Defined, for management purposes, as earnings 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.

FISCAL YEAR ENDED DECEMBER 31, 20142016 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 20132015

 

The major occurrences of the fiscal year ended 20142016 were: (a) the 15% devaluation of the Chilean peso and the 48%60% average devaluation of the Argentine peso against the US dollar and 55% against the Chilean peso during 2014;2016; (b) higher marketing expenses which are consistent with our long-term strategy for developing strong brands coupled with increased distribution expenses in our Chilean operation;the continuous execution of the “ExCCelencia CCU” program; (c) the compensation received by our Argentine subsidiary CICSA, for the terminationcombination of the contract which allowed us to importroute-to-market in the beer and distribute on an exclusive basis, Corona and Negra Modelo beersnon-alcoholic categories in Argentina, and the license for the production and distribution of Budweiser beer in Uruguay; andChile; (d) the Chilean Tax reformnew “Labeling Law”, which became effectiveestablishes certain restrictions on October 1, 2014, bringing a seriespromotion material, labeling, and commercialization of changes to tax ratesnon-alcoholic beverages and  tax schemes.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 CLP1,297,966CLP 1,558,898 million in 20142016 compared to CLP1,197,227CLP 1,498,372 million in 2013,2015, representing an 8.4% increase of 4.0%, primarily due to higher sales volumes and higher per unitaverage prices in allthe Chile and Wine Operating segments. Net sales performance of each of our Operating segments during 20142016 is described below:

Chile: Net sales increased 8.5%9.7% to CLP830,341CLP 997,376 million as a result of 4.1%4.5% higher sales volume coupled with 4.2%4.9% higher average prices. Higher sales volumes were fueled partially by promotional activities performed throughout the year as well as goodthe successful implementation of the combined route-to-market in beer and non-alcoholic beverages, which led to improve execution inat the points of sale and effective marketing campaigns, which allowed us to increase our consolidated market share. Unitsale. Average prices increased due to a higher sales mix, coupled with price increases throughoutrevenue management initiatives and the year.incorporation of high value brands to the portfolio.

Rio de la Plata:International Business: Net sales increased 6.1%decreased 8.8% to CLP299,668CLP 370,109 million, due to 6.0%as a result of 1.0% higher sales volumes partially offset by 5.6%9.6% lower average prices. Volumes increased due toprices as a consequence of the contributiondevaluation of 456 thousand hectoliters from the Paraguay operation.Argentine peso against Chilean peso.

Wine: Our Net sales of wine increased 13.2%6.3% to CLP172,349CLP 201,402 million in 2014,2016, from CLP152,255CLP 189,515 million in 2013.2015. The increase in Net sales was achieved due to a 2.5% increase in3.0% higher sales volume and a 10.4%3.2% increase in average prices, mainlyprices. This was due to the export side of the business, which showed good performance mainly driven by Asia and Latin America exports, andboth the domestic business, where good execution allowed us to consolidatewe once again consolidated our leading position in market value, terms.and the growth in the export businesses, combined with price increases and the strengthening of our distribution to our strategic markets.

66


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 20142016 was CLP604,537CLP 741,820 million compared to CLP536,697CLP 685,075 million in 2013, 12.6%2015, an 8.3% increase from 2013.compared to 2015. As a percentage of Net sales, Cost of sales increased to 46.6%47.6% in 20142016 from 44.8%45.7% in 2013.2015. The Cost of sales for our Operating segments during 2014 are2016 is described below:

Chile:The Cost of sales for our Chile Operating segment increased 11.7%14.5% to CLP383,559CLP 471,152 million in the twelve months ended December 31, 2014,2016, from CLP343,230CLP 411,375 million in the twelve months ended December 31, 2013, primarily due to an increase in direct costs of 10.5% due to the 15% currency devaluation in Chile during the year, partially offset by lower commodity costs; and 14.9% higher manufacturing costs as energy and salaries rose.2015. Cost of sales as a percentage of Net sales increased to 46.2%47.2% in 2016 from 45.2% in 2015, primarily due to the twelve months ended December 31, 2014 from 44.9%incorporation of high value brands, and the 3.5% average currency devaluation in Chile during the twelve months ended December 31, 2013.year compared to last year, partially offset by the results of the industrial and procurement initiatives of the efficiency program “ExCCelencia CCU”.

Rio de la Plata:International Business:The Cost of sales of our Rio de la PlataInternational Business Operating segment increased 20.2%decreased 3.2% to CLP136,175CLP 157,486 million in the twelve months ended December 31, 2014,2016, from CLP113,265CLP 162,665 million in the twelve months ended December 31, 2013 mainly due an increase in direct costs of 27.6% due to the 48% devaluation of the Argentine peso coupled with high inflation in Argentina, which was not offset by our cost saving efforts.2015. Cost of sales as a percentage of Net sales increased to 45.4%42.6% in the twelve months ended December 31, 20142016 from 40.1% in 2015. This was mainly due to the twelve months ended December 31, 2013.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 5.0%6.6% to CLP97,524CLP 112,938 million in 2014,2016, from CLP92,864CLP 105,956 million in 2013, mainly due to higher manufacturing costs as energy costs rose.2015. Cost of sales, as a percentage of Net sales, decreasedincreased from 61.0%55.9% in 20132015 to 56.6%56.1% in 2014, mainly2016, mostly due to lower input coststhe cost of grapes of the 2016 harvest, which had challenging weather conditions but was partially offset by a higher exchange rate.the results of the industrial initiatives of the efficiency program.

Gross margin

Our Gross margin increased 5.0%0.5% to CLP693,429CLP 817,078 million in 2014,2016, from CLP660,530CLP 813,296 million in 2013.2015. As a percentage of Net sales, Gross margin decreased to 53.4%52.4% in 20142016 from 55.2%54.3% in 2013.2015.


Marketing, Selling, Distribution and Administrative Expenses

The Marketing, and Selling, Distribution and Administrative expenses (“MSD&A”) primarily include advertising and promotional expenses, maintenance,selling expenses, distribution costs such as product transportation costs, services provided by third parties and other administrative expenses. Our MSD&A expenses increased 13.1%1.1% to CLP535,603CLP 619,543 million in 2014,2016, from CLP473,524CLP 612,565 million in 2013.2015. As a percentage of Net sales, our MSD&A increaseddecreased to 41.3%39.7% in 20142016 from 39.6%40.9% in 2013.2015. The MSD&A performance of each Operating segment during 20142016 is described below:

Chile: The MSD&A expenses of our Chile Operating segment increased 15.5%8.7% to CLP317,765CLP 373,408 million in the twelve months ended December 31, 2014,2016, from CLP275,203CLP 343,381 million in the twelve months ended December 31, 2013. The increase in MSD&A was mainly due to higher marketing investments and distribution expenses of CLP14,681 million and CLP21,199 million respectively. As2015. Nevertheless, as a percentage of Net sales, MSD&A increaseddecreased to 38.3%37.4% in 2016 from 37.8% in 2015, mainly due to the results of the efficiency plan “ExCCelencia CCU” especially in the twelve months ended December 31, 2014 from 36.0% in the twelve months ended December 31, 2013.logistics front.

Rio de la Plata:International Business: The MSD&A of our Rio de la PlataInternational Business Operating segment increased 7.9%decreased 11.4% to CLP154,300CLP 191,414 million in the twelve months ended December 31, 2014,2016, from CLP142,972CLP 216,099 million in the twelve months ended December 31, 20132015, mainly due mainly to the Argentina operation. Cost saving programs were not enough to offset the increase in MSD&A due to higher marketing expenses of CLP3,988 millioncurrency translation effect and higher administrative expenses of CLP6,516 million, all related mainly to inflationary pressures in the Argentinean operation.efficiencies captured. As a percentage of Net sales, our MSD&A increaseddecreased to 51.5%51.7% in 2016 from 53.3% in 2015, partially explained by the twelve months ended December 31, 2014 from 50.6% inresults of the twelve months ended December 31, 2013.logistics initiatives of the "ExCCelencia CCU" program.

Wine: The MSD&A of our Wine Operating segment increased 9.2%1.8% to CLP50,284CLP 52,007 million in 2014,2016, from CLP46,036CLP 51,070 million in 2013. This increase in2015. Nevertheless, MSD&A is primarily related to higher marketingexpenses of CLP2,091 million and higher distribution costs of CLP901 million, caused by an increase in marketing to support our branding strategy. Asas a percentage of Net sales, our MSD&A for this segment decreased to 29.2%25.8% in the twelve month period ended December 31, 20142016 from 30.2%26.9% in the twelve month period ended December 31, 2013 as higher Net sales compensated for the increase in MSD&A.2015, primarily due to our “ExCCelencia CCU” plan.

67


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.


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.


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, reaching CLP23,721representing 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 providedby 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:


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) of CLP4,249decreased 82.3% in 2015 to CLP 4,205 million, from CLP 23,721 million in 2013,2014, mainly due to the CLP 18,882 million compensation received by our Argentine subsidiary CICSA in 2014, for the termination of the contract whichthat 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. During 2014, we recognized as an Exceptional item the effect of CLP1,627 million associated with restructuring processes across Operating segments.

Adjusted Operating Result

Our Adjusted Operating Result decreased 4.4%increased 13.9% to CLP179,920CLP 204,937 million in 2015, as compared to CLP 179,920 million in 2014 and as compareda percentage of Net Sales decreased from 13.9% to CLP188,266 million13.7% in 2013, mainly due to a higher cost of sales and higher expenses, partially offset by2015. Excluding the positive one-time effect compensation of the compensationCLP 18,882 million received by our Argentine subsidiary CICSA. The Operating Result performance of each of our Operating segments during 2014 is described below:

Chile: The Operating result for the Chile Operating segment decreased 12.0% to CLP129,740 million due to an increase of 15.5%CICSA in MSD&A expenses and an increase of 11.7% in Cost of sales as the currency devaluated and higher marketing expenses were incurred, partially offset by a 8.5% increase in Net sales. The Operating result margin decreased from 19.3% to 15.6% for the twelve months ended December 31, 2014.

Rio de la Plata: The Operating result for the Río de la Plata Operating segment increased 5.5% to CLP28,152 million due to the agreements reached with Cervecería Modelo S. de R.L. de CV. and Anheuser-Busch LLC,Q2’14 for the termination of the contract which allows CICSAthat allowed us to import and distribute on an exclusive basis, Corona and Negra Modelo beers in Argentina and the license for the productionto produce and distribution ofdistribute Budweiser beer in Uruguay. CICSA receivedUruguay, 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 compensationNet 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 these agreements the amount of ARS277.2 million, equivalentInternational Business Operating segment increased 7.5% to US$34.2 million..CLP 30,266 million. The Adjusted Operating resultResult margin decreased from 9.5%9.4% in 2014 to 9.4%7.5% for in 2015. Excluding the twelve months ended December 31, 2014.above mentioned one-time effect compensation, the Adjusted Operating Result margin expansion was 437 bps.

Wine: The Adjusted Operating resultResult from our wine Operating segment increased 91.9%31.3% to CLP24,780CLP 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 from CLP12,913to a loss of CLP 13,193 million in 2013. The Operating2015, mainly due to a lower result margin for this Operating segment increased from 8.5% to 14.4% for the twelve months ended December 31, 2014.in Corporate costs.

Net Financing Expenses

Our Net financing expenses decreased 31.6%increased 41.0% to CLP10,821CLP 15,256 million in 20142015 as compared to CLP15,830CLP 10,821 million in 2013.2014. This decreaseincrease was primarily due to a lower level of Net financial debtCash and cash equivalents in 2014.2015.

Equity and income from joint ventures and associated

CCU has 50% or less participation in both Cervecería Austral, S.A.,Foods, BBO, CCC, and Foods Compañía de Alimentos CCU S.A.in other companies. The share of the gain/loss in the referred companies decreased to a loss of CLP899CLP 5,228 million in 2014,2015, from a gainloss of CLP309CLP 899 million in 20132014 mainly due to lower results in oursome of these joint ventures.ventures, including the divestments of the brands Calaf and Natur which generated a loss net of taxes of CLP 1,035 million.


Result as per adjustment units and Exchange rateForeign currency exchange differences

The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net loss of CLP4,772CLP 2,325 million in 2014,2015, as compared to a net loss of CLP6,094CLP 4,772 million in 2013.2014. This variation is primarily due to higher foreign currency exchange differences partially offset by a lowerand higher Result as per adjustment units, due to highera lower inflation during the year.2015 compared to 2014.

68


Other gains (losses)

Our Other gains (losses) increased from a net gain of CLP959CLP4,037 million in 20132014 to a net gain of CLP4,037CLP 8,512 million in 2014.2015. The increase mainly resulted from gains related to hedges covering foreign exchange variations on taxes.

Income taxes

Our income taxes for the twelve months ended December 31,in 2015 amounted to CLP 50,115 million, translating into an effective consolidated tax rate of 26.3%. Income taxes in 2014 amounted to CLP46,674CLP 46,674 million translating into an effective consolidated tax rate of 27.9%. Income taxes in 2013 amounted to CLP34,705 million translating into an effective consolidated tax rate of 20.7%. Income tax increased by CLP11,969 million mainly due to the tax rate increase for 2014 in Chile. The effect of the new tax rate of 21%, applicable from January 1, 2014, resulted in charges of CLP1,359 million against Income in 2014. 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 Net income. As of December 31, 2014, the total effect accounted against Net income was an amount of CLP14,520CLP 3,441 million.

Net income for the year

Our Net income for the twelve months ended December 31, 2014 decreased 9.1%in 2015 increased 16.3%, from CLP132,905 million in 2013 to CLP120,792CLP 120,792 million in 2014 to CLP 140,526 million in 2015, primarily as a result of a 4.4% decrease13.9% increase in Adjusted Operating Result and higher Income taxes.Result.

Net income attributable to equity holders of parent company

Our Net income attributable to equity holders of our parent company decreasedincreased 13.7% from CLP123,036 million in 2013 to CLP106,238CLP 106,238 million in 2014 for the reasons explainedto CLP 120,808 million in the preceding paragraphs.2015.

Non-controlling interests

Non-controlling interests increased from CLP9,869CLP 14,553 million in 20132014 to CLP14,553CLP 19,717 million in 2014.2015.

69



 

 

FISCAL YEAR ENDED DECEMBER 31, 2013 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2012B.

The major occurrences of the twelve months ended December 31, 2013 were: (a) significant increases in our expenses, which we were able to partially offset by increasing prices while protecting our market shares with commercial efforts and our innovative strategy, and (b) the strong and consistent growth of sales.

Net sales

Our Net sales were CLP1,197,227 million in 2013 compared to CLP1,075,690 million in 2012, representing an 11.3% increase, primarily due to higher sales volumes coupled with higher per unit prices on average.

The Net sales performance of our main Operating segments during 2013 is described below:

Chile:Net sales increased 13.1% to CLP765,196 million as a result of 12.4% higher sales volume coupled with 0.6% higher average prices. Sales volumes increased in all categories as a result of higher per capita consumption coupled with higher consolidated market share. Unit prices were higher on average as the sales mix in both the beer and pisco categories included more premium products.

Río de la Plata:Net sales increased 11.3% to CLP282,435 million as a result of 5.9% higher sales volume coupled with 5.1% higher average prices. Sales volumes increased mainly due to the increase in sales in the Uruguayan operation, partially offset by decreases in the Argentinean operation. Higher per unit prices were primarily as a result of price increases implemented at the end of 2013 in Argentina, as well as a higher percentage of premium products in our sales mix.

Wine:Net sales of wine increased 1.8% to CLP152,255 million in 2013, from CLP149,557 million in 2012. The increase in sales was due to a 1.9% average increase in unit prices partially compensated by a 0.1% decrease in sales volume. The 1.7% accumulated yearly average Chilean peso depreciation against the U.S. dollar positively influenced our exports.

Cost of sales

Our cost of sales in 2013 was CLP536,697 million compared to CLP493,087 million in 2012, an increase of 8.8%. However, as a percentage of Net sales, cost of sales decreased to 44.8% in 2013 from 45.8% in 2012.

Our cost of sales for our main Operating Segment during 2013 is described below:

Chile:The cost of sales for our Chilean operation increased 11.3% to CLP343,230 million in 2013, from CLP308,359 million in 2012, primarily due to higher volumes and lower cost per unit in non‑alcoholic categories as a percentage of Net sales. One-way packaging costs, which have a greater cost of sales on average, were higher due to changes in our sales mix, but the increase was partially offset by lower per unit raw material cost and decreased energy costs. Cost of sales as a percentage of Net sales decreased to 44.9% in 2013 from 45.6% in 2012 despite of the strong Chilean peso devaluation in the last quarter of the year.

Rio de la Plata:Cost of sales increased 13.2% to CLP113,265 million in 2013, from CLP100,033 million in 2012 mainly due to higher production costs in the CCU Argentina operation of CLP7,587 million, relating to items such as bottle depreciation, personnel and maintenance costs. Cost of sales as a percentage of Net sales increased to 40.1% in 2013 from 39.4% in 2012.

Wine:The cost of sales for our Wine segment decreased 2.9% to CLP92,864 million in 2013, from CLP95,635 million in 2012, primarily due to lower direct costs, which account for a CLP4,661 million decrease, related to a lower price for grapes due to a better harvest. Therefore, cost of sales as a percentage of Net sales decreased from 63.9% in 2012 to 61.0% in 2013.

70


Gross margin

Gross margin increased 13.4% to CLP660,530 million in 2013, from CLP582,603 million in 2012. As a percentage of Net sales, gross profit increased to 55.2% in 2013 from 54.2% in 2012 due to lower average unit costs of raw materials and higher sales prices.

Marketing and selling, distribution and administrative expenses

Our MSD&A increased 16.8% to CLP473,524 million in 2013, from CLP405,243 million in 2012. As a percentage of Net sales, our MSD&A increased to 39.6% in 2013 from 37.7% in 2012.

The MSD&A performance of our main Operating segments during the twelve months ended December 31, 2013 is described below:

Chile:The MSD&A of our Chilean operation increased 18.8% to CLP275,203 million in 2013, from CLP231,696 million in 2012. The increase in MSD&A was primarily attributable to higher distribution costs of CLP29,796 million due mainly to higher volumes and higher real salaries caused by low unemployment in Chile, as well as increased marketing expenses of CLP13,452 million to support a new innovation strategy and several new product launches in our brand portfolio. As a percentage of Net sales, MSD&A increased to 36.0% in 2013 from 34.2% in 2012.

Río de la Plata:The MSD&A of our Rio de la Plata segment increased 13.4% to CLP142,972 million in 2013, from CLP126,049 million in 2012 due mainly to the CCU Argentina business. The increase in MSD&A was primarily due to higher selling expenses of CLP12,633 million and higher distribution costs of CLP8,565 million, all related mainly to inflationary pressures in the Argentinean operation. As a percentage of Net sales, our MSD&A increased to 50.6% in 2013 from 49.7% in 2012.

Wine:The MSD&A of our wine segment increased 6.6% to CLP46,036 million in 2013, from CLP43,175 million in 2012. This increase in MSD&A was primarily related to higher marketing expenses of CLP1,162 million and higher distribution costs of CLP983 million due to higher real salaries caused by low unemployment in Chile. As a percentage of Net sales, our MSD&A for this segment increased to 30.2% in 2013 from 28.9% in 2012.

Other operating income/(expenses) and exceptional items

Other operating income/(expenses) increased in 2013 resulting in a net income of CLP4,249 million in 2013, as compared to a net income of CLP3,828 million in 2012.

During 2013, CCU recorded the effect of CLP2,989 million as exceptional items associated with a restructuring process of the organization which implied the early retirement of managers replaced internally, promotions and the sole and exceptional payments of incentives to the leaving and remaining personnel.

Operating result

The Operating result increased 3.9% to CLP188,266 million in 2013, as compared to CLP181,188 million in 2012. As a percentage of Net sales, our operating result decreased from 16.8% in 2012 to 15.7% in 2013.

The Operating result performance of our main Operating segments during the twelve months ended December 31, 2013 is described below:

Chile:The operating result increased 6.6% to CLP147,367 million due to 13.1% higher Net sales partially compensated by 11.3% higher cost of sales and 18.8% higher MSD&A expenses. The Operating result margin decreased from 20.4% to 19.3%.

Río de la Plata:The operating result decreased 4.9% to CLP26,693 million due to a 13.2% increase in cost of sales and 13.4% higher MSD&A expenses partially offset by 11.3% higher Net sales. The Operating result margin decreased from 11.1% to 9.5%.

Wine:The operating result increased 16.8% to CLP12,913 million in 2013, from CLP11,053 million in 2012 due to a 2.9% decrease in cost of sales and a 1.8% increase in Net sales partially offset bya 6.6% increase in MSD&A expenses. As a percentage of Net sales, our operating result margin increased from 7.4% in 2012 to 8.5% in 2013.

71


Net financing expenses

Net financing expenses increased 69.1% to a loss of CLP15,830 million in 2013 as compared to a loss of CLP9,362 million in 2012. This change was primarily due to higher debt in Argentina at ARS nominal interest rates, taken to renew the proprietary bottle park, partially offset by higher financial incomes from the current cash and cash equivalent in 2013 compared to 2012.

Equity and income from joint ventures

CCU has 50% participation in both Cervecería Austral S.A. and Foods Compañía de Alimentos CCU S.A. The share of the gain/loss in the referred companies increased 274.3% to a gain of CLP309 million in 2013, from a loss of CLP177 million in 2012.

Result as per adjustment units and exchange rate differences

The adjustment applied to our net liabilities due to Chilean inflation and foreign exchange fluctuations resulted in a net loss of CLP6,094 million in 2013, as compared to a net loss of CLP6,061 million in 2012. This variation is primarily due to higher foreign currency exchange differences partially offset by a better result as per adjustment units due a lower change in the UF value.

Other gains (losses)

Other gains (losses) increased from a net loss of CLP4,478 million in 2012 to a net gain of CLP959 million in 2013. The change resulted from gains related to hedges covering foreign exchange variations on taxes.

Income taxes

Income taxes for the twelve months ended December 31, 2013 amounted to CLP34,705 million, translating into an effective consolidated tax rate of 20.7%. Income taxes in 2012 amounted to CLP37,133 million, translating into an effective consolidated tax rate of 23.1%. Income tax decreased by CLP2,428 million mostly due to a one-time positive effect of CLP2,510 million tax provision reversals related to deposits for returns of bottles and containers.

Net income for the year

Net income for the twelve months ended December 31, 2013 increased 7.2% to CLP132,905 million in 2013 from CLP123,977 million in 2012, primarily as a result of a 3.9% operating result increase and lower income taxes.

Net income attributable to equity holders of parent company

Net income attributable to equity holders of our parent company increased 7.5% from CLP114,433 million in 2012 to CLP123,036 million in 2013 for the reasons explained in the preceding paragraphs.

Non-controlling interests

Non-controlling interests increased from CLP9,544 million in 2012 to CLP9,869 million in 2013. This increase was primarily due to higher results in Aguas CCU Nestlé, partially offset by a higher stake in Viña San Pedro Tarapacá S.A.

Liquidity and Capital Resources

 

Our principal source of liquidity has been cash generated by our operating activities, which amounted to CLP 138,845173,622 million, CLP 194,155219,511 million and CLP173,622  190,014 million, during the years 2012, 20132014, 2015 and 2014,2016, respectively.

 

72


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 20142016 were amounts collected from clients net of payments to suppliers of CLP528,430 646,311 million compared to CLP 513,398649,767 million in 20132015 and CLP 464,649532,878 million in 2012.2014.

 

In 2014,2016, our cash flows from financing activities totalled outflows of CLP132,156CLP 95,303 million compared to inflowsoutflows of CLP251,622CLP 82,839 million in 20132015 and outflows of CLP80,167CLP 132,156 million in 2012.2014. 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 CLP81,471CLP 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 (outflows of CLP3,162 million in 2013 and outflows of CLP3,545 million in 2012), of dividends paid of CLP65,316 million in 2014 (CLP63,681 million in 2013 and CLP66,117 million in 2012) and the repayment of bank borrowings of CLP20,766 million in 2014 (CLP22,344 million in 2013 and CLP62,425 million in 2012), and partially offset by the proceeds from short-term borrowings of CLP21,883 million in 2014 (CLP12,040 million in 2013 and CLP28,551 million in 2012), and the proceeds from long-term borrowings of CLP15,483 million in 2014 (CLP10,853 million in 2013 and CLP37,607 million in 2012)bond). Additionally, we received a netpaid amount of CLP326,663CLP 19,112 million from our 2013 capital increase.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 2014,2016, our cash used in investment activities totalled CLP238,970 155,007 million compared to CLP 136,918165,810 million in 20132015 and CLP 134,340238,970 million in 2012.2014. The principal components of cash used in investment activities in 20142016 consisted of capital expenditures of CLP227,863 128,883 million (CLP 122,451131,731 million in 20132015 and CLP 115,768230,080 million in 2012)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 (CLP 14,566 million in 2013 and CLP 19,522 million in 2012), partially offset by the proceeds from sale of assets of CLP2,587 million (CLP 1,741 million in 2013 and CLP 3,195 million in 2012)2014).

Other than in relation to Argentina, where the present measures taken by the Argentine Government to control the trade balance and the foreign exchange rate do not allow for the repatriation of dividends from our subsidiaries to Chile, there are no material restrictions, either legal or economic, that would limit our ability to transfer funds (i.e., dividends, loans, or advances) from our subsidiaries to us.

 

As of December 31, 2014,2016, we had CLP131,558CLP 58,342 million (CLP313,647(CLP 75,485 million in 20132015 and CLP54,996CLP 131,558 million in 2012)2014) in cash, overnight deposits, bank balances, time deposits and marketable securities,investments in mutual funds, which doesdo not include CLP83,217CLP 75,448 million (CLP95,206(CLP 117,069 million in 20132015 and CLP47,341CLP 83,217 million in 2012)2014) corresponding to readjustable promissory notes issued by the Central Bank andsecurities purchased under resale agreements. Indebtedness, including accrued interest, amounted to CLP187,153CLP 160,490 million as of December 31, 2014.2016. Short-term indebtedness included:

 

CLP49,138CLP 39,080 million of short-term bank borrowings,

CLP3,029CLP 3,250 million of bonds payable, and

CLP518CLP 216 million of financial lease obligationsobligations.

 

As of December 31, 2014,2016, long-term indebtedness, excluding the current portion, comprised:

CLP46,684CLP 29,606 million of long-term obligations to banks,

CLP70,908CLP 70,837 million of long-term obligations to the public represented by bonds, and

CLP16,875CLP 17,501 million of long-term financial lease obligations.

 

On


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 2, 2009 the Company issued two series of notes in the local market for UF 3 million and UF 2 million for a total of CLP104,188CLP 104,188 million in order to refinance a previous loan of CLP30,000CLP 30,000 million and a US$100 million syndicated loan that matured in November 2009. The conditions of the bonds are as follows:

 

73


 

“I” Series

“H” Series

UF amount

3 million

2 million

Term

5 years

21 years

Duration

4.63 years

11.5 years

Amortization

Bullet

SinceSemi-annual

since year 11

Interest Rate

UF+3.00%

UF+4.25%

 

As mentioned above, during the last quarter of 2009 we repaid a syndicated loan of US$100 million which had been converted into a fixed-rate UF loan through a cross-currency swap. Additionally, during March 2014 we paid all outstanding amounts under the “I” Series bonds.

 

As of December 31, 2014,2016, 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 2.002.50 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 UF770UF 770 thousand (CLP18,963  20,288 million as of December 31, 2014)2016) in CPCh; and a maximum indebtedness ratio of less than 3.00 to 1:001.00 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, 2014,2016, we met all our financial debt covenants and had a consolidated interest coverage ratio of 10.8313.99 to 1,1.00, a consolidated leverage ratio of 0.460.49 to 1.1.00. The consolidated adjusted equity attributable to equity holders of the parent company as of December 31, 20142016 was CLP 1,085,3671,136,527 million. Our ratio of unpledged assets over unsecured liabilities was 3.16.3.06.

 

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, 2014.2016. 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:

 

74



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest - Bearing Debts as of December 31, 2014 - Cash

 

 

(millions of Ch$, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual Maturity Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Rate

 

Averge Int.Rate

 

2015

 

2016

 

2017

 

2018

 

2019

 

Thereafter

 

TOTAL

 

Ch$ (UF)(1)

Bonds

4.2%

 

5,485

 

5,801

 

5,801

 

5,801

 

5,801

 

71,546

 

100,236

 

Ch$ (UF)(1)

Banks

6.5%

 

7,583

 

2,746

 

18,743

 

6,088

 

6,088

 

28,911

 

70,159

 

US$

Banks

3.7%

 

1,076

 

241

 

241

 

0

 

0

 

0

 

1,557

 

EUR

Banks

0.6%

 

4,735

 

0

 

0

 

0

 

0

 

0

 

4,735

 

Argentine pesos

Banks

22.5%

 

32,995

 

6,453

 

3,958

 

1,963

 

1,587

 

0

 

46,956

 

Uruguayan pesos

Banks

16.4%

 

1,741

 

0

 

0

 

0

 

0

 

0

 

1,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

53,615

 

15,241

 

28,742

 

13,852

 

13,476

 

100,457

 

225,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate

 

Averge Int.Rate

 

2015

 

2016

 

2017

 

2018

 

2019

 

Thereafter

 

TOTAL

 

US$

Banks

1.6%

 

5,364

 

4,956

 

4,956

 

0

 

0

 

0

 

15,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

5,364

 

4,956

 

4,956

 

0

 

0

 

0

 

15,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) UF as of Dec 31, 2014

                  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest - Bearing Debts(1) as of December 31, 2016

(millions of CLP, except percentages)

 

               

 

 

               

 

 

   

Contractual Flows Maturities

       

 

 

               

 

Fixed Rate

 

Averge Int.Rate

 

2017

 

2018

 

2019

 

2020

 

2021

 

Thereafter

 

TOTAL

CLP (UF)(2)

Bonds

4.2%

 

5,660

 

5,556

7,846

9,986

 

9,680

 

56,879

 

95,607

CLP (UF)(2)(3)

Banks

6.0%

 

1,775

1,620

11,588

1,153

 

1,153

 

28,639

 

45,929

CLP$

Banks

5.8%

 

28,794

2,660

2,660

313

 

313

 

-

 

34,740

US$

Banks

2.9%

 

1,086

-

-

-

 

-

 

-

 

1,086

Argentine pesos(4)

Banks

28.7%

 

9,686

4,378

2,683

-

 

-

 

-

 

16,747

Uruguayan pesos

Banks

6.0%

 

1,045

348

348

-

 

-

 

-

 

1,742

 

            

 

TOTAL

   

48,046

14,562

25,126

11,452

 

11,146

 

85,517

 

195,850

 

            

 

 

            

 

Variable rate

 

Averge Int.Rate

 

2017

2018

2019

2020

 

2021

 

Thereafter

 

TOTAL

US$

Banks

1.8%

 

108

5,332

-

-

 

-

 

-

 

5,440

Argentine pesos

Banks

16.6%

 

2,154

1,586

1,005

-

 

-

 

-

 

4,744

 

            

 

TOTAL

   

2,262

6,917

1,005

-

 

-

 

-

 

10,184

 

            

 

TOTAL

   

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.”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 and U.S. dollars.pesos. As of December 31, 2014,2016, we had invested CLP182,590 CLP 92,407million in Chilean peso related instruments.

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, 2014:2016:

 

 

Short-Term Financial Instruments

(in millions of CLP)

Time deposits

99,37316,935

Marketable securitiesMutual Funds

-25

Repos

83,21775,448

Total

182,59092,407

 


Capital Expenditures Commitments

Our plans for capital expenditures through the 2018 period 2017-2020 are displayed in the following table:

 

75


CLP million2017201820192020
Chile138,102197,254127,74590,394
Abroad37,63743,37222,15523,130
Total175,739240,626149,899113,523

  

Operating segment

2015

2016

2017

2018

  

(CLP Millions)

      

Chile

 

88,363

202,928

76,851

34,965

 

As a percentage of Total

40.3%

73.7%

56.4%

41.8%

 

Machinery and equipment

36,064

120,245

51,229

16,386

 

Packaging

17,054

19,094

15,650

13,814

 

Marketing assets

12,871

8,800

9,066

3,106

 

Software and hardware

1,019

6

0

97

 

Others

21,356

54,782

906

1,562

 

 

 

 

 

 

Rio de la Plata

 

32,081

35,716

24,183

20,594

 

As a percentage of Total

14.6%

13.0%

17.8%

24.6%

 

Machinery and equipment

8,396

12,356

4,178

2,236

 

Packaging

13,730

13,945

10,297

10,297

 

Marketing assets

6,124

7,414

7,414

6,355

 

Software and hardware

1,510

18

0

0

 

Others

2,321

1,983

2,295

1,706

 

 

 

 

 

 

Wine

 

17,583

6,656

8,024

7,819

 

As a percentage of Total

8.0%

2.4%

5.9%

9.4%

 

Machinery and equipment

3,989

538

1,808

1,919

 

Packaging

1,543

0

0

0

 

Marketing assets

27

320

311

284

 

Software and hardware

98

0

0

0

 

Others

11,926

5,797

5,905

5,616

      

Others

 

81,065

30,180

27,119

20,222

 

As a percentage of Total

37.0%

11.0%

19.9%

24.2%

      

Total

 

219,092

275,479

136,177

83,600

During the years 20152017 through 2018,2020, 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.

 

We expectThe 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 fundminimize capital costs, and at the same time debt levels and maturities compatible with our capitaloperational 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, throughas we have a combinationclose 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 internally generated funds, long-term indebtednessproduction 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 2013 capital increase.other for Argentina.

76In 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”.



 

 

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.


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, 2014:2016:

 

 

Payments due by period

 

(in million of CLP)

Contractual Obligations

Total

Less than 1 year

1 - 3 years

3 - 5 years

Mare than 5 years

Long-Term Debt Obligations

204,838

57,298

51,281

24,714

71,546

Capital Lease Obligations (1)

35,821

1,681

2,891

2,338

28,911

Operating Lease Obligations (2)

281,373

109,910

79,105

30,048

62,310

Purchase Obligations (3)

227,854

77,613

59,393

27,824

63,024

Total

749,886

246,502

192,669

84,924

225,791

 

 

 

 

 

 

(1) Includes our obligations to lease our new headquarters building (see Note 27 to the financial statements).

(2) includes real state property, vineyards and warehouse leases, as well as marketing contracts.

(3) Includes raw material purchase contracts.

 

 

 

 

      
   

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 years

Long-Term Debt Obligations

171,067

48,889

45,007

20,293

56,879

Capital Lease Obligations(2)

34,967

1,419

2,603

2,306

28,639

Operating Lease Obligations(3)

482,101

175,604

239,761

32,682

34,053

Purchase Obligations(4)

484,323

137,417

240,128

62,209

44,570

Total

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.

 

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 35 to our audited consolidated financial statements for a more detailed discussion of contingencies, including guarantees.

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. 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 effect as of January 1, 2011. These agreements have an initial term of 10 years, and shall automatically be renewed 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.

77


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 –Rio de la Plata Operating segment.”

 

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 revisedarerevised 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.


 

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 purchasepricepurchase 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 2.142.15 and 2.152.16 to our financial statements.

78


 

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 upon return ofwhen it returns the bottles and containers to the Company in good condition along with the original document. This value is determined by estimating the numberestimation of the bottles and containers in circulation that are expected to be returned to the Company over a periodin 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 bottlebottles and container.containers.

 

The Company does not intend to make a significant repayment of these deposits within the next 12 months. However, suchSuch 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.kind in its origin.

 

d) Severance Indemnities: As of December 31, 2014,2016, 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 6%5.52% in Chile and 42.43%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 or liability in its balance sheet when it becomes subjectConsolidated Statement of Financial Position according to the contractual stipulations of a financial instrument. following:

As of the date of the initial recognition, Management classifies its financial assets (i) at fair value through profit and loss orand (ii) collectible credits and accounts, depending on the purpose for which the financial assets were acquired.wereacquired. For those instruments not classified at fair value through profit and loss,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 techniquestechnique 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. These

After the initial recognition the Company values the financial assets are valued at fair value and the incomeas described below:

Accounts receivable

Trade receivable credits or losses originated by the change in fair valueaccounts are recognized in the Consolidated Statement of Income. The assets at fair value through profit and loss include financial assets classified as held for trading by the Company. Financial assets are classified as held for trading when acquired with the purpose of selling them within a short term. Derivative instruments are classified as held for trading unless they are classified as hedge instruments.according to their invoice value.

 

The estimatedCompany 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, for which 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 initialrecognition,initial recognition, loans and obligations accruing interest are valuedmeasured 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 expense. cost.

Loans and obligations accruing interest with a maturity within a twelve-monthtwelve 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-monthtwelve month period after the financial statement closing date.

79



 

 

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, 2014,2016, 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 our auditedthese consolidated financial statements.

 

Trend Information

The Chilean economy grew 1.9% in 2014, with an inflation rate of 4.6%. The GDP growth for 2015 had been estimated in the range of 1.8% to 3.5%. Average unemployment was 6.3% in 2014. 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.

During December 2014, the current Chilean government has submitted a proposal to the Chilean parliament, for their approval, to reform employment rules and labor laws which might result in a more rigid labor market.

Also, subject to further health regulations, which approval is delayed, new food labeling rules will take effect. This new regulation, to be met by manufacturers, will gradually toughen rules and restrictions on the labeling, packaging information, and food advertising, among others.

The Chilean Congress is also currently discussing a bill that establishes, among others, a new regime of temporary entitlements for water rights on future rights to be granted, while introducing a system of revocation for those not in use. This bill is subject to revision during the course of its discussion, and it is currently unclear what final form it will take if enacted.

Electricity spot prices have increased significantly in the past years due to drought conditions and the postponement of investments in new capacity, specifically hydroelectricity and coal generation. 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 (US consumer price index). A shortage is not foreseen in the upcoming years as electricity can be generated with fuel, though at a higher cost. Construction of new power generation plants remains uncertain.

Our main plants in Chile are supplied by Metrogas Quintero, a natural gas company, which imports gas from renewable sources at international prices. Accordingly, we do not foresee shortages as was the case in the past when the natural gas supply depended on Argentina.

The measures taken by the Argentine government to address the country’s economic situation have severely affected the Argentine financial system’s stability and have had a materially negative impact on its reputation and, more recently, on the Company’s business. Recently, Argentina has been increasing restrictions on foreign exchange transactions. 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 taxesand exchange control measures, could adversely affect our operations in Argentina and our future results of operations.

80



 

 

Revenues from CCU Argentina, in Chilean pesos, are also subject to the volatility of exchange rates of the Chilean peso and Argentine peso in any given period. This volatility may also affect the level of income reported from our foreign operations under IFRS. Restrictions imposed by the Argentine government on the repatriation of profits might delay the flow of cash from Argentina to Chile. There is a rule in Argentina with respect to imports which mandates that a company can import goods only if it can demonstrate a flow of exports to balance the trade deficit. This rule affects our businesses as we regularly import raw materials and finished products.

ITEM 6: Directors, Senior Management and Employees

A.  Directors and Senior Management

 

The following table sets forth certain information with respect to our executive officers andthe members of our board of directors, as of March 2015:directors:

 

Directors

Position

Position Held Since

At CCU Since

Andrónico Luksic

Chairman of the Board and Director

April 2013 (Chairman) November 1986 (Director)

November 1986

John NicolsonMarc Busain

Vice Chairman of the Board and Director

November 2008 (Vice Chairman) October 2008 (Director)April 2016

October 2008

Manuel José Noguera

Director

May 1987

May 1987April 2016

Francisco Pérez

Director

July 1998

February 1991

Philippe Pasquet

Director

June 2003

June 2003

Jorge Luis Ramos

Director

May 2011

May 2011

Carlos Molina

Director

April 2012

April 2012

Vittorio Corbo

Director

April 2012

April 2012

Pablo Granifo

Director

April 2013

April 2013

Senior ManagementRodrigo Hinzpeter

Position

Position Held Since

At Company Since

Patricio Jottar

Chief Executive OfficerDirector

July 19982015

July 1998

Marisol Bravo

Corporate Affairs and Public Relations Manager

June 1994

July 1991

Felipe Arancibia

Chief Human Resources Officer

February 2014

April 2002

Diego Bacigalupo

Corporate Development Manager

January 2014

August 2013

Matías Bebin

CPCh General Manager

February 2014

October 2006

Felipe Benavides

Legal Affairs Manager

March 2015

March 2015

Francisco DiharasarriDidier Debrosse

ECUSA General ManagerDirector

July 2015

July 2015

José Miguel Barros

Director

April 2016

April 2016

John Nicolson(1)

Vice Chairman of the Board

November 2008 (Vice Chairman) October 2008 (Director)

October 2003

June 19852008

Felipe DubernetJorge Luis Ramos(1)

Chief Financial OfficerDirector

February 2014May 2011

May 2011

Pedro Herane

Viña San Pedro General Manager

April 2013

May 2010

Stephen Koljatic(1)Until April 13, 2016

CCU Uruguay General Manager

September 2012

March 2001

Ronald Lucassen

Industrial Processes Corporate Manager

May 2014

May 2014

Hugo Ovando

CCU Chile General Manager

February 2014

September 1997

Martín Rodriguez

Head of Project Management Office

March 2015

March 2015

Fernando Sanchis

CCU Argentina General Manager

May 1995

November 1994

 

81


Andrónico Luksic (61),(63) was appointed Chairman of the Boardboard 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 Boardboard of Cervecera CCU Chile, ECUSA, CCU Argentina, CICSA, Central Cervecera de Colombia S.A.S and CPCh.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 APEC Business Advisory Council (ABAC) and vice chairman 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 theseroles, 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.


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 (61)(63), has served as our Director sincedirector from October 2008, and was appointed as Vice Chairman infrom November 2008.2008, 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 member of the Board of CCU Chile, ECUSA, CCU Argentina S.A., CICSA and CPCh. Hehe was President of Heineken Americas and member of Heineken’s Executive Committee until 2013, having joined from Scottish&Newcastle & Newcastle following its acquisition by Heineken N.V. His early career was with ICI Plc, Unilever PLC and Fosters Brewing Group. He is also holds a membernon-executive position as Chairman of Heineken’s Executive CommitteeAG 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, USAU.S.A. and the Directors’ Forum at London Business School, United Kingdom.

 

Manuel José NogueraJorge Luis Ramos (65)(64), has served as our Director sincedirector from May 1987.2011 until April 13, 2016. He currently lends assistance to the Board of Quiñenco and  is a senior partner at the law firm Noguera, Larraín y Dulanto Ltda. He was the legal advisor for the Luksic Group for over 40 years. He received his law degree from the Pontificia Universidad Católica de Chile.

Phillipe Pasquet (76), has served as our Director since June 2003. He has been working for Heineken since 1976. He is member of the board of directors of VSPT, CPCh, Foods and IRSA. He received degrees from theÉcole Supérieure de Commerce in Dijon, France, theInstitut International de Commerce in Paris, and theCentre Européen d’Education Permanente in Fontainebleau, France.

Francisco Pérez (57), 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, includingCervecería CCU, Chile, CICSA, CCU Argentina, ECUSA, CPCh, IRSA, Invexans S.A., Banco de Chile, Banchile Corredores de Seguros S.A., LQ Inversiones Financieras S.A., Viña San Pedro Tarapacá S.A.,  Sudamericana Agencias Aéreas y Marítimas S.A., Tech Pack S.A. (formely Madeco S.A.), Nexans and Hapag Lloyd.  Also he is chairman of the board of CSAV (Compañía Sud Americana de Vapores S.A.) and ENEX (Empresa Nacional de Energía Enex 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.

Jorge Luis Ramos (62), has served as our Director since May 2011. He is also currently a member of the board of directors of CCU Chile, VSPT, ECUSA, CPCh Compañía Cervecera Kunstmann 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, afterservingafter 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.

82



 

 

Carlos Alberto Molina (58), has served asThe principal business activities of our Director since April 2012. He is also member ofcurrent and former 2016 and 2017 directors are summarized in the Board of CCU Chile, ECUSA, CCU Argentina S.A., CICSA and Central Cervecera de Colombia S.A.S. He has over 25 years of management and strategic consulting experience. He joined Heineken through the acquisition of Femsa Cerveza and is currently responsible for Business Development for Heineken Americas. Mr. Molina was previously in charge of Planning and Strategy in Femsa Cerveza. He was also a board member of Kaiser in Brazil. Prior to that, 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.following table:

 

Directors

Business Activities

Andrónico Luksic

Chairman of CCU

Marc Busain

President of Heineken Americas

Francisco Pérez

Quiñenco’s CEO

Carlos Molina

Director of Companies

Vittorio Corbo

Director of Companies

Pablo Granifo

Chairman of Banco de Chile and VSPT

Rodrigo Hinzpeter

Manager Legal Department Quiñenco

Didier Debrosse

President of Heineken Brazil

José Miguel Barros

Director of Companies

John Nicolson

Former Vice Chairman of CCU

Jorge Luis Ramos

Director of Companies

Vittorio Corbo (72), has served as our Director since April 2012. He is a Senior Research Associate atAt the Centro de Estudios Públicos in Santiago, Chile and also Professor of Economics at the Pontificia Universidad Católica de Chile and at the Universidad de Chile. He is currently member of the Board of Banco Santander-España, Banco Santander Chile and Endesa-Chile. He is also Chairman of the Board of SURA Insurance-Chile and economic consultant to several large corporations. Mr. Corbo holds a commercial engineering degree (with distinction) from Universidad de Chile and a Ph.D. in economics from MIT.

Pablo Granifo (56), has been 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. 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 Empresa Nacional de Energía Enex S.A. He holds a Business Administration degree from the Pontificia Universidad Católica de Chile.

The shareholder’s meeting held on April 10, 2013 renewed the Board members13, 2016 a new board was elected for a term of three years. Theyears.The current members are Messrs. Andrónico Luksic, John Nicolson, Philippe Pasquet,Marc Busain, Francisco Pérez, Jorge Luis Ramos, Carlos Alberto Molina, Manuel José Noguera, Vittorio Corbo, Pablo Granifo, Rodrigo Hinzpeter, Didier Debrosse and Pablo Granifo.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 Since

Patricio Jottar

Chief Executive Officer

July 1998

July 1998

Marisol Bravo

Corporate Affairs Senior Director

June 1994

July 1991

Felipe Arancibia

Chief Human Resources Officer

February 2014

April 2002

Diego Bacigalupo

Corporate Development Manager

January 2014

August 2013

Matías Bebin

General Manager CPCh

February 2014

October 2006

Felipe Benavides

General Counsel

March 2015

March 2015

Francisco Diharasarri

General ManagerCCU Chile

October 2003

June 1985

Felipe Dubernet

Chief Financial Officer

February 2014

May 2011

Pedro Herane

General Manager VSPT

April 2013

May 2010

Ronald Lucassen

Industrial Processes Corporate Manager

May 2014

May 2014

Martín Rodriguez

Head of Project Management Office

March 2015

March 2015

Fernando Sanchis

General Manager CCU Argentina

May 1995

November 1994

Jesús García

General Comptroller

May 2005

May 2005

Ludovic Auvray

Manager International Business

June 2015

June 2015

Alvaro Rio

Manager Comercial CCU

March 2015

January 1991

Alvaro Román

Manager TransportesCCU

March 2015

March 1999

 

Patricio Jottar (52)(54), has served as our Chief Executive Officer since 1998. He is also currently a Directordirector of Aguas CCU, Chile,Comercial CCU, Cervecería CCU, CCU Argentina, CICSA, ECUSA, VSPT, Foods, Aguas CCU, Bebidas CCU-Pepsico SpA, Promarca, Compañía Cervecera Kunstmann S.A. (“CCK”)CCK, Bebidas del Paraguay and Central Cervecera de Colombia,CCC, and is Chairman of the Board of CPCh, ComercialTransportes CCU and Transportes CCUPromarca, 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.

 


Marisol Bravo (55)(57), is our Corporate Affairs and Public Relations ManagerSenior 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.Chile.

 

Felipe Arancibia (40)(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 ResourcesfromResources from the Ross School of Business from the University of Michigan and is also a part-time Professor of New Businesses development  at Universidad de Los Andes in Chile.

83


 

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 (35)(37), is our Corporate Development Manager, holdingand has held that position since January 2014. He has been with CCU since August 2013. He is currently a member of the Boardboard of PLASCO,Plasco, Aguas CCU, Bebidas BolivianasManantial, 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. Prior toBefore joining us, he worked at Quiñenco S.A. 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.

 

MatiasMatías Bebin (32)(34), has been the General Manager of Compañía Pisquera de ChileCPCh since January 1, 2014. He is currently a member of the Boardboard of Compañía Pisquera Bauzá S.A. and Transportes CCU. Prior to this position he was the Planning & Finance Manager for the company.CPCh. He has been with us since 2006, working in different companies of the group likesuch 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 (39)(41) is our Legal Affairs Manager, holdingGeneral 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 Legal Affairs ManagerGeneral Counsel at SMU since 2013. He was also a Senior Associate at Cariola, Diez, Pérez Cotapos and an International Associate for Debevoise & Plimpton LLP.LLP (New York). He received his lawLaw degree from the Pontifica Universidad Católica de Chile and an LLM from Duke University.

 

Francisco Diharasarri (55)(56), is the General Manager of ECUSACCU 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 Chile, General Manager of ECUSA and General Manager of PLASCO.Plasco. He is also currently Chairman of the Boardboard of Aguas CCU., PLASCO,CCU, Comercial CCU, Plasco, Foods, Alimentos Nutrabien S.A., Manantial, S.A.and Bebidas Carozzi CCU and is also a member of the Boardboard of CRECCU, CICSA, Transportes CCU, Bebidas CCU-Pepsico, Bebidas del Paraguay, Bebidas Bolivianas BBO, Promarca, among others. He received a degree in Civil Engineering from the Universidad de Chile.

 

Felipe Dubernet (45)(47), is our Chief Financial Officer, holdingand has held that position since February 2014, and he2014. He has been with us since May 2011.2011 as Procurement officer until January 2014. He is currently a member of the Boardboard of PLASCO,Plasco, CRECCU and Transportes CCU, among others. Prior to his current position; he was Chief Procurement Officer CCU S.A. between May 2011 and January 2014. 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 (45)(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 S.P.T.SPT. S.A., Viña Santa HelenaFinca 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 ProcteratProcter & 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.

Stephen Koljatic (39) is our General Manager of our operations in Uruguay as of September, 2012. Previously, he was our Corporate Development Manager from April 2010 until May 31, 2013. He joined the Company in 2001 as Finance Manager in the Karlovacka Brewery in Croatia. Between 2003 and 2005 he was Corporate Strategic Planning Manager and later in 2006 he became Finance Manager at Transportes CCU. In 2007 he joined Heineken’s Group Commerce in the Netherlands in the position of Global Sales & Distribution Development Manager until 2008. Prior to his current position he was Sales Manager at Comercial CCU, with responsibilities for northern Chile. Mr. Koljatic received his degree in Business Administration from the Pontificia UniversidadCatólica de Chile in 1999 and an MBA from the same university in 2005.

84



 

 

 

Ronald Lucassen (50)(52), has been the Industrial Processes Corporate Manager since May 2014. He is also currently a member of the Board of Transportes CCU. 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 BreweryGeneral Manager Brewing for DB Breweries’ Waitemata brewery in New Zealand, Technical Manager of the Grande Brasserie de Nouvelle-CalédonieGBNC in New Caledonia, and TechnicalProduction Manager of the Hainan Brewery in China for Asia Pacific Breweries. His last position was Production Manager in the Zoeterwoude Brewery in the Netherlands before joining the CEE Region in 2008 asBreweries, Supply Chain Director Czech Republic.Republic, and Supply Chain Director Russia. He holds a Mechanical Engineering degree and a Master’s degree from the Technische Universiteit Delft.

 

Hugo Ovando (45), is the General Manager of CCU Chile and assumed this position as of January 31, 2014. On June 1, 2013 he also assumed the position of Corporate Development Manager of CCU S.A. The latest was the General Manager of CPCh since April 30, 2010. He has been with us since 1997. He is also a director of Comercial CCU S.A., Transportes CCU Ltda., CICSA and Cervecería Austral S.A.. Prior to these positions, he was Corporate Projects Manager and Investor Relations Manager and Development Manager. He received a degree in Business Administration from the Pontificia Universidad Católica de Chile and a MBA from Babson College.

Martín Rodriguez (54)(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 is also currentlywas a Boardboard member of Cervecería CCU, Chile, ECUSA and Foods and several other companies linked to Quiñenco.until March 2015. He received a degree in Business and Administration from the Pontificia Universidad Católica de Chile, and holds a MastersMaster´s degree in Economics from the same University and an MBA from UCLA.

 

Fernando Sanchis (54)(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 Boardboard member of CCU Argentina, CICSA and Bebidas del Paraguay, amongstamong 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.

The principal business activities of our 2014 directors are summarized in the following table:

Directors

Business Activities

Andrónico Luksic

Chairman of CCU

John Nicolson

Vice Chairman of CCU

Manuel José Noguera

Director of Companies

Philippe Pasquet

Director of Companies related to Heineken

Francisco Pérez

Quiñenco’s CEO

Jorge Luis Ramos

Director of Companies

Carlos Molina

Business Development for Heineken Americas

Vittorio Corbo

Director of Companies

Pablo Granifo

Chairman of Banco de Chile and VSPT

On January 13, 2003, the existing shareholders’ agreement was amended in order to allow the Schörghuber Group to sell its interest in IRSA to Heineken Americas B.V., a subsidiary of Heineken International B.V. On April 17, 2003, the Schörghuber Group gave Quiñenco formal notice of the sale of its interest in IRSA to Heineken International B.V. Currently, Heineken Chile Ltda., a Chilean limited corporation controlled by Heineken Americas B.V., owns 50% of IRSA’s shares. As of December 31, 2005, IRSA’s primary shareholders’ agreement gives Quiñenco the right to propose to our board of directors the candidates for Chief Executive Officer, and to Heineken Chile Ltda. our GeneralComptroller and CCU Chile’s General Manager. On the other hand, under the agreement, neither Quiñenco nor Heineken Chile Ltda. can separately, directly or indirectly, buy or sell our shares.

85


 

B.  Compensation

For the year ended December 31, 2014, the aggregate amount of compensation paid by us to all our Directors was CLP2,352 million.

 

The Boardboard of Directors’directors’ gross compensation is determined by the shareholders at the annual shareholders’ meeting. The board’s compensation,As approved at our shareholders’the annual shareholders´ meeting held on April 9, 2014, consists13, 2016, the directors’ monthly remuneration, for their attendance to meetings, independent of a monthly attendance feethe number of UF100meetings held in each period, was fixed at UF 100 per board memberDirector, and UF200UF 200 for the Chairman, along with a profit-sharingplus an amount equalequivalent to 3% of the distributed dividends, for allthe board members, proportionately.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 our liquidthe net profits, the profit-sharing amount willboard of directors’ variable remuneration shall be calculated over a maximum of 50% of our liquidsuch profits. Additionally, boardThose directors that are members who participate inof the businessdirectors committee (See Item 6.C. Board Practices – directors committee) receive UF17a gross remuneration of UF 34 for each meeting they attend. LawN°18,046 introduced a mandatory remuneration forattend, plus the board members who are membersamount that, as the percentage of the directors’ committee, consisting of, at a minimum,dividends, is required to complete one third of the total remuneration a board member receives in such capacity. The shareholders´ meetingdirector is entitled to, pursuant to article 50 bis of April 10, 2013 approved that this remuneration was to be paid with UF34 for each meeting the board member attendsLaw Nº18,046 and the remaining portion, up to the mandated one third, will be paid once the total amountRegulation N° 1,956 of the compensation paid to the board member is known. Furthermore, boardSVS. Directors that are members who sit onand observers of the audit committee receive a monthly compensationgross remuneration of UF25.UF 25. The described compensation package was also approved for 2014 and 20152017 at shareholders’ meetingsmeeting held on April 9, 2014 and on April 15, 2015, respectively.12, 2017. 


 

In 2014,2016, the total compensation paid by us and our subsidiaries to each of our directors for services rendered was as follows:

 

 

Attendance

Dividend

 

Director

Meetings fee

Participation(1)

Total

 

(in thousands of CLP)

Andrónico Luksic

19,070

205,060

224,130

Guillermo Luksic

-

51,265

51,265

John Nicolson

26,348

205,060

231,408

Jorge Luis Ramos

33,521

205,060

238,581

Manuel José Noguera

28,693

205,060

233,753

Philippe Pasquet

113,976

205,060

319,037

Francisco Pérez

113,976

205,060

319,037

Carlos Molina

28,693

205,060

233,753

Vittorio Corbo

113,976

205,060

319,037

Pablo Granifo

28,693

153,795

182,488

(1) Includes the remuneration for members of the Audit, Directors and Business Committees.

 

 

 

 

 

Attendance

Dividend

 

Director

Meetings fee

Participation(1)

Total

 

(in thousands of CLP)

Andrónico Luksic Craig

68,564

201,347

269,911

Marc Busain

27,769

-

27,769

John Nicolson

40,593

201,347

241,940

Jorge Luis Ramos

59,011

260,930

319,941

Manuel José Noguera Eyzaguirre

-

100,673

100,673

Philippe Pasquet

-

147,244

147,244

Francisco Pérez Mackenna

203,582

283,644

487,226

Carlos Molina Solís

192,894

214,359

407,253

Vittorio Corbo

48,718

268,463

317,181

Pablo Granifo Lavin

139,457

253,397

392,854

Jose Miguel Barros van Hövell tot Westerflier

107,063

-

107,063

Rodrigo Hinzpeter Kirberg

139,483

100,673

240,156

Didier Debrosse

55,874

100,673

156,547

Total

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, 2014,2016, the aggregate amount of compensation paid by us to all our Directors was CLP3,216 million.

For the year ended December 31, 2016, the aggregate amount of compensation paid to our senior managers to other managers and toregistered at the principal executives,SVS during 2016, was CLP10,941 7,566million. 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

 

86


We are managed by our board of directors which, in accordance with our bylaws (Estatutos)(Estatutos), is formed by nine directors who are elected at theannualshareholders’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.On April 10, 2013,

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 annualshareholders’ meeting, the entire 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 renewedelected for a term of three years andyears. The current members of the board members elected wereof directors are Messrs. Andrónico Luksic, John Nicolson,Marc Busain, Francisco Pérez, Carlos Molina, Vittorio Corbo, ManuelPablo Granifo, Rodrigo Hinzpeter, Didier Debrosse and José Noguera, Carlos Molina, Philippe Pasquet, Francisco Pérez, Jorge Luis Ramos and Pablo Granifo.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.

 


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.Thedirectors. The board of directors does not have an executive committee. Nevertheless, we have a business committee consisting of certain board members which meets only on those occasions where it is necessary to review issues of special relevance which are later to be considered by the full board.

 

Directors Committee

 

The Directors’ Committeedirectors 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’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 millionUnidades de Fomento (as of March 31, 20152017 approximately CLP36,935CLP 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“comité de directoresdirectores” or “directors’“directors committee” and appoint at least one independent director. The directors’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’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 shallbeshall be delivered to the board, and shall be read at the board meeting in which the transaction is presented for approval or rejection;

    87


·

  • to examine the managers’, principal executive officers’ and employeesemployees´ 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;Company; and

    ·

  • all 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 andRelatedand Related Party Transactions.”Transactions”.

     

    Pursuant to the Chilean Corporations Act, no person shall be considered independent who, at any time during the previous eighteen monthsmonths:

     

    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;
    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; or

    5.

    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; or

    5.  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’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.

     

    88


    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 shareholdersboard meeting held on April 10, 2013,13, 2016, following the election of a new board of directors was appointed for a three year term.at the shareholders´ meeting held the same day, Mr. Vittorio Corbo, was elected as independent director in accordance with Article 50 bis of the Chilean Corporations Act.

    In the board meeting held on April 10, 2013, the independent director Mr. Vittorio Corbo, in accordance with the above-referenced law,Act, appointed Messrs. Philippe PasquetCarlos Molina and Francisco Pérez as members of our directors’directors committee which is composed ofin accordance with the three directors above mentioned.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’directors committee members shall perform, which shall not be less than a third of the remuneration of a regular director. The gross remuneration of our directors committee members, as approved at the shareholders’ meeting of the companyCompany held on April 10, 2013,12, 2017, is 34Unidades de Fomento (as of March 31, 2015,2017, approximately CLP 837.2900.1 thousand) per attendance at a directors committee meeting plus the amount required to complete the remaining third of the remuneration of a regular director. The same remuneration package was approved for 20142015 and 2015,2016, at the shareholders’ meetings of the companyCompany held on  April 9, 201415, 2015 and April 15, 2015,13, 2016, respectively.

     


    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’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 companyCompany held on April 15, 2015,12, 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 10, 2013,13, 2016, following the election of a new board at the shareholders´ meeting held the same day, the board of directors appointed the following directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee: Vittoriocommittee. Messrs. Corbo and Philippe Pasquet. Mr. Pasquet and Mr. CorboMolina meet the independence criteria under the Exchange Act and under the NYSE Rules. The board of directors also resolved that directors Mr. Jorge Luis RamosMessrs. José Miguel Barros and Mr. 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.

     

    89


    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.

     


    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:

     

    2012

    2013

    2014

    2014

    2015

    2016

     

     

    Chile

    1,965

    2,083

    2,514

    4,439

    4,547

    4,567 

    Rio de la Plata

    1,362

    1,442

    1,857

    International Business

    1,857

    1,938

    1,990 

    Wine

    1,120

    1,180

    1,206

    1,206

    1.250

    1,264 

    Others(1)

    2,033

    2,184

    2,265

    340

    365

    365 

    Total

    6,480

    6,889

    7,842

    7,842

    8,100

    8,186 

     

    (1) Includes our corporate office, PLASCO, TCCU, CRECCU and Comercial CCU.

    (1) Includes corporate head office functions only.

    (1) Includes corporate head office functions only.

     

    All employees whowhose 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 2,8809,258 million, CLP 3,2446,078 million and CLP 9,25810,342 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 2014,2016, we laid off 607735 employees.

     

    Chile Operating segment, Wine Operating segment and Other

     

    AsIn the Chile and Wine Operating segments and Other, as of December 31 of the last three years, we had a total of 5,118, 5,4475,985, 6,162 and 5,9856,196 permanent employees, in Chile, respectively. As of December 2014, 3,3812016, 3,466 were represented by 4445 labor unions. The average tenure of our permanent employees was approximately eight years.

     

    Unionized employees represent approximately 57%56% of our total permanent workforce. Our management believes it generally has a good relationship with the labor unions representing our employees.

     

    During 2014, 2,2382016, 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 byAdministradoras 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, 2014,2016, we had 342424 temporary employees, who were hired for specific time periods to satisfy short-term needs.

     

    90



     

     

    Rio de la PlataInternational 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 approximately66% 68% of our total permanent workforce, moreover in Uruguay this number represent75% 59% of our total permanent workforce.

     

    In addition to our permanent work force, as of December 31, 2014,2016, we had534  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,”Shareholders”, as of March 31, 2015,2017, 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.

     


    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, 2014, for each shareholder known to us to2017, presenting the twelve largest shareholders and all of our directors and senior management as a group:

     

     

     

    Shareholder

    Number of shares owned

    % Ownership

     

     

     

    INVERSIONES 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 4%5% of the outstanding shares of our common stock are IRSA with 60.00% and for allCommonwealth Bank of our directors and executive officersAustralia with 7.62% (according to the Schedule 13G filed on February 14, 2017, stating a holding of 28,150,464 shares, as a group:of December 31, 2016).

    Shareholder

    Number of shares owned

    % Ownership

     

     

     

    Inversiones y Rentas S.A.

    196,421,725

    53.158%

    Inversiones IRSA Ltda. (1)

    25,279,991

    6.842%

    Our directors and executive officers as a group (2)

    17,238

    0.005%

    (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 the Luksic family, as discussed below. Andrónico Luksic, our director, is a member of the Luksic family.

     

    As of March 31, 2015,2017, JPMorgan Chase Bank N.A. (“JPMorgan”), the Depositary for our ADR facility, was the record owner of 53,981,19156,360,299 shares of our common stock (14.6%(15.25% of the outstanding common stock) deposited in our ADR facility.

    91


     

    As of March 31, 2015,2017, we had4,352 4,274shareholders of record. To the best of our knowledge18knowledge 13 shareholders are not Chilean, excluding ADR holders, and of those 1813 non-Chilean shareholders, twoto the best of our knowledge 2 are U.S. corporations with a total of 46,760 (0.01%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 sevenfour custodians as part of the 1813 non-Chilean shareholders although we have no citizenship information relating thereto. All shareholders have equal voting rights.

     

    IRSA is a privately held Chilean corporation formed for the sole purpose of owning a controlling interest in us. IRSA is 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. Inversiones IRSA Ltda.

    To our knowledge, none of our common stock is a wholly-owned subsidiary of IRSA.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”.

     

     


    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 toChapterto Chapter XVI oftheof the Chilean Corporations ActreferencedAct 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 LawLaw;

      ·

    • 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 latterhaslatter 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;

      92


     

    ·

    • 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 Superintendency of Securities and Insurance (Superintendencia de Valores y Seguros, or “SVS”)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

    ·

    • 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 ofChapterof Chapter XVI oftheof 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 itisit is approved in a shareholders' extraordinary meeting by two-thirds of the voting shares of the company.

    93


     

    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'directors committee may have expressly requested to be evaluated. The directors'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'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.”Fact”.


     

    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.”amount”. For this purpose, any transaction that is both greater than 2,000 Unidades de Fomento (as of March, 31, 2015,2017, approximately CLP49.2CLP 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, 2015,2017, approximately CLP 492.5529.4 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,”Fact”, if applicable.

     

    94


    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’sCompany’s offices in Avda.Avenida Vitacura 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 1615 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 Ltda. and Comercial CCU S.A. 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.”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–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.”Argentina”.


     

    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.

     

    Alsosubject to the above license agreements, on April 24, 2006, through our subsidiary CCU Chile, we signed a brewing agreement withOn November 29, 2012, CICSA and Heineken Brouwerijen B.V., signed the Trademark License Agreement which provides us with the rightexclusive rights to produce, sell and packagedistribute Heineken lager at our local brewery and for its sale and distributionbeer in Peru, Colombia and Ecuador by Heineken’s appointed Distributor.Paraguay. This agreement commenced on April 24, 2006has an initial term of 10 years, and will be automatically renewed for one year renewable annually.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 (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 aninitialan 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.

    95


     

    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 July2015, we revised and amended the 2014 we amended and restated the 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.

     


    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 by the board of directorsand 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, 2014,2016, are detailed below:

     

    Company

    Relationship

    Transaction

    Amount (in millions of CLP)

    Heineken Brouwerijen B.V.

    Related to the controlling shareholder

    Products sale / license /sale/ license/ technical assistance /assistance/ billed services

    6,939

    9,689

    Amstel Brouwerijen BV

    Related to the controlling shareholdercontroller

    License and technical asssintanceassistance

    162

    166

    Inversiones y Rentas S.A.

    NestleShareholder

    Dividends paid/Office rental

    32,121

    Inversiones Irsa Ltda.

    Shareholder

    Billing services

    4,133

    Inversiones PFI Chile Ltda.

    Shareholders of subsidiary

    Purchase of products/Billed services

    13,318

    Nestlé Waters S.A.

    Shareholder of subsidiary

    Royalty paid

    204

    433

    NestleNestlé Chile S.A.

    Shareholder of subsidiary

    Dividends paid

    2,582

    3,531

    Cervecería Kunstmann Ltda.

    Shareholder of subsidiary

    Product sales / Billedsales/billed services

    341

    523

    CerveceraCervecería Valdivia S.A.

    Shareholder of subsidiary

    Dividends paid

    511

    634

    Comercial Patagona Ltda.

    Subsidiary joint venture

    Marketing service / services/products salessale

    1,636

    4,260

    Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

    Shareholder of subsidiary

    Loan / Supply contract / Purchase grape / Loan/supply contract/ purchase grape/Dividends paid

    5,745

    4,960

    Compañía Chilena de Fósforosforos S.A.

    Shareholder of subsidiary

    Dividends paid

    1,638

    1,274

    Inversiones y Rentas S.A.

    Controlling shareholder

    Dividends paid /Office rental

    32,713

    Cervecería Austral S.A.

    Joint venture

    Sales of products / royalty paid / royalty collected / Products/Purchase of productsproducts/Billed services

    4,493

    5,735

    Banco de Chile

    Related to the controlling shareholder

    Transport of securities / Sales of products / Derivatives / products/Derivatives/Investments / Interests / Leasing paid

    184,825

    158,293

    Foods Compañía de Alimentos CCU.S.A.CCU S.A.

    Joint venture

    Interests / Remittance send / Remittance received / Billed services / Purchase of products / Consignation sales / Sales of productsServices/ product sales/ consignment sales/ interests/ remittance paid and recieved

    93,616

    7,425

    Alusa S.A.

    Related to the controlling shareholderSubsidiary related

    Purchase of products

    1,562

    3,223

    Canal 13 S.P.A.

    Related to the controlling shareholderParent company related

    AdversitingAdvertising

    3,318

    3,428

    Banchile Corredores de Bolsa S.A.

    Related to the controlling shareholderParent company related

    InvestmentsFinancial investments

    315,790

    231,900

    Bebidas Bolivianas BBO S.A.

    Associated

    Sales of product and Contribution of capital

    2,570

    Central Cervecera de Colombia S.A.S.

    Joint operation

    Contribution of capital

    22,944

    Viña Tabalí S.A.

    Related to the controlling shareholdercontroller

    Billed services / Sales of fixed assets

    80

    52

    Fondo de Inversión Privado MallorcaOperaciones y Servicios Enex Ltda.

    Related subsidiaryto the controller

    Dividends paidSales of products

    17

    224

    Quiñenco S.A.

    Shareholder to Controller

    Sales of products

    14

    Antofagasta Minerals S.A.

    Related to the controller

    Sales of products

    36

    Inversiones Enex S.A

    Sales of products

    Sales of products

    1,162

    Empresas Carozzi S.A.

    Shareholder of joint operation

    Sales of products

    312

     

     

    See Note 1615 to our Consolidated Financial Statements for detailed information.


     

    C.  Interests of Experts and Counsel

     

    Not applicable.

    96


    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 than80 countries in 2014.2016. VSPT is the second-largest wine exporter in Chile. See “Item 4: Information on the CompanyBusiness Overview– Operating Segments Information– Our Wine Operating Segment.”Segment”.

     

    The following table presents our total wine exports by volume in millions of Chilean pesosand sales, as of December of the last three years as percentage of totalconsolidated volume and sales for the last three years:

     

    2012

    2013

    2014

     

     

     

    2014

    2015

    2016

    Exports (thousands of liters)

    70,577

    69,649

    66,936

     

     

    Exports (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

    2.86%

    3.18%

    2.92%

    8.33%

    8.25%

    8.41%

     

     

     

     

    Exports (CLP million)

    91,536

    91,579

    102,279

    % of total consolidated sales

    8.51%

    7.65%

    7.88%

    (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 regularannual 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, unless otherwise decided by unanimous vote of the issued shares of our common stock, 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.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 9, 2014,13, 2016, its dividend policy for future periods, authorizing the distribution of cash dividends in an amount at least equal to 50% of our IncomeNet 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 9, 2014,13, 2016, a dividend of CLP 103.4885797.47388 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 6366 per share of common stock (CLP 132 per ADS) distributed in January 10, 2014.8, 2016. Together, these dividend payments amounted to CLP 166.48857 million,60,404million, representing 50.0% of the “Income“Net income of the Year Attributable to Equity Holders of the Parent Company” for 2013.The board of directors, in its meeting held on December 2, 2014, approved the distribution, with a charge to 2014’s profits, of an interim dividend of CLP 63 per share of common stock (CLP 126 per ADR using the new ratio as of December 20, 2012 of 1 ADR to 2 common shares), totaling CLP23,278,680,936, which was paid on January 9, 2015. Additionally, the board of directors, in its meeting held on March 3, 2015, resolved to propose to the next regular shareholders meeting, thedistribution, with a charge to 2014’s profits, of a final dividend of CLP 98.78138 per share of common stock (CLP 197.56276 per ADR). The proposal, representing a total payment of CLP 36,500,003,610, was approved at our last annual shareholders’ meeting held on April 15, 2015 and the final dividend was paid beginning April 23, 2015 to the shareholders of record as of April 17, 2015.

    97



     

     

     

    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 ended
    December 31,

    Interim

    CLP Per share(1)

    Interim

    US$ Per ADS(2)

    Final(3)

    Total

    Final(3)

    Total

     

     

     

     

     

     

     

    2010

    58

    115.78

    173.78

    0.23

    0.50

    0.73

    2011

    61

    131.70

    192.70

    0.24

    0.54

    0.78

    2012

    63

    116.64

    179.64

    0.27

    0.49

    0.76

    2013

    63

    103.49

    166.49

    0.24

    0.37

    0.61

    2014

    63

    98.78

    161.78

    0.21

    0.32

    0.52

    (1) Interim and final dividend amounts are expressed in historical pesos.

    (2) U.S. dollars per ADR dividend information serves reference purposes only as we pay all dividends in Chilean pesos. On December 20, 2012, there was an ADR ratio change from 1 ADR 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.

            

    Year ended
    December 31,

    CLP Per share(1)

     

    US$ Per ADS(2)

    Interim

    Final(3)

    Total

     

    Interim

    Final(3)

    Total

     

     

     

     

     

     

     

     

    2012

    63

    116.64

    179.64

     

    0.27

    0.49

    0.76

    2013

    63

    103.49

    166.49

     

    0.24

    0.37

    0.61

    2014

    63

    98.78

    161.78

     

    0.21

    0.32

    0.52

    2015

    66

    97.47

    163.47

     

    0.18

    0.29

    0.47

    2016

    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 Stockcommon stock by holders, including holders of ADRs who are not Chilean residents, are subject to Chilean Withholdingwithholding taxes. See “Item 10: Additional Information – Taxation.”Taxation”.

     

    B.  Significant Changes

     

    Nothing to report.

     

    98



     

     

    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 Stockcommon stock on the Santiago Stock ExchangeExchanges in Chile as well as the high and low sales prices of the ADSs as reported by the NYSE:

     

     

     

    Santiago Stock Exchange

    NYSE(1)

     

    Santiago Stock Exchange

    NYSE(1)

     

    (per share of common stock)

    (per ADS)

     

    (per share of common stock)

    (per ADS)

     

     

     

     

     

    High

    Low

    High

    Low

     

    High

    Low

    High

    Low

     

    (CLP)

    (US$)

     

    (CLP)

    (CLP)

    (US$)

    Years

    Years

     

    Years

     

     

     

    2010

    5,920

    3,823

    24.57

    14.22

    2012

    7,788

    5,930

    32.73

    24.07

    2011

    6,800

    4,720

    25.48

    19.20

    2013

    8,094

    5,900

    34.91

    22.89

    2012

    7,900

    6,015

    32.77

    24.10

    2014

    6,900

    5,600

    24.22

    17.89

    2013

    8,210

    5,900

    34.95

    22.89

    2015

    8,784

    5,479

    25.27

    17.73

    2014

    6,900

    5,600

    24.22

    17.89

    2016

    8,120

    6,500

    24.17

    18.78

    2015 (through Mar. 31)

    6,500

    5,479

    20.90

    17.73

    2017 (through Mar. 31)

    8,449

    6,820

    25.46

    20.31

     

     

     

     

     

     

    2012

     

    2014

    2014

     

     

     

     

    1st quarter

    7,699

    6,015

    31.66

    24.10

    1st quarter

    6,400

    5,670

    24.22

    20.46

    2nd quarter

    7,900

    6,120

    32.77

    24.11

    2nd quarter

    6,900

    5,804

    23.94

    21.02

    3rd quarter

    6,814

    6,041

    28.75

    24.83

    3rd quarter

    6,750

    6,200

    23.79

    21.02

    4th quarter

    7,650

    6,555

    32.00

    27.09

    4th quarter

    6,594

    5,600

    22.13

    17.89

    2013

     

    2015

    2015

     

     

     

     

    1st quarter

    7,997

    7,375

    34.07

    31.06

    1st quarter

    6,500

    5,479

    20.90

    17.73

    2nd quarter

    8,210

    6,400

    34.95

    24.95

    2nd quarter

    7,146

    6,409

    23.91

    20.73

    3rd quarter

    7,850

    6,500

    30.25

    26.00

    3rd quarter

    7,935

    6,550

    23.80

    20.23

    4th quarter

    6,985

    5,900

    27.95

    22.89

    4th quarter

    8,784

    7,300

    25.27

    20.58

    2014

     

     

     

    2016

    2016

     

     

     

    1st quarter

    6,400

    5,670

    24.22

    20.46

    1st quarter

    7,875

    6,502

    22.87

    18.78

    2nd quarter

    6,900

    5,804

    23.94

    21.02

    2nd quarter

    8,120

    7,128

    24.12

    19.85

    3rd quarter

    6,750

    6,200

    23.79

    21.02

    3rd quarter

    7,810

    6,530

    24.17

    19.31

    4th quarter

    6,594

    5,600

    22.13

    17.89

    4th quarter

    7,250

    6,500

    21.85

    19.49

     

     

     

     

     

     

     

     

    Last six months

    Last six months

     

     

    Last six months

     

     

     

     

    October 2014

    6,594

    5,988

    22.13

    20.35

    October 2016

    7,250

    6,577

    21.85

    19.58

    November 2014

    6,380

    6,100

    21.62

    20.53

    November 2016

    7,140

    6,500

    21.58

    19.49

    December 2014

    6,350

    5,600

    20.78

    17.89

    December 2016

    7,119

    6,585

    21.39

    19.79

    January 2015

    6,100

    5,479

    19.90

    17.73

    January 2017

    7,367

    6,820

    22.66

    20.31

    February 2015

    6,100

    5,614

    19.37

    17.95

    February 2017

    7,740

    7,285

    23.94

    22.40

    March 2015

    6,500

    5,700

    20.90

    17.86

    March 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.

    (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.

    (1)On December 20, 2012, there was an ADR ratio change from 1 ADR to 5 common shares, to a new ratio of 1 ADR 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.

    99



     

     

    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.”“CCU”. The Santiago Stock Exchange accounted for approximately 83.9%87.7%, 90.1%88.3% and 87.7%87.4% of the trading volume of our common stock in Chile in the last three years, respectively. The remaining 16.1%12.3%, 9.9%11.7% and 12.3%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)

       

    Year

    Quarter

    Traded Volume(1)
    (thousands of ADS)

     

     

     

    2014

    1st quarter

    12,052

     

    2nd quarter

    10,094

     

    3rd quarter

    9,642

     

    4th quarter

    10,771

     

    Total

    42,559

       

    2015

    1st quarter

    8,464

     

    2nd quarter

    8,133

     

    3rd quarter

    8,730

     

    4th quarter

    9,338

     

    Total

    34,666

       

    2016

    1st quarter

    10,853

     

    2nd quarter

    10,121

     

    3rd quarter

    16,093

     

    4th quarter

    15,288

     

    Total

    52,355

     

    2012

    1st quarter

    6,023

    2nd quarter

    8,901

    3rd quarter

    6,459

    4th quarter

    6,119

    Total

    27,502

    2013

    1st quarter

    6,030

    2nd quarter

    9,663

    3rd quarter

    12,430

    4th quarter

    11,706

    Total

    39,829

    2014

    1st quarter

    12,052

    2nd quarter

    10,094

    3rd quarter

    9,642

    4th quarter

    10,771

    Total

    42,559

    (1)On December 20, 2012, there was an ADR ratio change from 1 ADR to 5 common shares, to a new ratio of 1 ADR to 2 common shares. Volumes shown above take into account this change.

     

    D.  Selling Shareholders

     

    Not applicable.

     

    100


    E.  Dilution

     

    Not applicable.

     

    F.  Expenses of the Issue

     

    Not applicable.

     


    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,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 inures tois in the benefitinterest of the company, hasthe 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.”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.

     

    101


    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.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.

     


    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.

     

    102


    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.

     


    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.
    ·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.

     

    103


    Action necessary to change the rights of holders of stock.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.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;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

    ·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

    ·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.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

    104


    ·guarantees of third parties' obligations, except when these third parties are subsidiary companies (in which case approval of the board of directors will suffice).

    ·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; and

    ·when required by the SVS, notwithstanding its right to call such meeting directly.

    ·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.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 publicopen 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 EmployeesDirectors and Senior Management.”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 restructuringcorporaterestructuring involving us (or any of our subsidiaries). See “Item 10.B. Memorandum and Articles of Association – rights, preferences and restrictions regarding shares”.


     

    Ownership threshold.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.”Rates”. Foreign investments can be registered with the ForeignInvestment Committee under Decree Law No. 600, guaranteeing the investor access to the Formal Exchange Market, or with the Central Bank of Chile under Chapter XIV of the Central Bank Foreign Exchange Regulations, (this regulationwhich regulates foreign exchange transactions, including access to the Formal Exchange Market).Market. Pursuant to Law N°20,780, dated September 29, 2014, abrogated Decreeon June 25, 2015 Law No. 600, effective January 1, 2016, provided that a new institutional framework for foreign investments is in effect on that date. Otherwise,N° 20,848 was enacted, replacing Decree Law N° 600 shall, by operation of law, remain in force until the date1974 and establishing a new framework is passedstatute 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 full force and effect.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%.

    105


     

    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 19th19th Regulations”), virtually eliminating all the restrictions and limitations that had been in force up to that date. The April 19th19th 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 19th19th 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 19th19th Regulations reduced the time needed to effect foreign exchange transactions by foreign investors in Chile.

    According to the April 19th19th 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 19th19th Regulations (the “New Rules”). The New Rules preserve the general principle established in the April 19th19th Regulations of freedom in foreign exchange transactions, simplified proceduressimplifiedprocedures to reduce the time needed to materialize foreign exchange transactions by foreign investors in Chile, and introduced several new provisions.


     

    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).

     

    106


    Notwithstanding the April 19th19th 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;

    -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)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,intoADSs, 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.month, using Appendix 3 of the Manual as detailed on its Chapter XIV number 6.


    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.made, according to number 2.2 of Chapter XIV of the Manual, using its Appendix N° 4.

    107


     

    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.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.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.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 noa general income tax treaty in force betweensigned by Chile and the United States.

    108States, but it is not in force (Congress approval is required).



     

     

    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 over 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 isdoes not eligible for thehave 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. Enacted onSeptember 29, 2014, Act No. 20,780 providesThose modifications also provide for the "Partially Integrated System"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.taxes, according to Rulings N°1,705 of May 15, 2006 and N°2,144 of October 3, 2013.

    GainUntil 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,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 approvedanalyzed 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 ADSsofADSs 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.


    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.

    109


    The distribution and 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, 2001.2001, 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:

    1. 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;
    2. 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;
    3. 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;
    4. a pension fund that is exclusively formed by individuals that receive their pension on account of capital accumulated in the fund;
    5. 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; or
    6. any 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.

    In order to be entitled to the exemption, foreign institutional investors, during the time in which they operate in Chile must:

    1. be organized abroad and not be domiciled in Chile;
    2. 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;
    3. 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; and
    4. register 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.

    110In 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:

    1. 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; or
    2. within 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 .Tax. We will also inform when the withholding was excessive in order to allow the filing for the reimbursement of taxes.

     


    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 accounttheaccount 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.

    111


    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 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.

    ·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 American Depositary ReceiptsADRs 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 alldistributions 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.


    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 thedepositarythe 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.

    112


    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 maximumreduced rate of 20% if the dividends represent “qualified dividend income.”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 20142016 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 20152017 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 imposed or withheld on such dividends, ifreduced 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.


    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 areurgedare urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

    113


    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.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 minimusminimis amounts 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 treatedistreated 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.


    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.

    114


    “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.

    115



     

     

    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 SensitivityRisk

     

    As of December 31, 2014,2016, we had a total of CLP13,691 10,143 million in debt indexed to LIBORvariable interest rates (CLP 11,84020,207 million as of December 31, 2013)2015). Consequently, as of December 31, 2014,2016, our financing structure consisted (without taking into account the cross currency interest rate swaps and cross interest rate swaps effects) of 7% (5% in 2013)6% (12% as of December 31, 2015) of debt with variable interest rates, and 93% (95% in 2013)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-currencycross currency interest rate swaps and cross interest rate swaps.

     

    As of December 31, 2014,2016, after considering the effect of cross currency interest ratesrate swaps and currencycross interest rate swaps, 100% (100%97% (97% in 2013)2015) of our long-term debt had fixed interest rates.

     

    The terms and conditions of the Company’s obligations as of December 31, 2014,2016, including exchange rates, interest rates, maturities and effective interest rates are detailed in Note 2726 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 malt,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 malt.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 2014,2016, we purchased 37,31561,753 tons of malt (32,203(53,890 tons in 2013)2015) and 52,72013,914 tons of barley (54,162(46,620 tons in 2013)2015). CCU Argentina acquires malt only from local producers. Such raw materials represent approximately 7% (9% in 2015 and 12% (12% in 2013)2014) of the direct cost for the Chile Operating segment. See“Item

    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.

    116



     

     

     

    Concentrates, sugar and plastic resin.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. We generally purchase our sugar requirements from Empresas Iansa S.A., the sole producer of sugar in Chile, as well as from imports. Plastic resin is also imported. 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.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 37%40% of the grapes used for export wines from its own vineyards, thereby reducing grape price volatility and ensuring quality consistency. Approximately 92%10% of the grape supply for the production of the wine sold in the domestic market is purchased from third parties.own vineyards. During 2014,2016, VSPT purchased 8%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. During the last three years VSPT grapes and wine costs in Chile were in the amount of CLP23,682 million, CLP31,008 million and CLP30,586 million, respectively. See “Item 4: Information on the Company – Business Overview – Raw Materials and other Supplies.”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.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, Argentineargentine peso, Uruguayanuruguayan peso, paraguayan guaraní, bolivians and Paraguayan Guaraní.colombian peso.

     

    As of December 31, 2014,2016, we maintained in Chile foreign currency liabilities amounting to CLP46,780CLP 49,694 million (CLP46,598(CLP 49,786 million in 2013)as of December 31, 2015), mostly denominated in U.S. dollars. Obligations with financial institutions and bonds in foreign currency (CLP19,838(CLP 6,352 million in 2014as of December 31, 2016 and CLP21,618CLP 16,626 million in 2013)as of December 31, 2015) represent 11% (9% in 2013)4% (10% as of December 31, 2015) of the total of such liabilities. The remaining 89% (91% in 2013)96% (90% as of December 31, 2015) is denominated mainly in inflation-indexed Chilean pesos. In addition, the Company maintains foreign currency assets for CLP57,086CLP 66,435 million (CLP47,369(CLP 72,888 million in 2013)as of December 31, 2015) that mainly correspond to exports in accounts receivable.

     

    Regarding the Argentineforeign subsidiaries operations, the liability net exposure assets in U.S. dollars and other currencies amounted to CLP7,044CLP 3,806 million as of December 31, 2014 (CLP9,412 million in 2013).

    Regarding the Uruguayan subsidiaries operations, the liability net exposure in U.S. dollars and other currencies amounted to CLP2,0162016 (CLP 1,368 million as of December 31, 2014 (CLP467 million in 2013)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, 2014, our assets (liabilities)2016, net exposure in foreign currencies of our Chilean operations, after the use of derivative instruments, amounted to CLP2,588an asset of CLP 3,809 million (CLP1,069(liability of CLP 757 million in 2013)as of December 31, 2015).

     

    In 2014,2016, of our total sales, 8% (8% in 2013)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% (57% in 2013)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.

     

    117


    On the other hand, we are exposed to exchange rate movements related to the conversion from Argentineargentine pesos, uruguayan pesos, paraguayan guaranis, bolivians and Uruguayancolombian pesos to Chileanchilean pesos in the income, assets and liabilities of our subsidiaries in Argentina.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.


    As of December 31, 2014,2016, the net investment in our Argentine, Uruguayanforeign subsidiaries, associated and Paraguayan subsidiariesjoint ventures amounted to CLP90,605CLP 135,002 million, (CLP84,363CLP 8,249 million in 2013), CLP14,540 million (CLP8,815 million in 2013) and CLP 22,60935,449 million, (CLP11,255respectively (CLP 133,555 million, in 2013), respectively.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, 2014,2016, our interest-bearing debt amounted to CLP240,660CLP 160,490 million (see note 2726 to the consolidated financial statements), 94% of which was fixed debt and 6% of which was variable-rate debt.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, 2014

     

    Interest - Bearing Debts as of December 31, 2016

    Interest - Bearing Debts as of December 31, 2016

     

    (millions of Ch$, except percentages)

    (millions of Ch$, except percentages)

     

    (millions of Ch$, except percentages)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Contractual Flows Maturities

     

     

     

     

     

    2015

     

    2016

     

    2017

     

    2018

     

    2019

     

    Thereafter

     

    Total

    Fair Value

     

     

     

    2017

    2018

    2019

    2020

    2021

    Thereafter

    Total

    Fair Value

    Interest bearing liabilities

    Interest bearing liabilities

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Interest bearing liabilities

     

     

     

     

    Fixed rate

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Ch$ (UF)(1)

    Bonds and Banks

     

    7,435

    7,176

    19,435

    11,139

    10,833

    85,517

    141,536

    122,528

    Average interest rate

     

    4.6%

    3.6%

    4.5%

    5.2%

     

     

      

     

    Ch$

    Bonds and Banks

     

    13,068

     

    8,547

     

    24,544

     

    11,889

     

    11,889

     

    100,457

     

    170,395

    149,834

     

    28,794

    2,660

    313

    -

    34,740

    34,318

    Average interest rate

     

    4.9%

     

    5.0%

     

    6.2%

     

    5.1%

     

    5.1%

     

    5.0%

     

     

     

    Average interest rate

     

    5.9%

    5.2%

    5.1%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

      

     

    US$

     

     

     

    1,076

     

    241

     

    241

     

    0

     

    0

     

    0

     

    1,557

    1,557

     

    1,086

    -

    1,086

    1,083

    Average interest rate

     

    4.1%

     

    2.6%

     

    2.6%

     

     

     

     

     

     

     

    3.7%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    EUR

     

     

     

    4,735

     

    0

     

    0

     

    0

     

    0

     

    0

     

    4,735

    4,735

    Average interest rate

     

    0.6%

     

     

     

     

     

     

     

     

     

     

     

    0.6%

     

    Average interest rate

     

    2.9%

       

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

        

     

    Argentine pesos

     

     

     

    32,995

     

    6,453

     

    3,958

     

    1,963

     

    1,587

     

    0

     

    46,956

    46,956

     

    9,686

    4,378

    2,683

    -

    16,747

    13,163

    Average interest rate

     

    23.9%

     

    21.2%

     

    19.3%

     

    15.0%

     

    15.0%

     

     

     

    22.4%

     

    Average interest rate

     

    27.4%

    30.5%

      

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

        

     

    Uruguayan pesos

    Uruguayan pesos

     

     

    1,741

     

    0

     

    0

     

    0

     

    0

     

    0

     

    1,741

    1,741

    Uruguayan pesos

     

    1,045

    348

    -

    1,742

    Average interest rate

     

    16.4%

     

     

     

     

     

     

     

     

     

     

     

    0

     

    Average interest rate

     

    6.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

      

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

      

     

    Variable rate

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

      

     

    US$

     

     

     

    5,364

     

    4,956

     

    4,956

     

     

     

     

     

     

     

    15,276

    15,276

     

    108

    5,332

    -

    -

    5,440

    5,336

    Average interest rate

     

    Libor +

     

    1.23%

     

     

     

     

     

     

     

     

     

     

     

    Average interest rate

    Libor +

     

    1.8%

       

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

        

     

    Argentine pesos

     

    2,154

    1,586

    1,005

    -

    4,744

    3,423

    Average interest rate

    Badlar +

    18.0%

    15.67%

    15.7%

     

     

     

     

    Non interest bearing liabilities

    Non interest bearing liabilities

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Non interest bearing liabilities

     

     

    Derivate Contract

    Derivate Contract

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Derivate Contract

     

     

    Cross Currency Swap:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Receive US$ at Libor + 1,36

     

    5,054

     

    8,989

     

     

     

     

     

     

     

     

     

    14,043

    13,639

    Pay US$ at 3,6%

     

     

    5,122

     

    6,296

     

     

     

     

     

     

     

     

     

    11,418

    11,175

    Pay EUR at 2,75%

     

     

    93

     

    2,385

     

     

     

     

     

     

     

     

     

    2,479

    2,478

    Cross Interest Rate Swap:

    Cross Interest Rate Swap:

     

     

    Receive

     

    -

    Pay

     

    -

    Forwards

     

     

     

    684

     

     

     

     

     

     

     

     

     

     

     

    684

    684

     

    11,119

    -

    11,119

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (1) UF as of Dec 31, 2016

    (1) UF as of Dec 31, 2016

     

     


    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, barley, 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 asofas of December 31, 2014.2016. 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, 2016

     

     

     

             

     

     

       

    Carrying Amount

        

    Fair Value

    On Balance Sheet Position

           

     

     

    Malt inventory (millions of CLP)

     

    8,817

         

    8,817

     

    Bulk wine inventory - raw material (millions of CLP)

    30,337

         

    30,337

     

             

     

     

        

    Expected Maturity

       

    Fair Value

     

       

    2017

    2018

    2019

    2020

    2021

    Thereafter

    Purchase Contracts

           

     

    Malt:

            

     

     

    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

    -

    -

    239,797

    Sugar:

      

    -

    -

    -

    -

    -

    -

    -

     

    Fixed Purchase Volume (tons)

     

    65,219

    -

    -

    -

    -

    -

    -

     

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

     

    610

    -

    -

    -

    -

    -

    -

     

    Contract Amount (thousands of US$)

     

    39,784

    -

    -

    -

    -

    -

    39,322

    Grapes:

            

     

     

    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

    14,752

    Wine:

            

     

     

    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.

    118

    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.



     

     

       

    Commodity Price Sensitivity as of December 31, 2014

       
               
        

    Carrying Amount

        

    Fair Value

    On Balance Sheet Position

            
     

    Malt inventory (millions of CLP)

     

    33,432

         

    33,432

     

    Bulk wine inventory - raw material

    28,435

         

    28,435

               
         

    Expected Maturity

       

    Fair Value

        

    2015

    2016

    2017

    2018

    2019

    Thereafter

     

    Purchase Contracts

            

    Malt:

             
     

    Fixed Purchase Volume (tons)

     

    43,900

    11,300

         
     

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

    579

    579

         
     

    Contract Amount (thousands of US$)

    25,409

    6,540

        

    31,725

    Sugar:

             
     

    Fixed Purchase Volume (tons)

     

    75,000

          
     

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

    550

          
     

    Contract Amount (thousands of US$)

    41,250

         

    41,072

    Grapes:

             
     

    Fixed Purchase Volume (tons)

     

    26,701

    13,576

    7,111

    6,886

    3,922

    1,763

     
     

    Weighted Average Price (CLP per liter)(*)

    210

    241

    251

    233

    260

    536

     
     

    Contract Amount (thousands of CLP)

    5,594

    3,271

    1,788

    1,607

    1,020

    945

    14,002

    Wine:

             
     

    Fixed Purchase Volume (tons)

     

    14,363

    12,500

         
     

    Weighted Average Price (CLP per liter)(*)

    258

    191

         
     

    Contract Amount (thousands of CLP)

    3,711

    2,381

        

    6,093

               
               

    (*) 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, 2014 we had malt purchase contracts for US$46.6 million, compared with US$76.5 million as of December 31, 2013.

    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 revenue andresults, assets and liabilities are in currencies that differ from our functional currency.currencies. However, since some of their operating revenues, costs and expenses are in the same currency, this can create a partial natural hedge. InFor the caseportion that is not naturally hedged of our subsidiary VSPT, occasionally there exist short-term timing differences related to invoicing and cash collection which can generate currency exposure. We have enteredoperations in Chile we enter into short-term U.S. dollar currency forward contractsderivative agreements (currency forwards) to mitigate this risk.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, 20142016 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 Value

    Debt Obligations

     

     

     

     

     

     

     

     

     

     

    Variable rate (US$)

     

     

     

     

     

     

     

     

     

     

    Short and medium term

      

    108

    5,332

    -

    -

    -

    -

    5,440

    5,336

     

    Average int.rate Libor +

    1.8%

    1.8%

    -

    -

    -

    -

    -

    -

    Fixed rate (US$)

             

     

    Short term

       

    1,086

    -

    -

    -

    -

    -

    1,086

    1,083

     

    Interest rate

    2.9%

    -

    -

    -

    -

    -

    -

    -

     

              

     

    Cash and Cash

             

     

    Equivalents(1)

             

     

    US$

       

    8,238

    -

    -

    -

    -

    -

    8,238

    8,238

    Others

       

    1,290

    -

    -

    -

    -

    -

    1,290

    1,290

    TOTAL

       

    9,528

    -

    -

    -

    -

    -

    9,528

    9,528

     

              

     

    Accounts Receivable(1)

           

     

    US$

       

    24,449

    -

    -

    -

    -

    -

    24,449

    24,449

    EUR

       

    7,025

    -

    -

    -

    -

    -

    7,025

    7,025

    Others

       

    1,257

    -

    -

    -

    -

    -

    1,257

    1,257

    TOTAL

       

    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 Value

     

     

     

    amount

     

     

     

     

     

     

     

     

    Derivate Contracts (in

     

     

     

     

     

     

     

     

    millions of Ch$)

     

     

     

     

     

     

     

     

     

     

    Receive US$

     

     

     

    467

    5,332

    -

    -

    -

    -

    5,799

    5,695

    Pay US$

     

     

     

    18,031

    -

    -

    -

    -

    -

    18,031

    17,991

    Receive EUR

     

     

     

    109

    -

    -

    -

    -

    -

    109

    109

    Pay EUR

     

     

     

    578

    4,967

    -

    -

    -

    -

    5,545

    5,603

    Receive Others

     

     

     

    11

    -

    -

    -

    -

    -

    11

    11

    Pay Others

     

     

     

    9

    -

    -

    -

    -

    -

    9

    9

    119



     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Exchange Rate Sensitivity as of December 31, 2014

     

    (millions of Ch$, except percentages and exchange rate)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    2015

     

    2016

     

    2017

     

    2018

     

    2019

     

    Thereafter

     

    Total

    Fair Value

    Debt Obligations

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Variable rate (US$)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Short and medium term

     

     

    5,364

     

    4,956

     

    4,956

     

     

     

     

     

     

     

    15,276

    15,276

     

    Average int.rate

    Libor + 1,19%

     

     

     

     

     

     

     

     

     

    Libor + 1,19%

    Fixed rate (US$)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Short term

     

     

     

    1,076

     

    241

     

    241

     

     

     

     

     

     

     

    1,557

    1,557

     

    Interest rate

    4.1%

     

    2.6%

     

    2.6%

     

     

     

     

     

     

     

    3.7%

     

    Fixed rate (Argentina $)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Short term

     

     

     

    32,995

     

    6,453

     

    3,958

     

    1,963

     

    1,587

     

     

     

    46,956

    46,956

     

    Interest rate

    23.9%

     

    21.2%

     

    19.3%

     

    15.0%

     

    15.0%

     

     

     

    22.4%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Cash and Cash

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Equivalents

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    US$

     

     

     

    6,059

     

     

     

     

     

     

     

     

     

     

     

    6,059

    6,059

    Others

     

     

     

    17,326

     

     

     

     

     

     

     

     

     

     

     

    17,326

    17,326

    TOTAL

     

     

     

    23,384

     

     

     

     

     

     

     

     

     

     

     

    23,384

    23,384

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Accounts Receivables

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    US$

     

     

     

    19,030

     

     

     

     

     

     

     

     

     

     

     

    19,030

    19,030

    EUR

     

     

     

    10,039

     

     

     

     

     

     

     

     

     

     

     

    10,039

    10,039

    Others

     

     

     

    53,339

     

     

     

     

     

     

     

     

     

     

     

    53,339

    53,339

    TOTAL

     

     

     

    82,408

     

     

     

     

     

     

     

     

     

     

     

    82,408

    82,408

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

                      

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Notional

    2015

     

    2016

     

    2017

     

    2018

     

    2019

     

    Thereafter

     

    Total

    Fair Value

     

     

     

    amount

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Derivate Contracts (in

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    thousand of US$)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Receive US$

     

     

     

    8,320

     

    14,800

     

     

     

     

     

     

     

     

     

    23,121

    22,570

    Pay US$

     

     

     

    8,433

     

    10,366

     

     

     

     

     

     

     

     

     

    18,799

    18,399

    Pay EUR

     

     

     

    126

     

    3,225

     

     

     

     

     

     

     

     

     

    3,352

    3,270

    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

    Fee

    Issuance of ADSs

    US$5 per each 100 ADSs issued

     

    Cancellation of ADSs

    US$5 per each 100 ADSs canceled

     

    Cash distributions

    US$0.05 or less per ADS

     

    During each year, the Depositarydepositary will collect fees of US$0.05 or less per ADS per calendar year for administering the ADSs.

     

    120


    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 2014,2016, the following reimbursements were made by JPMorgan, pursuant to the corresponding tax retention, in connection with our ADR program:

     

    Expenses

    US$amount in thousands amountUS$ (*)

    Documents EdgardEdgar and filing

    4.27.2

    FASB fee

    0.90.7

    PCAOB fee

    7.76.7

    Teleconferencing

    3.98.8

    Broker ReimbursementLegal advise related to 20-F preparation & filing

    17.762.5

    Software and licenses subscription Fee

    61.7

    TotalRepresentative Fees

    34.40.7

    Investor communications

    15.7

    Total

    164.1

    (*) includes 30% tax retention

     

    121



     

     

    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, 2014.2016. 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, 2014.2016.

     

    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, 20142016 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, 20142016 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.

    122


     

    The effectiveness of our internal control over financial reporting as of December 31, 20142016 has been audited by PricewaterhouseCoopers, an independent registered public accounting firm, as stated in their report which appears herein.


     

    (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 20142016 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

     

    InAt the board of directorsdirectors´ meeting held on April 10, 2013, after13, 2016, following the election of a new board at the shareholders´ meeting held the same day, the board of directors at the Shareholders’ meeting, the Board of Directors appointed the following membersdirectors Messrs. Vittorio Corbo and Carlos Molina to our Audit Committee: Messrs.Vittorioaudit committee. Mr. Corbo and Philippe Pasquet. Mr. Pasquet and Mr. CorboMolina meet the independence criteria contained inunder 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,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 inon 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 Boardboard of Directorsdirectors that applies to all of the members of our board of directors.directors, which was updated in July and December 2015. This codeCode of conductConduct is available on our website atwww.ccu.clorwww.ccuinvestor.com. The codeCode of conductConduct 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 codeCode of conductConduct 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 codeCode of conductConduct also establishes rules and procedures regarding conflicts of interest. The information on our website is not incorporated by reference into this document.

     


    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, 20132015 and 2014:2016:

    123


     

     

    2013

    2014

    2014

    2015

    2016

    (millions of CLP)

    (millions of CLP)

    Audit Fees

    430

    462

    462

    487

    743

    Audit-Related Fees

    6

    0

    -

    30

    Tax Fees

    0

    -

    8

    7

    All Other Fees

    158

    2

    2

    11

    18

    Total Fees

    593

    464

    464

    506

    798

     

     

    “Audit fees” in the above table are the aggregate fees billed by PricewaterhouseCoopersPwC in connection with the review and audit of our semi-annual and annual consolidated financial statements, as well as the review of other fillings. “Audit-related fees”filings. “Audit-Related Fees” are the aggregate fees billed by PricewaterhouseCoopersPwC for assurance and related services that are reasonablythe issuance of special full IFRS reports related to foreign entities. “Tax fees” are fees billed by PwC associated with the performanceissuance of the audit or review of our financial statements or that are traditionally performed by the external auditor,certificates for tax and include consultations relating to the review of the new system of consolidation of the financial statements.legal compliance purposes. “All Other Fees” are fees billed by PricewaterhouseCoopersPwC associated mostly with expenses related to CCU capital increase and Due Diligence, upgrade of the carbon footprint measurement system, and certifications of royalty payments, among others during 2013.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 endedDecember 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.


    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.

    Not applicable.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.


    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.

    124


     

    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, 20152017 approximately CLP 24.62339,708 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.”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 and,or, if applicable, included in the usual practice policy approved by the board of directors. See “Item 7: Major Shareholders and Related Party Transactions.”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.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) make recommendationspropose to the board of directors with respectthe independent accountants and the risk rating agencies, which the board must then propose to the appointment of independent auditors and risk rating agencies,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 EmployeesBoard PracticesDirectors Committee.”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. In the meeting held on February 3, 2010, our board of directors agreed to increase from three to four the number of members of the audit committee, and to appoint Mr. Philippe Pasquet as the fourth member. At the board of directorsdirectors´ meeting ofheld on April 10, 2013, following the13, 2016, followingthe election of a new board at the shareholders´ meeting theboardheld the same date, the board of directors appointed the following directors Messrs. Vittorio Corbo and Carlos Molina to our audit committee: Vittoriocommittee. Mr. Corbo and Philippe Pasquet. Mr. Pasquet and Mr. CorboMolina meet the independence criteria under the Exchange Act and under the NYSE Rules. The Boardboard of Directorsdirectors also resolved that directors Mr. Jorge Luis RamosMessrs. José Miguel Barros and Mr. Francisco Pérez shall participate in ourthe audit committee´s meetings as observers.

    125



     

     

     

    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 and disclose 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. A2008.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.

    126



     

     

    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 StatementsStatements.





     

     

    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: April2927, 20152017

     

     


    129


     

    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, 20142016 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, 2014,2016, 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, 20142016 has been audited by PricewaterhouseCoopers,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 20142016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

     

     

    By:/s/ Patricio Jottar                  

    By:      /s/ Patricio Jottar

    Chief Executive Officer

    /s/ Felipe Dubernet 
                Chief Financial Officer

     

    /s/ Felipe Dubernet              

    Chief Financial Officer

     

     

    Dated:  February 13, 201527, 2017

     

     

    Distribution:

    Investor Relation Manager

    PricewaterhouseCoopers

    Chief Financial Officer

    Legal Affairs Manager



    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

     


     

    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    To the Board of Directors and Shareholders of Compañía Cervecerías Unidas S.A.

    In our opinion, the accompanying consolidated balance sheets and the related consolidated statement of income, comprehensive income, shareholder´s equity and cash flows present fairly, in all material respects, the financial position of Compañía Cervecerías Unidas S.A. and its subsidiaries at December 31, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established inInternal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included inManagement’sReport on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

    A company’s internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles. A company’sinternal 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 the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on the financial statements.





     

    Page 2

    Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.






    INDEX

    CONSOLIDATED STATEMENT OF FINANCIAL POSITION (ASSETS)

    45

    CONSOLIDATED STATEMENT OF FINANCIAL POSITION (LIABILITIES AND EQUITY)

    56

    CONSOLIDATED STATEMENT OF INCOME

    67

    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

    78

    CONSOLIDATEDSTATEMENT OF CHANGES IN EQUITY

    89

    CONSOLIDATED STATEMENT OF CASH FLOW

    910

    NOTE 1 GENERAL INFORMATION

    1011

    NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    1519

    2.1Basis of preparation1519
    2.2Basis of consolidation1620
    2.3Financial information as peroperating operating segments1720
    2.4Foreign currency and unidad de fomento (Adjustment unit)1821
    2.5Cash and cash equivalents1922
    2.6Other financial assets22
    2.7Financial instruments1922
    2.72.8Financial asset impairment2124
    2.8Inventories21
    2.9Inventories24
    2.10Biological current assets25
    2.11Other non-financial assets2125
    2.102.12Property, plant and equipment2125
    2.112.13Leases2226
    2.122.14Investment property2226
    2.132.15Biological assets22
    2.14Intangible assets other than goodwill2326
    2.15Goodwill23
    2.16Goodwill27
    2.17Impairment of non-financial assets other than goodwill2327
    2.172.18Assets of a disposal group held for sale2428
    2.182.19Income taxes2428
    2.192.20Employees benefits2528
    2.20Provisions25
    2.21Provisions29
    2.22Revenue recognition2529
    2.222.23Commercial agreements with distributors and supermarket chains2629
    2.232.24Cost of sales of products2630
    2.242.25Other expenses by function2630
    2.252.26Distribution expenses2630
    2.262.27Administration expenses2630
    2.272.28Environment liabilities2730

    NOTE 3 ESTIMATES AND APPLICATION OF PROFESSIONAL JUDGMENT

    2730

    NOTE 4 ACCOUNTING CHANGES

    2731

    NOTE 5 RISK ADMINISTRATION

    2731

    NOTE 6 FINANCIAL INSTRUMENTS

    3437

    NOTE 7 FINANCIAL INFORMATION AS PER OPERATING SEGMENTS

    4043

    NOTE 8 BUSINESS COMBINATIONS47
    NOTE 9 NET SALES48
    NOTE 10 NATURE OF COST AND EXPENSE48
    NOTE 11 FINANCIAL RESULTS49
    NOTE 12 OTHER INCOME BY FUNCTION49

     


     

    NOTE 8 BUSINESS COMBINATIONS

    53

    NOTE 9 NATURE OF COST AND EXPENSE

    54

    NOTE 10 FINANCIAL RESULTS

    54

    NOTE 11 OTHER INCOME BY FUNCTION

    54

    NOTE 12 OTHER GAINS (LOSSES)

    55

    NOTE 13 OTHER GAIN AND LOSS

    49
    NOTE 14 CASH AND CASH EQUIVALENTS

    5055

    NOTE 1514 ACCOUNTS RECEIVABLES - TRADE AND OTHER RECEIVABLES

    5162

    NOTE 1615 ACCOUNTS AND TRANSACTIONS WITH RELATED COMPANIES

    5465

    NOTE 16 INVENTORIES

    70

    NOTE 17 INVENTORIESBIOLOGICAL CURRENT ASSETS

    5971

    NOTE 18 OTHER NON-FINANCIAL ASSETS

    6072

    NOTE 19 INVESTMENTSINVESTMENT ACCOUNTED FOR BY THE EQUITY METHOD

    6072

    NOTE 20 INTANGIBLE ASSETS (NET)OTHER THAN GOODWILL

    6276

    NOTE 21 GOODWILL

    6378

    NOTE 22 PROPERTY, PLANT AND EQUIPMENT

    6580

    NOTE 23 INVESTMENT PROPERTY

    6782

    NOTE 24 ASSETS OF DISPOSAL GROUP HELD FOR SALE

    6883

    NOTE 25 BIOLOGICAL ASSETSINCOME TAXES

    6884

    NOTE 26 INCOME TAXES

    70
    NOTE 27 OTHER FINANCIAL LIABILITIES

    7387

    NOTE 2827 ACCOUNTS PAYABLE - TRADE AND OTHER PAYABLES

    87103

    NOTE 28 PROVISIONS

    103

    NOTE 29 PROVISIONS

    87
    NOTE 30 OTHER NON-FINANCIAL LIABILITIES

    88104

    NOTE 30 EMPLOYEE BENEFITS

    104

    NOTE 31 EMPLOYEE BENEFITSNON-CONTROLLING INTERESTS

    88108

    NOTE 32 NON-CONTROLLING INTERESTSCOMMON SHAREHOLDERS' EQUITY

    91109

    NOTE 33 COMMON SHAREHOLDERS’ EQUITY

    92
    NOTE 34 EFFECTS OF CHANGES IN CURRENCY EXCHANGE RATE

    96113

    NOTE 3534 CONTINGENCIES AND COMMITMENTS

    100117

    NOTE 35 ENVIRONMENT

    120

    NOTE 36 ENVIRONMENT

    102
    NOTE 37SUBSEQUENT EVENTS

    104123

     

     


     

    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, 2014

    As of December 31, 2013

    Notes

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Current assets

     

     

     

     

     

     

    Cash and cash equivalent

    14

    214,774,876

    408,853,267

    13

    133,789,950

    192,554,239

    Other financial assets

    6

    6,483,652

    4,468,846

    6

    8,406,491

    13,644,105

    Other non-financial assets

    18

    18,558,445

    21,495,398

    18

    15,859,137

    17,654,373

    Accounts receivable-trade and other receivables

    15

    238,602,893

    211,504,047

    14

    280,766,784

    252,225,937

    Accounts receivable from related companies

    16

    11,619,118

    9,610,305

    15

    3,523,825

    4,788,930

    Inventories

    17

    175,179,189

    153,085,845

    16

    199,290,678

    174,227,415

    Biological assets

    17

    7,948,379

    7,633,340

    Taxes receivables

    26

    19,413,414

    9,139,406

    25

    29,423,479

    15,264,220

    Total current assets different from assets of disposal group held for sale

     

    684,631,587

    818,157,114

     

    679,008,723

    677,992,559

    Assets of disposal group held for sale

    24

    758,760

    339,901

    24

    2,377,887

    6,319,316

    Total assets of disposal group held for sale

     

    758,760

    339,901

     

    2,377,887

    6,319,316

    Total current assets

     

    685,390,347

    818,497,015

     

    681,386,610

    684,311,875

         

     

    Non-current assets

     

     

     

     

     

     

    Other financial assets

    6

    343,184

    38,899

    6

    203,784

    80,217

    Other non-financial assets

    18

    5,828,897

    15,281,111

    18

    5,369,211

    5,220,954

    Accounts receivable non-current

    14

    3,563,797

    -

    Accounts receivable from related companies

    16

    522,953

    350,173

    15

    356,665

    445,938

    Investment accounted by equity method

    19

    31,998,620

    17,563,028

    19

    64,404,946

    49,995,263

    Intangible assets other than goodwill

    20

    68,656,895

    64,033,931

    20

    77,678,850

    71,868,007

    Goodwill

    21

    86,779,903

    81,872,847

    21

    96,663,023

    99,490,372

    Property, plant and equipment (net)

    22

    833,171,234

    680,994,421

    22

    903,831,702

    872,667,210

    Biological assets

    25

    18,084,408

    17,662,008

    Investment property

    23

    7,917,613

    6,901,461

    23

    6,253,827

    6,838,002

    Deferred tax assets

    26

    30,207,019

    24,525,361

    25

    31,864,635

    34,529,593

    Total non-current assets

     

    1,083,510,726

    909,223,240

     

    1,190,190,440

    1,141,135,556

    Total Assets

    Total Assets

    1,768,901,073

    1,727,720,255

    Total Assets

    1,871,577,050

    1,825,447,431

     

    F-5

    F-
    4


    The accompanying notes 1 to 3736 are an integral part of these consolidated financial statements.


     


     

    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, 2014

    As of December 31, 2013

    Notes

    As of December 31, 2016

    As of December 31, 2015

    LIABILITIES

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Current liabilities

     

     

     

     

     

     

    Other financial liabilities

    27

    65,318,293

    120,488,188

    26

    66,679,933

    43,973,991

    Accounts payable-trade and other payables

    28

    203,782,805

    183,508,115

    27

    259,677,852

    227,736,803

    Accounts payable- to related companies

    16

    10,282,312

    7,286,064

    15

    9,530,071

    11,624,218

    Other short-term provisions

    29

    410,259

    833,358

    28

    409,164

    503,440

    Tax liabilities

    26

    11,697,135

    10,916,865

    25

    11,806,434

    12,198,024

    Employee benefits provisions

    31

    17,943,771

    20,217,733

    Employee benefits provisions

    30

    22,838,228

    21,712,059

    Other non-financial liabilities

    30

    68,896,763

    65,878,578

    29

    71,369,972

    70,942,144

    Total current liabilities

     

    378,331,338

    409,128,901

     

    442,311,654

    388,690,679

    Non-current liabilities

     

     

     

     

     

     

    Other financial liabilities

    27

    134,534,557

    142,763,030

    26

    117,944,033

    136,926,545

    Others accounts payable

    28

    369,506

    841,870

    27

    1,082,898

    1,645,098

    Accounts payable to related companies

    16

    -

    377,020

    Other long-term provisions

    29

    2,209,832

    2,135,122

    28

    1,323,520

    1,476,518

    Deferred tax liabilities

    26

    87,518,700

    73,033,414

    25

    86,789,951

    90,237,843

    Employee benefits provisions

    31

    17,437,222

    15,196,620

    30

    21,832,415

    18,948,603

    Total non-current liabilities

     

    242,069,817

    234,347,076

     

    228,972,817

    249,234,607

    Total liabilities

     

    620,401,155

    643,475,977

     

    671,284,471

    637,925,286

         

     

    EQUITY

    EQUITY

    EQUITY

    Equity attributable to equity holders of the parent

    33

     

     

    32

     

     

    Paid-in capital

     

    562,693,346

    562,693,346

     

    562,693,346

    562,693,346

    Other reserves

     

    (75,050,544)

    (65,881,809)

     

    (142,973,378)

    (103,226,416)

    Retained earnings

     

    537,945,375

    491,864,319

     

    657,578,187

    598,349,442

    Subtotal equity attributable to equity holders of the parent

     

    1,025,588,177

    988,675,856

    Total equity attributable to equity holders of the parent

     

    1,077,298,155

    1,057,816,372

    Non-controlling interests

    32

    122,911,741

    95,568,422

    31

    122,994,424

    129,705,773

    Total Shareholders' Equity

    Total Shareholders' Equity

    1,148,499,918

    1,084,244,278

    Total Shareholders' Equity

    1,200,292,579

    1,187,522,145

    Total Liabilities and Shareholders' Equity

    Total Liabilities and Shareholders' Equity

    1,768,901,073

    1,727,720,255

    Total Liabilities and Shareholders' Equity

    1,871,577,050

    1,825,447,431

     

    F-5

    F-6

     


    The accompanying notes 1 to 3736 are an integral part of these consolidated financial statements.


     

    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.

    Notes

    For the years ended December 31.

    2014

    2013

    2012

    2016

    2015

    2014

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Net sales

    9

    1,297,966,299

    1,197,226,510

    1,075,689,894

    7

    1,558,897,708

    1,498,371,715

    1,297,966,299

    Cost of sales

    10

    (604,536,815)

    (536,696,634)

    (493,087,247)

    9

    (741,819,916)

    (685,075,251)

    (604,536,815)

    Gross margin

     

    693,429,484

    660,529,876

    582,602,647

     

    817,077,792

    813,296,464

    693,429,484

    Other income by function

    12

    25,463,716

    5,508,863

    5,584,572

    11

    5,144,154

    6,577,244

    25,463,716

    Distribution costs

    10

    (240,848,630)

    (221,701,175)

    (186,588,731)

    9

    (270,835,822)

    (277,599,722)

    (240,848,630)

    Administrative expenses

    10

    (110,014,716)

    (93,289,698)

    (85,387,566)

    9

    (155,322,295)

    (128,135,799)

    (110,014,716)

    Other expenses by function

    10

    (188,109,562)

    (162,782,032)

    (135,022,711)

    9

    (195,412,109)

    (209,201,189)

    (188,109,562)

    Other gains (losses)

    13

    4,036,939

    958,802

    (4,478,021)

    12

    (8,345,907)

    8,512,000

    4,036,939

    Income from operational activities

     

    183,957,231

    189,224,636

    176,710,190

     

    192,305,813

    213,448,998

    183,957,231

    Financial Income

    11

    12,136,591

    8,254,170

    7,692,672

    10

    5,680,068

    7,845,743

    12,136,591

    Financial costs

    11

    (22,957,482)

    (24,084,226)

    (17,054,879)

    10

    (20,307,238)

    (23,101,329)

    (22,957,482)

    Equity and income of joint ventures and associated

    19

    (898,607)

    308,762

    (177,107)

    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

    11

    (613,181)

    (4,292,119)

    (1,002,839)

    10

    456,995

    957,565

    (613,181)

    Result as per adjustment units

    11

    (4,159,131)

    (1,801,765)

    (5,057,807)

    10

    (2,246,846)

    (3,282,736)

    (4,159,131)

    Income before taxes

     

    167,465,421

    167,609,458

    161,110,230

     

    170,328,270

    190,640,106

    167,465,421

    Income taxes

    26

    (46,673,500)

    (34,704,907)

    (37,133,330)

    25

    (30,246,383)

    (50,114,516)

    (46,673,500)

    Net income of year

     

    120,791,921

    132,904,551

    123,976,900

     

    140,081,887

    140,525,590

    120,791,921

     

     

     

     

     

     

     

    Net income atributable to:

     

     

     

     

    Net income attibutable to:

     

     

     

     

    Equity holders of the parent

     

    106,238,450

    123,036,008

    114,432,733

     

    118,457,488

    120,808,135

    106,238,450

    Non-controlling interests

    32

    14,553,471

    9,868,543

    9,544,167

    31

    21,624,399

    19,717,455

    14,553,471

    Net income of year

     

    120,791,921

    132,904,551

    123,976,900

     

    140,081,887

    140,525,590

    120,791,921

    Net income per share (Chilean pesos) from:

     

     

     

     

     

     

     

     

    Continuing operations

     

    287.52

    370.81

    359.28

     

    320.59

    326.95

    287.52

    Diluted earnings per share (Chilean pesos) from:

     

     

     

     

     

     

     

     

    Continuing operations

     

    287.52

    370.81

    359.28

     

    320.59

    326.95

    287.52

     

     

     

     

     

     

     

     

     

     

    F-6F-7

     


    The accompanying notes 1 to 3736 are an integral part of these consolidated financial statements.


     

    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.

    Notes

    For the years ended December 31.

    2014

    2013

    2012

    2016

    2015

    2014

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Net income of year

     

    120,791,921

    132,904,551

    123,976,900

     

    140,081,887

    140,525,590

    120,791,921

    Other income and expenses charged or credited against equity

     

     

     

     

    Other income and expenses charged or credited againts equity

     

     

     

     

    Cash flow hedges(1)

    33

    (155,258)

    256,592

    (826,120)

    32

    84,962

    80,693

    (155,258)

    Exchange differences of foreign subsidiaries(1)

    33

    (4,629,683)

    (17,054,187)

    (21,230,019)

    32

    (27,280,176)

    (29,678,944)

    (4,629,683)

    Gains (losses) from defined plans (1)

    33

    (1,884,054)

    (469,987)

    -

    32

    (2,355,384)

    (939,433)

    (1,884,054)

    Income tax related with cash flow hedge(1)

    33

    39,470

    (51,304)

    189,525

    32

    (20,648)

    (17,563)

    39,470

    Income tax relating to defined benefit plans (1)

    33

    501,689

    105,151

    -

    32

    659,198

    314,541

    501,689

    Total other comprehensive income and expense

     

    (6,127,836)

    (17,213,735)

    (21,866,614)

     

    (28,912,048)

    (30,240,706)

    (6,127,836)

    Comprehensive income and expense

     

    114,664,085

    115,690,816

    102,110,286

     

    111,169,839

    110,284,884

    114,664,085

    Comprehensive income originated by:

     

     

     

     

     

     

     

     

    Equity holders of the parent (2)

     

    97,067,296  

    107,443,199

    94,212,054

    Equity holders of the parent (2)

     

    91,752,250

    92,606,720

    97,067,296

    Non-controlling interests

     

    17,596,789

    8,247,617

    7,898,232

     

    19,417,589

    17,678,164

    17,596,789

    Comprehensive income and expense

     

    114,664,085

    115,690,816

    102,110,286

     

    111,169,839

    110,284,884

    114,664,085

     

    (1)    These items will be not reclassified to Consolidated Statement of Income when they are settled.

    (2)    Corresponds to the income (loss) for the year where no income or expenses have been recorded directly against shareholder´s equity.

     

    .

    F-7F-8

     


    The accompanying notes 1 to 3736 are an integral part of these consolidated financial statements.


     

    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

     

     

    CONSOLIDATED 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' Equity

    Common Stock

    Shares premium

    Currency translation difference

    Hedge reserves

    Actuarial gains and losses on defined benefit plans reserves

    Other reserves

    ThCh$

    ThCh$

    Balanced as of January 1, 2012

    215,540,419

    15,479,173

    (25,038,705)

    484,432

    -

    (10,619,334)

    373,129,952

    568,975,937

    115,809,725

    684,785,662

    Changes

     

    Interim dividends (1)

    -

    (20,065,681)

    (20,065,681)

    -

    (20,065,681)

    Interim dividends according to policy (2)

    -

    (37,150,689)

    (37,150,689)

    -

    (37,150,689)

    Other increase (decrease) in Equity (5)

    -

    -

    (6,702,880)

    Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control (3)

    -

    7,248,058

    -

    7,248,058

    (19,706,470)

    (12,458,412)

    Comprehensive income and expense

    -

    (19,637,257)

    (583,422)

    -

    114,432,733

    94,212,054

    7,898,232

    102,110,286

    Total changes in equity

    -

    (19,637,257)

    (583,422)

    -

    7,248,058

    57,216,363

    44,243,742

    (18,511,118)

    25,732,624

    AS OF DECEMBER 31, 2012

    215,540,419

    15,479,173

    (44,675,962)

    (98,990)

    -

    (3,371,276)

    430,346,315

    613,219,679

    97,298,607

    710,518,286

    Balanced as of January 1, 2013

    215,540,419

    15,479,173

    (44,675,962)

    (98,990)

    -

    (3,371,276)

    430,346,315

    613,219,679

    97,298,607

    710,518,286

    Changes

     

    Interim dividends (1)

    -

    (23,278,681)

    (23,278,681)

    -

    (23,278,681)

    Interim dividends according to policy (2)

    -

    (38,239,323)

    (38,239,323)

    -

    (38,239,323)

    Other increase (decrease) in Equity (5)

    -

    -

    (4,961,354)

    Effects business combination

    -

    -

    3,138,195

    Other increase (decrease) in Equity (4)

    15,479,173

    (15,479,173)

    -

    -

    -

    Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control (3)

    -

    2,867,444

    -

    2,867,444

    (8,154,643)

    (5,287,199)

    Issuance Equity (4)

    331,673,754

    -

    (5,010,216)

    -

    326,663,538

    -

    326,663,538

    Comprehensive income and expense

    -

    (15,408,235)

    164,099

    (348,673)

    -

    123,036,008

    107,443,199

    8,247,617

    115,690,816

    Total changes in equity

    347,152,927

    (15,479,173)

    (15,408,235)

    164,099

    (348,673)

    (2,142,772)

    61,518,004

    375,456,177

    (1,730,185)

    373,725,992

    AS OF DECEMBER 31, 2013

    562,693,346

    -

    (60,084,197)

    65,109

    (348,673)

    (5,514,048)

    491,864,319

    988,675,856

    95,568,422

    1,084,244,278

    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' Equity

    Common Stock

    Currency translation difference

    Hedge reserves

    Actuarial gains and losses on defined benefit plans reserves

    Other reserves

    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

    1,084,244,278

    562,693,346

    (60,084,197)

    65,109

    (348,673)

    (5,514,048)

    491,864,319

    988,675,856

    95,568,422

    1,084,244,278

    Changes

     

     

     

    Interim dividends (1)

    -

    -

    (23,278,681)

    (23,278,681)

    -

    (23,278,681)

    -

    (23,278,681)

    (23,278,681)

    -

    (23,278,681)

    Interim dividends according to policy (2)

    -

    -

    (36,500,001)

    (36,500,001)

    -

    (36,500,001)

    -

    (36,500,001)

    (36,500,001)

    -

    (36,500,001)

    Other increase (decrease) in Equity (5)

    -

    -

    2,419

    (378,712)

    (376,293)

    (8,594,222)

    (8,970,515)

    Other increase (decrease) in Equity (3)

    -

    2,419

    (378,712)

    (376,293)

    (8,594,222)

    (8,970,515)

    Effects business combination

    -

    -

    -

    18,340,752

    -

    -

    18,340,752

    Comprehensive income and expense

    -

    -

    (7,698,661)

    (108,479)

    (1,364,014)

    -

    106,238,450

    97,067,296

    18,375,122

    115,442,418

    -

    (7,698,661)

    (108,479)

    (1,364,014)

    -

    106,238,450

    97,067,296

    17,596,789

    114,664,085

    Total changes in equity

    -

    (7,698,661)

    (108,479)

    (1,364,014)

    2,419

    46,081,056

    36,912,321

    28,121,652

    65,033,973

    -

    (7,698,661)

    (108,479)

    (1,364,014)

    2,419

    46,081,056

    36,912,321

    27,343,319

    64,255,640

    AS 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

    123,690,074

    1,149,278,251

    562,693,346

    (67,782,858)

    (43,370)

    (1,712,687)

    (5,511,629)

    537,945,375

    1,025,588,177

    122,911,741

    1,148,499,918

    Balanced 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

    1,148,499,918

    Changes

     

     

    Interim 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

    110,284,884

    Total changes in equity

    -

    (27,652,528)

    40,844

    (589,731)

    25,543

    60,404,067

    32,228,195

    6,794,032

    39,022,227

    AS 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

    1,187,522,145

    Balanced 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

    1,187,522,145

    Changes

     

     

    Interim 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)

    Comprehensive income and expense

    -

    (25,123,546)

    41,607

    (1,623,299)

    -

    118,457,488

    91,752,250

    19,417,589

    111,169,839

    Increase (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)

    12,770,434

    AS 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 33)(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 2013,2016, the Company, through its subsidiaries Aguas CCU-Nestlé Chile S.A. and Embotelladoras Chilenas Unidas S.A., acquired additional interests in Viña San Pedro TarapacaManantial S.A. for an amount of ThCh$ 19,111,686, with a carrying value to ThCh$ 8,153,946 (ThCh$ 19,774,8543,816,220, resulting in 2012)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$ 5,627,425 (ThCh$ 12,521,899 in 2012)118,092, with a carrying value to ThCh$ 312,103, resulting in an increase to Other reserves of ThCh$ 2,526,520 (ThCh$ 7,252,955 in 2012) (Note194,000 (seeNote 1 (1)(4)). Additionally, as a part of the balance of 2013 recorded ThCh$ 341,169 related to an increase inFinally during 2016, joint venture Foods acquired additional interest in Saenz Briones & CíAlimentos Nutrabien S.A. for an amount of ThCH$ 14,352,706, with a S.A.I.C.

    (4)See Note 33, paidcarrying value to ThCh$ 3,497,385, resulting in capital.a decrease of ThCh$ 5,426,209.

    (5)      Mainly related to dividends to Non-controlling interest.

     

     

    F-8F-9

     


    The accompanying notes 1 to 36 are an integral part of these consolidated financial statements.
     

    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,

    Notes

    For the years ended as of December 31,

    2014

    2013

    2012

    2016

    2015

    2014

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Net cash flows from (used in) operational activities

     

     

     

    Cash flows from (used in) operational activities

     

     

     

    Collection classes:

      

     

       

    Proceeds from goods sold and services rendered

     

    1,584,494,230

    1,464,286,085

    1,269,625,648

     

    1,862,763,071

    1,770,338,769

    1,584,494,230

    Other proceeds from operating activities

     

    30,247,374

    19,057,966

    16,627,977

     

    23,086,788

    20,467,143

    30,247,374

    Types of payments:

      

     

       

    Payments of operating activities

     

    (1,056,064,042)

    (950,888,252)

    (804,986,368)

     

    (1,216,451,995)

    (1,120,571,275)

    (1,051,616,618)

    Payments of salaries

     

    (171,898,347)

    (145,277,349)

    (126,605,495)

     

    (201,389,122)

    (178,915,580)

    (171,898,347)

    Other payments for operating activities

     

    (162,644,788)

    (154,495,134)

    (174,403,470)

     

    (228,011,323)

    (220,365,087)

    (162,644,788)

    Dividends received

     

    75,169

    95,463

    37,834

     

    34,380

    45,492

    75,169

    Interest paid

     

    (16,309,783)

    (21,112,371)

    (15,257,385)

     

    (16,958,068)

    (19,813,502)

    (20,757,207)

    Interest received

     

    10,763,936

    8,244,764

    8,318,557

     

    5,635,697

    6,476,628

    10,763,936

    Income tax reimbursed (paid)

     

    (44,208,661)

    (26,390,153)

    (32,838,120)

     

    (47,055,951)

    (44,584,176)

    (44,208,661)

    Other cash movements

     

    (833,425)

    634,480

    (1,674,431)

    12

    8,360,871

    6,432,460

    (833,425)

    Net cash flows from (used in) operational activities

     

    173,621,663

    194,155,499

    138,844,747

    Net cash flows from operational activities

     

    190,014,348

    219,510,872

    173,621,663

      

     

       

    Cash flows from (used in) investing activities

     

     

     

     

     

     

     

    Cash flows used for control of subsidiaries or other businesses

    14

    (15,222,363)

    (14,566,278)

    (19,521,964)

    Cash flows used for purchase equity interests

     

    (8,369)

    -

    -

    Proceeds from sale of property, plant and equipment

     

    2,587,448

    1,740,687

    3,194,691

    Cash 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

    2,587,448

    Acquisition of property, plant and equipment

     

    (227,863,039)

    (122,451,045)

    (115,767,787)

     

    (125,691,740)

    (129,668,910)

    (227,863,039)

    Purchases of intangibles assets

     

    (2,217,113)

    (2,107,984)

    (1,986,089)

     

    (3,191,685)

    (2,062,012)

    (2,217,113)

    Other cash movements

     

    3,753,297

    466,710

    (259,227)

     

    469,240

    518,711

    3,753,297

    Net cash flows from (used in) investing activities

     

    (238,970,139)

    (136,917,910)

    (134,340,376)

    Net cash flows used in investing activities

     

    (155,007,390)

    (165,810,169)

    (238,970,139)

      

     

       

    Cash flows from (used in) financing activities

     

     

     

     

     

     

     

     

    Payments for changes in ownership interests in subsidiaries

    14

    -

    (5,627,425)

    (12,521,899)

    Payments for changes in ownership interests in subsidaries

    13

    (19,111,686)

    -

    -

    Proceeds from long-term loans

     

    15,482,763

    10,852,892

    37,606,666

     

    3,804,384

    19,570,689

    15,482,763

    Porceeds from short-term loans

     

    21,882,842

    12,040,310

    28,550,700

     

    19,345,325

    23,358,700

    21,882,842

    Total amount from loans

     

    37,365,605

    22,893,202

    66,157,366

     

    23,149,709

    42,929,389

    37,365,605

    Loan payments

     

    (20,766,024)

    (22,343,703)

    (62,424,910)

     

    (25,295,124)

    (54,797,023)

    (20,766,024)

    Proceeds from issuing shares

     

    -

    326,663,538

    -

    Payments of finance lease liabilities

     

    (1,745,210)

    (1,641,370)

    (1,572,959)

     

    (1,530,851)

    (1,697,649)

    (1,745,210)

    Payments of loan from related entities

     

    (223,225)

    (1,479,201)

    (142,569)

     

    (750,000)

    (601,494)

    (223,225)

    Dividends paid

     

    (65,315,914)

    (63,680,979)

    (66,117,348)

     

    (69,819,729)

    (66,147,145)

    (65,315,914)

    Other cash movements

     

    (81,470,807)

    (3,162,277)

    (3,544,966)

     

    (1,945,457)

    (2,525,569)

    (81,470,807)

    Net cash flows from (used in) financing activities

     

    (132,155,575)

    251,621,785

    (80,167,285)

    Net cash flows used in financing activities

     

    (95,303,138)

    (82,839,491)

    (132,155,575)

      

     

       

    Net increase (decrease in cash equivalents, before the effect of changes in exchange rate

    (197,504,051)

    308,859,374

    (75,662,914)

    Net decrease in cash equivalents, before the effect of changes in exchange rate

    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

     

    3,425,660

    (2,343,382)

    (65,569)

     

    1,531,891

    6,918,151

    3,425,660

      

     

       

    Cash and cash equivalents, initial balance

     

    408,853,267

    102,337,275

    178,065,758

    Cash and cash equivalents, final balance

    14

    214,774,876

    408,853,267

    102,337,275

    Cash and cash equivalents, beginning of the year

     

    192,554,239

    214,774,876

    408,853,267

    Cash and cash equivalents, final of the year

    13

    133,789,950

    192,554,239

    214,774,876

     

     

    F-9F-10


    The accompanying notes 1 to 36 are an integral part of these consolidated financial statements.
     

    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    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, date against which shareholders' ownership was measured for the action was December 14, 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 Cer0 ° 0,Cero 0°, Cristal Cero Radler, Escudo, Kunstmann, Austral, Dolbeck,D´olbek, Royal Guard, Royal Light, Morenita, Dorada, Szot, Guayacán and Stones of Lemon, Stones.Maracuyá and Apple varieties. It holds exclusive license to produce and market Heineken.Heineken, Sol and Coors. In Chile, the Company is the exclusive distributor of BudweiserTecate 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 Imperial, Bieckert and Palermo, and are the holders of exclusive license for the production and marketing of Budweiser, Heineken, Amstel and Amstel.Sol. CCU also imports Birra Moretti, Guiness and Kunstmann.Kunstmann beer. Additionally, exports beer to different countries in the region mainly under the Schneider and Heineken and Budweiser brands. In Argentina, CCU is the exclusive distributor of the energy drink Red Bull. Besides, participates in the cider business, controlling of Saenz Briones, andmarketing Sidra La Victoria. In these categories, its portfolio brands are Real, La Victoria Saenz Briones 1888 and Apple Storm ciders, among others.“1888”, brands leaders in the market. Also participates in the spirits business, which isits marketed under theEl Abuelo brand, El Abuelo.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, respectively.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, brand.Schneider and Kuntsmann brand and cider Sidra Real.

     

    In Paraguay, the Company participates in the non-alcoholic beverages and beer business since December 2013.alcoholic business. Its portfolio of non-alcoholic brands consists of Pulp, Maxi, Watt's, Puro Sol, La Fuente Villavicencio, Evian, Ser and Levite.Zuma. These brands include own, licensed and imported. InThe Company in the beer business the Companyis owner of Sajonia brand and imports Heineken, Carlsberg, Coors Light, Coors 1873, Schneider, Paulaner and Schneider,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 Real.Natur-all. These brands include own and licensed. The alcoholic brands consist of Real, Capital and Capital.Cordillera. It has of exclusive license for the importation and distribution of Heineken and the energy drink Monster.

     

    Within the non-alcoholic, segment in Chile Operating segment, CCU has the Bilz, Bilz Light, Pap, Pap Light, Kem, Kem Xtreme, Kem Xtreme Girl, Nobis, Cachantun, Cachantun Light, 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, andCanada Dry Agua Tónica, Gatorade, Sobe Adrenaline Rush, Lipton Ice Tea, 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 Watt´s.Fructus and the licencse Vivo and Caricia brands.

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    In the spirits, segment in Chile Operating segment, in the category of pisco, CCU owns the brand Mistral, Ruta,Campanario, Horcón Quemado,  Control C, Tres Erres, La Serena Campanarioand Ruta cocktail, and their respective extensions; Tres Erres and Horcón Quemado. In addition, the Company has exclusive license to produce and market in Chile the Pisco Bauzá brand.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.

     

    F-10


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    In the winesWine 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, Tierras Moradas, “1865”,Sideral, 1865, Castillo de Molina, Kankana del Elqui,Épica, 35 Sur, GatoNegro, Gato, Gato Negro, Las Encinas, Urmeneta, Manquehuito Altaïr, Sideral, Supremo, La Celia, La Consulta, Leyda: theand 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 S.A. which includes “Cuatro Estaciones” formed by Vernus, Notas de Guarda and D.O.N. (De Origen Noble), which add toincludes: Parras Viejas, Selección del Directorio, Santa Helena Reserva, Parras Viejas, Siglo de Oro, Santa Helena Varietal, Alpaca, Gran Vino and Gran Vino. The brands´s portfolio acquired via merger of Viña Tarapacá ex Zavala S.A., includes: Gran Tarapacá, Tarapacá Reserva, León de Tarapacá, Tarapacá Plus, Tara Pakay, Etiqueta Negra, Gran Reserva, Zavala,Santa Helena. VSPT also participates in Chile and international market with vines Misiones de Rengo, Viña Mar, Casa Rivas, Leyda and Tamarí, among others.Finca La Celia and Tamari in Argentina.

     

    InAt the businessend of sweet snacks in Chile, different products are produced underyear 2015, the brands Calaf, including the Duetto brand and others under which some cookies are made. In addition, the Company has other specific brands for each product line. The joint venture in Foods Compañía de Alimentos CCU S.A. ("Foods") also owns the Natur brand and, who participates in the Nutrabien brand.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.

     


    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 license

    Licenses

    Validity Date

    Watt's rigid packaging, except cartonAmstel in Argentina (1)

    IndefinitelyJuly 2022

    Pisco BauzáAmstel in Colombia (2)

    IndefinitelyMarch 2028

    Austral in Chile (3)

    July 2018

    Blue Moon in Chile (4)

    December 2021

    Buckler in Colombia (2)

    March 2028

    Budweiser in Argentina

    December 2025

    HeinekenCoors in Chile and Argentina (1)Paraguay

    10 years renewablesNegotiating the terms of a new contract

    HeinekenCoors in Paraguay (2)Chile (5)

    November 2022December 2025

    HeinekenCoors in Uruguay (1)Argentina (6)

    April 2023December 2019

    Pepsi, Seven Up and MirindaCoors in Colombia (6)

    December 2043

    Té Lipton

    March 20432020

    Crush, Canada Dry (Ginger Ale, Agua Tónica and Limón Soda) (3)in Chile (7)

    December 2018

    BudweiserGatorade in Chile

    December 2015

    Austral (4)

    July 2016

    Gatorade (5) (8)

    December 2018

    AmstelHeineken in Argentina (6)Bolivia (9)

    JulyDecember 2024

    Heineken in Paraguay (9)

    November 2022

    Heineken in Uruguay (9)

    10 years renewables

    Heineken in Chile and Argentina (10)

    10 years renewables

    Heineken in Colombia (11)

    March 2028

    Murphys in Colombia (2)

    March 2028

    Nestlé Pure Life in Chile (7)

    December 2017

    SolPaulaner in Chile(1)Paraguay

    10 years renewablesApril 2019

    SolPepsi, Seven Up and Mirinda in Argentina (1)Chile

    10 years renewablesDecember 2043

    Red Bull in Argentina

    December 2017

    CoorsRed Bull in Chile (8)(12)

    December 2025Indefinitely

    CoorsSchneider in Paraguay

    November 2017

    Sol in Argentina (9)(10)

    December10 years renewables

    Sol in Chile (10)

    10 years renewables

    Sol in Colombia (2)

    March 2028

    Té Lipton in Chile

    March 2020

    Tecate in Colombia

    March 2028

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

    Indefinitely

    Watt's in Paraguay (6)

    May 2019

     

     

     

    (1) License for 10 years, renewable every year, for a period of 10 years automatically, under identical conditions (Rolling Contract), unless one of the parties provides a notice of non-renewal.

    (2) License 10 years, renewable automatically, under identical conditions, for a period of 5 years, unless one of the parties provides a notice of non-renewal.

    (3) License renewable for periods of 5 years, subject to the compliance of the contract conditions. (4) Renewable License for period of 2 or 3 years, subject to compliance with contractual conditions.

    (4) Renewable for periods of two years, subject to the compliance of the contract conditions.

    (5) 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.

    (6)   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.

    (7)(2)   Renewable for periods of 5two years, subject to the compliance of the contract conditions.

    (8)(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.

    (9) Renewable(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-11



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

     

    As of December 31, 20142016 the Company had a total of  7,8428,186 employees according to the following detail:

     

     

    Number of employes

     

    Parent company

    Consolidated

    Main Executives

    73

    370

    Professionals and technicians

    228

    2,000

    Workers

    38

    5,472

    Total

    339

    7,842

     

    Number of employes

     

    Parent company

    Consolidated

    Senior Executives

    10

    16

    Managers and Deputy Managers

    79

    400

    Other employees

    276

    7,770

    Total

    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 indirect

    Tax ID

    Country of origin

    Functional currency

    Share percentage direct and indirect

    As of December 31, 2014

    As of December 31, 2013

    As of December 31, 2016

    As of December 31, 2015

    Direct

    Indirect

    Total

    Total

    Direct

    Indirect

    Total

    Total

    Cervecera CCU Chile Limitada

    96,989,120-4

    Chile

    Chilean pesos

    99.7500

    0.2499

    99.9999

    99.9999

    96,989,120-4

    Chile

    Chilean Pesos

    99.7500

    0.2499

    99.9999

    99.9999

    Embotelladora Chilenas Unidas S.A.(3)

    99,501,760-1

    Chile

    Chilean pesos

    96.8309

    3.1124

    99.9433

    99.9415

    99,501,760-1

    Chile

    Chilean Pesos

    99.0670

    0.9164

    99.9834

    99.9338

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

    0-E

    Argentina

    Argentine pesos

    -

    99.9923

    99.9907

    0-E

    Argentina

    Argentine pesos

    -

    99.9923

    99.9923

    Viña San Pedro Tarapacá S.A.

    91,041,000-8

    Chile

    Chilean pesos

    -

    64.6980

    64.6974

    Viña San Pedro Tarapacá S.A. (*)

    91,041,000-8

    Chile

    Chilean Pesos

    -

    64.6980

    64.6980

    Compañía Pisquera de Chile S.A.

    99,586,280-8

    Chile

    Chilean pesos

    46.0000

    34.0000

    80.0000

    80.0000

    99,586,280-8

    Chile

    Chilean Pesos

    46.0000

    34.0000

    80.0000

    80.0000

    Transportes CCU Limitada

    79,862,750-3

    Chile

    Chilean pesos

    98.0000

    2.0000

    100.0000

    100.0000

    79,862,750-3

    Chile

    Chilean Pesos

    98.0000

    2.0000

    100.0000

    100.0000

    CCU Investments Limited

    0-E

    Islas Cayman

    Chilean pesos

    99.9999

    0.0001

    100.0000

    100.0000

    0-E

    Cayman Islands

    Chilean Pesos

    99.9999

    0.0001

    100.0000

    100.0000

    Inversiones INVEX DOS CCU Limitada

    76,126,311-0

    Chile

    Chilean pesos

    99.0000

    0.9997

    99.9997

    99.9997

    Inversiones INVEX CCU DOS Limitada

    76,126,311-0

    Chile

    Chilean Pesos

    99.8516

    0.1484

    100.0000

    99.9999

    CRECCU S.A.

    76,041,227-9

    Chile

    Chilean pesos

    99.9602

    0.0398

    100.0000

    100.0000

    76,041,227-9

    Chile

    Chilean Pesos

    99.9602

    0.0398

    100.0000

    100.0000

    Fábrica de Envases Plásticos S.A.

    86,150,200-7

    Chile

    Chilean pesos

    90.9100

    9.0866

    99.9966

    99.9966

    86,150,200-7

    Chile

    Chilean Pesos

    90.9100

    9.0866

    99.9966

    99.9966

    Southern Breweries Establishment

    0-E

    Vaduz-Liechtenstein

    Chilean pesos

    50.0000

    49.9553

    99.9553

    99.9951

    Southern Breweries Limited (5)

    0-E

    Cayman Islands

    Chilean Pesos

    61.2146

    38.7804

    99.9950

    99.9553

    Comercial CCU S.A.

    99,554,560-8

    Chile

    Chilean pesos

    50.0000

    49.9866

    99.9866

    99.9862

    99,554,560-8

    Chile

    Chilean Pesos

    50.0000

    49.9866

    99.9866

    99.9866

    CCU Inversiones S.A. (1)

    76,593,550-4

    Chile

    Chilean pesos

    98.8398

    1.1334

    99.9732

    99.9724

    76,593,550-4

    Chile

    Chilean Pesos

    98.8398

    1.1339

    99.9737

    99.9732

    Millahue S.A.

    91,022,000-4

    Chile

    Chilean pesos

    99.9621

    -

    99.9621

    99.9621

    91,022,000-4

    Chile

    Chilean Pesos

    99.9621

    -

    99.9621

    99.9621

    Aguas CCU-Nestlé Chile S.A. (2)(1)

    76,007,212-5

    Chile

    Chilean pesos

    -

    50.0716

    50.0707

    76,007,212-5

    Chile

    Chilean Pesos

    -

    50.0669

    50.0669

    CCU Inversiones II Limitada (3)(2)

    76,349,531-0

    Chile

    Chilean pesos

    80.0000

    19.9946

    99.9946

    99.9946

    76,349,531-0

    Chile

    Chilean Pesos

    98.6709

    1.3290

    99.9999

    99.9946

    Compañía Cervecera Kunstmann S.A. (4)

    96,981,310-6

    Chile

    Chilean pesos

    50.0007

    -

    50.0007

    50.0007

    96,981,310-6

    Chile

    Chilean Pesos

    50.0007

    -

    50.0007

    50.0007

    Inversiones INVEX TRES Limitada

    76,248,389-0

    Chile

    Chilean pesos

    99.0000

    0.9884

    99.9884

    99.9997

    76,248,389-0

    Chile

    Chilean Pesos

    99.0000

    0.9884

    99.9884

    99.9884

    Milotur S.A.

    0-E

    Uruguay

    Uruguayan pesos

    100.0000

    -

    100.0000

    100.0000

    Coralina S.A.

    0-E

    Uruguay

    Uruguayan pesos

    100.0000

    -

    100.0000

    100.0000

    Marzurel S.A.

    0-E

    Uruguay

    Uruguayan pesos

    100.0000

    -

    100.0000

    100.0000

    Bebidas del Paraguay S.A. (2)

    0-E

    Paraguay

    Paraguayan guarani

    50.0050

    -

    50.0050

    50.0050

    Distribuidora del Paraguay S.A. (2)

    0-E

    Paraguay

    Paraguayan guarani

    49.9590

    -

    49.9590

    49.9590

    Los Huemules S.R.L.

    0-E

    Argentina

    Argentine pesos

    -

    75.4931

    26.9680

    Bebidas Ecusa SpA. (3)

    76,517,798-7

    Chile

    Chilean Pesos

    -

    99.9338

    99.9338

     

     

     

     

     

     

     

     

     

     

     

    (*)PublicF-C12ompany.

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    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, 20142016 and December 31, 2013,2015, 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 rights

    Tax ID

    Country of origin

    Functional currency

    Share percentage with voting rights

    As of December 31, 2014

    As of December 31, 2013

    As of December 31, 2016

    As of December 31, 2015

    %

    %

    Cervecera CCU Chile Limitada

    96,989,120-4

    Chile

    Chilean pesos

    100.0000

    96,989,120-4

    Chile

    Chilean Pesos

    100.0000

    Embotelladora Chilenas Unidas S.A.(3)

    99,501,760-1

    Chile

    Chilean pesos

    99.9444

    99.9426

    99,501,760-1

    Chile

    Chilean Pesos

    99.9834

    99.9338

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

    0-E

    Argentina

    Argentine pesos

    100.0000

    0-E

    Argentina

    Argentine pesos

    100.0000

    Viña San Pedro Tarapacá S.A.

    91,041,000-8

    Chile

    Chilean pesos

    64.6980

    64.7153

    91,041,000-8

    Chile

    Chilean Pesos

    64.6980

    Compañía Pisquera de Chile S.A.

    99,586,280-8

    Chile

    Chilean pesos

    80.0000

    99,586,280-8

    Chile

    Chilean Pesos

    80.0000

    Transportes CCU Limitada

    79,862,750-3

    Chile

    Chilean pesos

    100.0000

    79,862,750-3

    Chile

    Chilean Pesos

    100.0000

    CCU Investments Limited

    0-E

    Islas Cayman

    Chilean pesos

    100.0000

    0-E

    Cayman Islands

    Chilean Pesos

    100.0000

    Inversiones INVEX DOS CCU Limitada

    76,126,311-0

    Chile

    Chilean pesos

    100.0000

    Inversiones INVEX CCU DOS Limitada

    76,126,311-0

    Chile

    Chilean Pesos

    100.0000

    CRECCU S.A.

    76,041,227-9

    Chile

    Chilean pesos

    100.0000

    76,041,227-9

    Chile

    Chilean Pesos

    100.0000

    Fábrica de Envases Plásticos S.A.

    86,150,200-7

    Chile

    Chilean pesos

    100.0000

    86,150,200-7

    Chile

    Chilean Pesos

    100.0000

    Southern Breweries Establishment

    0-E

    Vaduz-Liechtenstein

    Chilean pesos

    100.0000

    Southern Breweries Limited (5)

    0-E

    Cayman Islands

    Chilean Pesos

    100.0000

    Comercial CCU S.A.

    99,554,560-8

    Chile

    Chilean pesos

    100.0000

    99,554,560-8

    Chile

    Chilean Pesos

    100.0000

    CCU Inversiones S.A. (1)

    76,593,550-4

    Chile

    Chilean pesos

    99.9737

    99.9728

    76,593,550-4

    Chile

    Chilean Pesos

    99.9737

    Millahue S.A.

    91,022,000-4

    Chile

    Chilean pesos

    99.9621

    91,022,000-4

    Chile

    Chilean Pesos

    99.9621

    Aguas CCU-Nestlé Chile S.A. (2)(1)

    76,007,212-5

    Chile

    Chilean pesos

    50.1000

    76,007,212-5

    Chile

    Chilean Pesos

    50.1000

    CCU Inversiones II Limitada (3)(2)

    76,349,531-0

    Chile

    Chilean pesos

    100.0000

    76,349,531-0

    Chile

    Chilean Pesos

    100.0000

    Compañía Cervecera Kunstmann S.A. (4)

    96,981,310-6

    Chile

    Chilean pesos

    50.0007

    96,981,310-6

    Chile

    Chilean Pesos

    50.0007

    Inversiones INVEX TRES Limitada

    76,248,389-0

    Chile

    Chilean pesos

    100.0000

    76,248,389-0

    Chile

    Chilean Pesos

    100.0000

    Milotur S.A.

    0-E

    Uruguay

    Uruguayan pesos

    100.0000

    Coralina S.A.

    0-E

    Uruguay

    Uruguayan pesos

    100.0000

    Marzurel S.A.

    0-E

    Uruguay

    Uruguayan pesos

    100.0000

    Bebidas del Paraguay S.A. (2)

    0-E

    Paraguay

    Paraguayan guarani

    50.0050

    Distribuidora del Paraguay S.A. (2)

    0-E

    Paraguay

    Paraguayan guarani

    49.9590

    Los Huemules S.R.L.

    0-E

    Argentina

    Argentine pesos

    100.0000

    24.9680

    Bebidas Ecusa SpA. (3)

    76,517,798-7

    Chile

    Chilean Pesos

    99.9338

     

     

     

     

     

     

    As explained inNote 8, on September 2012, the Company acquired 100% of shares of Marzurel S.A., Milotur S.A. and Coralina S.A.,which are Uruguayan companies and develop the mineral waters and soft drinks business in that country and in December 2013, the Company acquired 50.005% and 49.96% of shares of Paraguayan companies Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A., respectively.

    On May 2014, the Company acquired 34% of shares of Bolivian company Bebidas Bolivianas S.A. (Note 19). 

     

    The main movements in the ownership of the subsidiaries included in these consolidated financial statements are the following:

    (1)  CCU Inversiones S.A.

    On September and November, 2012, the Company, through its subsidiary CCU Inversiones S.A., acquired an additional 10.4430% interest in Viña San Pedro Tarapacá S.A. for ThCh$ 12,521,899 increasing its ownership interest to 60.4488%. Subsequently, during 2013, acquired an additional 4.2664% interest for ThCh$ 5,627,425 increasing its ownership interest to 64.7153%. As the Company has control of this subsidiary, the difference of ThCH$ 7,254,957 and ThCh$ 2,527,217 generated between purchase price and the equity method value was recorded under the item Other reserves in Equity in 2012 and 2013, respectively.

     

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

     

    As explained inNote 8, on December 24, 2012,On January 29, 2016  the Company, through the subsidiarysubsidiaries Aguas CCU-Nestlé Chile S.A., (“Aguas”) and Embotelladoras Chilenas Unidas S.A. (“ECUSA”) have acquired 51%48.07% and 0.92% of the shares of Manantial S.A. for(“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$ 9,416,524. Manantial S.A. isa Chilean company that specializes in purified water in bottlesfor home and office, use through dispensers referred to internationally as HOD (Home and Office Delivery). Subsequently, on June 7, 2013, the Company paid the outstanding balance of ThCh$ 1,781,909.

    19,111,686.

     

    F-13



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    (3)(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 acquiredparticipates 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 called Bebidas 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 Cervecera KunstmannCervecerías Unidas Argentina S.A.

     

    On September 27, 2012,January 7, 2016, throgh the argentinian subsidiary Compañía Industrial Cervecera S.A. (CICSA), the Company throughacquired 50.99% of the subsidiary Cervecera Kunstmann S.A., acquired 49% ofstock rights of Los Huemules S.R.L. for ThCh$ 271,843.SRL, after Mr. Juan Javier Negri declared its commitment character of CICSA and notified such situation to Los Huemules S.R.L. isan Argentinian company that specializes in gastronomic services.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.


    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.

     

    AtDecemberOnDecember 31, 2014,2016, Promarca S.A. recorded a profit of ThCh$ 4,646,6204,812,696 (ThCh$ 4,540,3354,708,318 in 20132015 and ThCh$ 3,976,9434,646,620 in 2012)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 Value

    ThCh$

    Intangible assets other than goodwill

    11,229,149

    Total non-current assets

    11,229,149

    Total Assets

    11,229,149

    Deferred tax liabilities

    3,029,909

    Total current liabilities

    3,029,909

    Net identifiable assets acquired

    8,199,240

    Amount 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. The total cost of this transaction as of December 31, 2011, was ThCh$ 4,721,741 and the total disbursement was ThCh$ 2,456,489. On December 2, 2013the Company proceeded to pay outstanding balance of ThCh$ 1,529,715.

     

    AtOn December 31, 2014,2015, CPB recorded a profit of ThCh$ 82,663 (ThCh$ 109,207 (ThCh$ 133,635 in 2013 and ThCh$ 85,140 in 2012)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, formed a new company called Bebidas CCU-PepsiCo SpA (BCP), was incorporated, which is definingqualifies as an arrangementjoint 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.

     

    AtOn December 31, 2014,2016, 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.


    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 Value

    ThCh$

    Cash and cash equivalent

    1

    Total current assets

    1

    Intangible assets other than goodwill

    15,495,163

    Total non-current assets

    15,495,163

    Total Assets

    15,495,164

    Deferred tax liabilities

    4,181,760

    Total current liabilities

    4,181,760

    Net identifiable assets

    11,313,404

    Non-controlling interests

    (5,656,702)

    Goodwill

    16,189,798

    Amount 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 of ThCh$ 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 31.12.2015

    ThCh$

    ThCh$

    ThCh$

    Other non-financial assets

     

    27,067,454

    (21,846,500)

    5,220,954

    Intangible assets other than goodwill

     

    64,120,426

    7,747,581

    71,868,007

    Goodwill

     

    83,300,573

    16,189,799

    99,490,372

     

     

     

     

     

         

    Non-current liabilities

    Balances presented at 12.31.2015

    Reclassification

    Balances 31.12.2015

    ThCh$

    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.

     

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

     

    The companies mentioned above (letter a), b) and c) 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.

     

    F-14


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 2Summary of significant accounting policies

     

     Significant accounting policies adopted for the preparation of these consolidated financial statements are described below:

    2.1        Basis 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, 20142016, 2015 and December 31, 2013,2014, Statement of changes in Equity, Statement of Income, Statement of Comprehensive Income and Statement of Cash Flow for the years ended December 31, 2014, 2013 and 2012.2016, 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 revaluationsubsequent 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 3 for 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 during the financial year 2014 and the Company has adopted and implementedpublished. These standards are required to be applied as appropriate. These were made mandatory from the following dates:following:

     

    NextNew Standards, Amendments, Improvementsand AmendmentsInterpretations

    Mandatory for years beginning in:

    Amendments to IAS 327

    Offsetting financial Assets and Financial LiabilitiesDisclosure Initiative.

    January, 1, 20142017

    Amendments to IAS 12

    Recognition of Deferred Tax Assets for Unrealised Losses.

    January, 1, 2017

    Improvement to IFRS 12

    Disclosure of Interest in Other Entities.

    January, 1, 2017

    Amendments to IFRS 10, IFRS 12 and IAS 272

    Investment entitiesClassification and Measurement of Share-based Payment Transactions.

    January, 1, 20142018

    IFRIC Interpretation 22

    Foreign Currency Transactions and Advance Consideration.

    January, 1, 2018

    Amendments to IAS 3640

    Recoverable amount Disclosures for non-financial assetsTransfers of Investment Property.

    January, 1, 20142018

    IFRIC 21Improvement to IAS 28

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

    January, 1, 20142018

    Amendments to IAS 39IFRS 9

    Novation of derivatives and continuation of hedge accountingFinancial Instruments.

    January, 1, 20142018

    Amendments to IAS 19IFRS 15

    Defined benefit plans: employee contributionsRevenue fro Contracts with Customers.

    January, 1, 20142018

    Improvement IFRS 215

    Definition of vesting conditionClarifications to IFRS 15 Revenue fro Contracts with Customers.

    JulyJanuary, 1, 20142018

    Improvement IFRS 3

    Accounting for contingent consideration in a business combination

    July 1, 2014

    Improvement IFRS 8

    Aggregation of operating segments - Reconciliation of the total of the reportable segments' assets to the entity's assets

    July 1, 2014

    Improvement IFRS 13

    Fair value measurement

    July 1, 2014

    Improvement IAS 16

    Revaluation method - proportionate restatement of accumulated depreciationLeases.

    JulyJanuary, 1, 2014

    Improvement IAS 24

    Related party disclosures

    July 1, 2014

    Improvement IAS 38

    Revaluation method - proportionate restatement of accumulated amortization

    July 1, 2014

    Improvement IFRS 1

    Meaning of "effective IFRSs"

    July 1, 2014

    Improvement IFRS 3

    Scope exceptions for joint ventures

    July 1, 2014

    Improvement IFRS 13

    Scope of paragraph 52

    July 1, 2014

    Improvement IAS 40

    Clarifying the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner - occupied property

    July 1, 20142019

     

     

     

     

    The adoption

    As of theseDecember 31, 2016, the company is in the process of evaluating the impact of adopting the IFRS 9, IFRS 15 and IFRS 16. These standards had no significantwill 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.

    F-15statements upon initial application.

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    At the date of issuance of these consolidated financial statements the following IFRS Amendments, Improvements and Interpretations to the existing standards have been published, which are not yet effective and the Company has not adopted earlier application:  

    Next Standards Improvements and Amendments

    Mandatory for years beginning in:

    Amendments to IFRS 11

    Accounting for acquisitions of interests in joint operations

    January 1,2016

    Amendments to IAS 16 and IAS 38

    Clarification of acceptable methods of depreciation and amortisation

    January 1, 2016

    Amendments to IAS 16 and IAS 41

    Agriculture: bearer plants

    January 1, 2016

    Amendments to IAS 27

    Equity method in separate financial statements

    January 1, 2016

    Amendments to IFRS 10 and IAS 28

    Sale or contribution of assets between an investor and its associate or joint venture

    January 1, 2016

    Improvement IFRS 7

    Servicing contracts - applicability of the amendments to IFRS 7 to condensed interim financial statements

    January 1, 2016

    Improvement IFRS 19

    Discount rate: regional market issue

    Januay 1, 2016

    Improvement IAS 34

    Disclosure of information elsewhere in the interim financial report

    January 1, 2016

    IFRS 14

    Regulatory deferral accounts

    January 1, 2016

    Improvement IFRS 5

    Changes in methods of disposal

    January 1, 2016

    Amendments to IFRS 10, IFRS 12 and IAS 28

    Investment Entities: Applying the Consolidated Exception

    January 1, 2016

    Amendments IAS 1

    Disclosure Initiative

    January 1, 2016

    IFRS 15

    Revenue from Contracts with Customers

    January 1, 2017

    IFRS 9

    Financial Instruments

    January 1, 2018

    The Company estimates that the adoption of the Standards, Amendments and Interpretations as described above will not have a material impact on the consolidated financial statements upon initial application.

    2.2        Basis 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 the assets, 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’subsidiaries accounting policies are amended to ensure uniformity with the policies adopted by the Company.

    F-16


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

     

    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 for 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.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    2.3        Financial information as peroperating operating segments

     

    The Company has defined three Operatingoperating segments which are essentially defined with respect to its revenues in the geographic areas of commercial activity: 1.- Chile, 2.- Río de la PlataInternational business and 3.- Wine.      Until December 31, 2013, the The Company reported three reportable segments within which identified six Operating segments and has restated the corresponding segment information from previous periods, according to IFRS 8.

    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 maker in order to make decisions about the resources to be allocated to the segment and assess its performance(SeeNote 7)7).

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

     

    The companyCompany defined the Adjusted Operating Result as the Income (loss)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 ROADA,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 segment.

    F-17

    other.

     

    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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.

     


    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 ofDecember2014, 2013 and 2012 areofDecember 31, 2016, 2015 y 2014are as follows:

     

    Chilean Pesos as per unit of foreign currency or adjustable unit

    Chilean Pesos as per unit of foreign currency or adjustable unit

    As of December 31, 2014

    As of December 31, 2013

    As of December 31, 2012

    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, 2014

    Ch$

    Ch$

    Ch$

    Foreign currencies

     

     

     

     

     

    US Dollar

    USD

     

    606.75

    524.61

    479.96

    US Dollar

    USD

    669.47

    710.16

    606.75

    Euro

    EUR

     

    738.05

    724.30

    634.45

    EUR

    705.60

    774.61

    738.05

    Argentine Peso

    ARG

     

    70.96

    80.45

    97.59

    ARG

    42.13

    54.46

    70.96

    Uruguayan Peso

    UYU

     

    24.90

    24.49

    25.12

    UYU

    22.82

    23.71

    24.90

    Canadian Dollar

    CAD

     

    522.88

    492.68

    482.27

    Sterling Pound

    GBP

     

    944.21

    866.41

    775.76

    GBP

    826.10

    1,053.02

    944.21

    Paraguayan guarani

    PYG

     

    0.13

    0.11

    PYG

    0.12

    0.12

    0.13

    Bolivians

    BS

     

    88.45

    76.47

    525.52

    BS

    97.59

    103.67

    88.45

    Colombian Peso

    COP

    0.22

    0.22

    0.25

    Adjustment Units

     

     

     

     

     

     

    Unidad de fomento

    UF

     

    24,627.10

    23,309.56

    22,840.75

    Unidad 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.

     

    F-18


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    2.5        Cash 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.

    2.7        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.

     

    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:

    Financial assets at fair value through profit and loss

    These assets are valued at fair value and the income or losses originated by the fair value variation are recognized in the Consolidated Statement of Income.

    The assets at fair value through profit and loss include financial assets classified as held for trading by the Company. Financial assets are classified as held for trading when acquired with the purpose of selling them within a short term. Derivative instruments are classified as held for trading unless they are classified as hedge instruments.

     

    Accounts receivable

     

    Trade receivable credits or accounts are recognized according to their invoice value.

     


    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 differentiateddifferent 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 valuedmeasured 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.

     

    F-19


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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 as of the date of the agreement and subsequently revalued at their fair value as of the date of the financial statements.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 qualifies is designated and is effective 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 fair value or in theininception  cash flows of the hedged item. A hedge is considered effective when changes in the fair value or 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%.

     

    Derivative instruments classified as hedges are accounted for as cash flow hedges.


    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 effect on resultsineffective 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 document.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. However, from December 31, 2012, suchSuch 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 sight,demand, with the original documentinvoice and the return of the respective bottles and containers and it does not have adjustability or interest clauses of any kind in its origin.

     

    F-20


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    2.72.8         Financial 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.

    2.82.9        Inventories

    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 assetsforassets 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.


    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

     

    CostsUnder the Biological current assets, the Company includes the costs associated with agricultural activities (winery)(grapes), which are deferredcapitalized up to the harvest date, at which time they become part of inventory cost for subsequentsubsequents processes. The Company considers that the costs associated with agricultural activities represent a reasonable approximation to fair value.

    2.92.11      Other non-financial assets

     

    Other non-financial assets mainly include disbursementsincludes advance payments associated with advertising related to commercial advertising preparation that iscontracts regarding the making of commercials which are work in process but hasprogress 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 equipmentequipment. Additionally it includes disbursements related to supplierstax payments to be recovered from subsidiaries in Argentina, guarantees paid related with leases and current and non-current advertising agreements.materials to be consumed related to industrial security tools.

    2.102.12      Property, 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.

     

    F-21


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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 years

    Land

    Indefinite

    Buildings and Constructions

    20 to 60

    Machinery and equipment

    10 to 25

    FurnitureFumiture and accessoriesaccesories

    5 to 10

    Other equipment (coolers and mayolicas)

    5 to 8

    Glass containers, and plastic containers

    3 to 12

    Vines in production

    30

     

     

     

    GainGains and 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.

     


    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 itemasset of Property,property, plant and equipment exceeds its recoverable amount, itthis is reduced immediately reduced to its recoverable amount (See(See Note 2.16).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.

    2.112.13      Leases

     

    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.

    2.122.14       Investment 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.

    2.13 Biological assets

    Biological assets held by Viña San Pedro Tarapacá S.A. (VSPT or the Company) 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. Agricultural production (grapes) resulting from the vines under production is valued at its cost value when harvested.

    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.

    F-22


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    The Company uses the amortized historical cost to value its biological assets, on the basis that management considers that it represents a reasonable approximation of fair value.

    2.142.15      Intangible 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 2.16).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.

     

    Research and development

    Research and development expenses are recognized in the period 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 2.16)2, 2.17).


    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.

    2.152.16      Goodwill

     

    Goodwill represents the excess of costthe consideration transferred the amount of a business combinationany non-controlling interes in the acquiree and the acquisition date fair vale of any previous equity interest in the acquiree over the Company’s share in the fair value of identifiablethe net idetificable assets liabilities and contingent liabilities as of the acquisition date,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)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.

    2.162.17      Impairment of non-financialnon 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.

    F-23


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

     

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

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    2.172.18      Assets 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.

    2.182.19      Income 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, which are Chile, Argentina, Uruguay and Paraguay.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.

     

    F-24


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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.

    2.192.20      Employees 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 valueby 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.

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    As of December 31, 2012, the actuarial gains and losses originated by the valuation of the liabilities subject to such plans, was recorded directly in the Consolidated Statement of Income. Additionally, at the same date, the financial cost related to severance indemnity was recorded under Cost of sales or Administrative expenses. Beginning January 1, 2013 due

    According to the amendment of IAS 19, (applied prospectively), the actuarial gains and losses are recognisedrecognized 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.

    2.202.21      Provisions

     

    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 29)28).

    2.212.22      Revenue 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.

     

    F-25


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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 eventcase of discrepancies between the commercial agreements and delivery conditions those established inIncoterms, the agreements shallfirst one will prevail.

    2.222.23      Commercial 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.


    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.

    2.232.24      Cost 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.

     

    2.242.25       Other 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.

    2.252.26       Distribution expenses

     

    Distribution costs include all the necessary costs to deliver products to clients.

    2.262.27      Administration 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.

     

    F-26


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    2.272.28      Environment 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.

     


    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 2.152, 2.16 and Note 21).

    •              The valuation of commercial trademarks to determine the existence of potential losses due to potential impairment (Note 2.142, 2.17 and Note 20).

    •              The assumptions used in the current calculation of liabilities and obligations to employees(Note 2.192, 2.20 and Note 31)30).

    •              Useful life of property, plant and equipment (Note 2.102, 2.12 and Note 22), biological assets (Note 2.13 and Note 25) and intangibles (Note 2.142, 2.15 and Note 20).

    •              The assumptions used for the calculation of fair value financial instruments(Note 2.62, 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 2.20,2, 2.10 and Note 29)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

     

    As ofDuring the year ended on December 31, 2014,2016, 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.

     

    F-27


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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.


    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 Argentina, Uruguay and Paraguay.foreign countries. The Company’s greatest exchange rate exposure is the variation of the Chilean peso as compared to the US Dollar, Euro, Sterling Pound, Argentine Peso, Uruguayan Peso, Paraguayan Guarani, Bolivian Peso and Guarani paraguayan.Colombian Peso.

     

    As of DecemberofDecember 31, 2014, we2016, the Company maintained in Chile foreign currency liabilitiesobligations amounting to CLP46,780 million (CLP46,598 millionThCh$ 49,694,209 (ThCh$ 49,785,548 in 2013)2015), mostly denominated in U.S. dollars. Obligations with financial institutionsUS Dollars. Foreign currency obligations (ThCh$ 6,352,391 in 2016 and bondsThCh$ 16,626,496 in foreign currency (CLP19,838 million2015) represent 4% (10% in 2014 and CLP21,618 million in 2013) represent 11% (9% in 2013)2015) of the total of suchOther financial liabilities. The remaining 89% (91%96% (90% in 2013)2015) is mainly denominated in inflation-indexed Chilean pesos.pesos (see inflation risk section). In addition, the Company maintains foreign currency assets for CLP57,086 million (CLP47,369 millionThCh$ 66,435,330 (ThCh$ 72,887,721 in 2013)2015) that mainly correspond to exports in accounts receivable.

     

    Regarding the Argentineforeign subsidiaries operations, the net exposure liabilityassets in US Dollars and other currencies amounts to ThCh$ 7,043,6483,806,184 (ThCh$ 9,412,0411,368,068 in 2013)2015).

    Regarding the Uruguayan subsidiaries operations, the net exposure liability in US Dollars and other currencies amounts to ThCh$ 2,016,054 (ThCh$ 466,519 in 2013).

     

    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, 2014,2016, the Company’s mitigate net asset exposure in foreign currencies in Chile, after the use of derivative instruments, is ana asset amounting to ThCh$ 2,588,0533,808,526 (liability ofamounting to ThCh$ 1,068,823757,256 in 2013)2015).

     

    OfAs of December 31, 2016,of the Company’s total sales, both in Chile Argentina and Uruguay,abroad, 8% (8% in 20132015 and 9%8% in 2012)2014) corresponds to export sales made in foreign currencies, mainly US Dollars Euro and Sterling PoundEuro and of the total costs 63% (54% in 2015 and 55% (57% in 2013 and 2012)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 pesosPesos, Uruguayan Pesos, Paraguayan guaranis,Guaranis, Bolivians and Uruguayan pesosColombian Pesos to Chilean Pesos with respect to assets, liabilities, income and expenses of its subsidiaries in Argentina, Uruguay and Paraguay.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, 2014,2016, the net investment in Argentineforeign subsidiaries, associated and joint ventures amounted to ThCh$ 90,604,760135,001,540, ThCh$ 8,249,048 and ThCh$ 35,449,038 respectively (ThCh$ 84,362,639133,554,918, ThCh$ 6,628,484 and ThCh$ 18,718,832 in 2013), Uruguay amounted to ThCh$ 14,539,508 (ThCh$ 8,815,230 in 2013) and in Paraguay amounted to
    ThCh$ 22,609,205 (ThCh$ 11,254,656 in 2013)2015).

    F-28

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Exchange rate sensitivity analysis

     

    The exchange rate differences effect recognized in the Consolidated Statement of Income for the periodyear ended as ofDecember 31, 2014,2016, 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 (ThCh$ 4,292,119 in 2013 and ThCh$ 1,002,839 in 2012)2014). Considering the exposure as ofDecember 31,, 2014, 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 (loss) after taxes of
    ThCh$ 289,448 (a loss of ThCh$ 58,687 in 2015 and a loss of ThCh$ 204,456 (income (loss) of ThCh$ 85,506  in 2013 and ThCh$ 234,606 in 2012)2014).

     

    Considering that approximately 8% of the Company’ sales relates to export sales carried out in Chile (8% in 2015 and 9%8% in 2013 and 2012 respectively)2014), in currencies different from the Chilean Peso, and that in Chile approximately 53% (53%63% (54% in 20132015 and 52%55% in 2012)2014) of the Company’s direct costs are indexed to the US Dollar and assuming that the Chilean Pesofunctional 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 income (loss)loss after taxes of ThCh$ 10,223,655 (income (loss) from13,908,457 (loss of ThCh$ 9,970,63110,380,193 in 20132015 and ThCh$ 8,965,35910,004,379 in 2012)2014).

     

    The Company can also be affected by the variation of the exchange rate of where the countries included in Río de la Plata Operating Segment (Argentina, Uruguay and Paraguay),foreign subsidiaries operate, since the result is converted to Chilean Pesos at the average rate of each month. The result of the operations in Río de la Plata Operating Segmentthe foreign subsidiaries during the year 20142016 were an income of ThCh$28,152,804 (ThCh $ 26,693,464 32,507,630 (ThCh$32,141,475 in 2013 andThCh $ 28,057,1632015 andThCh$ 29,235,462 in 2012)2014). Therefore, a depreciation (or appreciation) of 10% in the exchange rate of the Argentine and Uruguayan Peso, the UruguayanPeso and the Paraguayan Guarani against the Chilean Peso, would be a loss (income) before tax of ThCh$ 2,815,2503,250,763 (ThCh$ 2,790,8983,214,147 in 20132015 and ThCh$ 2,818,1892,923,546 in 2012)2014).

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    The net investment maintained in foreign subsidiaries, that operate in Argentina amountsassociated and joint ventures amounted to ThCh$ 90,604,760 as of December 31, 2014135,001,540, ThCh$ 8,249,048 and ThCh$ 35,449,038, respectively (ThCh$ 84,362,639133,554,918, ThCh$ 6,628,484 and ThCh$ 18,718,832 in 2013)2015). Assuming a 10% increase or decrease in the Argentine peso exchange rate as compared totheArgentine 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$ 9,060,47617,869,963 (ThCh$ 8,436,26416,655,069 in 2013)2015) recorded as a credit (charge) against Equity.

     

    The net investment maintained in subsidiaries that operate in Uruguay amounts to ThCh$ 14,539,508 as of December 31, 2014 (ThCh$ 8,815,230 in 2013). Assuming a 10% increase or decrease in the Uruguayan peso exchange rate as compared to the Chilean Peso, and maintaining constant all the rest of the variables, the increase (decrease) would hypothetically result in income (loss) of ThCh$ 1,453,951 recorded as a credit (charge) against Equity (ThCh$ 881,523 in 2013).

    The net investment maintained in subsidiaries that operate in Paraguay amounts to ThCh$ 22,609,205 as of December 31, 2014 (ThCh$ 11,254,656 in 2013). Assuming a 10% increase or decrease in the Uruguayan peso exchange rate as compared to the Chilean Peso, and maintaining constant all the rest of the variables, the increase (decrease) would hypothetically result in income (loss) of ThCh$ 2,260,921C (ThCh$ 1,125,466 in 2013) recorded as a credit (charge) against Equity.

    The companyompany 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 LIBORLondon Inter Bank Offer Rate (“LIBOR”) and Buenos Aires Deposits of Large Amount Rate (“BADLAR”) variable interest rate indexed obligations.

     

    As of December 31, 2014,2016, the Company had a total ThCh$ 13,690,98710,142,841 in debt indexed to LIBORvariable interest rates (ThCh$ 11,840,11720,206,608 in 2013)2015). Consequently, as of December 31, 2014,2016, the company’s financing structure is made up (without considering the effects of cross currency swaps effect) of approximately 7% (5%6% (12% in 2013)2015) in debt with variable interest rates, and 93% (95%94% (88% in 2013)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.

     

    F-29


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    As of December 31, 2014,2016, after considering the effect of interest rates and currency swaps, approximately 100% (100%97% (97% in 2013)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, 2014,2016, including exchange rates, interest rates, maturities and effective interest rates, are detailed inNote 2726.

     

    Interest rates sensitivity analysis

     

    The total financial expense recognized in the Consolidated Statement of Income for the twelve month ended as of December 31, 2014,2016, related to short-term and long-term debts amounted to ThCh$ 22,957,48220,307,238 (ThCh$ 24,084,22623,101,329 in 20132015 and ThCh$ 17,054,87922,957,482 in 2012)2014). AsAssuming a reasonably possible increase of December 31, 2014 we were 100% covered against100 bps in variable interest rate fluctuations (100% covered asrates and maintaining constant all the rest of December 31, 2013)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 allowsallow 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, 2014,2016, related to UF indexed short-term and long-term debt, and resulted in a loss ofofThCh$ 2,246,846 (ThCh$ 3,282,736 in 2015 and ThCh$ 4,159,131 (ThCh$  1,801,765 in 2013 and ThCh$ 5,057,807 in 2012)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$ 3,035,3713,065,645 (ThCh$ 2,999,4673,065,747 in 20132015 and ThCh$ 5,079,4543,035,371 in 2012)2014) in the Consolidated Statement of Income.


    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 2014,2016, the Company purchased 52,72013,914 tons (54,162(46,620 tons in 2013)2015) of barley and 37,31561,753 tons (32,203(53,890 tons in 2013)2015) of malt. CCU Argentina acquires mainly malt from local producers. Such raw materials represent approximately 7% (9% in 2015 and 12% (12% in 2013)2014) of the direct cost of Chile Operating segment.

     

    Of the cost of Chile Operating segment, the cost of cans represents approximately 12%15% of the direct cost (16%(12% in 2013)2015 and 12% in 2014). Meanwhile in Río de la Platathe International Business Operating segment the cans cost represent approximately 20%34% of the direct cost of raw materials in 2014 (22%2016 (30% in 2013)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% (27% in 2013)2014) of the direct cost of Chile Operating segment. The company does not engage in hedging the purchases of raw materials.

     

    F-30


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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. Approximately 23%For the last 12 months, approximately 26% (31% in 2013)2015) of the total wine of VSPT supply comes from its own vineyards. In the export business the own supply for 20142016 was 37% (37%40% (48% for 2013)2015).

     

    The remaining 77%74% (69% in 2013)2015) supply is purchased from third parties through.through long term and spot contracts. During 2014,2016, the subsidiary VSPT acquired 69%64% (55% in 2013)2015) of the necessary grapes and wine from third parties through spot contracts. itIt also acquired 8%11% of its grape needs in 20142016 from long term agreements (15%(14% in 2013)2015).

     

    AsWe must consider that as of December 31, 2014, we must consider that2016, the wine represents 59% (58%56% (57% in 2013)2015) of the total direct cost of VSPT.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 20142016 amounts to ThCh$ 433,749,832540,692,963 (ThCh$ 382,645,778485,391,583 in 20132015 and ThCh$ 361,570,855433,749,832 in 2012)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$ 21,875,40528,076,333 (ThCh$ 20,363,65324,078,370 in 20132015 and ThCh$ 18,419,28421,875,405 in 2012)2014) for Chile Operating segment, ThCh$5,925,786 8,089,082 (ThCh$ 5,421,4378,444,331 in 20132015 and ThCh$ 5,018,5565,925,786 in 2012)2014) for Río de la PlataInternational Business Operating segment, ThCh$ 6,414,0357,222,786 (ThCh$ 6,180,9516,736,734 in 20132015 and ThCh$ 6,553,854 2012)6,414,035 2014) for Wine Operating segment.


    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, 2014,2016, amounts to 89% (89%88% (88% in 2013)2015) of the total accounts receivable.

     

    Overdue but not impaired commercial accounts receivable corresponds to clients that show delays of less than 18.233 days (21 days in 2013)2015).

     

    As of December 31, 2014,2016, the Company had approximately 9041,078 clients (854(998 clients in 2013)2015) indebted in over Ch$ 10 million each that together represent approximately 86% (86%84% (85% in 2013)2015) of the total commercial accounts receivable. There were 195224 clients (184(217 clients in 2013)2015) with balances over Ch$ 50 million each, representing approximately 76% (76%74% (74% in 2013)2015) of the total accounts receivable. The 94% (95%91% (93% in 2013)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, 2014,2016, as a large percentage of these are covered by insurance.

     

    F-31


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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% (83%(89% in 2013)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, 2014,2016, there were 7276 clients (75(69 clients in 2013)2015) indebted for over ThCh$ 65,000 each, which represent 87% (87%91% (88% in 2013)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 (47(25 days in 2013)2015).

     

    The Company estimates that no loan risk provisions are necessary in addition to the individual and collective provisions determined as of December 31, 2014.2016. See analysis of accounts receivables maturities and losses due to impairment of accounts receivables (Note 1514).

     

    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, 2014.2016.

    Tax riskFinancial investments and derivative instruments

     

    Our businessesThe 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 taxed with different duties, particularly with excise taxes onnot exposed to significant risks of market. With respect to financial derivative instruments, these are valued at fair value and contracted only in the consumption of alcoholic and non-alcoholic beverages.Chilean market.

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    The Argentine excise tax is 8.7% for beer, and the Chilean excise tax is 20.5% for beer and wine, 31.5% for spirits, 18% for sugar content non alcoholic beverages and 10% for no sugar content non alcoholic beverages. An increase in the rate of these or any other tax could negatively affect our sales and profitability.

    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 maturities

    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

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Other financial liabilities no derivative

     

     

     

     

     

     

     

    Bank borrowings

    68,685,959

    8,567,124

    34,661,755

    31,604,772

    626,411

    -

    75,460,062

    Bond payable

    74,086,739

    1,108,143

    4,551,720

    13,401,920

    19,666,590

    56,878,538

    95,606,911

    Financial leases obligations

    17,716,869

    368,052

    1,050,810

    2,603,315

    2,305,704

    28,638,952

    34,966,833

    Deposits for return of bottles and containers

    13,015,723

    -

    13,015,723

    -

    -

    -

    13,015,723

    Sub-Total

    173,505,290

    10,043,319

    53,280,008

    47,610,007

    22,598,705

    85,517,490

    219,049,529

    Derivative

     

     

     

     

     

     

     

    Derivative financial instruments

    11,118,676

    11,118,676

    -

    -

    -

    -

    11,118,676

    Sub-Total

    11,118,676

    11,118,676

    -

    -

    -

    -

    11,118,676

    Total

    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 maturities

    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

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Other financial liabilities no derivative

     

     

     

     

     

     

     

    Bank borrowings

    76,050,091

    18,531,305

    30,981,974

    32,627,707

    3,135,314

    -

    85,276,300

    Bond payable

    74,508,233

    1,077,908

    4,529,040

    10,909,363

    17,346,078

    64,742,891

    98,605,280

    Financial leases obligations

    17,559,874

    418,380

    1,087,320

    2,709,603

    2,439,335

    28,871,228

    35,525,866

    Deposits for return of bottles and containers

    12,503,170

    -

    12,503,170

    -

    -

    -

    12,503,170

    Sub-Total

    180,621,368

    20,027,593

    49,101,504

    46,246,673

    22,920,727

    93,614,119

    231,910,616

    Derivative

     

     

     

     

     

     

     

    Hedging derivatives

    107,698

    61,543

    46,333

    -

    -

    -

    107,876

    Derivative financial instruments

    171,470

    167,701

    3,770

    -

    -

    -

    171,471

    Sub-Total

    279,168

    229,244

    50,103

    -

    -

    -

    279,347

    Total

    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 inF-Note 632.

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

    A summary of the Company’s financial liabilities with their maturities as of December 31, 2014 and 2013, based on the non-discounted contractual cash flows appears below:

    As of December 31, 2014

    Book value

    Contractual flows maturities

    Less than 1 year

    Between 1 and 5 years

    More than 5 years

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Other financial liabilities no derivative

     

     

     

     

     

    Bank borrowings

    95,822,149

    51,813,214

    52,789,648

    -

    104,602,862

    Bond payable

    73,937,639

    5,485,283

    23,204,531

    71,545,695

    100,235,509

    Financial leases obligations

    17,392,945

    1,681,160

    5,228,658

    28,911,336

    35,821,154

    Deposits for return of bottles and containers

    11,787,424  

    11,787,424

    -

    -

    11,787,424

    Sub-Total

    198,940,157

    70,767,081

    81,222,837

    100,457,031

    252,446,949

    Derivative financial liabilities

     

     

     

     

     

    Liability coverage

    228,376

    161,879

    (307,947)

    -

    (146,068)

    Derivative hedge liabilities

    684,317

    684,317

    -

    -

    684,317

    Sub-Total

    912,693

    846,196

    (307,947)

    -

    538,249

    Total

    199,852,850

    71,613,277

    80,914,890

    100,457,031

    252,985,198

    As of December 31, 2013

    Book value

    Contractual flows maturities

    Less than 1 year

    Between 1 and 5 years

    More than 5 years

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Other financial liabilities no derivative

     

     

     

     

     

    Bank borrowings

    80,971,892

    38,895,940

    50,142,798

    1,817,484

    90,856,222

    Bond payable

    153,032,487

    77,504,882

    24,887,830

    81,315,757

    183,708,469

    Financial leases obligations

    16,932,430

    1,744,243

    5,271,866

    28,476,487

    35,492,596

    Deposits for return of bottles and containers

    11,451,872

    11,451,872

    -

    -

    11,451,872

    Sub-Total

    262,388,681

    129,596,937

    80,302,494

    111,609,728

    321,509,159

    Derivative financial liabilities

     

     

     

     

     

    Liability coverage

    201,064

    137,151

    66,551

    -

    203,702

    Derivative hedge liabilities

    661,473

    661,473

    -

    -

    661,473

    Sub-Total

    862,537

    798,624

    66,551

    -

    865,175

    Total

    263,251,218

    130,395,561

    80,369,045

    111,609,728

    322,374,334

    View current and non-current book value inNote 6

    F-33


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

     

    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, 2014

    As of December 31, 2013

    As of December 31, 2016

    As of December 31, 2015

    Current

    Non current

    Current

    Non current

    Current

    Non current

    Current

    Non current

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash and cash equivalents

    214,774,876

    -

    408,853,267

    -

    133,789,950

    -

    192,554,239

    -

    Other financial assets

    6,483,652

    343,184

    4,468,846

    38,899

    8,406,491

    203,784

    13,644,105

    80,217

    Accounts receivable - trade and other receivable (net)

    238,602,893

    -

    211,504,047

    -

    280,766,784

    3,563,797

    252,225,937

    -

    Accounts receivable from related companies

    11,619,118

    522,953

    9,610,305

    350,173

    Acoounts receivable from related companies

    3,523,825

    356,665

    4,788,930

    445,938

    Total financial assets

    471,480,539

    866,137

    634,436,465

    389,072

    426,487,050

    4,124,246

    463,213,211

    526,155

    Bank borrowings

    49,137,896

    46,684,253

    33,193,852

    47,778,040

    39,079,561

    29,606,398

    27,714,998

    48,335,093

    Bonds payable

    3,029,425

    70,908,214

    74,432,086

    78,600,401

    3,250,023

    70,836,716

    3,155,239

    71,352,994

    Financial leases obligations

    518,139

    16,874,806

    612,491

    16,319,939

    215,950

    17,500,919

    321,416

    17,238,458

    Derivative hedge liabilities

    684,317

    -

    661,473

    -

    Liability coverage

    161,092

    67,284

    136,414

    64,650

    Derivative financial instruments

    11,118,676

    -

    171,470

    -

    Hedging derivatives

    -

    -

    107,698

    -

    Deposits for return of bottles and containers

    11,787,424

    -

    11,451,872

    -

    13,015,723

    -

    12,503,170

    -

    Total other non-financial liabilities (*)

    65,318,293

    134,534,557

    120,488,188

    142,763,030

    Total other non-financial liabililities (*)

    66,679,933

    117,944,033

    43,973,991

    136,926,545

    Account payable- trade and other payable

    203,782,805

    369,506

    183,508,115

    841,870

    259,677,852

    1,082,898

    227,736,803

    1,645,098

    Accounts payable to related entities

    10,282,312

    -

    7,286,064

    377,020

    9,530,071

    -

    11,624,218

    -

    Total financial liabilities

    279,383,410

    134,904,063

    311,282,367

    143,981,920

    335,887,856

    119,026,931

    283,335,012

    138,571,643

     

     

     

     

     

    (*) SeeNote 2726 - Other financial liabilities.

    F-34

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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, 2015

     

    Book Value

    Fair Value

    Book Value

    Fair Value

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash and cash equivalents

    133,789,950

    133,789,950

    192,554,239

    192,554,239

    Other financial assets

    8,610,275

    8,610,275

    13,724,322

    13,724,322

    Accounts receivable - trade and other receivable (net)

    284,330,581

    284,330,581

    252,225,937

    252,225,937

    Acoounts receivable from related companies

    3,880,490

    3,880,490

    5,234,868

    5,234,868

    Total financial assets

    430,611,296

    430,611,296

    463,739,366

    463,739,366

    Bank borrowings

    68,685,959

    69,668,649

    76,050,091

    77,380,452

    Bonds payable

    74,086,739

    81,769,096

    74,508,233

    80,087,449

    Financial leases obligations

    17,716,869

    30,154,204

    17,559,874

    29,104,078

    Derivative financial instruments

    11,118,676

    11,118,676

    171,470

    171,470

    Hedging derivatives

    -

    -

    107,698

    107,698

    Deposits for return of bottles and containers

    13,015,723

    13,015,723

    12,503,170

    12,503,170

    Total other non-financial liabililities (*)

    184,623,966

    205,726,348

    180,900,536

    199,354,317

    Account payable- trade and other payable

    260,760,750

    260,760,750

    229,381,901

    229,381,901

    Accounts payable to related entities

    9,530,071

    9,530,071

    11,624,218

    11,624,218

    Total financial liabilities

    454,914,787

    476,017,169

    421,906,655

    440,360,436

     

     

     

     

     

    a)(*) SeeComposition ofNote 26 - Other financial assets and liabilities:liabilities.

     

     

    As of December 31, 2014

    As of December 31, 2013

     

    Book Value

    Fair Value

    Book Value

    Fair Value

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash and cash equivalents

    214,774,876

    214,774,876

    408,853,267

    408,853,267

    Other financial assets

    6,826,836

    6,826,836

    4,507,745

    4,507,745

    Accounts receivable - trade and other receivable (net)

    238,602,893

    238,602,893

    211,504,047

    211,504,047

    Accounts receivable from related companies

    12,142,071

    12,142,071

    9,960,478

    9,960,478

    Total financial assets

    472,346,676

    472,346,676

    634,825,537

    634,825,537

    Bank borrowings

    95,822,149

    98,167,470

    80,971,892

    81,571,288

    Bonds payable

    73,937,639

    80,134,117

    153,032,487

    149,220,332

    Financial leases obligations

    17,392,945

    28,975,321

    16,932,430

    19,849,691

    Derivative hedge liabilities

    684,317

    684,317

    661,473

    661,473

    Liability coverage

    228,376

    228,376

    201,064

    201,064

    Deposits for return of bottles and containers

    11,787,424

    11,787,424

    11,451,872

    11,451,872

    Total other non-financial liabilities (*)

    199,852,850

    219,977,025

    263,251,218

    262,955,720

    Account payable- trade and other payable

    204,152,311

    204,152,311

    184,349,985

    184,349,985

    Accounts payable to related entities

    10,282,312

    10,282,312

    7,663,084

    7,663,084

    Total financial liabilities

    414,287,473

    434,411,648

    455,264,287

    454,968,789

     

     

     

     

     


    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, 2014

    Fair value with changes in income

    Cash and cash equivaletns and loans and accounts receivables

    Hedge derivatives

    Total

    ThCh$

    ThCh$

    Assets

     

     

    As of December 31, 2016

    Fair value with changes in income

    Cash and cash equivaletns and loans and accounts receivables

    Hedge derivatives

    Total

    ThCh$

    ThCh$

    Financial assets

     

     

    Derivative financial instruments

    5,467,620

    -

    343,184

    5,810,804

    479,492

    -

    309,237

    788,729

    Marketable securities and investments in other companies

    1,016,032

    -

    1,016,032

    7,821,546

    -

    7,821,546

    Total other financial assets

    6,483,652

    -

    343,184

    6,826,836

    8,301,038

    -

    309,237

    8,610,275

    Cash and cash equivalents

    -

    214,774,876

    -

    214,774,876

    -

    133,789,950

    -

    133,789,950

    Accounts receivable-trade and other receivables (net)

    -

    238,602,893

    -

    238,602,893

    -

    284,330,581

    -

    284,330,581

    Account receivable from to related companies

    -

    12,142,071

    -

    12,142,071

    -

    3,880,490

    -

    3,880,490

    Total

    6,483,652

    465,519,840

    343,184

    472,346,676

    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

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Financial liabilities

     

     

     

     

    Bank borrowings

    -

    -

    68,685,959

    68,685,959

    Bonds payable

    -

    -

    74,086,739

    74,086,739

    Financial leases obligations

    -

    -

    17,716,869

    17,716,869

    Deposits for return of bottles and containers

    -

    -

    13,015,723

    13,015,723

    Derivative financial instruments

    11,118,676

    -

    -

    11,118,676

    Total others financial liabililities

    11,118,676

    -

    173,505,290

    184,623,966

    Account payable- trade and other payable

    -

    -

    260,760,750

    260,760,750

    Accounts payable to related entities

    -

    -

    9,530,071

    9,530,071

    Total

    11,118,676

    -

    443,796,111

    454,914,787

     

    F-35

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    As of December 31, 2014

    Fair value with changes in income

    Hedge derivatives

    Financial liabilities measured at amortized cost

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Liabilities

     

     

     

     

    Bank borrowings

    -

    -

    95,822,149

    95,822,149

    Bonds payable

    -

    -

    73,937,639

    73,937,639

    Financial leases obligations

    -

    -

    17,392,945

    17,392,945

    Deposits for return of bottles and containers

    -

    -

    11,787,424

    11,787,424

    Derivative financial instruments

    684,317

    228,376

    -

    912,693

    Total others financial liabilities

    684,317

    228,376

    198,940,157

    199,852,850

    Account payable- trade and other payable

    -

    -

    204,152,311

    204,152,311

    Accounts payable to related entities

    -

    -

    10,282,312

    10,282,312

    Total

    684,317

    228,376

    413,374,780

    414,287,473

    As of December 31, 2015

    Fair value with changes in income

    Cash and cash equivaletns and loans and accounts receivables

    Hedge derivatives

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Financial assets

     

     

     

     

    Derivative financial instruments

    9,365,572

    -

    816,622

    10,182,194

    Marketable securities and investments in other companies

    3,542,128

    -

    -

    3,542,128

    Total other financial assets

    12,907,700

    -

    816,622

    13,724,322

    Cash and cash equivalents

    -

    192,554,239

    -

    192,554,239

    Accounts receivable-trade and other receivables (net)

    -

    252,225,937

    -

    252,225,937

    Account receivable from to related companies

    -

    5,234,868

    -

    5,234,868

    Total

    12,907,700

    450,015,044

    816,622

    463,739,366

     

    As of December 31, 2013

    Fair value with changes in income

    Cash and cash equivalents and loans and accounts receivables

    Hedge derivatives

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Assets

     

     

     

     

    Derivative financial instruments

    2,349,405

    -

    1,039,003

    3,388,408

    Marketable securities and investments in other companies

    1,119,337

    -

    -

    1,119,337

    Total other financial assets

    3,468,742

    -

    1,039,003

    4,507,745

    Cash and cash equivalents

    -

    408,853,267

    -

    408,853,267

    Accounts receivable-trade and other receivables (net)

    -

    211,504,047

    -

    211,504,047

    Account receivable from to related companies

    -

    9,960,478

    -

    9,960,478

    Total

    3,468,742

    630,317,792

    1,039,003

    634,825,537

    As of December 31, 2015

    Fair value with changes in income

    Hedge derivatives

    Financial libilities measured at amortized cost

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Financial liabilities

     

     

     

     

    Bank borrowings

    -

    -

    76,050,091

    76,050,091

    Bonds payable

    -

    -

    74,508,233

    74,508,233

    Financial leases obligations

    -

    -

    17,559,874

    17,559,874

    Deposits for return of bottles and containers

    -

    -

    12,503,170

    12,503,170

    Derivative financial instruments

    171,470

    107,698

    -

    279,168

    Total others financial liabililities

    171,470

    107,698

    180,621,368

    180,900,536

    Account payable- trade and other payable

    -

    -

    229,381,901

    229,381,901

    Accounts payable to related entities

    -

    -

    11,624,218

    11,624,218

    Total

    171,470

    107,698

    421,627,487

    421,906,655

     

    As of December 31, 2013

    Fair value with changes in income

    Hedge derivatives

    Financial liabilities measured at amortized cost

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Liabilities

     

     

     

     

    Bank borrowings

    -

    -

    80,971,892

    80,971,892

    Bonds payable

    -

    -

    153,032,487

    153,032,487

    Financial leases obligations

    -

    -

    16,932,430

    16,932,430

    Deposits for return of bottles and containers

    -

    -

    11,451,872

    11,451,872

    Derivative financial instruments

    661,473

    201,064

    -

    862,537

    Total others financial liabilities

    661,473

    201,064

    262,388,681

    263,251,218

    Account payable- trade and other payable

    -

    -

    184,349,985

    184,349,985

    Accounts payable to related entities

    -

    -

    7,663,084

    7,663,084

    Total

    661,473

    201,064

    454,401,750

    455,264,287

    F-36

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    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, 2014

    As of December 31, 2013

    As of December 31, 2016

    As of December 31, 2015

    Number agreements

    Nominal amounts thousand

    Asset

    Liability

    Number agreements

    Nominal amounts thousand

    Asset

    Liability

    Number of agreements

    Nominal amounts thousand

    Asset

    Liability

    Numberofagreements

    Nominal amounts thousand

    Asset

    Liability

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cross currency interest rate swaps UF/CLP

    -

    -

    1

    3,000

    1,000,104

    -

    Cross currency interest rate swaps CLP/USD

    1

    11,237

    53,743

    -

    -

    Less than a year

    -

    -

     

    3,000

    1,000,104

    -

    1

    11,237

    53,743

    -

    -

    -

    Cross interest rate swaps USD/USD

    2

    18,185

    -

    184,999

    2

    18,117

    9,351

    156,501

    -

    -

    1

    10,094

    -

    107,698

    Less than a year

     

    8,185

    -

    117,714

     

    117

    -

    91,851

    -

    -

    -

    -

    -

    10,094

    -

    107,698

    Between 1 and 5 years

     

    10,000

    -

    67,285

     

    18,000

    9,351

    64,650

    Cross currency interest rate swaps USD/EURO

    1

    4,499

    343,184

    43,377

    1

    4,476

    29,548

    44,563

    1

    7,889

    255,494

    -

    2

    12,353

    816,622

    -

    Less than a year

     

    63

    -

    43,377

     

    40

    -

    44,563

    -

    -

    51,710

    -

    -

    4,477

    736,405

    -

    Between 1 and 5 years

     

    4,436

    343,184

    -

     

    4,436

    29,548

    -

    -

    7,889

    203,784

    -

    -

    7,876

    80,217

    -

    Forwards USD

    30

    93,709

    5,467,620

    570,413

    20

    90,559

    2,202,537

    275,200

    29

    224,332

    359,254

    10,586,653

    27

    148,404

    9,276,156

    117,151

    Less than a year

     

    93,709

    5,467,620

    570,413

     

    90,559

    2,202,537

    275,200

    -

    224,332

    359,254

    10,586,653

    -

    148,404

    9,276,156

    117,151

    Forwards Euro

    8

    11,975

    -

    98,507

    10

    4

    143,749

    325,638

    10

    49,421

    109,164

    523,079

    7

    11,981

    57,834

    52,368

    Less than a year

     

    11,975

    -

     

    4

    143,749

    325,638

    -

    49,421

    109,164

    523,079

    -

    11,981

    57,834

    52,368

    Forwards CAD

    1

    (870)

    -

    1,622

    2

    1,850

    3,119

    9,651

    2

    1,480

    11,074

    7,720

    4

    1,500

    18,192

    1,951

    Less than a year

     

    (870)

    -

    1,622

     

    1,850

    3,119

    9,651

    -

    1,480

    11,074

    7,720

    -

    1,500

    18,192

    1,951

    Forwards GBP

    2

    (1,060)

    -

    13,775

    2

    1,500

    -

    50,984

    2

    700

    -

    1,224

    3

    865

    13,390

    -

    Less than a year

     

    (1,060)

    -

    13,775

     

    1,500

    -

    50,984

    -

    700

    -

    1,224

    -

    865

    13,390

    -

    Total derivative instruments

    44

     

    5,810,804

    912,693

    38

     

    3,388,408

    862,537

    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 classified;designation; consequently their effects are recorded in Income, in Other gains (losses), separately from the hedged item..

     

    F-37


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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 2726.

     

    As of December 31, 2014

    As of December 31, 2016

    As of December 31, 2016

    Entity

    Nature of risks covered

    Rights

    Obligations

    Fair value of net asset (liabilities)

    Maturity

    Nature of risks covered

    Rights

    Obligations

    Fair value of net asset (liabilities)

    Maturity

    Currency

    Amount

    Currency

    Amount

    Currency

    Amount

    Currency

    Amount

    ThCh$

    ThCh$

    Scotiabank

    Interest rate fluctuation in loans

    USD

    4,862,197

    USD

    4,870,405

    (8,208)

    06-22-2015

    Interest rate and exchange rate on bank bonds

    USD

    5,335,826

    EUR

    5,080,332

    255,494

    06-18-2018

    Banco de Chile

    Interest rate and exchange rate fluctuation in loans

    USD

    2,718,035

    EUR

    2,418,228

    299,807

    07-11-2016

    Interest rate on bank bonds

    CLP

    7,458,187

    USD

    7,404,444

    53,743

    07-03-2017

    Banco de Chile

    Interest rate and exchange rate fluctuation in loans

    USD

    6,128,148

    USD

    6,304,976

    (176,792)

    07-07-2016

     

     

     

     

     

     

     

     

     

     

     

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    As of December 31, 2015

    Entity

    Nature of risks covered

    Rights

    Obligations

    Fair value of net asset (liabilities)

    Maturity

    Currency

    Amount

    Currency

    Amount

    Amount

    ThCh$

    ThCh$

    ThCh$

    Scotiabank

    Interest rate and exchange rate in bank obligations

    USD

    5,700,299

    EUR

    5,589,172

    111,127

    06-18-2018

    Banco de Chile

    Interest rate and exchange rate on bank bonds

    USD

    3,205,865

    EUR

    2,500,370

    705,495

    07-11-2016

    Banco de Chile

    Interest rate on bank bonds

    USD

    7,227,245

    USD

    7,334,943

    (107,698)

    07-07-2016

     

     

     

     

     

     

     

     

     

    As of December 31, 2013

    Entity

    Nature of risks covered

    Rights

    Obligations

    Fair value of net asset (liabilities)

    Maturity

    Currency

    Amount

    Currency

    Amount

    Amount

    ThCh$

    ThCh$

    ThCh$

    Scotiabank

    Interest rate fluctuation in loans

    USD

    4,211,482

    USD

    4,207,536

    3,946

    06-22-2015

    Banco de Chile

    Interest rate and exchange rate fluctuation in loans

    USD

    2,368,588

    EUR

    2,383,602

    (15,014)

    07-11-2016

    Banco de Chile

    Interest rate fluctuation in loans

    USD

    5,340,215

    USD

    5,491,311

    (151,096)

    07-07-2016

    Banco de Chile

    Interest rate and exchange rate fluctuation in bond

    UF

    70,704,908

    CLP

    69,704,804

    1,000,104

    03-17-2014

     

     

     

     

     

     

     

     

    The Consolidated Statement of Other Comprehensive Income includes under the caption cash flow hedge, for the years endedDecemberended December 31,, 2014, 2013 and 2012, 2016, a debit aftercredit before income taxes of ThCh$ 155,258 (a credit after income taxes of84,962 (ThCh$ 80,693 and ThCh$ 256,592155,258, in 2015 and a debit of ThCh$ 826,120, in 2013 and 2012,2014, 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 hierarchy

    Level 1

    Level 2

    Level 3

    ThCh$

    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-38



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    The fair value of financial facilities recorded at fair value in the Consolidated Financial Statements, are as follows:

    As of December 31, 2014

    Recorded fair value

    fair value hierarchy

    level 1

    level 2

    level 3

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Derivative financial instruments

    5,467,620

    -

    5,467,620

    -

    Market securities and investments in other companies

    1,016,032

    1,016,032

    -

    -

    Derivative hedge assets

    343,184

    -

    343,184

    -

    Fair value financial assets

    6,826,836

    1,016,032

    5,810,804

    -

    Derivative hedge liabilities

    228,376

    -

    228,376

    -

    Derivative financial instruments

    684,317

    -

    684,317

    -

    Fair value financial liabilities

    912,693

    -

    912,693

    -

     

     

     

     

     

         

    As of December 31, 2013

    Recorded fair value

    fair value hierarchy

    level 1

    level 2

    level 3

    ThCh$

    ThCh$

    As of December 31, 2015

    Recorded fair value

    Fair value hierarchy

    Level 1

    Level 2

    Level 3

    ThCh$

    ThCh$

    Derivative financial instruments

    2,349,405

    -

    2,349,405

    -

    9,365,572

    -

    9,365,572

    -

    Market securities and investments in other companies

    1,119,337

    -

    -

    3,542,128

    -

    -

    Derivative hedge assets

    1,039,003

    -

    1,039,003

    -

    Hedging derivatives

    816,622

    -

    816,622

    -

    Fair value financial assets

    4,507,745

    1,119,337

    3,388,408

    -

    13,724,322

    3,542,128

    10,182,194

    -

    Derivative hedge liabilities

    201,064

    -

    201,064

    -

    Hedging derivatives

    107,698

    -

    107,698

    -

    Derivative financial instruments

    661,473

    -

    661,473

    -

    171,470

    -

    171,470

    -

    Fair value financial liabilities

    862,537

    -

    862,537

    -

    279,168

    -

    279,168

    -

     

     

     

     

     

    During year ended as ofDecember 31, 2014,2016, 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-39

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    Note 7Financial Information as per operating segments

    The Company has defined threeOperating 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 3. Wine. 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 each segmentthe 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 services

    Chile

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

    Río de la PlataInternational Business

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

    WineWines

    Wines, mainly in export markets to more 80 countries.

     

     

    Corporate revenues and expenses are presented separately within the Other, segment. Inin addition this segmentin 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-40



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    a)    Information as per Operatingoperating segments for the years ended as ofDecemberDecember 31, 20142016 and 2013:2015:

     

    Chile Operating segment

    Río de la Plata Operating segment

    Wine Operating segment

    Others

    Total

    Chile(4)

    International Business

    Wines

    Others(4)

    Total

    2014

    2013

    2014

    2013

    2014

    2013

    2014

    2013

    2014

    2013

    2016

    2015

    2016

    2015

    2016

    2015

    2016

    2015

    2016

    2015

    ThCh$

    ThCh$

    ThCh$

    Sales revenue external customers

    813,639,952

    751,079,523

    292,152,707

    274,029,865

    168,139,809

    146,938,005

    -

    1,273,932,468

    1,172,047,393

    973,220,715

    885,769,609

    366,778,056

    400,051,022

    195,322,270

    184,169,165

    -

    -

    1,535,321,041

    1,469,989,796

    Other income

    9,100,957

    8,560,450

    3,992,902

    7,405,658

    3,918,028

    4,524,947

    7,021,944

    4,688,062

    24,033,831

    25,179,117

    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

    28,381,919

    Sales revenue between segments

    7,600,483

    5,555,707

    3,522,074

    999,777

    290,716

    792,495

    (11,413,273)

    (7,347,979)

    -

    -

    8,524,493

    6,932,905

    546,972

    953,967

    228,767

    131,209

    (9,300,232)

    (8,018,081)

    -

    -

    Net sales

    830,341,392

    765,195,680

    299,667,683

    282,435,300

    172,348,553

    152,255,447

    (4,391,329)

    (2,659,917)

    1,297,966,299

    1,197,226,510

    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

    1,498,371,715

    Change %

    8.5

    -

    6.1

    -

    13.2

    -

    8.4

    -

    9.7

    -

    (8.8)

    -

    6.3

    -

    4.0

    -

    Cost of sales

    (383,558,625)

    (343,230,330)

    (136,174,602)

    (113,264,790)

    (97,523,601)

    (92,864,092)

    12,720,013

    12,662,578

    (604,536,815)

    (536,696,634)

    (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

    46.2

    44.9

    45.4

    40.1

    56.6

    61.0

    -

    46.6

    44.8

    47.2

    45.2

    42.6

    40.1

    56.1

    55.9

    -

    47.6

    45.7

    Gross margin

    446,782,767

    421,965,350

    163,493,081

    169,170,510

    74,824,952

    59,391,355

    8,328,684

    10,002,661

    693,429,484

    660,529,876

    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

    53.8

    55.1

    54.6

    59.9

    43.4

    39.0

    -

    53.4

    55

    52.8

    54.8

    57.4

    59.9

    43.9

    44.1

    -

    52.4

    54.3

    MSD&A (1)

    (317,765,235)

    (275,202,656)

    (154,299,739)

    (142,972,002)

    (50,284,131)

    (46,036,147)

    (13,253,897)

    (9,312,740)

    (535,603,002)

    (473,523,545)

    (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

    38.3

    36.0

    51.5

    50.6

    29.2

    30.2

    -

    41.3

    39.6

    37.4

    37.8

    51.7

    53.3

    25.8

    26.9

    -

    39.7

    40.9

    Other operating income (expenses)

    722,478

    1,385,111

    20,173,967

    1,038,067

    238,952

    (166,311)

    2,585,913

    1,991,965

    23,721,310

    4,248,832

    1,734,871

    626,889

    (394,820)

    3,315,892

    732,689

    44,823

    1,043,939

    217,706

    3,116,679

    4,205,310

    Operating result before Exceptional Items (EI)

    129,740,010

    148,147,805

    29,367,309

    27,236,575

    24,779,773

    13,188,897

    (2,339,300)

    2,681,886

    181,547,792

    191,255,163

    Change %

    (12.4)

    -

    7.8

    -

    87.9

    -

    (5.1)

    -

    % of Net sales

    15.6

    19.4

    9.8

    9.6

    14.4

    8.7

    -

    14.0

    16.0

    Exceptional Items (EI) (2)

    -

    (780,458)

    (1,214,505)

    (543,111)

    -

    (275,700)

    (412,995)

    (1,390,060)

    (1,627,500)

    (2,989,329)

    Operating result (3)

    129,740,010

    147,367,347

    28,152,804

    26,693,464

    24,779,773

    12,913,197

    (2,752,295)

    1,291,826

    179,920,292

    188,265,834

    Adjusted 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

    204,936,998

    Change %

    (12.0)

    -

    5.5

    -

    91.9

    -

    (4.4)

    -

    (0.5)

    -

    (31.2)

    -

    14.3

    -

    (2.1)

    -

    % of Net sales

    15.6

    19.3

    9.4

    9.5

    14.4

    8.5

    -

    13.9

    15.7

    15.5

    17.1

    5.6

    7.5

    18.5

    17.2

    -

    12.9

    13.7

    Net financial expense

    -

    (10,820,891)

    (15,830,056)

    -

    (14,627,170)

    (15,255,586)

    Equity and income of associates and joint ventures

    -

    (898,607)

    308,762

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

    -

    (5,560,522)

    (5,228,135)

    Foreign currency exchange differences

    -

    (613,181)

    (4,292,119)

    -

    456,995

    957,565

    Results as per adjustment units

    -

    (4,159,131)

    (1,801,765)

    -

    (2,246,846)

    (3,282,736)

    Other gains (losses)

    -

    4,036,939

    958,802

    -

    (8,345,907)

    8,512,000

    Income before taxes

     

    167,465,421

    167,609,458

    -

    -

    170,328,270

    190,640,106

    Income taxes

     

    (46,673,500)

    (34,704,907)

     -

    (30,246,383)

    (50,114,516)

    Net income for year

     

    120,791,921

    132,904,551

    -

    -

    140,081,887

    140,525,590

    Non-controlling interests

     

    14,553,471

    9,868,543

     -

    21,624,399

    19,717,455

    Net income attributable to equity holders of the parent

     

    106,238,450

    123,036,008

    -

    -

    118,457,488

    120,808,135

    Depreciation and amortization

    38,832,969

    37,534,253

    11,194,117

    9,957,053

    7,115,790

    7,238,886

    11,464,690

    9,516,304

    68,607,566

    64,246,496

    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

    81,566,802

    ORBDA before EI

    168,572,979

    185,682,058

    40,561,426

    37,193,628

    31,895,563

    20,427,783

    9,125,390

    12,198,190

    250,155,358

    255,501,659

    Change %

    (9.2)

    -

    9.1

    -

    56.1

    -

    (2.1)

    -

    % of Net sales

    20.3

    24.3

    13.5

    13.2

    18.5

    13.4

    -

    19.3

    21.3

    ORBDA (4)

    168,572,979

    184,901,600

    39,346,921

    36,650,517

    31,895,563

    20,152,083

    8,712,395

    10,808,130

    248,527,858

    252,512,330

    ORBDA (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

    286,503,800

    Change %

    (8.8)

    -

    7.4

    -

    58.3

    -

    (1.6)

    -

    2.0

    -

    (26.6)

    -

    10.4

    -

    (0.8)

    -

    % of Net sales

    20.3

    24.2

    13.1

    13.0

    18.5

    13.2

    -

    19.1

    21.1

    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).


    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)

    Total

     

    2015

    2014

    2015

    2014

    2015

    2014

    2015

    2014

    2015

    2014

     

    ThCh$

    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

    1,273,932,468

    Other 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

    24,033,831

    Sales 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

    1,297,966,299

      Change %

    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

    46.6

    Gross 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

    53.4

    MSD&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

    41.3

    Other 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

    23,721,310

    Adjusted 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

    181,547,792

      Change %

    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

    14.0

    Exceptional 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

    179,920,292

      Change %

    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

    14

    Net 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

    4,036,939

    Income before taxes

    -

    -

    -

    -

    -

    -

    -

    -

    190,640,106

    167,465,421

    Income taxes

     - - - - - - - -

    (50,114,516)

    (46,673,500)

    Net income for year

    -

    -

    -

    -

    -

    -

    -

    -

    140,525,590

    120,791,921

    Non-controlling interests

     - - - - - - - -

    19,717,455

    14,553,471

    Net income attributable to equity holders of the parent

    -

    -

    -

    -

    -

    -

    -

    -

    120,808,135

    106,238,450

    Depreciation 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

    68,607,566

    ORBDA 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

    250,155,358

    ORBDA (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

    248,527,858

      Change %

    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.Duringnature.During the year 2014, the Company has considered this result as asan Exceptional Items related to different restructuring process of Operating segments and for the year 2013, the Companyhas considered this result as an Exceptional items (EI) related to restructuring process which implied the early retirement of managers replaced internally, promotions and the sole and exceptional payments of incentives to the leaving and remaining personnel.operating segments.

    (3)    OperatingAdjusted operating result (For(for management purposes we have defined as earningsNet 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(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-41

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    b)c)  Information as perOperating segmentsFor 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 yearsfollowing tables:

    For the year ended as ofDecember 31, 20132015:

     

    Chile

    Others

     

    2015

    2015

     

    Previously reported

    Adjusted

    Tight

    Previously reported

    Adjusted

    Tight

     

    ThCh$

    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)

    1,700,951

    Sales 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

    217,706

    Adjusted 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)

    2,964,525

    ORBDA (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 2012:

     

    Chile Operating segment

    Río de la Plata Operating segment

    Wine Operating segment

    Others

    Total

     

    2013

    2012

    2013

    2012

    2013

    2012

    2013

    2012

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Sales revenue external customers

    751,079,523

    665,913,311

    274,029,865

    248,970,437

    146,938,005

    144,593,467

    -

    5

    1,172,047,393

    1,059,477,220

    Other income

    8,560,450

    6,364,664

    7,405,658

    4,777,057

    4,524,947

    4,642,408

    4,688,062

    428,545

    25,179,117

    16,212,674

    Sales revenue between segments

    5,555,707

    4,250,836

    999,777

    78,860

    792,495

    321,491

    (7,347,979)

    (4,651,187)

    -

    -

    Net sales

    765,195,680

    676,528,811

    282,435,300

    253,826,354

    152,255,447

    149,557,366

    (2,659,917)

    (4,222,637)

    1,197,226,510

    1,075,689,894

    Change %

    13.1

    -

    11.3

    -

    1.8

    -

    -

    -

    11.3

    -

    Cost of sales

    (343,230,330)

    (308,358,522)

    (113,264,790)

    (100,032,812)

    (92,864,092)

    (95,634,950)

    12,662,578

    10,939,037

    (536,696,634)

    (493,087,247)

    % of Net sales

    44.9

    45.6

    40.1

    39.4

    61.0

    63.9

    -

    -

    44.8

    45.8

    Gross margin

    421,965,350

    368,170,289

    169,170,510

    153,793,542

    59,391,355

    53,922,416

    10,002,661

    6,716,400

    660,529,876

    582,602,647

    % of Net sales

    55.1

    54.4

    59.9

    60.6

    39.0

    36.1

    -

    -

    55.2

    54.2

    MSD&A (1)

    (275,202,656)

    (231,695,795)

    (142,972,002)

    (126,048,966)

    (46,036,147)

    (43,175,330)

    (9,312,740)

    (4,322,674)

    (473,523,545)

    (405,242,765)

    % of Net sales

    36.0

    34.2

    50.6

    49.7

    30.2

    28.9

    -

    -

    39.6

    37.7

    Other operating income (expenses)

    1,385,111

    1,746,137

    1,038,067

    312,587

    (166,311)

    306,013

    1,991,965

    1,463,592

    4,248,832

    3,828,329

    Operating result before Exceptional Items (EI)

    148,147,805

    138,220,631

    27,236,575

    28,057,163

    13,188,897

    11,053,099

    2,681,886

    3,857,318

    191,255,163

    181,188,211

    Change %

    7.2

    -

    (2.9)

    -

    19.3

    -

    -

    -

    5.6

    -

    % of Net sales

    19.4

    20.4

    9.6

    11.1

    8.7

    7.4

    -

    -

    16.0

    16.8

    Exceptional Items (EI) (2)

    (780,458)

    -

    (543,111)

    -

    (275,700)

    -

    (1,390,060)

    -

    (2,989,329)

    -

    Operating result (3)

    147,367,347

    138,220,631

    26,693,464

    28,057,163

    12,913,197

    11,053,099

    1,291,826

    3,857,318

    188,265,834

    181,188,211

    Change %

    6.6

    -

    (4.9)

    -

    16.8

    -

    -

    -

    3.9

    -

    % of Net sales

    19.3

    20.4

    9.5

    11.1

    8.5

    7.4

    -

    -

    15.7

    17

    Net financial expense

    -

    -

    -

    -

    -

    -

    -

    -

    (15,830,056)

    (9,362,207)

    Equity and income of associates and joint ventures

    -

    -

    -

    -

    -

    -

    -

    -

    308,762

    (177,107)

    Foreign currency exchange differences

    -

    -

    -

    -

    -

    -

    -

    -

    (4,292,119)

    (1,002,839)

    Results as per adjustment units

    -

    -

    -

    -

    -

    -

    -

    -

    (1,801,765)

    (5,057,807)

    Other gains (losses)

    -

    -

    -

    -

    -

    -

    -

    -

    958,802

    (4,478,021)

    Income before taxes

     

     

     

     

     

     

     

     

    167,609,458

    161,110,230

    Income taxes

            

    (34,704,907)

    (37,133,330)

    Net income for year

     

     

     

     

     

     

     

     

    132,904,551

    123,976,900

    Non-controlling interests

            

    9,868,543

    9,544,167

    Net income attributable to equity holders of the parent

     

     

     

     

     

     

     

     

    123,036,008

    114,432,733

    Depreciation and amortization

    37,534,253

    33,285,317

    9,957,053

    7,022,680

    7,238,886

    6,566,207

    9,516,304

    7,885,916

    64,246,496

    54,760,120

    ORBDA before EI

    185,682,058

    171,505,948

    37,193,628

    35,079,843

    20,427,783

    17,619,306

    12,198,190

    11,743,234

    255,501,659

    235,948,331

    Change %

    8.3

    -

    6.0

    -

    15.9

    -

    -

    -

    8.3

    -

    % of Net sales

    24.3

    25.4

    13.2

    13.8

    13.4

    11.8

    -

    -

    21.3

    21.9

    ORBDA (4)

    184,901,600

    171,505,948

    36,650,517

    35,079,843

    20,152,083

    17,619,306

    10,808,130

    11,743,234

    252,512,330

    235,948,331

    Change %

    7.8

    -

    4.5

    -

    14.4

    -

    -

    -

    7.0

    -

    % of Net sales

    24.2

    25.4

    13.0

    13.8

    13.2

    11.8

    -

    -

    21.1

    21.9

     

     

     

     

     

     

     

     

     

     

     

    (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.For the year 2013, the Companyhas considered this result as an Exceptional items (EI) related to restructuring process which implied the early retirement of managers replaced internally, promotions and the sole and exceptional payments of incentives to the leaving and remaining personnel.

    (3)

    Operating result (For management purposes we have defined as earnings 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) in information as per Operating segment letter a).

    (4)

    ORBDA (For management purpose we have defined as Operating Result before Depreciation and Amortization).

     

    F-42

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    Sales information by geographic location

    Net sales per geographical location

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Chile

    991,938,043

    907,947,965

    813,918,521

    Argentina

    264,631,403

    279,342,525

    258,941,048

    Uruguay

    11,204,806

    9,936,020

    2,830,325

    Paraguay

    30,192,047

    -

    -

    Total

    1,297,966,299

    1,197,226,510

    1,075,689,894

    See distributionFor the year ended as of domestic and exports revenues in Note 9December 31, 2014:

     

     

    Chile

    Others

     

    2014

    2014

     

    Previously reported

    Adjusted

    Tight

    Previously reported

    Adjusted

    Tight

     

    ThCh$

    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)

    559,921

    Sales 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)

    2,458,269

    Adjusted 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)

    1,838,071

    ORBDA 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

    -

    -

    -

     

     

     

     

     

     

     

    Depreciation

    See definition of (1), (2), (3) and amortization(4) in information as peroperating segments

    Property, plant and equipment depreciation and amortization of software

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Chile Operating segment

    38,832,969

    37,534,253

    33,285,317

    Río de la Plata Operating segment

    11,194,117

    9,957,053

    7,022,680

    Wine Operating segment

    7,115,790

    7,238,886

    6,566,207

    Others (1)

    11,464,690

    9,516,304

    7,885,916

    Total

    68,607,566

    64,246,496

    54,760,120

    (1)Other includes depreciation and amortization corresponding to the Corporate Support Units and Strategic Service Units.

    F-43 Operating segment letter b).

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 20142016

     

    Capital expenditures as peroperating segments

    Capital expenditures (property, plant and equipment and software additions)

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Chile Operating segment

    85,904,965

    70,441,360

    52,724,178

    Río de la Plata Operating segment

    33,481,407

    29,779,226

    26,945,555

    Wine Operating segment

    12,686,080

    4,839,881

    9,137,730

    Others (1)

    98,007,700

    19,498,562

    28,838,059

    Total

    230,080,152

    124,559,029

    117,645,522

    (1)Other includes the capital investments corresponding to the Corporate Support Units and Strategic Service Units.

    Assets as peroperating segments

    Assets per segment

    As of December 31, 2014

    As of December 31, 2013

    ThCh$

    ThCh$

    Chile Operating segment

    653,728,891

    560,654,096

    Río de la Plata Operating segment

    275,037,618

    199,389,168

    Wine Operating segment

    297,145,081

    277,730,436

    Others (1)

    542,989,483

    689,946,555

    Total

    1,768,901,073

    1,727,720,255

    (1)Other includes goodwill and the assets corresponding to the Corporate Support Units and Strategic Service Units.

    Assets perSales information by geographic location

     

    Assets per geographical location

    As of December 31, 2014

    As of December 31, 2013

    ThCh$

    Chile

    1,480,587,584

    1,514,645,406

    Argentina

    211,886,432

    195,931,022

    Net sales per geographical location

    For the years ended as of December 31,

    2016

    2015

    2014

    ThCh$

    ThCh$

    Chile (1)

    1,176,972,109

    1,081,835,420

    991,938,043

    Argentina (2)

    329,585,488

    366,886,701

    264,631,403

    Uruguay

    23,971,219

    17,143,827

    15,204,331

    14,432,950

    11,204,806

    Paraguay

    52,455,838

    -

    37,135,780

    35,216,644

    30,192,047

    Total

    1,768,901,073

    1,727,720,255

    1,558,897,708

    1,498,371,715

    1,297,966,299

     

    (1)F-44Includes net sales correspond to Corporate Support Unit and eliminations between geographical locations. Additionally, includes net sales made in Chile of the Wines Operating segment.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Operating Segment’s additional information(2)

    The Consolidated Statement of Income classified according toIncludes net sales made by the Company’s operations management is as follows:

    CONSOLIDATED STATEMENT OF INCOME

    Notes

    For the years ended December 31.

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Sales revenue external customers

     

    1,273,932,468

    1,172,047,393

    1,059,477,220

    Other income

     

    24,033,831

    25,179,117

    16,212,674

    Net sales

    9

    1,297,966,299

    1,197,226,510

    1,075,689,894

    Change %

     

    8.4

    11.3

    -

    Cost of sales

     

    (604,536,815)

    (536,696,634)

    (493,087,247)

    % of Net sales

     

    46.6

    44.8

    45.8

    Gross margin

     

    693,429,484

    660,529,876

    582,602,647

    % of Net sales

     

    53.4

    55.2

    54.2

    MSD&A (1)

     

    (535,603,002)

    (473,523,545)

    (405,242,765)

    % of Net sales

     

    41.3

    39.6

    37.7

    Other operating income (expenses)

     

    23,721,310

    4,248,832

    3,828,329

    Operating result before Exceptional Items (EI)

     

    181,547,792

    191,255,163

    181,188,211

    Change %

     

    (5.1)

    5.6

    -

    % of Net sales

     

    14.0

    16.0

    16.8

    Exceptional Items (EI) (2)

     

    (1,627,500)

    (2,989,329)

    -

    Operating result (3) (5)

     

    179,920,292

    188,265,834

    181,188,211

    Change %

     

    (4.4)

    3.9

    -

    % of Net sales

     

    13.9

    15.7

    16.8

    Net financial expense

    11

    (10,820,891)

    (15,830,056)

    (9,362,207)

    Equity and income of associates and joint ventures

    19

    (898,607)

    308,762

    (177,107)

    Foreign currency exchange differences

    11

    (613,181)

    (4,292,119)

    (1,002,839)

    Results as per adjustment units

    11

    (4,159,131)

    (1,801,765)

    (5,057,807)

    Other gains (losses)

    13

    4,036,939

    958,802

    (4,478,021)

    Income before taxes

     

    167,465,421

    167,609,458

    161,110,230

    Income taxes

    26

    (46,673,500)

    (34,704,907)

    (37,133,330)

    Net income for year

     

    120,791,921

    132,904,551

    123,976,900

    Non-controlling interests

    32

    14,553,471

    9,868,543

    9,544,167

    Net income attributable to equity holders of the parent

     

    106,238,450

    123,036,008

    114,432,733

    Depreciation and amortization

     

    68,607,566

    64,246,496

    54,760,120

    ORBDA before EI

     

    250,155,358

    255,501,659

    235,948,331

    Change %

     

    (2.1)

    8.3

    -

    % of Net sales

     

    19.3

    21.3

    21.9

    ORBDA (4)

     

    248,527,858

    252,512,330

    235,948,331

    Change %

     

    (1.6)

    7.0

    -

    % of Net sales

     

    19.1

    21.1

    21.9

     

     

     

     

     

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

    F-45


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    (4) The following is a reconciliation of our gains (losses) from operational activities, the most directly comparable IFRS measure to Operating Result for the years ended December 31, 2014, 2013 and 2012:

     

    For the years ended December 31.

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Income from operational activities

     

    183,957,231

    189,224,636

    176,710,190

    Add (Subtract):

     

     

     

     

    Results derivative contracts

     

    (4,152,548)

    (2,390,493)

    4,030,484

    Marketable securities to fair value

     

    103,306

    107,914

    (92,469)

    Other

     

    12,303

    1,323,777

    540,006

    Exceptional Items (EI) (2)

     

    1,627,500

    2,989,329

    -

    Operating result before EI

     

    181,547,792

    191,255,163

    181,188,211

    Exceptional Items (EI) (2)

     

    (1,627,500)

    (2,989,329)

    -

    Operating result (1)

     

    179,920,292

    188,265,834

    181,188,211

    See definition of (1) and (2) in information as per Operating segment.

    Information per segments of joint ventures

    The Company’s Management reviews the financial position and the operating results of all its joint ventures and associates described inNote 19. The information that appears below relates to 100% joint ventures and associates: Cervecería Austral S.A. (beer segment) and Foods Compañía de Alimentos CCU S.A. (foods segment), which represents the figures that have not been consolidated in the Company’s financial statements as joint ventures and associates are accounted for under the equity method, as explained inNote 2.2

    The figures for each entity 100% of each in summary form are as follows:

     

    As of December 31, 2014

    As of December 31, 2013

    As of December 31, 2012

    Cervecería Austral S.A.

    Foods S.A.

    Cervecería Austral S.A.

    Foods S.A.

    Cervecería Austral S.A.

    Foods S.A.

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Net sales

    9,326,474

    37,073,178

    7,949,500

    23,312,230

    6,633,014

    20,529,548

    Operating result

    377,909

    (165,406)

    506,859

    (268,040)

    91,569

    (413,580)

    Net income for year

    269,405

    (661,832)

    446,348

    174,201

    95,114

    (449,925)

    Capital expenditures

    881,082

    431,526

    399,967

    811,079

    703,445

    1,009,462

    Depreciation and amortization

    (383,992)

    (1,552,463)

    (366,308)

    (1,050,432)

    (358,850)

    (922,112)

    Current assets

    5,184,453

    10,441,156

    3,491,797

    10,118,422

    3,159,893

    8,364,951

    Non-current assets

    4,767,116

    34,309,062

    4,302,124

    28,109,818

    4,270,639

    27,321,395

    Current liabilities

    3,454,424

    14,096,278

    1,588,759

    11,796,719

    1,582,482

    9,709,334

    Non-current liabilities

    374,011

    2,351,086

    277,527

    1,007,569

    231,159

    727,260

     

     

     

     

     

     

     

    (1)See Note 19

    F-46


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 8Business Combinations

    a)Marzurel S.A., Milotur S.A. and Coralinasubisiaries Finca La Celia S.A. and Los Huemules S.R.L.

    Year 2012 Acquisitions

    a.1) On September 13, 2012,SRL., registered under the Company acquired 100% of stock, votingWines Operating segment and economic rights of Marzurel S.A., Milotur S.A. and Coralina S.A., which are Uruguayan companies that develop the mineral waters and soft drinks business in that country.

             At December, 31 2012, the total amount of this transaction was ThCh$ 10,512,588 and was recorded under Other non-financial assets,due to the Company was in the process of assessing the fair values of this acquisition and the estimated impact of this process was not considered significant to the financial statement as of that date(See Note 18)Chile Operating segment, respectively.

     

    a.2) On September 27, 2012, the Company, through the subsidiary Cervecera Kunstmann S.A., acquired 49% of rights of Los Huemules S.R.L. for ThCh$ 271,843. Los Huemules S.R.L. isan Argentinian company that specializes in gastronomic services.

    a.3) The Extraordinary Meeting of Shareholders held on May 16 and July 1, 2014, resolved to increase the capital of the subsidiary Milotur S.A. in the amount of US$ 3,578,461 and US 4,000,000, respectively, equivalent for an a total amount of ThCh$ 4,191,988. At the date of issue of these consolidated financial statements such capital increased was paid.

    On October 2 and 3, 2013, the Company signed a contract with its subsidiary CCU Inversiones II Limited, which the last acquired all of stock, voting and economic rights of Marzurel S.A., Milotur S.A. and Coralina S.A.

    b) Manantial S.A.Sales information by customer

     

    Year 2012 Acquisitions

    On December 24, 2012, the Company acquired 51% of the stock of Manantial S.A., a Chilean company that develops the business of purified water in large bottles at home and offices through the use of dispensers, business that is known internationally as HOD (Home and Office Delivery).

    At December, 31 2012, the total amount of this transaction was ThCh$ 9,416,524 and was recorded under Other non-financial assets(Note 18)

    Year 2013 Acquisitions

    On June 7, 2013, the Company proceeded to pay outstanding balance of ThCh$ 1,781,909 related to the acquisition of Manantial S.A.

    For the acquisition of the Uruguayan, Argentine and Chilean companies, the Company have been determined the fair values of the assets, liabilities and contingent liabilities, generating goodwill for an amount of ThCh$ 14,616,297, among others (Note 21). 

    c)Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

    Year 2013 Acquisitions

    During December 2013, the Company acquired 50.005% and 49.96% 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 in 2013 recorded under Other non-financial assets (Note 18) and a funding (capital increase) for ThCh$ 12,432,754 (in two annually payments) and the assets as well as the liabilities were not consolidated as of December 31, 2013 because their impact line-by-line was not considered significant.

    For the acquisition of the Paraguayan companies, the Company have been determined the fair values of the assets, liabilities and contingent liabilities, generating goodwill and trademarks for an amount of ThCh$ 5,566,003 and ThCh$ 3,658,167, respectively, among others (Note 20 and 21)

    F-47


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    On December 23, 2014, the Company signed a contract with its subsidiary CCU Inversiones II Limited, which the last acquired all of stock of Bebidas del Paraguay S.A. and Distribuidora del Paraguay S.A.

    Bebidas del Paraguay S.A. (BdP) and Distribuidora del Paraguay S.A. (DdP) are considerated as an economic group that share operational and financial strategy. BdP manufactures products with different brands of its property. DdP is your sole and exclusive customer, which is responsible for the distribution and marketing of its products, reason why BdP proceeds to consolidate to DdP.

    It is expected that the acquisition of these companies increases their productive capacities, through the expansion of their productive assets, growth in market share through the various brands market and participation in local and foreign markets, as well as operational improvements as a result of synergies obtained in the operational and administrative functions.

    Note 9

     

    For the years ended as of December 31,

    Net Sales

    2016

    2015

    2014

     

    Net sales distributed between domestic and export, are as follows:

     

    For the years ended as of December 31,

     

    2014

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

    Domestic sales

    1,188,231,333

    1,102,834,492

    980,795,179

    Exports sales

    109,734,966

    94,392,018

    94,894,715

    Total

    1,297,966,299

    1,197,226,510

    1,075,689,894

    Note 10ThCh$

    Nature of cost andThCh$

    expenseThCh$

    Domestic sales

    Operational cost and expense grouped by natural classification are as follows:1,429,152,068

    1,374,282,584

     

    For the years ended as of December 31,

     

    2014

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

    Raw material cost

    433,749,832

    382,645,778

    361,570,855

    Materials and maintenance expense

    38,678,842

    32,596,344

    27,740,998

    Personal expense (1)

    169,331,464

    155,010,442

    128,161,486

    Transportation and distribution

    201,371,151

    184,417,248

    154,488,838

    Advertising and promotion expense

    105,649,991

    85,063,591

    75,977,235

    Lease expense

    13,347,091

    12,201,288

    10,985,054

    Energy expense

    29,566,627

    25,398,656

    27,713,998

    Depreciation and amortization

    68,607,566

    64,246,496

    54,760,120

    Other expenses

    83,207,159

    72,889,696

    58,687,671

    Total

    1,143,509,723

    1,014,469,539

    900,086,255

    1,188,231,333

    Exports sales

    129,745,640

    124,089,131

    109,734,966

    (1)TotalSee Note 31 Employee benefits.

    1,558,897,708

    1,498,371,715

    F-1,297,966,29948


    Sales information by product category

     

    For the years ended as of December 31,

    Sales information by product category

    2016

    2015

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Alcoholic business

    1,041,923,724

    1,040,145,164

    880,580,817

    Non-alcoholic business

    493,397,317

    429,844,632

    393,351,650

    Others (1)

    23,576,667

    28,381,919

    24,033,832

    Total

    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

    2014

    ThCh$

    ThCh$

    ThCh$

    Chile Operating segment

    61,736,849

    56,698,871

    38,832,969

    International business Operating segment

    11,928,705

    14,334,415

    11,194,117

    Wines Operating segment

    7,078,873

    7,568,991

    7,115,790

    Others (1)

    2,783,619

    2,964,525

    11,464,690

    Total

    83,528,046

    81,566,802

    68,607,566

    (1)Includes depreciation and amortization corresponding to the Corporate Support Units.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 11Financial results

    The financial income composition for the year ended as of December 31, 2014, 2013 and 2012, is as follows:

     

    For the years ended as of December 31,

    Financial Results

    2014

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

    Financial income

    12,136,591

    8,254,170

    7,692,672

    Financial cost

    (22,957,482)

    (24,084,226)

    (17,054,879)

    Foreign currency exchange differences

    (613,181)

    (4,292,119)

    (1,002,839)

    Result as per adjustment units

    (4,159,131)

    (1,801,765)

    (5,057,807)

    Total

    (15,593,203)

    (21,923,940)

    (15,422,853)

    Note 12Other 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,

     

    2014

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

    Sales of fixed assets

    3,146,816

    2,381,160

    2,525,648

    Lease expense

    364,388

    318,830

    409,325

    Others

    21,952,512

    2,808,873

    2,649,599

    Total

    25,463,716

    5,508,863

    5,584,572

    (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.2016

    Note 13Other Gain and Loss

    The detail of other gain (loss) items is as follows:

    Other gain and (loss)

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Results derivative contracts

    4,152,548

    2,390,493

    (4,030,484)

    Marketable securities to fair value

    (103,306)

    (107,914)

    92,469

    Other

    (12,303)

    (1,323,777)

    (540,006)

    Total

    4,036,939

    958,802

    (4,478,021)

    F-49


    Cash flows Operating Segments

    Cash flows Operating Segments

     

    For the years ended as of December 31,

     

    2016

    2015

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Cash flows from (used in ) Operating activities

     

    190,014,348

    219,510,872

    173,621,663

    Chile Operating segment

     

    152,862,350

    49,531,088

    27,943,224

    International BusinessOperating segment

     

    13,065,093

    31,975,494

    10,070,867

    Wines Operating segment

     

    32,949,789

    30,926,463

    31,523,287

    Others (1)

     

    (8,862,884)

    107,077,827

    104,084,285

     

     

     

     

     

    Cash 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

    17,907,244

    International Business Operating segment

     

    18,577,556

    3,431,139

    23,525,276

    Wines 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

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Chile Operating segment

     

    53,809,780

    43,771,262

    53,895,523

    International business Operating segment

     

    39,592,739

    27,871,662

    33,481,407

    Wines Operating segment

     

    14,767,858

    10,052,863

    12,686,080

    Others (1)

     

    20,713,048

    50,035,135

    130,017,142

    Total

     

    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, 2015

    ThCh$

    ThCh$

    Chile Operating segment

    1,125,266,274

    1,056,161,363

    International business Operating segment

    259,002,220

    256,319,478

    Wines Operating segment

    316,965,318

    308,288,465

    Others (1)

    170,343,238

    204,678,125

    Total

    1,871,577,050

    1,825,447,431

    (1)Includes assets corresponding to the Corporate Support Units.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 14 Cash and cash equivalents

    Cash and cash equivalent balances were as follows:

     

    As of December

     31, 2014

    As of December

    31, 2013

    As of December

    31, 2012

     

    ThCh$

    ThCh$

    ThCh$

    Cash

    12,708

    16,242

    11,015

    Overnight deposits

    1,319,399

    883,299

    1,119,358

    Bank balances

    30,853,126

    29,614,669

    44,411,396

    Time deposits

    99,373,117

    282,628,752

    9,454,130

    Investments in mutual funds

    -

    503,838

    -

    Securities purchased under resale agreements

    83,216,526

    95,206,467

    47,341,376

    Total

    214,774,876

    408,853,267

    102,337,275

    The currency composition of cash and cash equivalents atDecember 31, 2014, is as follows:

     

    Chilean Peso

    Unidad de

    Fomento

    US Dollar

    Euro

    Argentine Peso

    Uruguayan

    Peso

    Guaraní

    Paraguayo

    Others

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash

    9,939

    -

    420

    -

    2,349

    -

    -

    -

    12,708

    Overnight deposits

    -

    -

    1,319,399

    -

    -

    -

    -

    -

    1,319,399

    Bank balances

    8,790,934

    -

    4,738,935

    974,179

    11,726,073

    536,097

    3,753,420

    333,488

    30,853,126

    Time deposits

    90,962,579

    8,410,538

    -

    -

    -

    -

    -

    -

    99,373,117

    Securities purchased under resale agreements

    83,216,526

    -

    -

    -

    -

    -

    -

    -

    83,216,526

    Total

    182,979,978

    8,410,538

    6,058,754

    974,179

    11,728,422

    536,097

    3,753,420

    333,488

    214,774,876

    The currency composition of cash and cash equivalents at December 31, 2013, is as follows:2016

     

    Chilean Peso

    Unidad de

    Fomento

    US Dollar

    Euro

    Argentine

     Peso

    Uruguayan

    Peso

    Guaraní

    Paraguayo

    Others

    Total

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash

    6,446

    -

    42

    -

    1,217

    8,537

    -

    -

    16,242

    Overnight deposits

    -

    -

    883,299

    -

    -

    -

    -

    -

    883,299

    Bank balances

    24,559,899

    -

    695,292

    1,718,676

    1,730,671

    545,378

    -

    364,753

    29,614,669

    Time deposits

    282,628,752

    -

    -

    -

    -

    -

    -

    -

    282,628,752

    Investments in mutual funds

    503,838

    -

    -

    -

    -

    -

    -

    -

    503,838

    Securities purchased under resale agreements

    95,206,467

    -

    -

    -

    -

    -

    -

    -

    95,206,467

    Total

    402,905,402

    -

    1,578,633

    1,718,676

    1,731,888

    553,915

    -

    364,753

    408,853,267

    F-50


    Assets per geographic location

    Assets per geographical location

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    Chile (1)

    1,600,077,453

    1,557,641,691

    Argentina (2)

    197,986,123

    188,897,724

    Uruguay

    27,327,545

    25,703,157

    Paraguay

    46,185,929

    53,204,859

    Total

    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, 2015

    ThCh$

    ThCh$

    Chile Operating segment

    242,132,457

    218,651,536

    International business Operating segment

    100,994,174

    97,680,139

    Wines Operating segment

    104,147,109

    102,780,420

    Others (1)

    224,010,731

    218,813,191

    Total

    671,284,471

    637,925,286

    (1)Others includes liabilites corresponding to the Corporate Support Units.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    The currency composition of cash and cash equivalents at December 31, 2012,2016

    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

    2014

    ThCh$

    ThCh$

    ThCh$

    Sales revenue external customers

     

    1,535,321,041

    1,469,989,796

    1,273,932,468

    Other income

     

    23,576,667

    28,381,919

    24,033,831

    Net sales

     

    1,558,897,708

    1,498,371,715

    1,297,966,299

      Change %

     

    4.0

    15.4

    -

    Cost of sales

     

    (741,819,916)

    (685,075,251)

    (604,536,815)

      % of Net sales

     

    47.6

    45.7

    46.6

    Gross margin

     

    817,077,792

    813,296,464

    693,429,484

      % of Net sales

     

    52.4

    54.3

    53.4

    MSD&A (1)

     

    (619,542,751)

    (612,564,776)

    (535,603,002)

      % of Net sales

     

    39.7

    40.9

    41.3

    Other operating income (expenses)

     

    3,116,679

    4,205,310

    23,721,310

      Change %

     

    (2.1)

    12.9

    -

    Exceptional Items (EI) (2)

     

    -

    -

    (1,627,500)

    Adjusted operating result (3)

     

    200,651,720

    204,936,998

    179,920,292

      Change %

     

    (2.1)

    13.9

    -

      % of Net sales

     

    12.9

    13.7

    13.9

    Net 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

    4,036,939

    Income before taxes

     

    170,328,270

    190,640,106

    167,465,421

    Income taxes

    25

    (30,246,383)

    (50,114,516)

    (46,673,500)

    Net income for year

     

    140,081,887

    140,525,590

    120,791,921

    Non-controlling interests

    31

    21,624,399

    19,717,455

    14,553,471

    Net income attributable to equity holders of the parent

     

    118,457,488

    120,808,135

    106,238,450

    Depreciation and amortization

     

    83,528,045

    81,566,802

    68,607,566

      Change %

     

    (0.8)

    14.5

    -

    ORBDA (4)

     

    284,179,765

    286,503,800

    248,527,858

      Change %

     

    (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).


    Compañía Cervecerías follows:

     

    ChileanPeso

    Unidad de

    Fomento

    US Dollar

    Euro

    Argentine

    Peso

    Uruguayan

    Peso

    Guaraní

    Paraguayo

    Others

    Total

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash

    10,659

    -

    356

    -

    -

    -

    -

    -

    11,015

    Overnight deposits

    1,119,358

    -

    -

    -

    -

    -

    -

    -

    1,119,358

    Bank balances

    26,813,548

    -

    412,941

    303,571

    16,847,635

    -

    -

    33,701

    44,411,396

    Time deposits

    8,892,234

    -

    561,896

    -

    -

    -

    -

    -

    9,454,130

    Investments in mutual funds

    -

    -

    -

    -

    -

    -

    -

    -

    -

    Securities purchased under resale agreements

    47,341,376

    -

    -

    -

    -

    -

    -

    -

    47,341,376

    Total

    84,177,175

    -

    975,193

    303,571

    16,847,635

    -

    -

    33,701

    102,337,275

    The total accumulated cash flows paid in business combinations and acquisitions of associates are as follows:

     

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Payments for business acquisitions

     

     

     

     

    Amount paid to acquire interests in associated (1)

     

    15,222,363

    -

    -

    Amount paid for business acquisitions (2)

     

    -  

    14,566,278

    19,521,964

    Amount paid by changes in the ownership shares in subsidiaries (3)

     

    -  

    5,627,425

    12,521,899

    Total

     

    15,222,363

    20,193,703

    32,043,863

    (1)Corresponds to acquisitions of 34% of Bebidas BolivianasUnidas S.A. and 50% of Central Cervecera de Colombia S.A.S.subsidiaries

    (2)CorrespondsNotes to the purchase of Bebidas del Paraguay S.A., Distribuidora del ParaguayConsolidated 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

    2014

    ThCh$

    ThCh$

    ThCh$

    Net income of year

    140,081,887

    140,525,590

    120,791,921

    Add (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

    22,957,482

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

    5,560,522

    5,228,135

    898,607

    Foreign currency exchange differences

    (456,995)

    (957,565)

    613,181

    Result as per adjustment units

    2,246,846

    3,282,736

    4,159,131

    Income taxes

    30,246,383

    50,114,516

    46,673,500

    Adjusted Operating result

    200,651,720

    204,936,998

    179,920,292

    Exceptional Item (EI)

    -

    -

    1,627,500

    AdjustedOperating result before(EI)

    200,651,720

    204,936,998

    181,547,792

    Depreciation and amortization

    83,528,045

    81,566,802

    68,607,566

    ORBDA before (EI)

    284,179,765

    286,503,800

    250,155,358

    Exceptional Item (EI)

    -

    -

    (1,627,500)

    ORBDA

    284,179,765

    286,503,800

    248,527,858


    Compañía Cervecerías Unidas S.A. and a pay of outstanding balance relatedsubsidiaries

    Notes to the acquisition in ManantialConsolidated 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

    2014

    ThCh$

    ThCh$

    ThCh$

    Consolidated statement of income

     

     

     

    Distribution 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

    3.369.906

    Total 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)and d), respectively.

    As of December 31, 2016, the Company has not made other business combinations.


    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

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Raw material cost

    540,692,964

    485,391,583

    433,749,832

    Materials and maintenance expense

    47,102,582

    43,093,939

    38,678,842

    Personnel expense (1)

    210,885,553

    197,915,151

    169,331,464

    Transportation and distribution

    230,047,942

    234,431,464

    201,371,151

    Advertising and promotion expense

    105,938,586

    117,921,841

    105,649,991

    Lease expense

    16,294,896

    13,641,122

    13,347,091

    Energy expense

    24,444,163

    25,178,032

    29,566,627

    Depreciation and amortization

    83,528,045

    81,566,802

    68,607,566

    Other expenses

    104,455,411

    100,872,027

    83,207,159

    Total

    1,363,390,142

    1,300,011,961

    1,143,509,723

    (1)See Note 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

    2014

    ThCh$

    ThCh$

    ThCh$

    Financial income

    5,680,068

    7,845,743

    12,136,591

    Financial 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

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Sales of fixed assets

    1,882,883

     

    2,541,619

    1,978,208

    Lease

    382,934

     

    245,285

    364,388

    Sales of glass

    549,787

     

    672,203

    836,098

    Others

    2,328,550

     

    3,118,137

    (1) 22,285,022

    Total

    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.


    Compañía Pisquera Bauzá S.A. in 2013; Marzurel S.A, MiloturCervecerías Unidas S.A. and Coralinasubsidiaries

    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

    2014

    ThCh$

    ThCh$

    ThCh$

    Results derivative contracts (1)

    (10,134,414)

    9,839,675

    4,152,548

    Marketable 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 13 Cash 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, 2014

     

    ThCh$

    ThCh$

    ThCh$

    Cash

    106,203

    12,712

    12,708

    Overnight deposits

    1,978,738

    462,873

    1,319,399

    Bank balances

    41,276,555

    42,370,367

    30,853,126

    Time deposits

    14,955,778

    32,639,373

    99,373,117

    Investments in mutual funds

    24,772

    -

    -

    Securities purchased under resale agreements

    75,447,904

    117,068,914

    83,216,526

    Total

    133,789,950

    192,554,239

    214,774,876


    Compañía Cervecerías Unidas S.A. and Manantial in 2012.subsidiaries

    Notes to the Consolidated Financial Statements

    (3)December 31, 2016Corresponds

    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

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash

    100,921

    788

    -

    4,494

    -

    -

    -

    106,203

    Overnight deposits

    -

    1,978,738

    -

    -

    -

    -

    -

    1,978,738

    Bank balances

    27,164,331

    6,258,367

    786,887

    2,158,115

    1,136,782

    3,269,045

    503,028

    41,276,555

    Time deposits

    14,955,778

    -

    -

    -

    -

    -

    -

    14,955,778

    Investments in mutual funds

    -

    -

    -

    24,772

    -

    -

    -

    24,772

    Securities purchased under resale agreements

    75,447,904

    -

    -

    -

    -

    -

    -

    75,447,904

    Total

    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

    Total

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash

    10,675

    39

    -

    1,998

    -

    -

    -

    12,712

    Overnight deposits

    -

    462,873

    -

    -

    -

    -

    -

    462,873

    Bank balances

    21,964,295

    4,922,732

    955,840

    5,699,756

    948,816

    7,519,619

    359,309

    42,370,367

    Time deposits

    32,639,373

    -

    -

    -

    -

    -

    -

    32,639,373

    Securities purchased under resale agreements

    117,068,914

    -

    -

    -

    -

    -

    -

    117,068,914

    Total

    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

    Totales

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash

    9,939

    -

    420

    -

    2,349

    -

    -

    -

    12,708

    Overnight deposits

    -

    -

    1,319,399

    -

    -

    -

    -

    -

    1,319,399

    Bank balances

    8,790,934

    -

    4,738,935

    974,179

    11,726,073

    536,097

    3,753,420

    333,488

    30,853,126

    Time deposits

    90,962,579

    8,410,538

    -

    -

    -

    -

    -

    -

    99,373,117

    Investments in mutual funds

    -

    -

    -

    -

    -

    -

    -

    -

    -

    Securities purchased under resale agreements

    83,216,526

    -

    -

    -

    -

    -

    -

    -

    83,216,526

    Totales

    182,979,978

    8,410,538

    6,058,754

    974,179

    11,728,422

    536,097

    3,753,420

    333,488

    214,774,876


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to additionally percentage of acquisition in VSPT (the Consolidated Financial Statements

    December 31, 2016Note 1) in 2013

    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

    0.33

    Banco Santander

    12-28-2016

    01-10-2017

    CLP

    2,400,792

    0.33

    Banco Santander

    12-29-2016

    01-25-2017

    CLP

    5,701,292

    0.34

    Banco Consorcio

    12-28-2016

    01-26-2017

    CLP

    5,401,782

    0.33

    Banco Francés

    12-12-2016

    01-11-2017

    $ ARG

    201,362

    1.60

    Total

     

     

     

    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

    0.35

    Banco Consorcio

    12-29-2015

    01-20-2016

    CLP

    800,181

    0.34

    Banco Consorcio

    12-29-2015

    01-25-2016

    CLP

    2,850,665

    0.35

    Banco Consorcio

    12-14-2015

    01-12-2016

    CLP

    37,568

    0.32

    Banco Consorcio

    12-29-2015

    01-29-2016

    CLP

    2,500,600

    0.36

    Banco Consorcio

    12-21-2015

    01-20-2016

    CLP

    460,521

    0.34

    Banco de Crédito e Inversiones

    12-15-2015

    01-08-2016

    CLP

    7,762,889

    0.33

    Banco Santander

    12-21-2015

    01-20-2016

    CLP

    6,407,467

    0.35

    Banco Santander

    12-23-2015

    01-20-2016

    CLP

    1,251,133

    0.34

    Banco Santander

    12-24-2015

    01-11-2016

    CLP

    1,651,271

    0.33

    Banco Santander

    12-28-2015

    01-25-2016

    CLP

    3,301,122

    0.34

    HSBC Bank Chile

    12-17-2015

    01-14-2016

    CLP

    2,103,298

    0.33

    Total

     

     

     

    32,639,373

     


    Compañía Cervecerías Unidas S.A. and 2012.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

    0.31

    Banco Consorcio

    12-24-2014

    01-19-2015

    CLP

    4,002,707

    0.29

    Banco Consorcio

    12-22-2014

    01-20-2015

    CLP

    230,186

    0.27

    Banco Consorcio

    12-22-2014

    01-20-2015

    CLP

    700,588

    0.28

    Banco de Chile

    11-06-2014

    02-05-2015

    CLP

    3,016,500

    0.30

    Banco de Chile

    11-25-2014

    01-09-2015

    CLP

    8,430,240

    0.30

    Banco de Chile

    12-11-2014

    01-12-2015

    CLP

    2,054,168

    0.31

    Banco de Chile

    12-26-2014

    02-10-2015

    CLP

    2,001,000

    0.30

    Banco de Chile

    12-30-2014

    02-10-2015

    CLP

    3,000,300

    0.30

    Banco de Chile

    11-06-2014

    02-05-2015

    UF

    3,039,750

    1.60

    Banco de Crédito e Inversiones

    10-28-2014

    01-08-2015

    CLP

    3,472,080

    0.30

    Banco de Crédito e Inversiones

    12-16-2014

    01-23-2015

    CLP

    8,011,600

    0.29

    Banco de Crédito e Inversiones

    10-15-2014

    01-08-2015

    CLP

    10,079,567

    0.31

    Banco de Crédito e Inversiones

    12-26-2014

    02-10-2015

    CLP

    2,301,073

    0.28

    Banco Internacional

    12-16-2014

    01-23-2015

    CLP

    3,005,700

    0.38

    Banco Itaú

    10-29-2014

    01-27-2015

    CLP

    5,331,387

    0.28

    Banco Santander

    11-20-2014

    01-08-2015

    CLP

    4,518,450

    0.30

    Banco Santander

    11-28-2014

    01-15-2015

    CLP

    5,618,480

    0.30

    Banco Santander

    12-03-2014

    01-08-2015

    CLP

    2,306,440

    0.30

    Banco Santander

    12-24-2014

    01-19-2015

    CLP

    4,703,180

    0.29

    Banco Santander

    12-26-2014

    02-10-2015

    CLP

    4,002,000

    0.30

    Banco Santander

    12-30-2014

    02-10-2015

    CLP

    2,100,203

    0.29

    Banco Santander

    12-03-2014

    01-08-2015

    CLP

    150,420

    0.30

    Banco Santander

    12-11-2014

    01-07-2015

    CLP

    1,803,360

    0.28

    Banco Security

    12-22-2014

    01-23-2015

    CLP

    2,702,430

    0.30

    Banco Security

    12-23-2014

    01-30-2015

    CLP

    2,401,920

    0.30

    BancoEstado

    10-29-2014

    01-27-2015

    UF

    5,370,788

    0.28

    Total

     

     

     

    99,373,117

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    Note 15December 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

    0.32

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-28-2016

    01-04-2017

    CLP

    3,602,675

    0.32

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-28-2016

    01-04-2017

    CLP

    2,044,419

    0.32

    BanChile Corredores de Bolsa S.A.

    Banco Santander

    12-28-2016

    01-04-2017

    CLP

    674,935

    0.32

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-28-2016

    01-06-2017

    CLP

    1,679,525

    0.32

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-28-2016

    01-06-2017

    CLP

    1,205,429

    0.32

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-28-2016

    01-06-2017

    CLP

    1,116,326

    0.32

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-29-2016

    01-06-2017

    CLP

    1,427,025

    0.31

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-29-2016

    01-06-2017

    CLP

    1,725,807

    0.31

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-29-2016

    01-06-2017

    CLP

    5,799,890

    0.31

    BanChile Corredores de Bolsa S.A.

    Banco de Crédito e Inversiones

    12-29-2016

    01-06-2017

    CLP

    1,549,449

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Scotiabank Sudamericano

    12-29-2016

    01-06-2017

    CLP

    3,916,539

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-29-2016

    01-06-2017

    CLP

    6,085,662

    0.33

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-29-2016

    01-10-2017

    CLP

    2,400,528

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco de Crédito e Inversiones

    12-29-2016

    01-10-2017

    CLP

    6,019,097

    0.33

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-29-2016

    01-10-2017

    CLP

    3,933,092

    0.33

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-30-2016

    01-10-2017

    CLP

    1,600,149

    0.28

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-30-2016

    01-10-2017

    CLP

    3,000,280

    0.28

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-29-2016

    01-10-2017

    CLP

    1,350,297

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco BICE

    12-29-2016

    01-05-2017

    CLP

    105,017

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-29-2016

    01-10-2017

    CLP

    500,110

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco Santander

    12-29-2016

    01-10-2017

    CLP

    3,500,770

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-29-2016

    01-16-2017

    CLP

    4,000,880

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-29-2016

    01-20-2017

    CLP

    1,917,467

    0.33

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-29-2016

    01-20-2017

    CLP

    82,974

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-29-2016

    01-03-2017

    CLP

    250,055

    0.33

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-29-2016

    01-05-2017

    CLP

    6,101,342

    0.33

    BancoEstado S.A. Corredores de Bolsa

    Banco de Crédito e Inversiones

    12-27-2016

    01-03-2017

    CLP

    925,383

    0.31

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-29-2016

    01-05-2017

    CLP

    725,160

    0.33

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-28-2016

    01-16-2017

    CLP

    872,178

    0.32

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-28-2016

    01-16-2017

    CLP

    435,612

    0.32

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-28-2016

    01-16-2017

    CLP

    1,865,909

    0.32

    BanChile Corredores de Bolsa S.A.

    Banco de Crédito e Inversiones

    12-28-2016

    01-16-2017

    CLP

    1,241,355

    0.32

    BanChile Corredores de Bolsa S.A.

    Banco Santander

    12-28-2016

    01-16-2017

    CLP

    261,444

    0.32

    Total

     

     

     

     

    75,447,904

     

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


    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

    0.32

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-28-2015

    01-08-2016

    CLP

    4,253,623

    0.31

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-28-2015

    01-20-2016

    CLP

    19,557

    0.30

    BanChile Corredores de Bolsa S.A.

    Banco de Crédito e Inversiones

    12-28-2015

    01-08-2016

    CLP

    8,828,519

    0.31

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-24-2015

    01-08-2016

    CLP

    4,674,281

    0.32

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-28-2015

    01-08-2016

    CLP

    3,923,128

    0.31

    BanChile Corredores de Bolsa S.A.

    BancoEstado

    12-28-2015

    01-20-2016

    CLP

    449

    0.30

    BancoEstado S.A. Corredores de Bolsa

    Banco BICE

    12-29-2015

    01-14-2016

    CLP

    980,345

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-28-2015

    01-04-2016

    CLP

    4,693,648

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-29-2015

    01-08-2016

    CLP

    7,565,908

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Banco de Chile

    12-29-2015

    01-14-2016

    CLP

    4,219,808

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Banco de Crédito e Inversiones

    12-28-2015

    01-04-2016

    CLP

    3,999,302

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-30-2015

    01-07-2016

    CLP

    200,021

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-30-2015

    01-14-2016

    CLP

    2,749,535

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-30-2015

    01-14-2016

    CLP

    750,078

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-28-2015

    01-07-2016

    CLP

    2,600,806

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco Itaú

    12-29-2015

    01-01-2016

    CLP

    1,300,277

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Banco Santander

    12-29-2015

    01-14-2016

    CLP

    3,079,945

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Banco Security

    12-28-2015

    01-04-2016

    CLP

    5,779,339

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Banco Security

    12-29-2015

    01-08-2016

    CLP

    241,899

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Banco Security

    12-29-2015

    01-14-2016

    CLP

    1,919,498

    0.32

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-28-2015

    01-04-2016

    CLP

    4,837,882

    0.31

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-29-2015

    01-08-2016

    CLP

    140,839

    0.32

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-29-2015

    01-14-2016

    CLP

    10,702,283

    0.32

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-23-2015

    01-12-2016

    CLP

    195,156

    0.30

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-28-2015

    01-04-2016

    CLP

    1,003,626

    0.31

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-29-2015

    01-08-2016

    CLP

    353,294

    0.32

    BancoEstado S.A. Corredores de Bolsa

    BBVA Chile

    12-30-2015

    01-14-2016

    CLP

    9,801,762

    0.31

    BancoEstado S.A. Corredores de Bolsa

    Scotiabank Sudamericano

    12-29-2015

    01-14-2016

    CLP

    652,718

    0.32

    BancoEstado S.A. Corredores de Bolsa

    Scotiabank Sudamericano

    12-28-2015

    01-04-2016

    CLP

    2,443,254

    0.31

    BancoEstado S.A. Corredores de Bolsa

    BancoEstado

    12-29-2015

    01-08-2016

    CLP

    800,000

    0.32

    BBVA Corredores de Bolsa S.A.

    BBVA Chile

    12-22-2015

    01-11-2016

    CLP

    350,326

    0.31

    Valores Security S.A. C. de B.

    Banco BICE

    12-22-2015

    01-07-2016

    CLP

    110,651

    0.34

    Valores Security S.A. C. de B.

    Banco Central de Chile

    12-28-2015

    01-04-2016

    CLP

    4,856,917

    0.32

    Valores Security S.A. C. de B.

    Banco Central de Chile

    11-30-2015

    01-06-2016

    CLP

    4,053,610

    0.34

    Valores Security S.A. C. de B.

    Banco Consorcio

    12-28-2015

    01-04-2016

    CLP

    24,999

    0.32

    Valores Security S.A. C. de B.

    Banco de Crédito e Inversiones

    12-28-2015

    01-04-2016

    CLP

    119,401

    0.32

    Valores Security S.A. C. de B.

    Banco Itaú

    12-28-2015

    01-04-2016

    CLP

    4,234,301

    0.32

    Valores Security S.A. C. de B.

    Banco Security

    11-30-2015

    01-06-2016

    CLP

    1,725,673

    0.34

    Valores Security S.A. C. de B.

    Banco Security

    12-28-2015

    01-04-2016

    CLP

    2,707,819

    0.32

    Valores Security S.A. C. de B.

    Banco Security

    12-22-2015

    01-07-2016

    CLP

    14,478

    0.34

    Valores Security S.A. C. de B.

    BancoEstado

    11-30-2015

    01-06-2016

    CLP

    241,798

    0.34

    Valores Security S.A. C. de B.

    BancoEstado

    12-28-2015

    01-04-2016

    CLP

    401,100

    0.32

    Valores Security S.A. C. de B.

    BancoEstado

    12-22-2015

    01-07-2016

    CLP

    125,126

    0.34

    Valores Security S.A. C. de B.

    BBVA Chile

    12-28-2015

    01-04-2016

    CLP

    1,659,944

    0.32

    Total

     

     

     

     

    117,068,914

     

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


    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

    0.30

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-16-2014

    01-20-2015

    CLP

    10,015,000

    0.30

    BanChile Corredores de Bolsa S.A.

    Banco de Chile

    12-17-2014

    01-09-2015

    CLP

    2,002,613

    0.28

    BanChile Corredores de Bolsa S.A.

    Banco Santander

    12-16-2014

    01-15-2015

    CLP

    8,012,000

    0.30

    BanChile Corredores de Bolsa S.A.

    Banco Santander

    12-17-2014

    01-09-2015

    CLP

    2,002,613

    0.28

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-17-2014

    01-09-2015

    CLP

    1,001,307

    0.28

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-22-2014

    01-23-2015

    CLP

    1,401,176

    0.28

    BanChile Corredores de Bolsa S.A.

    Scotiabank Sudamericano

    12-16-2014

    01-15-2015

    CLP

    4,006,000

    0.30

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-17-2014

    01-08-2015

    CLP

    600,784

    0.28

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-19-2014

    01-08-2015

    CLP

    250,280

    0.28

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-26-2014

    01-08-2015

    CLP

    2,501,167

    0.28

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-30-2014

    01-20-2015

    CLP

    2,250,203

    0.27

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-24-2014

    01-08-2015

    CLP

    2,001,307

    0.28

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-23-2014

    01-06-2015

    CLP

    450,336

    0.28

    Banco Estado S.A. Corredores de Bolsa

    BancoEstado

    12-29-2014

    01-08-2015

    CLP

    650,122

    0.28

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-29-2014

    01-22-2015

    CLP

    2,900,561

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-30-2014

    02-10-2015

    CLP

    5,000,483

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-15-2014

    01-08-2015

    CLP

    2,604,021

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-16-2014

    01-08-2015

    CLP

    1,101,595

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-17-2014

    01-08-2015

    CLP

    250,338

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-18-2014

    01-08-2015

    CLP

    1,301,634

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-22-2014

    01-08-2015

    CLP

    550,479

    0.29

    BBVA Corredores de Bolsa Ltda.

    BBVA Banco Bhif

    12-23-2014

    01-08-2015

    CLP

    1,100,851

    0.29

    Valores Security S.A. C. de B.

    Banco BICE

    11-26-2014

    01-08-2015

    CLP

    87,863

    0.31

    Valores Security S.A. C. de B.

    Banco BICE

    12-17-2014

    01-23-2015

    CLP

    484,241

    0.28

    Valores Security S.A. C. de B.

    Banco BICE

    12-29-2014

    01-06-2015

    CLP

    2,920,853

    0.29

    Valores Security S.A. C. de B.

    Banco Central de Chile

    11-18-2014

    01-07-2015

    CLP

    288,293

    0.29

    Valores Security S.A. C. de B.

    Banco Central de Chile

    12-01-2014

    01-20-2015

    CLP

    1,246,441

    0.31

    Valores Security S.A. C. de B.

    Banco Central de Chile

    12-17-2014

    01-23-2015

    CLP

    28,349

    0.28

    Valores Security S.A. C. de B.

    Banco Central de Chile

    11-26-2014

    01-08-2015

    CLP

    1,166,177

    0.31

    Valores Security S.A. C. de B.

    Banco Central de Chile

    12-29-2014

    01-08-2015

    CLP

    1,000,193

    0.29

    Valores Security S.A. C. de B.

    Banco Consorcio

    12-29-2014

    01-15-2015

    CLP

    100,759

    0.28

    Valores Security S.A. C. de B.

    Banco Consorcio

    12-29-2014

    01-06-2015

    CLP

    400,077

    0.29

    Valores Security S.A. C. de B.

    Banco de Crédito e Inversiones

    11-18-2014

    01-07-2015

    CLP

    886,510

    0.29

    Valores Security S.A. C. de B.

    Banco Itaú

    11-18-2014

    01-07-2015

    CLP

    1,037,652

    0.29

    Valores Security S.A. C. de B.

    Banco Itaú

    11-26-2014

    01-08-2015

    CLP

    174,866

    0.31

    Valores Security S.A. C. de B.

    Banco Itaú

    12-01-2014

    01-20-2015

    CLP

    418,344

    0.31

    Valores Security S.A. C. de B.

    Banco Itaú

    12-17-2014

    01-23-2015

    CLP

    1,512,069

    0.28

    Valores Security S.A. C. de B.

    Banco Itaú

    12-29-2014

    01-15-2015

    CLP

    788,389

    0.28

    Valores Security S.A. C. de B.

    Banco Santander

    12-01-2014

    01-20-2015

    CLP

    413,433

    0.31

    Valores Security S.A. C. de B.

    Banco Security

    11-18-2014

    01-07-2015

    CLP

    3,839,782

    0.29

    Valores Security S.A. C. de B.

    Banco Security

    11-26-2014

    01-08-2015

    CLP

    1,180,497

    0.31

    Valores Security S.A. C. de B.

    Banco Security

    12-01-2014

    01-20-2015

    CLP

    630,151

    0.31

    Valores Security S.A. C. de B.

    Banco Security

    12-17-2014

    01-23-2015

    CLP

    3,998,068

    0.28

    Valores Security S.A. C. de B.

    Banco Security

    12-29-2014

    01-15-2015

    CLP

    1,318,189

    0.28

    Valores Security S.A. C. de B.

    Banco Security

    12-29-2014

    01-06-2015

    CLP

    577,769

    0.29

    Valores Security S.A. C. de B.

    BancoEstado

    11-18-2014

    01-07-2015

    CLP

    976,860

    0.29

    Valores Security S.A. C. de B.

    BancoEstado

    12-17-2014

    01-23-2015

    CLP

    47,422

    0.28

    Valores Security S.A. C. de B.

    BBVA Banco Bhif

    12-17-2014

    01-23-2015

    CLP

    438,345

    0.28

    Valores Security S.A. C. de B.

    BBVA Banco Bhif

    12-29-2014

    01-15-2015

    CLP

    469,734

    0.28

    Valores Security S.A. C. de B.

    BBVA Banco Bhif

    12-29-2014

    01-06-2015

    CLP

    1,102,267

    0.29

    Valores Security S.A. C. de B.

    Scotiabank Sudamericano

    12-29-2014

    01-15-2015

    CLP

    723,563

    0.28

    Total

     

     

     

     

    83,216,526

     

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


    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

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Total disbursement per business acquisition

     

     

     

     

    Cash flow used in the purchase of non-controling interests (1)

     

    2,174,370

    1,921,245

    13,776,885

    Other cahs payment to acquire interests in joint ventures (2)

     

    27,043,481

    42,163,032

    1,445,478

    Cahs flow used for control of subsidiaries or other business (3)

     

    19,111,686

    -

    -

    Payment for changes in ownership interests in subidiaries (4)

     

    641,489

    -

    8,369

    Total

     

    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, 2015

     

    Current

    Non current

    Current

    Non current

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Accounts receivables:

     

     

     

     

    ChileOperating 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, 2015

     

    ThCh$

    ThCh$

    Chilean Peso

    179,896,747

    158,757,937

    Argentine Peso

    56,773,947

    48,535,814

    US Dollar

    24,449,473

    25,498,590

    Euro

    7,025,446

    7,463,166

    Unidad de Fomento

    3,613,395

    7,102

    Uruguayan Pesos

    5,304,719

    4,074,908

    Paraguayan Guaraní

    6,010,193

    6,111,636

    Others currencies

    1,256,661

    1,776,784

    Total

    284,330,581

    252,225,937


    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 balances

    0 a 3 months

    3 a 6 months

    6 a 12 months

    More than 12 months

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Accounts receivables:

     

     

     

     

     

     

    ChileOperating segment

    145,670,490

    134,545,838

    8,090,616

    1,136,211

    638,417

    1,259,408

    International business Operating segment

    63,600,881

    55,230,423

    7,521,071

    130,299

    275,300

    443,788

    Wines reportable Operating segment

    42,958,093

    39,499,120

    3,028,707

    208,628

    137,671

    83,967

    Others 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

    1,787,163

    Impairment 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

    100,890

    Others 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 balances

     

    0 a 3 months

    3 a 6 months

    6 a 12 months

    More than 12 months

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Accounts receivables:

     

     

     

     

     

     

    ChileOperating segment

    136,203,740

    124,024,627

    10,108,821

    659,670

    511,993

    898,629

    International business Operating segment

    52,591,935

    45,600,898

    5,839,178

    226,648

    321,512

    603,699

    Wines reportable Operating segment

    43,333,189

    40,022,791

    2,715,939

    193,781

    299,921

    100,757

    Others 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

    1,603,085

    Impairment 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.


    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, 2015

     

    ThCh$

    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

    264,618

    Back of unused provisions

    1,031,841

    557,106

    Effect of translation into presentation currency

    200,616

    277,795

    Total

    (3,837,914)

    (3,936,871)


    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:


    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, 2015

    ThCh$

    ThCh$

    0-E

    Bebidas Bolivianas BBO S.A.

    Bolivia

    (3)

    Associated

    Sales of products

    USD

    42,006

    78,810

    0-E

    Pepsi Cola Panamericana S.R.L.

    Perú

    (3)

    Associated with the controller

    Sales of products

    USD

    1,149

    1,149

    76,028,758-K

    Norgistics Chile S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    -

    110

    76,029,109-9

    Inversiones Chile Chico Ltda.

    Chile

    (1)

    Related to the controller

    Billed services

    CLP

    526

    5,353

    76,178,803-5

    Viña Tabalí S.A.

    Chile

    (1)

    Related to the controller

    Billed services

    CLP

    10,513

    29,817

    77,051,330-8

    Cervecería Kunstmann Ltda.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    120,458

    142,789

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    (1)

    Joint venture

    Sales of products

    CLP

    1,035,566

    738,270

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    (1)

    Joint venture

    Rental of cranes

    CLP

    3,215

    2,875

    78,780,780-1

    Operaciones y Servicios Enex Ltda.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    13,058

    90,323

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (5)

    Shareholder to subsidiary

    Advance purchase

    CLP

    14,393

    1,065,214

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (1)

    Shareholder to subsidiary

    Sales of products

    CLP

    7,450

    24,027

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (4)

    Shareholder to subsidiary

    Loan

    U.F.

    30,542

    29,589

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (5)

    Shareholder to subsidiary

    Sales of products

    U.F.

    76,620

    74,529

    90,081,000-8

    Compañía Chilena de Fósforos S.A.

    Chile

    (1)

    Shareholder to subsidiary

    Sales of products

    CLP

    2,575

    5,651

    90,160,000-7

    Compañía Sud Americana de Vapores S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    458

    522

    90,703,000-8

    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

    3,723

    91,705,000-7

    Quiñenco S.A.

    Chile

    (1)

    Shareholder Controller

    Sales of products

    CLP

    1,937

    3,070

    92,011,000-2

    Empresa Nacional de Energía ENEX S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    -

    2,136

    92,048,000-4

    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

    4,198

    94,625,000-7

    Inversiones Enex S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    258,306

    203,349

    96,427,000-7

    Inversiones y Rentas S.A.

    Chile

    (1)

    Controller

    Sales of products

    CLP

    -

    12,664

    96,536,010-7

    Inversiones Consolidadas Limitada

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    1,513

    1,409

    96,571,220-8

    Banchile Corredores de Bolsa S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    3,096

    1,073

    96,591,040-9

    Empresas Carozzi S.A.

    Chile

    (1)

    Shareholder of joint operation

    Sales of products

    CLP

    76,704

    301,882

    96,645,790-2

    Socofin S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    -

    10

    96,819,020-2

    Agrícola El Cerrito S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    30

    30

    96,847,140-6

    Inmobiliaria Norte Verde S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    30

    40

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    (1)

    Joint venture

    Sales of products

    CLP

    255,330

    29,502

    97,004,000-5

    Banco de Chile

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    120,547

    126,435

    99,525,700-9

    Las Margaritas S.A.

    Chile

    (1)

    Related to the controller

    Sales of products

    CLP

    -

    47

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Sales of products

    CLP

    73,511

    358,428

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Transport service

    CLP

    39,669

    881,499

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Interests

    CLP

    219,835

    219,647

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Sales service

    CLP

    96,572

    118,292

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Shared service

    CLP

    243,689

    182,822

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Collection service

    CLP

    312

    49,646

    99,542,980-2

    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, 2015

    ThCh$

    ThCh$

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (4)

    Shareholder to subsidiary

    Loan

    U.F.

    190,040

    209,330

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

    Chile

    (4)

    Shareholder to subsidiary

    Sales of products

    U.F.

    166,625

    236,608

    Total

     

     

     

     

     

     

    356,665

    445,938


    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, 2015

    ThCh$

    ThCh$

    0-E

    Amstel Brouwerijen B.V.

    Holanda

    (3)

    Related to the controller

    License and technical assiStance

    Euros

    64,932

    246,334

    0-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

    6,568,594

    0-E

    Heineken Brouwerijen B.V.

    Holanda

    (3)

    Related to the controller

    Purchase of products

    Euros

    787,873

    307,118

    0-E

    Heineken Nederland Supply

    Francia

    (3)

    Related to the controller

    License and technical assistance

    Euros

    -

    37,772

    0-E

    Heineken supply chain B.V.

    Francia

    (3)

    Related to the controller

    Purchase of products

    Euros

    -

    11,647

    0-E

    Nestlé Waters Management & Tecnology S.A.S.

    Uruguay

    (3)

    Related to the controller

    Purchase of products

    Euros

    -

    12,191

    0-E

    Nestlé Waters Marketing & Distribution S.A.S.

    Chile

    (3)

    Related to the controller

    Purchase of products

    Euros

    -

    21,861

    0-E

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

    Chile

    (3)

    Related to the controller

    Purchase of products

    USD

    -

    151,578

    0-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

    21,100

    76,481,675-7

    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

    15,707

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    (1)

    Joint venture

    Marketing services

    CLP

    37,889

    24,694

    78,105,460-7

    Alimentos Nutrabien S.A.

    Chile

    (1)

    Joint venture

    Purchase of products

    CLP

    315

    212

    78,259,420-6

    Inversiones PFI Chile Ltda.

    Chile

    (1)

    Shareholder to subsidiary

    Purchase of products

    CLP

    846,035

    1,195,665

    81,805,700-8

    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

    -

    13,205

    89,010,400-2

    Alusa Chile S.A.

    Chile

    (1)

    Related to the controller

    Purchase of products

    CLP

    -

    437,884

    92,011,000-2

    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

    193

    96,591,040-9

    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

    25,911

    96,798,520-1

    Saam Extraportuarios S.A.

    Chile

    (1)

    Related to the controller

    Transport service

    CLP

    -

    17

    96,810,030-0

    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

    414,400

    97,004,000-5

    Banco de Chile

    Chile

    (1)

    Related to the controller

    Billed services

    CLP

    41,001

    2,431

    99,540,870-8

    Aguas de Antofagasta S.A.

    Chile

    (1)

    Related to the controller

    Water service

    CLP

    -

    36,879

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Purchase of products

    CLP

    36,834

    63,212

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Consignation sales

    CLP

    217,689

    2,015,613

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Discount fleet

    CLP

    143,465

    -

    Total

     

     

     

     

     

     

    9,530,071

    11,624,218


    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

    2014

    Amounts

    (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

    79,394

    0-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

    64,321

    76,313,970-0

    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

    254,392

    77,755,610-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

    578,485

    78,259,420-6

    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

    7,975

    81,805,700-8

    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

    11,411

    81,805,700-8

    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

    10,539

    96,427,000-7

    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

    797,953

    96,571,220-8

    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

    126,260

    96,919,980-7

    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

    231,038

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controller

    Sales of products

    87,772

    48,800

    39,148

    25,446

    60,472

    21,165

    97,004,000-5

    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

    1,427,444

    97,004,000-5

    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

    363,945

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    Joint venture

    Sales of products

    5,973

    2,745

    13,540

    6,223

    15,097

    9,511

    99,542,980-2

    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

    6,990,442

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    Joint venture

    Consignation sales

    5,115,078

    -

    24,067,498

    -

    23,303,360

    -

     

     

     

     

     

     

     

     

     

     

     


    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.


    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, 2015

     

    ThCh$

    ThCh$

    Finished products

    76,323,417

    50,873,881

    In process products

    1,935,157

    1,828,386

    Raw material

    113,232,691

    113,716,967

    In transit raw material

    4,460,822

    3,707,440

    Materials and products

    5,675,945

    5,926,122

    Realizable 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, 2014

     

     

    ThCh$

    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

    1,369,096

    Business combination effect

    27,107

    175,666

    10,391

    Total

    (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.


    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:

     

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Accounts receivables:

     

     

    Chile reportable segment

    87,979,118

    82,679,391

    Río de la Plata reportable segment

    50,498,496

    39,991,531

    Wines reportable segment

    38,575,440

    38,645,382

    Total Others reportable segment

    43,083,819

    39,379,373

    Others accounts receivables (1)

    21,619,152

    15,314,439

    Impairment loss estimate

    (3,153,132)

    (4,506,069)

    Total

    238,602,893

    211,504,047

    ThCh$

    As of January 1, 2015

     

    Historic cost

    7,633,591

    (1)Book Value

    Primarlly includes Comercial CCU S.A. which makes sales multiclass on behalf of Cervecera CCU Chile, ECUSA, CPCh, VSPT and Foods.7,633,591

     

     

    F-51


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    The Company’s accounts receivable are denominated in the following currencies:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Chilean Peso

    156,192,520

    137,392,333

    Argentine Peso

    46,140,278

    37,420,770

    US Dollar

    19,030,421

    23,341,142

    Euro

    10,038,934

    7,263,490

    Unidad de Fomento

    2,021

    45,225

    Uruguayan Pesos

    4,520

    3,856,106

    Guaraní Paraguayo

    5,477,622

    -

    Others currencies

    1,716,577

    2,184,981

    Total

    238,602,893

    211,504,047

    The detail of the accounts receivable maturities as ofDecember 31, 2014, is as follows:

     

    Total

    Current

     balance

    Overdue balances

    0 a 3 months

    3 a 6 months

    6 a 12 months

    More than 12

    months

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Accounts receivables:

     

     

     

     

     

     

    Chile reportable segment

    87,979,118

    81,335,105

    5,453,180

    485,827

    325,316

    379,690

    Río de la Plata reportable segment

    50,498,496

    41,505,514

    7,058,969

    791,980

    289,994

    852,039

    Wines reportable segment

    38,575,440

    33,384,725

    4,696,632

    187,721

    150,061

    156,301

    Total Others reportable segment (1)

    43,083,819

    38,808,700

    3,218,244

    212,767

    230,855

    613,253

    Others accounts receivables

    21,619,152

    19,689,147

    663,317

    1,266,688

    -

    -

    Sub Total

    241,756,025

    214,723,191

    21,090,342

    2,944,983

    996,226

    2,001,283

    Impairment loss estimate

    (3,153,132)

    -

    (608,126)

    (285,728)

    (505,187)

    (1,754,091)

    Total

    238,602,893

    214,723,191

    20,482,216

    2,659,255

    491,039

    247,192

    (1)Primarlly includes Comercial CCU S.A. which makes sales multiclass on behalf of Cervecera CCU Chile, ECUSA, CPCh, VSPT and Foods. 

    The detail of the accounts receivable maturities asAs of December 31, 2013, is as follows:2015

     

     

    Total

    Current

    balance

    Overdue balances

     

    0 a 3 months

    3 a 6 months

    6 a 12 months

    More than 12

    months

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Accounts receivables:

          

    Chile reportable segment

    82,679,390

    74,761,586

    6,261,638

    261,061

    451,736

    943,369

    Río de la Plata reportable segment

    39,991,531

    33,904,790

    4,110,465

    975,319

    148,786

    852,171

    Wines reportable segment

    38,645,382

    33,201,043

    4,134,689

    814,425

    288,308

    206,917

    Total Others reportable segment (1)

    39,380,374

    34,783,229

    2,665,321

    619,291

    167,846

    1,144,687

    Others accounts receivables

    15,314,439

    14,787,403

    416,358

    110,678

    -

    -

    Sub Total

    216,011,116

    191,438,051

    17,588,471

    2,780,774

    1,056,676

    3,147,144

    Impairment loss estimate

    (4,506,068)

    -

    (235,579)

    (538,513)

    (851,997)

    (2,879,979)

    Total

    211,505,048

    191,438,051

    17,352,892

    2,242,261

    204,679

    267,165

    Acquisitions

    (1)Primarlly includes Comercial CCU S.A. which makes sales multiclass on behalf of Cervecera CCU Chile, ECUSA, CPCh, VSPT and Foods. 

    F-52


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    18,192,939

    The Company markets its products through retail, wholesale clients, chains and supermarkets. As ofDecember 31, 2014, the accounts receivable from the three most important supermarket chains in Chile and Argentina represent 29% (31% in 2013) 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% of the accounts receivable balances. For this reason, 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.

    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.

    The movement of the impairment losses provision for accounts receivable is as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Balance at the beginning of year

    4,506,069

    4,912,802

    Impairment estimate for accounts receivable

    346,606

    1,081,914

    Uncollectible accounts

    (914,016)

    (720,031)

    Released provisions

    (680,950)

    (627,848)

    Effect of translation into presentation currency

    (104,576)

    (140,768)

    Total

    3,153,133

    4,506,069

    F-53


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 16Accounts 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.Decreases 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 Limari Ltda.renew the contract for a period of ten years. Consequently, the UF 9,995 will pay in ten instalments of UF 1,162 each one, beginning February 28, 2015.harvesting

    (18,193,190)

    Book Value

    7,633,340

     

    (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.

     

    The transaction schedule includes all the transactions made with related parties.

    The detail of the accounts receivable and payable from related companies asAs of December 31, 2014 and 2013, is as follows:2015

     

    Historic cost

    7,633,340

    Book Value

    7,633,340

     

     

    F-54


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Accounts receivable from related companies

    Current:

    Tax ID

    Company

    Country of

    origin

    Ref.

    Relationship

    Transaction

    Currency

    As of December 31,

    2014

    As of December 31,

    2013

    ThCh$

    ThCh$

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    (1)

    Joint venture

    Sales of products

    CLP

    235,683

    188,278

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    (1)

    Joint venture

    Royalty collected

    CLP

    -

    5,194

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    (1)

    Joint venture

    Billed services

    CLP

    15,391

    20,253

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    (1)

    Related joint operating

    Sales of products

    CLP

    1,573,306

    224,650

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    (1)

    Related joint operating

    Leases cranes

    CLP

    2,191

    1,481

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Sales of products

    CLP

    841,647

    187,525

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Transport service

    CLP

    433,647

    1,034,550

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (2)

    Joint venture

    Remittance send

    CLP

    6,108,351

    6,335,472

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Interests

    CLP

    362,790

    65,779

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (2)

    Joint venture

    Sale service

    CLP

    128,430

    227,842

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Shared service

    CLP

    238,980

    135,638

    81,805,700-8

    Cooperativa Agricola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (1)

    Shareholder of subsidiary

    Purchase advanced

    CLP

    1,055,714

    57,625

    81,805,700-8

    Cooperativa Agricola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (1)

    Shareholder of subsidiary

    Sales of products

    CLP

    60,673

    -

    81,805,700-8

    Cooperativa Agricola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (4)

    Shareholder of subsidiary

    Loan

    U.F.

    29,602

    259,179

    81,805,700-8

    Cooperativa Agricola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (5)

    Shareholder of subsidiary

    Supply contract

    U.F.

    71,616

    67,637

    77,051,330-8

    Cervecería Kunstmann Ltda.

    Chile

    (1)

    Shareholder of subsidiary

    Sales of products

    CLP

    142,957

    90,519

    0-E

    Heineken Brouwerijen B.V.

    Netherland

    (3)

    Related to the controlling

    Sales of products

    USD

    43,428

    33,948

    96,427,000-7

    Inversiones y Renta S.A.

    Chile

    (1)

    Controller

    Sales of products

    CLP

    9,330

    6,046

    97,004,000-5

    Banco de Chile

    Chile

    (1)

    Related to the controlling

    Sales of products

    CLP

    179,284

    167,704

    91,021,000-9

    Madeco S.A.

    Chile

    (1)

    Related to the controlling

    Sales of products

    CLP

    3,683

    3,683

    92,236,000-6

    Watt´s S.A.

    Chile

    (1)

    Related joint venture

    Services

    CLP

    -

    18,164

    76,178,803-5

    Viña Tabali S.A.

    Chile

    (1)

    Related to the controlling

    Billed services

    CLP

    79,437

    6,015

    90,081,000-8

    Compañía Chilena de Fósforos S.A.

    Chile

    (1)

    Shareholder of subsidiary

    Sales of products

    CLP

    2,978

    4,805

    O-E

    Bebidas de Paraguay S.A.

    Paraguay

    (3)

    Subsidiary

    Sales of products

    USD

    -

    468,318

    Total

     

     

     

     

     

     

    11,619,118

    9,610,305

    Non Current:

    Tax ID

    Company

    Country of

    origin

    Ref.

    Relationship

    Transaction

    Currency

    As of December 31,

    2014

    As of December 31,

    2013

    ThCh$

    ThCh$

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (4)

    Shareholder of subsidiary

    Supply contract

    U.F.

    298,973

    350,173

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (3)

    Shareholder of subsidiary

    Loan

    U.F.

    223,980

    -

    Total

     

     

     

     

     

     

    522,953

    350,173

    F-55


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Accounts payable to related companies

    Current:

    Tax ID

    Company

    Country of

    origin

    Ref.

    Relationship

    Transaction

    Currency

    As of December 31,

    2014

    As of December 31,

    2013

    ThCh$

    ThCh$

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    (1)

    Joint venture

    Purchase of products

    CLP

    1,232,609

    288,652

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    (1)

    Joint venture

    Royalty paid

    CLP

    45,687

    119,071

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    (1)

    Subsidiary joint venture

    Marketing services

    CLP

    22,810

    37,171

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Purchase of products

    CLP

    2,414,179

    574,402

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Trucker discounts

    CLP

    -

    42,374

    99,542,980-2

    Foods Compañía de Alimentos CCU S.A.

    Chile

    (1)

    Joint venture

    Consignation sales

    CLP

    557,331

    558,880

    81,805,700-8

    Cooperativa Agricola Control Pisquero de Elqui y Limarí Ltda.

    Chile

    (1)

    Shareholder of subsidiary

    Purchase of products

    CLP

    -

    1,089,590

    77,051,330-8

    Cervecería Kunstmann Ltda.

    Chile

    (1)

    Shareholder of subsidiary

    Purchase of products

    CLP

    6,400

    6,205

    0-E

    Heineken Brouwerijen B.V.

    Netherland

    (3)

    Related to the controlling

    License and technical assistance

    Euros

    3,354,448

    3,721,131

    0-E

    Heineken Brouwerijen B.V.

    Netherland

    (3)

    Related to the controlling

    Purchase of products

    Euros

    1,009,856

    -

    76,178,803-5

    Viña Tabali S.A.

    Chile

    (1)

    Related to the controlling

    Recaudation for customers

    CLP

    37,185

    27,116

    78,105,460-7

    Alimentos Nutrabien S.A.

    Chile

    (1)

    Joint venture

    Purchase of products

    CLP

    314

    1,502

    87,938,700-0

    Agroproductos Bauza y Cía. Ltda.

    Chile

    (1)

    Related joint operating

    Purchase of products

    CLP

    31,199

    222

    84,898,000-5

    Alusa S.A.

    Chile

    (1)

    Related to the controlling

    Purchase of products

    CLP

    73,233

    468,675

    97,004,000-5

    Banco de Chile

    Chile

    (1)

    Related to the controlling

    Billed services

    CLP

    4,504

    2,528

    76,115,132-0

    Canal 13 S.P.A.

    Chile

    (1)

    Related to the controlling

    Adversiting

    CLP

    170,091

    278,460

    96,689,310-9

    Transbank S.A.

    Chile

    (1)

    Related to the controlling

    Commission of sale

    CLP

    54

    54

    90,160,000-7

    Compañía Sud Americana de Vapores S.A.

    Chile

    (1)

    Related to the controlling

    Transport service

    CLP

    2,928

    280

    96,908,430-9

    Telefónica del Sur Servicios Intermedios S.A.

    Chile

    (1)

    Related to the controlling

    Telephony service

    CLP

    661

    -

    0-E

    Amstel Brouwerijen B.V.

    Netherland

    (3)

    Related to the controlling

    License and technical assistance

    Euros

    121,854

    69,660

    99,505,690-9

    Blue Two Chile S.A.

    Chile

    (1)

    Related to the controlling

    Telephony service

    CLP

    -

    91

    92,048,000-4

    Sudamericana Agencias Aéreas y Maritimas S.A.

    Chile

    (1)

    Related to the controlling

    Transport service

    CLP

    231

    -

    92,236,000-6

    Watt´s S.A.

    Chile

    (1)

    Related to the controlling

    Purchase of products

    CLP

    67,315

    -

    78,259,420-6

    Inversiones PFI Chile Ltda.

    Chile

    (1)

    Shareholder of subsidiary

    Purchase of products

    CLP

    1,116,372

    -

    0-E

    Tabacos del Paraguay S.A. Importadora Exportadora

    Paraguay

    (3)

    Related subsidiary

    Adversiting

    PYG

    13,051

    -

    Total

     

     

     

     

     

     

    10,282,312

    7,286,064

    Non Current:

    Tax ID

    Company

    Country of

    origin

    Ref.

    Relationship

    Transaction

    Currency

    As of December 31,

    2014

    As of December 31,

    2013

    ThCh$

    ThCh$

    O-E

    Bebidas de Paraguay S.A.

    Paraguay

    (3)

    Subsidiary

    Distribution

    USD

    -

    377,020

    Total

     

     

     

     

     

     

    -

    377,020

    F-56


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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,

    2014

    2013

    2012

    Amounts

    (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

    Heineken Brouwerijen B.V.

    Netherland

    Related to the controlling

    Billed services

    95,533

    (95,533)

    58,343

    (58,343)

    53,538

    (53,538)

    0-E

    Heineken Brouwerijen B.V.

    Netherland

    Related to the controlling

    Purchase of products

    295,899

    -

    225,145

    -

    191,321

    -

    0-E

    Heineken Brouwerijen B.V.

    Netherland

    Related to the controlling

    Sales of products

    208,932

    79,394

    244,804

    93,026

    917,456

    345,633

    0-E

    Heineken Brouwerijen B.V.

    Netherland

    Related to the controlling

    License and technical assintance

    6,338,435

    (6,338,435)

    6,990,715

    (6,990,715)

    7,733,364

    (7,733,364)

    0-E

    Heineken Italia Spa

    Italia

    Related to the controlling

    Purchase of products

    -

    -

    40,025

    -

    38,978

    -

    0-E

    Amstel Brouwerijen BV

    Netherland

    Related to the controlling

    License and technical assintance

    161,865

    (161,865)

    69,660

    (69,660)

    -

    -

    0-E

    Nestle Waters Argentina S.A.

    Argentina

    Shareholder of subsidiary

    License and technical assintance

    -

    -

    1,350

    (1,350)

    45,564

    (45,564)

    0-E

    Nestle Waters S.A.

    Italia

    Shareholder of subsidiary

    Royalty paid

    204,010

    (204,010)

    155,839

    (155,839)

    135,930

    (135,930)

    90,703,000-8

    Nestle Chile S.A.

    Chile

    Shareholder of subsidiary

    Dividends paid

    2,581,736

    -

    2,442,310

    -

    3,253,214

    -

    77,051,330-8

    Cervecería Kunstmann Ltda.

    Chile

    Shareholder of subsidiary

    Sales of products

    317,990

    254,392

    265,054

    212,043

    201,828

    161,462

    77,051,330-8

    Cervecería Kunstmann Ltda.

    Chile

    Shareholder of subsidiary

    Billed services

    23,335

    23,335

    174,871

    174,871

    39,793

    39,793

    79,985,340-K

    Cervecera Valdivia S.A.

    Chile

    Shareholder of subsidiary

    Dividends paid

    511,172

    -

    523,063

    -

    449,557

    -

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    Subsidiary joint venture

    Marketing service

    225,128

    (225,128)

    208,191

    (208,191)

    182,773

    (182,773)

    77,755,610-K

    Comercial Patagona Ltda.

    Chile

    Subsidiary joint venture

    Sales of products

    1,410,939

    578,485

    1,998,700

    819,468

    1,310,486

    537,299

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

    Chile

    Shareholder of subsidiary

    Loan

    27,681

    7,975

    26,200

    8,092

    13,180

    2,165

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

    Chile

    Shareholder of subsidiary

    Supply contract

    71,616

    11,411

    67,784

    12,456

    34,169

    5,614

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

    Chile

    Shareholder of subsidiary

    Purchase grape

    5,027,758

    -

    8,251,401

    -

    5,521,250

    -

    81,805,700-8

    Cooperativa Agrícola Control Pisquero de Elqui y Limari Ltda.

    Chile

    Shareholder of subsidiary

    Dividends paid

    617,964

    -

    774,087

    -

    772,631

    -

    90,081,000-8

    Compañía Chilena de Fosforo S.A.

    Chile

    Shareholder of subsidiary

    Dividends paid

    1,637,775

    -

    1,134,431

    -

    1,998,104

    -

    96,427,000-7

    Inversiones y Rentas S.A.

    Chile

    Controller

    Dividends paid

    32,701,972

    -

    35,285,513

    -

    37,850,647

    -

    96,427,000-7

    Inversiones y Rentas S.A.

    Chile

    Controller

    Office rental

    10,539

    10,539

    10,174

    10,174

    9,984

    9,984

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    Joint venture

    Sales of products

    315,650

    126,260

    293,194

    117,278

    251,203

    123,089

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    Joint venture

    Royalty paid

    389,655

    (389,655)

    340,706

    (340,706)

    258,836

    (258,836)

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    Joint venture

    Royalty collected

    30,694

    30,694

    47,265

    47,265

    47,436

    47,436

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    Joint venture

    Purchase of products

    3,525,715

    -

    2,703,252

    -

    2,171,939

    -

    96,919,980-7

    Cervecería Austral S.A.

    Chile

    Joint venture

    Billed services

    231,038

    231,038

    205,076

    205,076

    189,029

    189,029

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controlling

    Transport of securities

    356,432

    (356,432)

    72,005

    (72,005)

    36,235

    (36,235)

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controlling

    Sales of products

    60,472

    21,165

    30,865

    10,803

    36,495

    12,773

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controlling

    Derivatives

    2,595,060

    (1,637)

    9,358,500

    3,158

    13,524,375

    (42,668)

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controlling

    Investments

    181,200,794

    1,427,444

    111,695,000

    366,198

    52,990,501

    394,676

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controlling

    Interests

    387,547

    (387,547)

    258,196

    (258,196)

    264,723

    (264,723)

    97,004,000-5

    Banco de Chile

    Chile

    Related to the controlling

    Leasing paid

    224,872

    (24,155)

    140,033

    (24,680)

    355,095

    (36,027)

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Interests

    363,945

    363,945

    334,899

    334,899

    359,433

    359,433

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Remittance send

    31,144,541

    -

    22,938,115

    -

    20,993,817

    -

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Remittance received

    31,367,766

    -

    24,353,351

    -

    20,846,549

    -

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Billed services

    6,990,442

    6,990,442

    4,901,800

    4,901,800

    3,734,008

    3,734,008

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Purchase of products

    430,381

    (430,381)

    345,267

    (345,267)

    276,500

    (276,500)

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Consignation sales

    23,303,360

    -

    13,523,940

    -

    12,178,770

    -

    99,542,980-2

    Foods Compañía de Alimentos CCU.S.A.

    Chile

    Joint venture

    Sales of products

    15,097

    9,511

    16,926

    12,981

    15,729

    7,325

    96,956,680-K

    Alusa S.A.

    Chile

    Related to the controlling

    Purchase of products

    1,562,351

    -

    1,427,550

    -

    1,225,555

    -

    76,115,132-0

    Canal 13 S.P.A.

    Chile

    Related to the controlling

    Adversiting

    3,318,107

    (1,196,948)

    4,397,642

    (2,078,401)

    3,980,772

    (2,367,794)

    96,571,220-8

    Banchile Corredores de Bolsa S.A.

    Chile

    Related to the controlling

    Investments

    315,790,000

    797,953

    205,902,500

    368,684

    278,110,000

    440,160

    96,571,220-9

    Banchile Corredores de Bolsa S.A.

    Chile

    Related to the controlling

    Commissions

    -

    -

    577,994

    (577,994)

    -

    -

    79,903,790-4

    Soc. Agrícola y Ganadera Río Negro Ltda.

    Chile

    Related to the controlling

    Purchase of products

    -

    -

    162,772

    -

    1,427

    -

    76,178,803-5

    Viña Tabalí S.A.

    Chile

    Related to the controlling

    Recaudation for division

    -

    -

    -

    -

    243,728

    -

    76,178,803-5

    Viña Tabalí S.A.

    Chile

    Related to the controlling

    Billed services

    64,321

    64,321

    47,440

    47,440

    94,644

    94,644

    76,178,803-5

    Viña Tabalí S.A.

    Chile

    Related to the controlling

    Sales of fixed assets

    15,306

    15,306

    -

    -

    -

    -

    76,029,691-0

    Comarca S.A.

    Chile

    Related subsidiary

    Access fee

    -

    -

    1,313,475

    -

    409,460

    -

    76,173,468-7

    Fondo de Inversión Privado Mallorca

    Chile

    Related subsidiary

    Dividends paid

    17,172

    -

    60,053

    -

    -

    -

    76,173,468-7

    Fondo de Inversión Privado Mallorca

    Chile

    Related subsidiary

    Remaining amount of shares

    -

    -

    1,529,715

    -

    -

    -

     

     

     

     

     

     

     

     

     

     

     

    F-57


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Remuneration of the Management key employees

    The Company is managed by a Board ofDirectors comprised of 9 memberseachof whomisin office for a 3-year term and may be re-elected.

    The Board was appointed at the Ordinary Shareholders´ Meeting held on April 10, 2013, being elected Messrs. Andrónico Luksic Craig, Pablo Granifo Lavín, Carlos Molina Solís, John Nicolson, Manuel José Noguera Eyzaguirre, Philippe Pasquet, Francisco Pérez Mackenna, Jorge Luis Ramos Santos and Vittorio Corbo Lioi, who is independent, according to article 50 bis of Law Nº 18,046. The Chairman and the Vice Chairman, as well as the members of the Audit Committee were designated at the Board of Directors´ meeting held on April 10, 2013. In 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 comprised of Directors Messrs. Pérez, Pasquet and Corbo.  Additionally, Messrs. Corbo and Pasquet were designated 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 and Ramos shall participate in the Audit Committee´s meetings as observers.

    As agreed to at the Ordinary Shareholders´ Meeting referred to above, the Directors’ remuneration consists of a per diem for their attendance at each meeting of UF 100 per Director, and UF 200 for the Chairman, 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 2014. If the distributed dividends exceed 50% of the net profits, the Board of Directors’ share shall be calculated over a maximum 50% of such profits.

    Those Directors that are members of the Directors Committee receive a remuneration per diem 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 Circular Letter N° 1956 of the SVS. On the other hand, Directors that are members of the Business Committee receive a remuneration per diem of UF 17, for each meeting they attend.  Directors that are members of the Audit Committee receive a monthly remuneration of UF 25.

    According to the above, as ofDecember 31, 2014, the Directors received ThCh$ 2,703,342 (ThCh$ 2,461,403 in 2013 and ThCh$ 2,533,225 in 2012) in per diems and shares. In addition, ThCh$ 117,342 (ThCh$ 109,981 in 2013 and ThCh$ 114,529 in 2012) were paid in compensation for gains sharing to the main executives of the Parent Company.

    The following is the total remuneration received by the top officers of the Parent Company during the years ended as ofDecember 31, 2014 and 2013:

     

    For the years ended as of December

    31,

    2014

    2013

    ThCh$

    ThCh$

    Salaries

    5,212,395

    5,464,562

    Employees’ short-term benefits

    2,620,769

    2,198,595

    Employments termination benefits

    3,107,575

    129,229

    Total

    10,940,739

    7,792,386

    The Company grants annual discretionary and variable bonuses, to the top officers, 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-58


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 17Inventories

    The inventory balances were as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Finished products

    56,873,874

    39,817,511

    In process products

    1,568,879

    4,416,816

    Agricultural explotation

    7,633,591

    6,130,652

    Raw material

    103,535,487

    96,107,993

    In transit raw material

    553,972

    2,864,938

    Materials and products

    7,602,904

    5,034,630

    Realizable net value estimate and obsolescence

    (2,589,518)

    (1,286,695)

    Total

    175,179,189

    153,085,845

    The Company wrote off a total of ThCh$ 1,033,337, ThCh$ 1,495,381 and ThCh$ 1,038,364 relating to inventory shrinkage and obsolescence for the year endedDecember 31, 2014, 2013 and 2012, 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, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Initial balance

    (1,286,695)

    (1,254,312)

    Inventories write-down estimation

    (2,682,310)

    (1,533,745)

    Inventories recognized as an expense

    1,369,096

    1,501,086

    Business combination effect

    10,391

    276

    Total

    (2,589,518)

    (1,286,695)

    As ofDecember 31, 2014 and 2013, the Company does not have any inventory pledged as guarantee against financial obligations.

    F-59


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    Note 18  Other non-financial assets

    The Company maintained the following other non-financial assets:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Insurance paid

    2,841,121

    2,437,657

    Advertising

    7,885,301

    6,024,985

    Advances to suppliers

    9,098,153

    13,613,214

    Guarantees paid

    318,105

    236,244

    Consumables

    453,548

    440,314

    Dividends receivable

    36,044

    64,777

    Recoverable taxes

    1,610,979

    1,434,219

    Cost of subsidiaries acquired (1)

    -

    11,254,656

    Other

    2,144,091

    1,270,443

    Total

    24,387,342

    36,776,509

    Current

    18,558,445

    21,495,398

    Non current

    5,828,897

    15,281,111

    Total

    24,387,342

    36,776,509

    (1)See Note 8

    Note 19Investments accounted for by the equity method

    Joint arrangements, Joint ventures and Associates

    As ofDecember 31, 2014 and 2013, the Company recorded investments qualifying as joint venture and associates.

    The share value of the investments in joint ventures and associates is as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

    ThCh$

    ThCh$

    Cervecería Austral S.A. (1)

    4,957,494

    4,851,052

    Foods Compañía de Alimentos CCU S.A. (2)

    12,837,774

    12,711,976

    Bebidas Bolivianas S.A. (3)

    12,757,874

    -

    Central Cervecera de Colombia S.A.S. (4)

    1,445,478

    -

    Total

    31,998,620

    17,563,028

    The above mentioned values include the goodwill generated through the acquisition of the following joint ventures, which are presented net of any impairment loss:

     

    As of December

    31, 2014

    As of December

    31, 2013

    ThCh$

    ThCh$

    Cervecería Austral S.A.

    1,894,770

    1,894,770

    Total

    1,894,770

    1,894,770

    F-60


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    The results accrued in joint ventures and associates are as follows:

     

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    ThCh$

    Cervecería Austral S.A.

    157,836

    221,662

    47,856

    Foods Compañía de Alimentos CCU S.A.

    (16,476)

    87,100

    (224,963)

    Bebidas Bolivianas S.A.

    (1,039,967)

    -

    -

    Total

    (898,607)

    308,762

    (177,107)

    Changes in investments in joint ventures and associates during such periods are as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Balance at the beginning of year

    17,563,028

    17,326,391

    Business combination effect

    15,222,363

    -

    Participation in the joint ventures and associates (loss)

    (898,607)

    308,762

    Dividends received

    (39,096)

    (66,949)

    Other changes

    150,932

    (5,176)

    Total

    31,998,620

    17,563,028

    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.

    (3) Bebidas Bolivianas S.A.

    On May 7, 2014, the Company acquired 34% of the stock rights of Bebidas Bolivianas S.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.

    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.

    (4) 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. At the date of issuance of these consolidated financial statements CCU Inversiones II Limitada paid US$ 2,500,000. The partnership involves the construction of a beer production plant, with a total capacity of 3,000,000 hectoliters.

    F-61


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    The summarized financial information of these companies as ofDecember 31, 2014 and 2013, appears in detail inNote 7.  

    The Company does not have any contingent liabilities related to joint ventures and associates as ofDecember 31, 2014.

    Note 20 Intangible Assets (net)

    The intangible assets movement during the years ended as of December 31, 20132016

    Acquisitions

    19,611,307

    Decreases due to harvesting

    (19,296,268)

    Book Value

    7,948,379

    As of December 31, 2016

    Historic cost

    7,948,379

    Book Value

    7,948,379


    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, 2015

     

    Current

    Non current

    Current

    Non current

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Insurance paid

    3,038,856

    -

    3,512,317

    -

    Advertising

    5,819,736

    2,567,939

    4,822,197

    2,652,382

    Advances to suppliers

    5,269,826

    -

    7,438,102

    -

    Guarantees paid

    50,590

    227,738

    99,493

    228,749

    Consumables

    433,570

    -

    526,645

    -

    Dividends receivable

    245,073

    -

    150,343

    -

    Recoverable taxes (1)

    -

    1,231,414

    -

    1,303,925

    Cost of subsidiaries acquired (2)

    -

    641,489

    -

    -

    Other

    1,001,486

    700,631

    1,105,276

    1,035,898

    Total

    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)See Note 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

    5,043,071

    Foods Compañía de Alimentos CCU S.A. (2)

    50.00

    5,624,391

    11,582,085

    Central Cervecera de Colombia S.A.S. (3)

    50.00

    35,449,038

    18,718,832

    Total joint ventures

     

    46,621,887

    35,343,988

    Bebidas Bolivianas BBO S.A. (4)

    34.00

    17,281,665

    14,276,937

    Other companies

     

    501,394

    374,338

    Total associates

     

    17,783,059

    14,651,275

    Total

     

    64,404,946

    49,995,263


    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, 2015

     

    ThCh$

    ThCh$

    Cervecería Austral S.A.

     

    1,894,770

    1,894,770

    Bebidas Bolivianas BBO S.A.

     

    9,032,617

    7,648,453

    Total

     

    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

    2014

    ThCh$

    ThCh$

    ThCh$

    Cervecería Austral S.A.

    754,326

    247,180

    157,836

    Foods 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, 2015

     

    ThCh$

    ThCh$

    Balance at the beginning of year

    49,995,263

    31,998,620

    Business combination effect

    25,118,232

    23,387,006

    Participation 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.


    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 BolivianasBBOS.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.


    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

    Associated

     

    For the years ended as of December 31,

     

    2016

    2015

    2014

     

    ThCh$

    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

    8,470,716

    Operating 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

    3,719,889

    Depreciation 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, 2015

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Assets and Liabilities

     

     

     

     

     

     

    Current assets

    64,587,798

    7,602,940

    57,908,034

    9,326,003

    15,625,609

    6,987,602

    Non-current assets

    50,994,744

    30,504,073

    29,453,402

    31,393,842

    39,076,178

    17,664,655

    Current liabilities

    23,043,784

    5,886,879

    6,233,586

    6,086,146

    17,550,702

    4,467,768

    Non-current liabilities

    2,350,385

    7,789,367

    3,720,129

    9,494,421

    2,725,097

    5,244,421

     

     

     

     

     

     

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    Note 20 Intangible 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

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2015

     

     

     

     

     

    Historic cost

    58,720,268

    21,353,252

    1,914,139

    1,046,487

    83,034,146

    Accumulated amortization

    -

    (14,281,717)

    -

    (95,534)

    (14,377,251)

    Book Value

    58,720,268

    7,071,535

    1,914,139

    950,953

    68,656,895

     

     

     

     

     

     

    As of December 31, 2015

     

     

     

     

     

    Additions

    -

    3,160,435

    -

    104,739

    3,265,174

    Additions by business combination (1)

    7,747,581

    -

    -

    -

    7,747,581

    Transfers (2)

    (3,266,332)

    -

    -

    -

    (3,266,332)

    Divestitures (cost)

    -

    (3,748)

    -

    -

    (3,748)

    Divestitures (amortization)

    -

    3,748

    -

    -

    3,748

    Amortization 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

    186,862

    Book Value

    60,966,038

    8,284,024

    1,914,139

    703,806

    71,868,007

     

     

     

     

     

     

    As of December 31, 2015

     

     

     

     

     

    Historic cost

    60,966,038

    24,212,125

    1,914,139

    904,007

    87,996,309

    Accumulated amortization

    -

    (15,928,101)

    -

    (200,201)

    (16,128,302)

    Book Value

    60,966,038

    8,284,024

    1,914,139

    703,806

    71,868,007

     

     

     

     

     

     

    As of December 31, 2016

     

     

     

     

     

    Additions

    40,000

    4,533,631

    219,163

    -

    4,792,794

    Additions by business combination (1)

    5,614,575

    -

    -

    -

    5,614,575

    Divestitures (cost)

    -

    (167,825)

    (42,243)

    -

    (210,068)

    Divestitures (amortization)

    -

    197,910

    -

    -

    197,910

    Amortization 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

    346,369

    Book Value

    64,905,623

    10,292,591

    2,091,059

    389,577

    77,678,850

     

     

     

     

     

     

    As of December 31, 2016

     

     

     

     

     

    Historic cost

    64,905,623

    28,364,765

    2,091,059

    763,017

    96,124,464

    Accumulated 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)and d).

    (2) SeeNote 24, letter a).

    There are no restriction or any pledge against on intangible assets.


    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

    25,861,588

     

    Manantial S.A.

    1,166,000

    1,166,000

     

    Compañía Pisquera de Chile S.A.

    1,363,782

    1,363,782

     

    Compañía Cerveceria Kunstmann S.A.

    286,744

    286,518

     

    Subtotal

    34,292,689

    28,677,888

    International Business

    CCU Argentina S.A. and subsidiaries

    4,774,066

    6,171,061

     

    Marzurel S.A., Coralina S.A. and Milotur S.A.

    2,822,016

    2,932,762

     

    Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

    3,234,664

    3,440,608

     

    Subtotal

    10,830,746

    12,544,431

    Wines

    Viña San Pedro Tarapacá S.A.

    19,782,188

    19,743,719

     

    Subtotal

    19,782,188

    19,743,719

    Total

     

    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.


    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:

     

     

    Trademarks

    Software

    programs

    Water rights

    Distribution

     rights

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2013

     

     

     

     

     

    Historic cost

    53,838,908

    19,007,103

    886,146

    649,620

    74,381,777

    Accumulated amortization

    -

    (13,086,941)

    -

    (362,798)

    (13,449,739)

    Book Value

    53,838,908

    5,920,162

    886,146

    286,822

    60,932,038

          

    As of December 31, 2013

     

     

     

     

     

    Additions

    -

    2,364,684

    -

    377,020

    2,741,704

    Additions by business combination

    4,100,212

    3,826

    39,210

    -

    4,143,248

    Divestitures (cost)

    -

    (2,083,146)

    -

    -

    (2,083,146)

    Divestitures (amortization)

    -

    2,083,146

    -

    -

    2,083,146

    amortization of year

    -

    (1,643,424)

    -

    (174,696)

    (1,818,120)

    Conversion effect

    -

    47,162

    -

    497

    47,659

    Effect of conversion amortization

    (1,851,072)

    (132,765)

    -

    (29,803)

    (2,013,640)

    Foreign currency exchange differences

    -

    -

    -

    1,042

    1,042

    Book Value

    56,088,048

    6,559,645

    925,356

    460,882

    64,033,931

          

    As of December 31, 2013

     

     

     

     

     

    Historic cost

    56,088,048

    19,199,598

    925,356

    1,024,457

    77,237,459

    Accumulated amortization

    -

    (12,639,953)

    -

    (563,575)

    (13,203,528)

    Book Value

    56,088,048

    6,559,645

    925,356

    460,882

    64,033,931

          

    As of December 31, 2014

     

     

     

     

     

    Additions

    -

    2,292,555

    988,783

    21,933

    3,303,271

    Additions by business combination

    3,658,167

    -

    -

    568,666

    4,226,833

    amortization of year

    -

    (1,718,514)

    -

    (45,718)

    (1,764,232)

    Effect of conversion amortization

    -

    79,405

    -

    7,512

    86,917

    Conversion effect

    (1,025,947)

    (141,556)

    -

    (62,322)

    (1,229,825)

    Book Value

    58,720,268

    7,071,535

    1,914,139

    950,953

    68,656,895

          

    As of December 31, 2014

     

     

     

     

     

    Historic cost

    58,720,268

    21,353,252

    1,914,139

    1,046,487

    83,034,146

    Accumulated amortization

    -

    (14,281,717)

    -

    (95,534)

    (14,377,251)

    Book Value

    58,720,268

    7,071,535

    1,914,139

    950,953

    68,656,895

     

    There are no restriction or any pledge against on intangible assets.

    F-Goodwill62


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

     

    The detailThCh$

    As of the Trademarks appears below:

    Segment

    Cash Generating Unit

    As of December

    31, 2014

    As of December

    31, 2013

    (CGU)

    ThCh$

    ThCh$

    Chile

    Embotelladoras Chilenas Unidas S.A.

    19,280,007

    19,280,007

     

    Compañía Pisquera de Chile S.A.

    4,630,114

    4,630,114

     

    Compañía Cerveceria Kunstmann S.A.

    286,518

    286,518

     

    Subtotal

    24,196,639

    24,196,639

    Río de la Plata

    CCU Argentina S.A. and subsidiaries

    8,040,335

    9,115,987

     

    Marzurel S.A., Coralina S.A. and Milotur S.A.

    3,079,360

    3,028,478

     

    Bebidas del Paraguay S.A.

    3,658,167

    -

     

    Subtotal

    14,777,862

    12,144,465

    Wines

    Viña San Pedro Tarapacá S.A.

    19,745,767

    19,746,944

     

    Subtotal

    19,745,767

    19,746,944

    Total

     

    58,720,268

    56,088,048

    January 1Management has not identified any evidence of impairment of intangible assets. Respect to trademarks with indefinite useful life, used the same methodology which is designated in,Note 21

    Note 21Goodwill 

    The goodwill movements during the years ended as of December 31, 2013 and 2014 was as follows:

    Goodwill

    ThCh$

    As of January 1 2013

    Historic cost

    70,055,369

    Book Value

    70,055,369

    As of December 31, 2013

    Additions by business combination

    14,616,297

    Conversion effect

    (2,798,819)

    Book Value

    81,872,847

    As of December 31, 2013

    Historic cost

    81,872,847

    Book Value

    81,872,847

    As of December 31, 2014

    Additions by business combination

    5,566,003

    Conversion effect

    (658,947)

    Book Value

    86,779,903

    As of December 31, 2014 2015

     

    Historic cost

    86,779,903

    Book Value

    86,779,903

     

    There are no restrictions or pledges against on goodwill.

     

    As of December 31, 2015

     

    Additions by business combination (1)

    16,189,798

    Transfers (2)

    (2,856,245)

    Conversion effect

    (623,084)

    Book Value

    F-99,490,37263

     


    As of December 31, 2015

    Historic cost

    99,490,372

    Book Value

    99,490,372

    As of December 31, 2016

    Conversion effect

    (2,827,349)

    Book Value

    96,663,023

    As of December 31, 2016

    Historic cost

    96,663,023

    Book 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

    25,257,686

     

    Manantial S.A.

    8,879,245

    8,879,245

     

    Compañía Pisquera de Chile S.A.

    9,808,550

    9,808,550

     

    Los Huemules S.R.L.

    47,443

    47,443

     

    Subtotal

    43,992,924

    43,992,924

    International Business

    CCU Argentina S.A. and subsidiaries

    6,851,916

    8,864,698

     

    Marzurel S.A., Coralina S.A. and Milotur S.A.

    7,260,675

    7,701,975

     

    Bebidas del Paraguay S.A. y Distribuidora del Paraguay S.A.

    6,141,364

    6,514,631

     

    Subtotal

    20,253,955

    23,081,304

    Wines

    Viña San Pedro Tarapacá S.A.

    32,416,144

    32,416,144

     

    Subtotal

    32,416,144

    32,416,144

    Total

     

    96,663,023

    99,490,372


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    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:Consolidated Financial Statements

    December 31, 2016

    Segment

    Cash Generating Unit

    As of December 31, 2014

    As of December 31, 2013

    (CGU)

    ThCh$

    ThCh$

    Chile

    Embotelladoras Chilenas Unidas S.A.

    9,083,766

    9,083,766

     

    Manantial S.A.

    8,879,245

    8,879,245

     

    Compañía Pisquera de Chile S.A.

    12,664,795

    12,664,795

     

    Los Huemules S.R.L.

    47,443

    47,443

     

    Subtotal

    30,675,249

    30,675,249

    Río de la Plata

    CCU Argentina S.A. and subsidiaries

    11,557,934

    13,107,723

     

    Marzurel S.A., Coralina S.A. and Milotur S.A.

    6,580,451

    5,689,609

     

    Bebidas del Paraguay S.A.

    5,566,003

    -

     

    Subtotal

    23,704,388

    18,797,332

    Wines

    Viña San Pedro Tarapacá S.A.

    32,400,266

    32,400,266

     

    Subtotal

    32,400,266

    32,400,266

    Total

     

    86,779,903

    81,872,847

    Goodwill assigned to the CGU is submitted

    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.


    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

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2015

     

     

     

     

     

     

     

     

     

    Historic 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

    1,451,908,843

    Accumulated 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

    851,255,642

     

     

     

     

     

     

     

     

     

     

    As of December 31, 2015

     

     

     

     

     

     

     

     

     

    Additions

    -

    -

    -

    -

    123,581,249

    -

    -

    -

    123,581,249

    Transfers

    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

    -

    6,594,822

    Capitalized interests

    -

    -

    -

    -

    1,086,976

    -

    -

    -

    1,086,976

    Depreciation

    (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

    14,545,154

    Others 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

    15,882,880

    Transfers to Assets Held for Sale (Cost)

    (2,682,692)

    -

    -

    -

    -

    -

    -

    -

    (2,682,692)

    Transfers to Assets Held for Sale (Depreciation)

    443,892

    -

    -

    -

    -

    -

    -

    -

    443,892

    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

    872,667,210

     

     

     

     

     

     

     

     

     

     

    As of December 31, 2015

     

     

     

     

     

     

     

     

     

    Historic 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

    1,510,011,569

    Accumulated 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

    872,667,210

     

     

     

     

     

     

     

     

     

     

    As of December 31, 2016

     

     

     

     

     

     

     

     

     

    Additions

    -

    -

    -

    -

    128,518,969

    -

    -

    -

    128,518,969

    Transfers

    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

    -

    -

    3,640,555

    Capitalized interests

    -

    -

    -

    -

    853,832

    -

    -

    -

    853,832

    Depreciation

    (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

    13,366,547

    Others 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

    7,949,849

    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

     

     

     

     

     

     

     

     

     

     

    As of December 31, 2016

     

     

     

     

     

     

     

     

     

    Historic 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

    1,592,047,360

    Accumulated 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


    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, 2015

     

    ThCh$

    ThCh$

    Land

    226,136,602

    227,849,584

    Total

    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, 2015

     

    ThCh$

    ThCh$

    Land

    3,130,181

    3,037,571

    Buildings

    9,217,312

    9,333,443

    Machinery and equipment

    228,081

    1,061,907

    Total

    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.


    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

    Total

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2015

     

     

     

    Historic cost

    5,860,457

    2,775,205

    8,635,662

    Depreciation

    -

    (718,049)

    (718,049)

    Book Value

    5,860,457

    2,057,156

    7,917,613

     

     

     

     

    As of December 31, 2015

     

     

     

    Additions

    -

    4,148

    4,148

    Transfers 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

    31,934

    Book Value

    5,097,142

    1,740,860

    6,838,002

     

     

     

     

    As of December 31, 2015

     

     

     

    Historic cost

    5,097,142

    2,487,425

    7,584,567

    Depreciation

    -

    (746,565)

    (746,565)

    Book Value

    5,097,142

    1,740,860

    6,838,002

     

     

     

     

    As of December 31, 2016

     

     

     

    Additions

    -

    11,036

    11,036

    Divestitures

    (2,563)

    -

    (2,563)

    Depreciation

    -

    (41,055)

    (41,055)

    Conversion effect (depreciation)

    (364,940)

    (218,986)

    (583,926)

    Conversion effect

    -

    32,333

    32,333

    Book Value

    4,729,639

    1,524,188

    6,253,827

     

     

     

     

    As of December 31, 2016

     

     

     

    Historic cost

    4,729,639

    2,279,475

    7,009,114

    Depreciation

    -

    (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.


    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 segment

    On 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 budgets and projections reviewed byterms which were reflected in the 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 assessmentbefore mentioned transaction. As a consequence of the specific risks relatedaforementioned CPCh recorded a provision before taxes for an amount of ThCh$ 1,401,253, charged to the corresponding CGU. The discount rates used range from a 9.1% to 14.2%. Given the materialityresult of the amounts involved, it was not considered relevant to describe additional informationfourth quarter of for year 2015. This amount is presented under Other gains/losses in this Note. A reasonable change in assumptions would not result in an impairment to goodwill.the Consolidated Statement of Income of the quarter.

       

    As December 31, 2014, the Company has not identified any evidence of impairment of goodwill. 
    b)

    International Business Operating segment

     

    F-64


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014

    -

    Note 22Property, plant and equipment

    The movement of Property, plant and equipment as of December 31, 2013 and 2014, is as follows:

     

    Land, buildings and construction

    Machinery and equipment

    Bottles and containers

    Other Equipment

    Assets under construction

    Furniture, accessories and vehicles

    Assets under finance lease

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2013

     

     

     

     

     

     

     

     

    Historic cost

    420,121,331

    325,305,827

    136,425,774

    89,315,579

    69,764,486

    46,695,394

    13,936,681

    1,101,565,072

    Accumulated depreciation

    (113,014,899)

    (209,579,744)

    (68,604,355)

    (64,891,602)

    -

    (32,122,025)

    (1,023,786)

    (489,236,411)

    Book Value

    307,106,432

    115,726,083

    67,821,419

    24,423,977

    69,764,486

    14,573,369

    12,912,895

    612,328,661

             

    As of December 31, 2013

     

     

     

     

     

     

     

     

    Additions

    -

    -

    -

    -

    126,510,921

    -

    -

    126,510,921

    Additions of historic cost by business combination

    9,508,826

    2,045,046

    2,596,541

    1,240,456

    (667,055)

    925,057

    2,660,469

    18,309,340

    Additions of accumulated depreciation by business combination

    (343,605)

    (397,840)

    (1,382,700)

    (556,672)

    -

    (504,520)

    (1,027,870)

    (4,213,207)

    Transfers

    31,377,878

    33,449,473

    27,408,964

    10,772,291

    (107,022,783)

    4,014,177

    -

    -

    Conversion effect historic cost

    (4,639,869)

    (6,646,895)

    (5,573,110)

    (2,063,872)

    (1,519,083)

    (239,855)

    -

    (20,682,684)

    Write off (cost)

    (305,532)

    (2,977,948)

    (1,158,045)

    (564,261)

    -

    (543,730)

    -

    (5,549,516)

    Write off (depreciation)

    -

    2,962,066

    1,154,048

    563,071

    -

    401,674

    -

    5,080,859

    Depreciation

    (11,830,318)

    (15,948,234)

    (17,651,783)

    (6,064,360)

    -

    (5,680,608)

    (72,040)

    (57,247,343)

    Conversion effect depreciation

    582,674

    2,969,134

    2,051,084

    1,267,746

    -

    211,925

    -

    7,082,563

    Others increase (decreased

    125,523

    229,673

    (6,967)

    -

    498,229

    (7,942)

    (108,410)

    730,106

    Transfers to Investment Property (cost)

    (1,459,953)

    -

    -

    -

    -

    -

    -

    (1,459,953)

    Transfers to Investment Property (depreciation)

    542,013

    -

    -

    -

    -

    -

    -

    542,013

    Divestitures (cost)

    (887,734)

    (1,606,975)

    (273,849)

    (1,186,069)

    -

    (3,488,317)

    -

    (7,442,944)

    Divestitures (depreciation)

    603,068

    1,593,986

    213,908

    1,179,515

    -

    3,415,128

    -

    7,005,605

    Book Value

    330,379,403

    131,397,569

    75,199,510

    29,011,822

    87,564,715

    13,076,358

    14,365,044

    680,994,421

             

    As of December 31, 2013

     

     

     

     

     

     

     

     

    Historic cost

    453,487,502

    349,828,341

    161,171,871

    97,514,125

    87,564,715

    46,791,927

    16,605,171

    1,212,963,652

    Accumulated depreciation

    (123,108,099)

    (218,430,772)

    (85,972,361)

    (68,502,303)

    -

    (33,715,569)

    (2,240,127)

    (531,969,231)

    Book Value

    330,379,403

    131,397,569

    75,199,510

    29,011,822

    87,564,715

    13,076,358

    14,365,044

    680,994,421

             

    As of December 31, 2014

     

     

     

     

     

     

     

     

    Additions

    -

    -

    -

    -

    210,692,974

    -

    -

    210,692,974

    Additions of historic cost by business combination

    10,427,012

    12,835,099

    -

    3,418,895

    36,673

    1,183,127

    -

    27,900,806

    Additions of accumulated depreciation by business combination

    (1,389,726)

    (7,479,822)

    -

    (1,432,178)

    -

    (976,481)

    -

    (11,278,207)

    Transfers

    100,881,784

    36,903,635

    31,891,992

    16,780,869

    (196,727,122)

    10,054,122

    214,720

    -

    Conversion effect historic cost

    (3,282,317)

    (4,921,609)

    (4,702,605)

    (1,528,664)

    (318,098)

    (230,044)

    -

    (14,983,337)

    Write off (cost)

    (1,209,647)

    (1,572,892)

    (806,633)

    (869,736)

    -

    (1,107,114)

    (4,543)

    (5,570,565)

    Write off (depreciation)

    1,662

    1,413,756

    788,331

    868,292

    -

    880,419

    2,310

    3,954,770

    Capitalized interests

    116,740

    151,331

    -

    -

    (26,061)

    -

    -

    242,010

    Depreciation

    (13,035,409)

    (16,609,058)

    (18,438,461)

    (7,772,824)

    -

    (5,888,407)

    (435,795)

    (62,179,954)

    Conversion effect depreciation

    360,238

    1,784,979

    1,700,078

    850,194

    -

    184,539

    -

    4,880,028

    Transfers to Investment Property (cost)

    (534,384)

    -

    -

    -

    (559,440)

    -

    -

    (1,093,824)

    Transfers to Investment Property (depreciation)

    12,590

    -

    -

    -

    -

    -

    -

    12,590

    Others increase (decreased

    (1,577,323)

    1,465,411

    2,208,005

    (643,234)

    (567,720)

    28,623

    (392,985)

    520,777

    Divestitures (cost)

    (912,917)

    (8,793,380)

    (751,727)

    (2,887,307)

    -

    (525,145)

    (7,538)

    (13,878,014)

    Divestitures (depreciation)

    424,428

    8,619,785

    694,205

    2,761,160

    -

    451,774

    5,407

    12,956,759

    Book Value

    420,662,134

    155,194,804

    87,782,695

    38,557,289

    100,095,921

    17,131,771

    13,746,620

    833,171,234

             

    As of December 31, 2014

     

     

     

     

     

     

     

     

    Historic cost

    557,500,819

    388,454,274

    189,538,674

    111,860,840

    100,095,921

    56,290,001

    16,367,167

    1,420,107,696

    Accumulated depreciation

    (136,838,685)

    (233,259,470)

    (101,755,979)

    (73,303,551)

    -

    (39,158,230)

    (2,620,547)

    (586,936,462)

    Book Value

    420,662,134

    155,194,804

    87,782,695

    38,557,289

    100,095,921

    17,131,771

    13,746,620

    833,171,234

    F-65


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

     

    The balance of the land at the end of each year is as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Land

    228,846,045

    162,013,374

    Total

    228,846,045

    162,013,374

    Capitalized interestas of December 31, 2014, amount to ThCh$ 1,010,296 (ThCh$ 1,190,770 in 2013).

    Due to the nature of the Company’s businesses, the asset values do not consider an estimate for the cost of dismantling, withdrawal or rehabilitation.

    The Company does not maintain pledges or restrictions over property, plant and equipment items, except for the land and building under finance lease.

    Management has not seen any evidence of impairment of Property, plant and equipment in 2014.

    Assets under finance lease:

    The book value of land and buildings relates to finance lease agreements for the Parent Company and its subsidiaries. Such assets will not be owned by the Company until the corresponding purchase options are exercised.

     

    As of December 31, 2014

    As of December 31, 2013

     

    ThCh$

    ThCh$

    Land

    2,234,946

    2,234,946

    Buildings

    9,449,575

    9,565,706

    Machinery and equipment

    2,062,099

    2,564,392

    Total

    13,746,620

    14,365,044

    Note 27, letter bincludes 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-66


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    Note 23Investment Property

    Changes in the movement of the investment property during the years ended of December 31, 2013 and 2014 is as follows:

     

    Lands

    Buildings

    Total

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2013

     

     

     

    Historic cost

    6,038,995

    608,015

    6,647,010

    Depreciation

    -

    (86,964)

    (86,964)

    Book Value

    6,038,995

    521,051

    6,560,046

        

    As of December 31, 2013

     

     

     

    Transfers from PPE (cost)

    -

    1,459,954

    1,459,954

    Transfers from PPE (depreciation)

    -

    (542,013)

    (542,013)

    Depreciation

    -

    (46,257)

    (46,257)

    Conversion effect (cost)

    (448,626)

    (94,764)

    (543,390)

    Conversion effect (depreciation)

    -

    13,121

    13,121

    Book Value

    5,590,369

    1,311,092

    6,901,461

        

    As of December 31, 2013

     

     

     

    Historic cost

    5,590,369

    1,964,783

    7,555,152

    Depreciation

    -

    (653,691)

    (653,691)

    Book Value

    5,590,369

    1,311,092

    6,901,461

        

    As of December 31, 2014

     

     

     

    Additions

    275,001

    -

    275,001

    Transfers from PPE (cost)

    243,505

    850,319

    1,093,824

    Transfers from PPE (accumuleted depreciation)

    -

    (12,590)

    (12,590)

    Depreciation

    -

    (65,208)

    (65,208)

    Conversion effect (cost)

    (248,418)

    (39,897)

    (288,315)

    Conversion effect (depreciation)

    -

    13,440

    13,440

    Book Value

    5,860,457

    2,057,156

    7,917,613

        

    As of December 31, 2014

     

     

     

    Historic cost

    5,860,457

    2,775,205

    8,635,662

    Depreciation

    -

    (718,049)

    (718,049)

    Book Value

    5,860,457

    2,057,156

    7,917,613

    Investment property includes twenty lands properties, two offices and one apartment, situated in Chile, which are maintained for appreciation purposes, with one lands properties, two offices and one apartment of them being leased and generating ThCh$ 153,283 revenue during year 2014 (ThCh$ 110,333 in 2013 and ThCh$ 4,071 in 2012). Additionally, there are three lands in Argentina, which are leased and generated an income for ThCh$ 117,661 for year 2014 (ThCh$ 134,103 in 2013 and ThCh$ 141,292 in 2012). In addition, the expenses associated with such investment properties amount to ThCh$ 190,670 for the year ended as of December 31, 2014 (ThCh$ 161,915 in 2013 and ThCh$ 139,190 in 2012).

    Management has not seen any evidence of impairment of Investment property.

    The Company does not maintain any pledge or restriction over investment property items.

    F-67


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    Note 24Assets of disposal group held for sale

    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, which expected to occur during 2015.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.

    As described inNote 2.17, non-current assets held for sale have been recorded at the lower During November 2015 this property was sold and a gain before tax of book value and estimated sale valueDecember 31, 2014.ThCh$ 1,977,432 was recognize under item Other income by function.

     

    -

    AtDecember 31, 2014 and 2013,During September 2015, the itemsBoard of assets held forsubsidiary Saenz Briones S.A. authorized the sale areof property located in Luján de Cuyo city, Provincia de Mendoza, Argentina. At the following:

    Assets of disposal group held for sale

    As of December

    31, 2014

    As of December

    31, 2013

    ThCh$

    ThCh$

    Land

    196,818

    83,824

    Constructions

    467,833

    154,242

    Machinerys

    94,109

    101,835

    Total

    758,760

    339,901

    Note 25Biological Assets

    The Company, through its subsidiaries Viña San Pedro Tarapacá S.A., has biological assets corresponding to vinesdate of issuance of these Financial Statements 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 inproperty is the manufacturing of wine, which is marketed both in the domestic market and abroad.

    As ofDecember 31, 2014, the Company maintained approximately 4,208, of which 4,083 hectares are for vines in production stage. Of the total hectares mentioned above, 3,765 correspond to own land and 318 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 2014, the production plant vines yield approximately 42,5 million kilos of grapes (54,1 million kilos of grapes in 2013).

    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.

    For production vines depreciation is carried out on a linear basis and it is based on the 30-years average estimated production useful life, which is periodically assessed. Vines under formation are not depreciated until they start production.

    The costs incurred for acquiring and planting new vines are capitalized.

    The Company uses the amortized historical cost to value its biological assets, the basis that management considers that it represents a reasonable approximation to fair value.

    F-same condition.68


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    There is no evidence of impairment on the biological assets held by the Company.

     

     

    The movement of biological assets during the years ended December 31, 2013 and 2014 is as follows:

    c)

     

    Biological Assets

    Under

    Production Vines

    Training vines

    Total

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2013

     

     

     

    Historic cost

    28,369,903

    1,653,240

    30,023,143

    Accumulated depreciation

    (11,917,930)

    -

    (11,917,930)

    Book Value

    16,451,973

    1,653,240

    18,105,213

        

    As of December 31, 2013

     

     

     

    Additions

    -

    927,115

    927,115

    Transfers

    770,597

    (770,597)

    -

    Historic cost conversion effects

    (135,973)

    -

    (135,973)

    Depreciation

    (1,155,197)

    -

    (1,155,197)

    Depreciation conversion effect

    68,987

    -

    68,987

    Divestitures (cost)

    (340,230)

    -

    (340,230)

    Divestitures (depreciation)

    192,093

    -

    192,093

    Book Value

    15,852,250

    1,809,758

    17,662,008

        

    As of December 31, 2013

     

     

     

    Historic cost

    28,664,297

    1,809,758

    30,474,055

    Accumulated depreciation

    (12,812,047)

    -

    (12,812,047)

    Book Value

    15,852,250

    1,809,758

    17,662,008

        

    As of December 31, 2014

     

     

     

    Additions

    -

    1,763,432

    1,763,432

    Transfers

    1,809,510

    (1,809,510)

    -

    Historic cost conversion effects

    (20,437)

    -

    (20,437)

    Depreciation

    (1,179,010)

    -

    (1,179,010)

    Depreciation conversion effect

    42,677

    -

    42,677

    Divestitures (cost)

    (415,903)

    -

    (415,903)

    Divestitures (depreciation)

    231,641

    -

    231,641

    Book Value

    16,320,728

    1,763,680

    18,084,408

        

    As of December 31, 2014

     

     

     

    Historic cost

    30,037,467

    1,763,680

    31,801,147

    Accumulated depreciation

    (13,716,739)

    -

    (13,716,739)

    Book Value

    16,320,728

    1,763,680

    18,084,408

    F-69Wine Operating segment

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    -

    Note 26Income taxes

    Tax accounts receivableDuring 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.


    The detail ofCompañía 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, 2015

    ThCh$

    ThCh$

    Land

    1,816,348

    1,855,980

    Contructions

    504,207

    544,863

    Machinerys

    57,332

    74,109

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

    -

    3,844,364

    Total

    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, 2015

     

    ThCh$

    ThCh$

    Refundable tax previous year

    4,436,810

    3,296,151

    Taxes under claim (1)

    2,141,476

    2,138,675

    Argentinean tax credits

    2,532,114

    3,756,333

    Monthly provisions

    18,860,164

    4,592,593

    Payment of absorbed profit provision

    75,141

    33,276

    Other credits

    1,377,774

    1,447,192

    Total

    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, 2015

     

    ThCh$

    ThCh$

    Chilean income taxes

    7,033,363

    7,689,139

    Monthly provisional payments

    4,365,187

    3,488,085

    Chilean unique taxes

    68,824

    224,045

    Estimated Argentine minimum gain subsidiaries taxes

    339,060

    796,755

    Total

    11,806,434

    12,198,024


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the following:Consolidated Financial Statements

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Refundable tax previous year

    658,744

    103,186

    Taxes under claim

    2,808,110

    2,288,108

    Argentinean tax credits

    3,910,500

    3,652,539

    Monthly provisions

    9,394,028

    1,299,344

    Payment of absorbed profit provision

    975,477

    -

    Other credits

    1,666,555

    1,796,229

    Total

    19,413,414

    9,139,406

    Taxes accounts payable

    The detail of taxes payable taxes is as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Chilean income taxes

    6,718,638

    8,848,026

    Monthly provisional payments

    4,113,611

    1,539,101

    Chilean unique taxes

    48,810

    114,060

    Estimated Argentine minimum gain subsidiaries taxes

    816,076

    415,678

    Total

    11,697,135

    10,916,865

    F-70


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

     

    Tax expense

    The detail of the income tax and deferred tax expense for the years ended as ofDecember 31, 2014, 2013 and 2012, is as follows:2016

     

    For the years ended as of December 31,

     

    2014

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

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

    992,342

    101,216

    (8,752,061)

    Prior year adjustments

    4,763,242

    (3) 7,857,107

    165,671

    Effect of change in tax rates

    (1) (14,520,287)

    -

    (2) (5,265,298)

    Tax benefits (loss)

    527,447

    (2,225,971)

    2,590,142

    Total deferred tax expense

    (8,237,256)

    5,732,352

    (11,261,546)

    Current tax expense

    (34,522,795)

    (35,137,106)

    (25,317,317)

    Prior period adjustments

    (3,913,449)

    (3) (5,300,153)

    (554,467)

    (Loss) Income from income tax

    (46,673,500)

    (34,704,907)

    (37,133,330)

    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

    2014

     

    ThCh$

    ThCh$

    ThCh$

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

    (878,629)

    (454,933)

    992,342

    Prior year adjustments

    3,838,136

    3,204,656

    4,763,242

    Effect of change in tax rates

    (856,612)

    (1,066,964)

    (14,520,287)

    Tax benefits (loss)

    (765,292)

    248,559

    527,447

    Total 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 effect of the new tax rate of 21%, applicable from January 1, 2014, resulted in charges of ThCh$ 1,359,437 against income in2014.

          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.

    (2) This concept is related to a change in tax rate, based on a modified tax law in Chile. This change in tax rate, which was initially a temporary measure, raised the rate from 17% to 20% for the year 2011 and 18.5% for the year 2012, returning to 17% in 2013. Subsequently, on September 27, 2012, Law N° 20,630, so-called Tax Reform was published, which made permanent the tax rate change from 17% to 20% for First Category Tax beginning in 2012, generating a charge to deferred income tax of ThCh$ 5,265,298. This charge includes ThCh$ 2,512,683 related to deferred tax of the revaluation of land, upon implementation of IFRS, whose origin was adjusted in Equity under Retained earnings. According to instructions from the SVS in its Ordinary Office N° 26160, dated November 7, 2012, in response to our submission dated October 31, 2012, this amount was charged to the Net income of 2012.

    (3)   Mainly related to a one-time effect caused by a deferred tax provision reversal related to deposits for returns of bottles and containers provision.  

    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,

     

    2014

    2013

    2012

     

    ThCh$

    ThCh$

    ThCh$

    Net income from cash flow hedge

    39,470

    (51,304)

    189,525

    Actuarial gains and losses deriving from defined benefit plans

    501,689

    105,151

    -

    Charge to equity

    541,159

    53,847

    189,525

    F-71


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    Effective Rate

    The Company’s income tax expense as ofDecember 31, 2014, 2013 and 2012 represents 27.9%, 20.7% and 23.1%, 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,

    2014

    2013

    2012

    ThCh$

    Rate

    ThCh$

    Rate

    ThCh$

    Rate

    Income before taxes

    167,168,082

    -  

    167,609,458

    -

    161,110,230

    -

    Income tax using the statutory rate

    (35,105,297)

    21.0

    (33,521,892)

    20.0

    (32,222,046)

    20.0

    Adjustments to reach the effective rate

     

     

     

     

     

     

    Income not taxable (non-deductible expenses) net

    (133.385)

    0.1

    (1,307,033)

    0.7

    3,886,184

    (2.4)

    Effect of change in tax rate

    (14,520,288)

    8.7

    -

    -

    (5,265,298)

    3.3

    Effect of tax rates in Argentina and Uruguay

    2,235,676

    (1.3)

    (2,432,936)

    1.5

    (3,143,374)

    2.0

    Prior year adjustments

    849,794

    (0.5)

    2,556,954

    (1.5)

    (388,796)

    0.2

    Income tax, as reported

    (46,673,500)

    27.9

    (34,704,907)

    20.7

    (37,133,330)

    23.1

    Deferred taxes

    Deferred tax assets and liabilities included in the Balance Sheet were as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Deferred tax assets

     

     

    Accounts receivable impairment provision

    721,772

    1,176,765

    Employee benefits and other non taxable expenses

    7,984,756

    4,399,300

    Inventory impairment provision

    886,694

    300,166

    Severance indemnity

    4,592,647

    3,440,514

    Inventory valuation

    1,143,039

    2,445,158

    Amortization of intangibles

    1,021,992

    932,056

    Other assets

    8,401,374

    6,119,364

    Tax loss carryforwards

    5,454,745

    5,712,038

    Total assets from deferred taxes

    30,207,019

    24,525,361

       

    Deferred taxes liabilities

     

     

    Fixed assets depreciation

    36,618,758

    32,736,097

    Deposit for bottles and containers

    -

    429,698

    Capitalized software expense

    1,694,859

    1,189,887

    Agricultural operation expense

    3,493,499

    3,262,103

    Manufacturing indirect activation costs

    3,777,813

    2,459,863

    Intangibles

    10,524,509

    7,379,376

    Land

    30,479,61

    25,124,736

    Other liabilities

    929,652

    451,654

    Total liabilities from deferred taxes

    87,518,700

    73,033,414

    Total

    (57,311,681)

    (48,508,053)

    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-72


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    Deferred tax assets

    Deferred Taxes
    ThCh$

    As of January 1, 2013

    (52,963,093)

    Deferred taxes for business combination

    (1,824,913)

    Deferred taxes expenses

    5,732,352

    Conversion effect

    420,582

    Deferred taxes against equity

    53,847

    Other deferred movements taxes

    73,172

    Charge

    4,455,040

    As of December 31, 2013

    (48,508,053)

    As of January 1, 2014

    Deferred taxes for business combination

    (461,566)

    Deferred Tax Losses Tax absorption

    (968,195)

    Charge to income tax deferred

    (8,237,257)

    Conversion effect

    84,862

    Deferred taxes against equity

    541,159

    Other deferred movements taxes

    237,369

    Charge

    (8,803,628)

    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

    2014

     

    ThCh$

    ThCh$

    ThCh$

    Net income from cash flow hedge

    (20,648)

    (17,563)

    39,470

    Actuarial gains and losses deriving from defined benefit plans

    659,198

    314,541

    501,689

    Charge to equity

    638,550

    296,978

    541,159

    Effective Rate

    The Company’s income tax expense as ofDecember 31, 2016, 2015 y 2014 represents 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

    2014

    ThCh$

    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)

    21.00

    Adjustments to reach the effective rate

     

     

     

     

     

     

    Tax effect of permanent differences, net

    10,357,858

    (6.10)

    (3,202,337)

    1.70

    (133,385)

    0.10

    Effect of change in tax rate

    (856,612)

    0.50

    (1,066,964)

    0.50

    (14,520,287)

    8.60

    Effect 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


    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, 2015

     

    ThCh$

    ThCh$

    Movement of deferred tax assets

     

     

    Accounts receivable impairment provision

    861,158

    714,251

    Other non-tax expenses

    11,303,607

    12,808,597

    Employee benefits

    2,166,999

    1,930,430

    Inventory impairment provision

    1,554,362

    499,611

    Severance indemnity

    4,937,161

    5,044,561

    Inventory valuation

    2,337,591

    1,454,638

    Amortization of intangibles

    206,616

    2,517,835

    Other assets

    3,536,574

    3,856,366

    Tax loss carryforwards

    4,960,567

    5,703,304

    Total assets from deferred taxes

    31,864,635

    34,529,593

     

     

     

    Deferred taxes liabilities

     

     

    Fixed assets depreciation

    36,617,407

    40,338,573

    Capitalized software expense

    2,271,445

    1,852,161

    Agricultural operation expense

    5,698,674

    4,348,021

    Manufacturing indirect activation costs

    4,865,509

    3,867,574

    Intangibles

    10,054,490

    10,012,031

    Land

    23,726,645

    26,511,916

    Other liabilities

    3,555,781

    3,307,567

    Total liabilities from deferred taxes

    86,789,951

    90,237,843

    Total

    (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.


    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)

    Note 27Other financial liabilities

    Debts and financial liabilities classified based on the type of obligation and their classificationsIncrease in the consolidated balance sheet are as follows:joint operation

     

    As of December

    31, 2014

    As of December

    31, 2013

     

    ThCh$

    ThCh$

    Bank borrowings (*)

    95,822,149

    80,971,892

    Bonds payable (*)

    73,937,639

    153,032,487

    Financial leases obligations (*)

    17,392,945

    16,932,430

    Deposits for return of bottles and containers

    11,787,424

    11,451,872

    Derivatives (**)

    684,317

    661,473

    Liability coverage (**)

    228,376

    201,064

    Total

    199,852,850

    263,251,218

    Current

    65,318,293

    120,488,188

    Non current

    134,534,557

    142,763,030

    Total

    199,852,850

    263,251,218

    (*)  SeeNote 5

    (**) SeeNote 6

    F-73


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    (1,208,970)

    Deferred Tax Losses Tax absorption

    The maturities and interest rates of such obligations are as follows:

    As ofDecember 31, 2014:

     

     

     

     

     

     

     

    Undiscounting amounts according to 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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bank borrowings

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Santander RIO

    Argentina

    USD

    338,173

    -

    -

    -

    -

    338,173

    At maturity

    4.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Santander RIO

    Argentina

    USD

    338,173

    -

    -

    -

    -

    338,173

    At maturity

    4.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Supervielle

    Argentina

    USD

    -

    73,057

    -

    -

    -

    73,057

    At maturity

    4.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Supervielle

    Argentina

    USD

    -

    79,145

    -

    -

    -

    79,145

    At maturity

    4.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Supervielle

    Argentina

    USD

    -

    76,101

    -

    -

    -

    76,101

    At maturity

    4.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Supervielle

    Argentina

    USD

    -

    75,844

    -

    -

    -

    75,844

    At maturity

    4.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Fondo para la Transformación y Crec.

    Argentina

    $ARG

    -

    2,114

    -

    -

    -

    2,114

    Semiannual

    6.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    581,393

    -

    -

    -

    -

    581,393

    At maturity

    28.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    569,746

    -

    -

    -

    -

    569,746

    At maturity

    30.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    327,034

    -

    -

    -

    -

    327,034

    At maturity

    28.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    174,129

    -

    -

    -

    -

    174,129

    At maturity

    26.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    3,725

    13,226

    13,708

    -

    -

    30,659

    Quarter

    15.25

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    131,476

    -

    -

    -

    -

    131,476

    At maturity

    26.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,640

    -

    -

    -

    -

    29,640

    At maturity

    26.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,640

    -

    -

    -

    -

    29,640

    At maturity

    26.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    177,838

    -

    -

    -

    -

    177,838

    At maturity

    26.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    29,711

    -

    -

    -

    -

    29,711

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco BBVA

    Argentina

    $ARG

    402,311

    -

    -

    -

    -

    402,311

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    43,659

    -

    -

    -

    -

    43,659

    At maturity

    24.00

    91,041,000-8

    Viña San Pedro Tarapaca S.A. (1)

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    USD

    23,097

    -

    2,691,604

    -

    -

    2,714,701

    At maturity

    1.79

    91,041,000-8

    Viña San Pedro Tarapaca S.A. (2)

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    USD

    53,348

    -

    6,067,500

    -

    -

    6,120,848

    At maturity

    1.79

    91,041,000-8

    Viña San Pedro Tarapaca S.A. (2)

    Chile

    97,018,000-1

    Scotiabank

    Chile

    USD

    1,438

    4,854,000

    -

    -

    -

    4,855,438

    At maturity

    1.19

    91,041,000-8

    Viña San Pedro Tarapaca S.A.

    Chile

    97,030,000-7

    Banco Estado

    Chile

    EUR

    -

    4,590,673

    -

    -

    -

    4,590,673

    At maturity

    0.59

    91,041,000-8

    Viña San Pedro Tarapaca S.A.

    Chile

    97,030,000-7

    Banco Estado

    Chile

    UF

    -

    54,044

    -

    9,358,298

    -

    9,412,342

    At maturity

    2.70

    99,586,280-8

    Compañía Pisquera de Chile S.A

    Chile

    97,030,000-7

    Banco Estado

    Chile

    CLP

    448,895

    -

    15,949,982

    -

    -

    16,398,877

    At maturity

    0.00

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    14,752

    42,394

    120,811

    48,426

    -

    226,383

    Monthly

    4.80

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    7,798

    23,813

    68,838

    53,562

    -

    154,011

    Monthly

    5.48

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    6,392

    19,613

    39,365

    -

    -

    65,370

    Monthly

    5.36

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    1,654

    2,266

    -

    -

    -

    3,920

    Monthly

    9.12

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    19,000

    57,000

    152,000

    12,667

    -

    240,667

    Monthly

    7.59

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    14,000

    42,000

    112,000

    88,667

    -

    256,667

    Monthly

    5.88

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    CLP

    9,214

    3,107

    -

    -

    -

    12,321

    Monthly

    7.32

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    CLP

    7,426

    17,873

    -

    -

    -

    25,299

    Monthly

    7.56

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    CLP

    22,178

    68,690

    80,528

    -

    -

    171,396

    Monthly

    6.66

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    CLP

    62,759

    192,305

    -

    -

    -

    255,064

    Monthly

    4.38

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    -

    251,734

    -

    -

    -

    251,734

    Monthly

    0.37

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    5,834

    14,043

    -

    -

    -

    19,877

    Monthly

    0.63

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    33,596

    104,022

    72,279

    -

    -

    209,897

    Monthly

    0.63

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    -

    200,852

    -

    -

    -

    200,852

    Monthly

    0.63

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    CLP

    18,792

    -

    -

    -

    -

    18,792

    Monthly

    0.50

    0-E

    Milotur S.A.

    Uruguay

    O-E

    Nuevo Banco Comercial

    Uruguay

    USD

    23,418

    69,795

    93,672

    -

    -

    186,885

    Monthly

    5.50

    0-E

    Milotur S.A.

    Uruguay

    O-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    601,212

    -

    -

    -

    -

    601,212

    At maturity

    17.00

    0-E

    Milotur S.A.

    Uruguay

    O-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    357,814

    -

    -

    -

    -

    357,814

    At maturity

    1.12

    0-E

    Milotur S.A.

    Uruguay

    O-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    138,532

    -

    -

    -

    -

    138,532

    At maturity

    17.00

    0-E

    Milotur S.A.

    Uruguay

    O-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    643,409

    -

    -

    -

    -

    643,409

    At maturity

    16.80

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    -

    515,411

    -

    -

    -

    515,411

    At maturity

    4.50

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    -

    618,493

    -

    -

    -

    618,493

    At maturity

    4.50

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    Banco de Chile

    Chile

    CLP

    -

    1,034,167

    -

    -

    -

    1,034,167

    At maturity

    4.92

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    Scotiabank

    Chile

    USD

    2,413

    -

    387,514

    -

    -

    389,927

    At maturity

    1.90

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    BancoEstado

    Chile

    CLP

    1,303,864

    -

    -

    -

    -

    1,303,864

    At maturity

    0.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    1,541,623

    4,401,173

    -

    -

    -

    5,942,796

    Quarter

    15.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    445,789

    1,208,180

    3,221,814

    3,221,813

    -

    8,097,596

    Monthly

    15.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Citibank

    Argentina

    $ARG

    54,865

    177,392

    335,073

    -

    -

    567,330

    Monthly

    15.25

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Macro

    Argentina

    $ARG

    690,557

    1,418,990

    4,257,610

    -

    -

    6,367,157

    Quarter

    26.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    14,494,421

    -

    -

    -

    -

    14,494,421

    At maturity

    26.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Hipotecario

    Argentina

    $ARG

    3,063,385

    -

    -

    -

    -

    3,063,385

    At maturity

    29.00

    0-E

    Saenz Briones SA

    Argentina

    0-E

    Banco HSBC

    Argentina

    $ARG

    2,724

    -

    -

    -

    -

    2,724

    At maturity

    20.00

    0-E

    Saenz Briones SA

    Argentina

    0-E

    Banco Citibank

    Argentina

    $ARG

    93,631

    236,522

    236,522

    -

    -

    566,675

    Monthly

    15.25

    0-E

    Saenz Briones SA

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    829,136

    -

    -

    -

    -

    829,136

    At maturity

    30.00

    Sub-total

     

     

     

     

     

     

    28,599,857

    20,538,039

    33,900,820

    12,783,433

    -

    95,822,149

     

     

    F-74


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    (33,276)

    Deferred taxes from tax loss carry forwards absorption

     

     

     

     

     

     

     

    Undiscounting amounts according to maturity

     

     

    Debtor 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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bonds payable

     

     

     

     

     

     

     

     

     

     

     

     

     

    90,413,000-1

    CCU S.A

    Chile

    415 13/06/2005 BONO SERIE E

    Chile

    UF

    -

    2,437,294

    4,741,076

    4,818,518

    12,313,550

    24,310,438

    Semiannual

    4.00

    90,413,000-1

    CCU S.A

    Chile

    573 23/03/2009 BONO SERIE H

    Chile

    UF

    592,131

    -

    -

    2,149,320

    46,885,750

    49,627,201

    Semiannual

    4.25

    Sub-total

     

     

     

     

     

     

    592,131

    2,437,294

    4,741,076

    6,967,838

    59,199,300

    73,937,639

     

     

     

     

     

     

     

     

     

    Undiscounting amounts according to 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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Financial leases obligations

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Supervielle

    Argentina

    $ARG

    1,475

    4,620

    11,088

    2,466

    -

    19,649

    At maturity

    17.50

    96,711,590-8

    Manantial S.A.

    Chile

    97,000,600-6

    Banco de Creditos e Inversiones

    Chile

    UF

    7,058

    15,218

    29,841

    -

    -

    52,117

    Monthly

    5.06

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    20,250

    42,944

    37,825

    -

    -

    101,019

    Monthly

    9.31

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco Estado

    Chile

    UF

    12,160

    6,585

    -

    -

    -

    18,745

    Monthly

    14.01

    96,711,590-8

    Manantial S.A.

    Chile

    97,053,000-2

    Banco Security

    Chile

    UF

    31,538

    79,780

    57,744

    -

    -

    169,062

    Monthly

    6.81

    90,413,000-1

    CCU S.A

    Chile

    99,012,000-5

    Consorcio Nacional de Seguros S.A

    Chile

    UF

    22,926

    38,773

    102,087

    117,043

    16,135,005

    16,415,834

    Monthly

    7.07

    96981310-6

    Compañía Cervecera Kunstmann S.A

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    38,866

    101,818

    75,724

    -

    -

    216,408

    Monthly

    6.43

    96981310-6

    Compañía Cervecera Kunstmann S.A

    Chile

    97,030,000-7

    Banco Estado

    Chile

    UF

    21,843

    66,935

    189,245

    92,241

    -

    370,264

    Monthly

    4.33

    76,077,848-6

    Cervecera Belga de la Patagonia

    Chile

    97,015,000-5

    Banco Santander de Chile

    Chile

    UF

    1,306

    4,044

    11,760

    12,737

    -

    29,847

    Monthly

    6.27

    Sub-total financial leases obligations

     

     

     

     

     

    157,422

    360,717

    515,314

    224,487

    16,135,005

    17,392,945

     

     

                   

    Total

     

     

     

     

     

     

    29,349,410

    23,336,050

    39,157,210

    19,975,758

    75,334,305

    187,152,733

     

     

    (1) This obligation is hedged by a Cross Currency Interest Rate Swap agreement(Note 6)

    (2)This obligation is hedged by a Cross Interest Rate Swap(Note 6)

    .

    F-75


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    1,931,318

    Conversion effect

    503,187

    Deferred taxes against equity

    296,978

    Other deferred movements taxes

    114,194

    Change

    1,603,431

    As of December 31, 2013:2015

    (55,708,250)

     

     

     

     

     

     

     

     

    Undiscounting amounts according to 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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bank borrowings

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Santander Rio

    Argentina

    USD

    474,529

    -

    -

    -

    -

    474,529

    At maturity

    2.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Santander Rio

    Argentina

    USD

    105,450

    -

    -

    -

    -

    105,450

    At maturity

    2.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Supervielle

    Argentina

    USD

    -

    131,485

    -

    -

    -

    131,485

    At maturity

    3.75

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Supervielle

    Argentina

    USD

    -

    26,351

    -

    -

    -

    26,351

    At maturity

    2.75

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Supervielle

    Argentina

    USD

    -

    105,167

    -

    -

    -

    105,167

    At maturity

    2.75

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Fondo para la Transformación y Crec.

    Argentina

    $ARG

    -

    4,663

    2,828

    -

    -

    7,491

    Semiannual

    6.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    772,295

    -

    -

    -

    -

    772,295

    At maturity

    26.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    196,225

    -

    -

    -

    -

    196,225

    At maturity

    24.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    178,430

    -

    -

    -

    -

    178,430

    At maturity

    26.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    72,218

    -

    -

    -

    -

    72,218

    At maturity

    24.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    184,282

    -

    -

    -

    -

    184,282

    At maturity

    24.00

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    -

    12,883

    29,253

    -

    -

    42,136

    At maturity

    15.25

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    65,968

    -

    -

    -

    -

    65,968

    At maturity

    26.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    37,982

    -

    -

    -

    -

    37,982

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    -

    32,822

    -

    -

    -

    32,822

    At maturity

    23.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    33,585

    -

    -

    -

    -

    33,585

    At maturity

    19.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    33,444

    -

    -

    -

    -

    33,444

    At maturity

    23.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    33,444

    -

    -

    -

    -

    33,444

    At maturity

    23.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    -

    32,822

    -

    -

    -

    32,822

    At maturity

    23.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    -

    32,822

    -

    -

    -

    32,822

    At maturity

    23.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    -

    32,822

    -

    -

    -

    32,822

    At maturity

    23.50

    0-E

    Finca La Celia S.A

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    375,229

    -

    -

    -

    -

    375,229

    At maturity

    22.75

    91,041,000-8

    Viña San Pedro Tarapacá S.A. (1)

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    USD

    20,846

    -

    2,327,223

    -

    -

    2,348,069

    At maturity

    1.86

    91,041,000-8

    Viña San Pedro Tarapacá S.A. (2)

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    USD

    47,971

    -

    5,246,100

    -

    -

    5,294,071

    At maturity

    1.87

    91,041,000-8

    Viña San Pedro Tarapacá S.A.

    Chile

    97,015,000-5

    Banco Santander Chile

    Chile

    USD

    -

    4,198,419

    -

    -

    -

    4,198,419

    At maturity

    0.88

    91,041,000-8

    Viña San Pedro Tarapacá S.A.

    Chile

    97,015,000-5

    Banco Santander Chile

    Chile

    EUR

    -

    4,492,063

    -

    -

    -

    4,492,063

    At maturity

    0.75

    91,041,000-8

    Viña San Pedro Tarapacá S.A. (2)

    Chile

    97,018,000-1

    Banco Scotiabank

    Chile

    USD

    1,097

    -

    4,196,880

    -

    -

    4,197,977

    At maturity

    1.18

    96,981,310-6

    Compañía Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    Banco Del Estado De Chile

    Chile

    CLP

    -

    520,292

    -

    -

    -

    520,292

    At maturity

    5.84

    96,981,310-6

    Compañía Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    Banco Del Estado De Chile

    Chile

    CLP

    -

    624,350

    -

    -

    -

    624,350

    At maturity

    5.84

    99,586,280-8

    Compañía Pisquera De Chile S.A.

    Chile

    97,030,000-7

    Banco Del Estado De Chile

    Chile

    CLP

    471,136

    -

    -

    15,900,089

    -

    16,371,225

    At maturity

    6.86

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    1,679,820

    3,352,055

    8,380,136

    -

    -

    13,412,011

    Monthly

    15.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BNA

    Argentina

    $ARG

    407,527

    1,369,813

    7,305,668

    1,826,416

    -

    10,909,425

    Monthly

    15.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Macro

    Argentina

    $ARG

    59,417

    89,388

    648,064

    -

    -

    796,869

    Monthly

    15.25

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Citi Bank

    Argentina

    $ARG

    -

    6,144,870

    -

    -

    -

    6,144,870

    At maturity

    21.60

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Hipotecario

    Argentina

    $ARG

    -

    1,641,872

    -

    -

    -

    1,641,872

    At maturity

    22.00

    0-E

    Sidra La Victoria S.A.

    Argentina

    0-E

    Banco Hipotecario

    Argentina

    $ARG

    -

    409,118

    -

    -

    -

    409,118

    At maturity

    22.00

    0-E

    Saenz Briones S.A.

    Argentina

    0-E

    Banco HSBC

    Argentina

    $ARG

    80,449

    -

    -

    -

    -

    80,449

    At maturity

    17.00

    0-E

    Saenz Briones S.A.

    Argentina

    0-E

    Banco HSBC

    Argentina

    $ARG

    -

    60,314

    -

    -

    -

    60,314

    At maturity

    20.00

    0-E

    Saenz Briones S.A.

    Argentina

    0-E

    Banco Citi Bank

    Argentina

    $ARG

    -

    108,329

    628,800

    -

    -

    737,129

    Monthly

    15.25

    0-E

    Saenz Briones S.A.

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    479,195

    -

    -

    -

    -

    479,195

    At maturity

    21.75

    0-E

    Saenz Briones S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    405,519

    -

    -

    -

    -

    405,519

    At maturity

    31.00

    0-E

    Saenz Briones S.A.

    Argentina

    0-E

    Banco Hipotecario

    Argentina

    $ARG

    -

    1,233,671

    -

    -

    -

    1,233,671

    At maturity

    22.00

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Nuevo Banco Comercial

    Uruguay

    USD

    1,595

    -

    -

    -

    -

    1,595

    Monthly

    6.50

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Nuevo Banco Comercial

    Uruguay

    USD

    17,251

    53,159

    145,959

    -

    -

    216,369

    Monthly

    5.00

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    135,213

    -

    -

    -

    -

    135,213

    Monthly

    17.30

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    271,453

    -

    -

    -

    -

    271,453

    At maturity

    10.00

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Banco Citi Bank

    Uruguay

    UYU

    516,074

    -

    -

    -

    -

    516,074

    At maturity

    14.50

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Nuevo Banco Comercial

    Uruguay

    UYU

    524,597

    -

    -

    -

    -

    524,597

    At maturity

    17.30

    96,711,590-8

    Manantial S.A.

    Chile

    97,000,600-6

    Banco de Crédito e Inversiones

    Chile

    CLP

    5,925

    10,216

    -

    -

    -

    16,141

    Monthly

    9.84

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    CLP

    1,497

    4,165

    5,000

    -

    -

    10,662

    Monthly

    9.12

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    CLP

    1,785

    -

    -

    -

    -

    1,785

    Monthly

    12.12

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    CLP

    19,000

    57,000

    152,000

    95,000

    -

    323,000

    Monthly

    7.60

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco Del Estado De Chile

    Chile

    CLP

    5,361

    16,739

    21,797

    -

    -

    43,897

    Monthly

    7.56

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco Del Estado De Chile

    Chile

    CLP

    41,462

    96,942

    220,977

    -

    -

    359,381

    Monthly

    6.52

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itau

    Chile

    CLP

    8,490

    26,474

    15,352

    -

    -

    50,316

    Monthly

    7.32

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itau

    Chile

    CLP

    6,823

    21,303

    27,743

    -

    -

    55,869

    Monthly

    7.56

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itau

    Chile

    CLP

    20,603

    63,930

    178,709

    -

    -

    263,242

    Monthly

    6.66

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    UF

    12,364

    38,110

    108,570

    104,095

    -

    263,139

    Monthly

    4.80

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    UF

    6,864

    21,256

    61,120

    68,302

    18,297

    175,839

    Monthly

    5.48

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco De Chile

    Chile

    UF

    5,659

    17,488

    50,228

    13,433

    -

    86,808

    Monthly

    5.36

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    USD

    26,731

    -

    -

    -

    -

    26,731

    Monthly

    2.00

    Sub-total

     

     

     

     

     

     

    8,110,679

    25,083,173

    29,752,407

    18,007,336

    18,297

    80,971,892

     

     

     

    As of January 1, 2016

     

    F-76Increase in joint operation


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    (1,514,955)

    Deferred Tax Losses Tax absorption

    (178,473)

    Deferred taxes from tax loss carry forwards absorption

    1,337,603

    Conversion effect

    245,227

    Deferred taxes against equity

    638,550

    Other deferred movements taxes

    254,982

    Change

    782,934

    As of December 31, 2016

    (54,925,316)

     

     

     

    Registration or ID No. Instrument

     

     

    Undiscounting amounts according to maturity

     

     

    Debtor 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

    Rate

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bonds payable

     

     

     

     

     

     

     

     

     

     

     

     

     

    91,041,000-8

    Viña San Pedro Tarapacá S.A.

    Chile

    415 13/06/2005 BONO SERIE A

    Chile

    UF

    610,793

    428,096

    1,726,876

    1,730,745

    5,830,231

    10,326,741

    Semiannual

    3.80

    90,413,000-1

    CCU S.A.

    Chile

    388 18/10/2004 BONO SERIE E

    Chile

    UF

    -

    2,309,671

    4,470,092

    4,505,563

    13,958,093

    25,243,419

    Semiannual

    4.00

    90,413,000-1

    CCU S.A.

    Chile

    573 23/03/2009 BONO SERIE H

    Chile

    UF

    575,064

    -

    -

    -

    46,378,801

    46,953,865

    Semiannual

    4.25

    90,413,000-1

    CCU S.A.

    Chile

    572 23/03/2009 BONO SERIE I

    Chile

    UF

    70,508,462

    -

    -

    -

    -

    70,508,462

    At maturity

    3.00

    Sub-total

     

     

     

     

     

     

    71,694,319

    2,737,767

    6,196,968

    6,236,308

    66,167,125

    153,032,487

     

     

     

     

     

     

     

     

     

    Undiscounting amounts according to 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

    Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Financial leases obligations

     

     

     

     

     

     

     

     

     

     

     

     

     

    90,413,000-1

    CCU S.A.

    Chile

    99,012,000-5

    Consorcio Nacional de Seguros S.A.

    Chile

    UF

    20,266

    62,917

    105,060

    103,461

    15,329,071

    15,620,775

    Monthly

    7.07

    96,981,310-6

    Compañía Cervecera Kunstmann S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    34,772

    90,112

    193,188

    11,641

    -

    329,713

    Monthly

    6.43

    96,981,310-6

    Compañía Cervecera Kunstmann S.A.

    Chile

    97,030,000-7

    Banco del Estado de Chile

    Chile

    UF

    19,817

    60,727

    171,693

    178,764

    -

    431,001

    Monthly

    4.33

    96,981,310-6

    Compañía Cervecera Kunstmann S.A.

    Chile

    97,015,000-5

    Banco Santander Chile

    Chile

    UF

    17,486

    -

    -

    -

    -

    17,486

    Monthly

    7.20

    76,077,848-6

    Cervecera Belga De La Patagonia S.A.

    Chile

    97,015,000-5

    Banco Santander Chile

    Chile

    UF

    1,168

    3,615

    10,512

    11,911

    5,420

    32,626

    Monthly

    6.27

    96,711,590-8

    Manantial S.A.

    Chile

    97,000,600-6

    Banco de Crédito e Inversiones

    Chile

    UF

    12,343

    8,523

    1,955

    -

    -

    22,821

    Monthly

    6.30

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    17,069

    47,893

    48,694

    -

    -

    113,656

    Monthly

    6.07

    96,711,590-8

    Manantial S.A.

    Chile

    97,053,000-2

    Banco Security

    Chile

    UF

    31,202

    93,739

    128,056

    -

    -

    252,997

    Monthly

    6.78

    96,711,590-8

    Manantial S.A.

    Chile

    97,000,600-6

    Banco de Crédito e Inversiones

    Chile

    UF

    848

    896

    -

    -

    -

    1,744

    Monthly

    22.31

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    5,087

    9,832

    -

    -

    -

    14,919

    Monthly

    12.62

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco del Estado de Chile

    Chile

    UF

    17,603

    40,651

    20,513

    -

    -

    78,767

    Monthly

    16.04

    96,711,590-8

    Manantial S.A.

    Chile

    97,053,000-2

    Banco Security

    Chile

    UF

    4,243

    11,682

    -

    -

    -

    15,925

    Monthly

    6.99

    Sub-total financial leases obligations

     

     

     

     

     

    181,904

    430,587

    679,671

    305,777

    15,334,491

    16,932,430

     

     

                   

    Total

     

     

     

     

     

     

    79,986,902

    28,251,527

    36,629,046

    24,549,420

    81,519,913

    250,936,809

     

     

     

    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, 2015

     

    Current

    Non current

    Current

    Non current

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Bank borrowings (*)

    39,079,561

    29,606,398

    27,714,998

    48,335,093

    Bonds payable (*)

    3,250,023

    70,836,716

    3,155,239

    71,352,994

    Financial leases obligations (*)

    215,950

    17,500,919

    321,416

    17,238,458

    Deposits 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.


    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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bank borrowings

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Superville

    Argentina

    USD

    136,115

    -

    -

    -

    -

    136,115

    At maturity

    3.50

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Superville

    Argentina

    USD

    135,537

    -

    -

    -

    -

    135,537

    At maturity

    3.50

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Superville

    Argentina

    USD

    217,353

    -

    -

    -

    -

    217,353

    At maturity

    3.50

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Superville

    Argentina

    USD

    -

    54,032

    -

    -

    -

    54,032

    At maturity

    4.25

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Macro

    Argentina

    USD

    -

    200,933

    -

    -

    -

    200,933

    At maturity

    1.85

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    USD

    201,628

    -

    -

    -

    -

    201,628

    At maturity

    2.70

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    USD

    -

    133,909

    -

    -

    -

    133,909

    At maturity

    2.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    1,436

    1,589

    -

    -

    -

    3,025

    Quarter

    15.25

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    433,258

    -

    -

    -

    -

    433,258

    At maturity

    36.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    228,734

    -

    -

    -

    -

    228,734

    At maturity

    29.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    340,659

    -

    -

    -

    -

    340,659

    At maturity

    28.50

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    -

    518,917

    -

    -

    -

    518,917

    At maturity

    26.75

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    367,243

    -

    -

    -

    -

    367,243

    Quarter

    30.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    9,178

    400,250

    -

    -

    -

    409,428

    Quarter

    27.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco San Juan

    Argentina

    $ARG

    425

    84,263

    -

    -

    -

    84,688

    Quarter

    23.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    BBVA

    Argentina

    $ARG

    524,538

    -

    -

    -

    -

    524,538

    At maturity

    27.50

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    BBVA

    Argentina

    $ARG

    50,045

    -

    -

    -

    -

    50,045

    At maturity

    27.00

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    290,342

    -

    -

    -

    -

    290,342

    At maturity

    27.75

    0-E

    Finca La Celia S.A.

    Argentina

    0-E

    Banco Patagonia

    Argentina

    $ARG

    74,763

    -

    -

    -

    -

    74,763

    At maturity

    27.50

    91,041,000-8

    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

    4.40

    91,041,000-8

    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

    2.70

    91,041,000-8

    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

    1.79

    99,586,280-8

    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

    6.86

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    16,333

    50,142

    46,143

    -

    -

    112,618

    Monthly

    4.80

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    9,264

    28,576

    57,305

    -

    -

    95,145

    Monthly

    5.48

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    UF

    7,599

    5,124

    -

    -

    -

    12,723

    Monthly

    5.36

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    13,500

    40,500

    108,000

    18,000

    -

    180,000

    Monthly

    6.00

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    19,000

    57,000

    12,667

    -

    -

    88,667

    Monthly

    7.59

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    14,000

    42,000

    88,667

    -

    -

    144,667

    Monthly

    5.88

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    22,500

    67,500

    180,000

    22,500

    -

    292,500

    Monthly

    5.76

    96,711,590-8

    Manantial S.A.

    Chile

    76,645,030-K

    Banco Itaú

    Chile

    CLP

    8,111

    25,086

    72,892

    13,047

    -

    119,136

    Monthly

    6.12

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco Estado

    Chile

    CLP

    -

    205,849

    -

    -

    -

    205,849

    Monthly

    4.92

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco Estado

    Chile

    CLP

    67,488

    203,111

    580,563

    -

    -

    851,162

    Monthly

    4.92

    96,711,590-8

    Manantial S.A.

    Chile

    97,030,000-7

    Banco Estado

    Chile

    CLP

    19,030

    58,392

    167,461

    52,210

    -

    297,093

    Monthly

    5.02

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    37,500

    112,500

    37,510

    -

    -

    187,510

    Monthly

    5.04

    96,711,590-8

    Manantial S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    -

    255,037

    -

    -

    -

    255,037

    Monthly

    4.68

    0-E

    Milotur S.A.

    Uruguay

    0-E

    Banco Itaú

    Uruguay

    UYI

    406,353

    638,554

    696,605

    -

    -

    1,741,512

    Monthly

    6.00

    96,981,310-6

    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

    5.35

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,018,000-1

    Scotiabank

    Chile

    CLP

    18,000

    2,000,000

    -

    -

    -

    2,018,000

    At maturity

    4.50

    96,981,310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97,004,000-5

    Banco de Chile

    Chile

    CLP

    -

    6,656

    400,000

    -

    -

    406,656

    At maturity

    4.68

    96,981,310-6

    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

    5.02

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BNA

    Argentina

    $ARG

    251,181

    717,375

    1,912,999

    -

    -

    2,881,555

    Monthly

    15.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Macro

    Argentina

    $ARG

    34,300

    23,406

    -

    -

    -

    57,706

    Monthly

    15.25

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    421,179

    421,652

    -

    -

    -

    842,831

    Quarter

    26.00

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BNA

    Argentina

    $ARG

    103,106

    303,347

    134,821

    -

    -

    541,274

    Monthly

    25.19

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Galicia

    Argentina

    $ARG

    68,826

    789,966

    5,529,763

    -

    -

    6,388,555

    Quarter

    30.50

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Citibank

    Argentina

    $ARG

    30,190

    -

    -

    -

    -

    30,190

    At maturity

    25.66

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco HSBC

    Argentina

    $ARG

    2,109,794

    -

    -

    -

    -

    2,109,794

    At maturity

    25.25

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco BBVA

    Argentina

    $ARG

    1,392

    -

    -

    -

    -

    1,392

    At maturity

    26.12

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Macro

    Argentina

    $ARG

    12

    -

    -

    -

    -

    12

    At maturity

    25.53

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Santander Rio

    Argentina

    $ARG

    199,954

    -

    -

    -

    -

    199,954

    At maturity

    25.00

    0-E

    Saenz Briones y Cía. S.A.

    Argentina

    0-E

    Banco Citibank

    Argentina

    $ARG

    1,138

    -

    -

    -

    -

    1,138

    At maturity

    26.50

    Sub-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 5 the non-discounted contractual cash flows.


    Compañía Cross Currency Interest Rate Swap agreement(Note 6)Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    (2)December 31, 2016This obligation is hedged by

     

     

     

     

     

     

     

    Maturity

     

     

    Debtor 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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bonds payable

     

     

     

     

     

     

     

     

     

     

     

     

     

    90,413,000-1

    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

    4.00

    90,413,000-1

    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

    4.25

    Sub-total

     

     

     

     

     

     

    637,729

    2,612,294

    7,471,522

    14,839,751

    48,525,443

    74,086,739

     

     

     

     

     

     

     

     

     

    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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Financial leases obligations

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A

    Argentina

    -

    Banco Supervielle

    Argentina

    $ARG

    981

    3,017

    1,464

    -

    -

    5,462

    At maturity

    17.50

    96,711,590-8

    Manantial S.A.

    Chile

    -

    Banco de Creditos e Inversiones

    Chile

    UF

    14,369

    3,837

    -

    -

    -

    18,206

    Monthly

    3.13

    96,711,590-8

    Manantial S.A.

    Chile

    -

    Banco de Chile

    Chile

    UF

    6,054

    8,072

    -

    -

    -

    14,126

    Monthly

    8.65

    96,711,590-8

    Manantial S.A.

    Chile

    -

    Banco Security

    Chile

    UF

    4,489

    8,755

    -

    -

    -

    13,244

    Monthly

    9.25

    90,413,000-1

    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

    7.07

    96,981,310-6

    Compañía Cervecera Kunstmann S.A

    Chile

    97,030,000-7

    BancoEstado

    Chile

    UF

    25,436

    77,942

    98,688

    -

    -

    202,066

    Monthly

    4.33

    76,077,848-6

    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

    6.27

    Sub-total

     

     

     

     

     

     

    65,088

    150,862

    225,373

    143,905

    17,131,641

    17,716,869

     

     

                   

    Total

     

     

     

     

     

     

    8,481,440

    34,064,094

    36,676,882

    15,610,067

    65,657,084

    160,489,567

     

     


    Compañía Cross Currency Rate Swap(Note 6)Cervecerías Unidas S.A. and subsidiaries

    .

    Notes to the Consolidated Financial Statements

    F-77December 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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bank borrowings

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Supervielle

    Argentina

    USD

    -

    128,459

    -

    -

    -

    128,459

    At maturity

    6.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    272,706

    -

    -

    -

    -

    272,706

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    106,222

    -

    -

    -

    -

    106,222

    At maturity

    28.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    420,665

    -

    -

    -

    -

    420,665

    At maturity

    28.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    1,857

    7,389

    3,095

    -

    -

    12,341

    At maturity

    15.25

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    506,450

    -

    -

    -

    -

    506,450

    At maturity

    27.50

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    151,260

    -

    -

    -

    -

    151,260

    At maturity

    29.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco San Juan

    Argentina

    $ARG

    -

    486,804

    -

    -

    -

    486,804

    Quarter

    29.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Patagonia

    Argentina

    $ARG

    405,927

    -

    -

    -

    -

    405,927

    At maturity

    25.00

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco BBVA

    Argentina

    $ARG

    535,283

    -

    -

    -

    -

    535,283

    At maturity

    29.50

    0-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

    1.92

    91.041.000-8

    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

    1.90

    91.041.000-8

    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

    2.70

    91.041.000-8

    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

    1.15

    91.041.000-8

    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

    6.86

    99.586.280-8

    Manantial S.A.

    Chile

    97.030.000-7

    Banco de Chile

    Chile

    UF

    15,123

    46,470

    109,544

    -

    -

    171,137

    At maturity

    4.80

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    UF

    8,529

    26,304

    75,692

    16,855

    -

    127,380

    Monthly

    5.48

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    UF

    7,004

    21,588

    12,375

    -

    -

    40,967

    Monthly

    5.36

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    CLP

    13,500

    40,500

    108,000

    72,000

    -

    234,000

    Monthly

    6.00

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    CLP

    19,000

    57,000

    88,668

    -

    -

    164,668

    Monthly

    7.59

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    CLP

    14,000

    42,000

    112,000

    32,667

    -

    200,667

    Monthly

    5.88

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    CLP

    22,500

    67,500

    180,000

    112,500

    -

    382,500

    Monthly

    5.76

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco Itaú

    Chile

    CLP

    23,690

    56,839

    -

    -

    -

    80,529

    Monthly

    6.66

    96.711.590-8

    Manantial S.A.

    Chile

    76.645.030-K

    Banco Itaú

    Chile

    CLP

    7,704

    23,532

    68,516

    50,621

    -

    150,373

    Monthly

    6.12

    96.711.590-8

    Manantial S.A.

    Chile

    76.645.030-K

    Banco Estado

    Chile

    CLP

    200,000

    -

    -

    -

    -

    200,000

    Monthly

    5.26

    96.711.590-8

    Manantial S.A.

    Chile

    76.645.030-K

    Banco Estado

    Chile

    CLP

    254,313

    -

    -

    -

    -

    254,313

    Monthly

    4.38

    96.711.590-8

    Manantial S.A.

    Chile

    97.030.000-7

    Banco Estado

    Chile

    CLP

    35,843

    36,436

    -

    -

    -

    72,279

    At maturity

    7.56

    96.711.590-8

    Manantial S.A.

    Chile

    97.030.000-7

    Banco Estado

    Chile

    CLP

    -

    150,000

    -

    -

    -

    150,000

    At maturity

    5.40

    96.711.590-8

    Manantial S.A.

    Chile

    97.030.000-7

    Banco Estado

    Chile

    CLP

    -

    255,510

    -

    -

    -

    255,510

    Monthly

    4.22

    96.711.590-8

    Manantial S.A.

    Chile

    97.030.000-7

    Banco Estado

    Chile

    CLP

    18,029

    55,418

    158,974

    138,117

    -

    370,538

    Monthly

    5.02

    96.711.590-8

    Milotur S.A.

    Chile

    97.030.000-7

    Nuevo Banco Comercial

    Chile

    USD

    25,991

    71,036

    -

    -

    -

    97,027

    At maturity

    5.50

    96.711.590-8

    Milotur S.A.

    Chile

    97.030.000-7

    Banco Itaú

    Chile

    UYI

    -

    344,850

    1,701,800

    -

    -

    2,046,650

    Monthly

    6.00

    0-E

    Compañia Cervecera Kunstmann S.A.

    Uruguay

    O-E

    Banco Estado

    Uruguay

    CLP

    -

    515,083

    -

    -

    -

    515,083

    Monthly

    4.34

    0-E

    Compañia Cervecera Kunstmann S.A.

    Uruguay

    O-E

    Banco Estado

    Uruguay

    CLP

    -

    618,100

    -

    -

    -

    618,100

    Monthly

    4.34

    96.981.310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97.030.000-7

    Banco de Chile

    Chile

    CLP

    -

    1,030,538

    -

    -

    -

    1,030,538

    At maturity

    4.38

    96.981.310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97.030.000-7

    Scotiabank

    Chile

    USD

    7,229

    453,561

    -

    -

    -

    460,790

    At maturity

    1.90

    96.981.310-6

    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

    5.02

    96.981.310-6

    Compañia Cervecera Kunstmann S.A.

    Chile

    97.018.000-1

    Scotiabank

    Chile

    CLP

    -

    1,028,447

    -

    -

    -

    1,028,447

    At maturity

    4.08

    96.981.310-6

    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

    15.00

    96.981.310-6

    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

    25.19

    0-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

    26.00

    0-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

    29.40

    0-E

    Compañía Industrial Cervecera S.A.

    Argentina

    0-E

    Banco Macro

    Argentina

    $ARG

    44,130

    136,150

    75,639

    -

    -

    255,919

    Monthly

    15.25

    0-E

    Saenz Briones y Cía. S.A.

    Argentina

    0-E

    Banco Citibank

    Argentina

    $ARG

    65,596

    121,022

    -

    -

    -

    186,618

    Quarter

    15.25

    Sub-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 5 the non-discounted contractual cash flows.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

     

     

     

    Registration or ID No. Instrument

     

     

    Maturity

     

     

    Debtor 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 Rate

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Bonds payable

     

     

     

     

     

     

     

     

     

     

     

     

     

    90.413.000-1

    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

    4.00

    90.413.000-1

    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

    4.25

    Sub-total

     

     

     

     

     

     

    615,318

    2,539,921

    4,953,915

    7,348,000

    59,051,079

    74,508,233

     

     

     

     

     

     

     

     

     

    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 Rate

     

     

     

     

     

     

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

     

    %

    Financial leases obligations

     

     

     

     

     

     

     

     

     

     

     

     

     

    0-E

    Finca La Celia S.A

    Argentina

    O-E

    Banco Supervielle

    Argentina

    $ARG

    1,267

    3,900

    6,147

    -

    -

    11,314

    Monthly

    17.50

    96.711.590-8

    Manantial S.A.

    Chile

    97.000.600-6

    Banco de Creditos e Inversiones

    Chile

    UF

    5,371

    16,386

    9,292

    -

    -

    31,049

    Monthly

    5.06

    96.711.590-8

    Manantial S.A.

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    UF

    10,764

    16,845

    13,524

    -

    -

    41,133

    Monthly

    9.31

    96.711.590-8

    Manantial S.A.

    Chile

    97.053.000-2

    Banco Security

    Chile

    UF

    21,598

    25,628

    12,867

    -

    -

    60,093

    Monthly

    6.81

    90.413.000-1

    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

    7.07

    96.981.310-6

    Compañía Cervecera Kunstmann S.A

    Chile

    97.004.000-5

    Banco de Chile

    Chile

    UF

    42,822

    23,183

    12,799

    -

    -

    78,804

    Monthly

    5.58

    96.981.310-6

    Compañía Cervecera Kunstmann S.A

    Chile

    97.030.000-7

    BancoEstado

    Chile

    UF

    23,716

    72,672

    196,552

    -

    -

    292,940

    Monthly

    4.33

    76.077.848-6

    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

    6.27

    Sub-total

     

     

     

     

     

     

    119,492

    201,924

    378,035

    231,950

    16,628,473

    17,559,874

     

     

                   

    Total

     

     

     

     

     

     

    6,994,698

    24,196,955

    40,890,654

    20,356,339

    75,679,552

    168,118,198

     

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    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, 2014

    As of December 31, 2013

     

    Fixed Interest

     Rate

    Variable Interest

    Rate

    Fixed Interest

    Rate

    Variable Interest

     Rate

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    US Dollar

    1,557,305

    13,690,987

    5,286,097

    11,840,117

    Chilean Pesos

    21,537,298

    -

    18,640,160

    -

    Argentine Pesos

    42,866,462

    -

    38,740,332

    -

    Unidades de Fomento

    101,169,041

    -

    170,490,703

    -

    Euros

    4,590,673

    -

    4,492,063

    -

    Uruguayan Pesos

    1,740,967

    -

    1,447,337

    -

    Total

    173,461,746

    13,690,987

    239,096,692

    11,840,117

    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, 2015

     

    Fixed Interest Rate

    Variable Interest Rate

    Fixed Interest Rate

    Variable Interest Rate

     

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    US Dollar

    1,079,507

    5,272,884

    686,276

    15,940,220

    Chilean Pesos

    33,822,001

    -

    25,840,175

    -

    Argentine Pesos

    11,515,546

    4,869,957

    17,146,915

    4,266,388

    Unidades 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)   On July 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.


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014, were 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.


    Compañía Cervecerías follows: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.


    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.


    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).


    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.


    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)   Bank Borrowings

    Banco Estado – Bank Loans

    On July 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: 

    (a)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.

    (b)Maintain a debt ratio of no more than 2.5, measured as Total liabilities divided by Equity.

    (c)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, 2014, the Company was in compliance with the financial covenants and specific requirements of this loan.

    F-78


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    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 6

    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 6

    The aforementioned loans oblige the Company to comply with the same covenants as the Series A Bond as indicated in letter a) and b) obligations with the public in this Note.

    c) 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.

    Banco Estado  – Bank Loans

    a)On April 23, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of ThCh$ 3,000,000, maturing on July 19, 2012.

          On July 19, 2012 the previous loan was renewed for a period of 71 days, maturing on September 28, 2012. Subsequently, on the same time this loan was renewed for a period of 84 days, maturing on December 21, 2012. On December 21, 2012, this loan was renewed for 60 days, maturating on February 19, 2013, renewed again for 94 days, maturing on May 24, 2013.

          This loan accrued interest at an annual rate. The subsidiary amortized interest and capital amortization consists of a single payment at the end of the established term.

          On May 24, 2013, this loan was paid.

    b)   On July 19, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of ThCh$ 1,000,000, maturing on September 28, 2012. Subsequently this loan was renewed for a period of 84 days, maturing on December 21, 2012. It was renewed for 60 days, maturing in February 19, 2013, renewed again for 94 days, maturing on May 24, 2013.

          This loan accrued a fixed interest at an annual rate. The subsidiary amortized interest and capital amortization consists of a single payment at the end of the established term.

          On May 24, 2013, this loan was paid.

    c)   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, maturiting on April 25, 2015.

    F-79


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 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.

    d)   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, maturiting on April 25, 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.

    e)   On June 16, 2014, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Estado for a total of 6,000,000 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.

    f)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.

    g)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.

    Banco Scotiabank – Bank Loans

    a) On June 21, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Scotiabank for a total of
    US$ 3,897,940, maturing on June 20, 2013.

          This loan accrued interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortized interest quarterly 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).

          On June 20, 2013, this loan was paid.

    b)   On June 21, 2012, the subsidiary Viña San Pedro Tarapacá S.A. signed a bank loan with Banco Scotiabank for a total of US$ 11,000,000, maturing on June 21, 2013.

          This loan accrued interest at a compound floating rate Libor plus 180 days plus a fixed margin. The subsidiary amortized interest semi-annually and capital amortization consists of a single payment at the end of the established term.

          On June 21, 2013, this loan was paid.

    c)   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 seeNote6

    F-80


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    d)   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.

    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, maturating 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.

    [1]EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).

    F-81


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    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, 2014, 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)

    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.

    Banco BBVA Francés S.A. – Préstamo bancario con Compañía Industrial Cervecera S.A. (CICSA)

    d)   On June 18, 2014, the subsidiary CICSA signed a bank loan with BBVA Bank for a total of 90 million Argentinian pesos, maturing on November 18, 2017.

          This loan accrues a fixed interest at an annual rate. The subsidiary amortizes interest and capital amortization quarterly.

    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-82



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Compañía Cervecera Kunstmann S.AS.A., Manantial S.A. and ManantialFinca La Celia S.A.:

     

    Other lease agreements are as follows:

     

    Type

    Institution

    Contract Date

    Currency

    Amount

    Number of

    quotas

    Anual Interest

    Purchase

    option (UF)

    Institution

    Contract Date

    Currency

    ThCh$

    Number of quotas

    Annual Interest

    Purchase option (UF)

    Compañía Cervecera Kunstmann S.A.

    Compañía Cervecera Kunstmann S.A.

    Compañía Cervecera Kunstmann S.A.

    Production plant

    Banco de Chile

    04-19-05

    UF

    20,489

    168

    8.30%

    302

    Land Lote 2 C

    Banco de Chile

    06-26-07

    UF

    7,716

    121

    5.80%

    85

    Land Lote 2 D

    Banco de Chile

    03-25-08

    UF

    15,000

    97

    4.30%

    183

    Production Plant

    Banco de Chile

    19-04-05

    UF

    20.489

    168

    8.30%

    302

    Land Lote 2C

    Banco de Chile

    26-06-07

    UF

    7.716

    121

    5.80%

    85

    Land Lote 2D

    Banco de Chile

    25-03-08

    UF

    15.000

    97

    4.30%

    183

    Land Lote 13F1

    Banco Estado

    10-10-2012

    UF

    22,341

    72

    4.33%

    348

    Banco Estado

    10-10-12

    UF

    22.341

    72

    4.33%

    348

    Manantial S.A.

    Manantial S.A.

    Manantial S.A.

    Dispensers

    Banco de Crédito e Inversiones

    01-04-2012

    UF

    4,275

    37

    5.06%

    116

    Banco de Crédito e Inversiones

    04-01-12

    UF

    4.275

    37

    5.06%

    116

    Dispensers

    Banco de Chile

    12-05-2011

    UF

    1,073

    37

    5.98%

    311

    Banco de Chile

    05-12-11

    UF

    1.073

    37

    5.98%

    311

    Vehicles

    Banco de Chile

    08-27-12

    UF

    1,265

    25

    12.63%

    51

    Vehicles

    Banco Estado

    09-15-11

    UF

    5,342

    25

    14.01%

    208

    Banco de Chile

    27-08-12

    UF

    1.265

    25

    12.63%

    51

    Computers

    Banco Security

    08-23-11

    UF

    2,387

    37

    6.99%

    65

    Banco Security

    23-08-11

    UF

    2.387

    37

    6.99%

    65

    Dispensers

    Banco Security

    08-09-2011

    UF

    20,845

    37

    6.62%

    563

    Banco Security

    09-08-11

    UF

    20.845

    37

    6.62%

    563

    Finca La Celia S.A.

    Finca La Celia S.A.

    Finca La Celia S.A.

    Automotor

    Banco Supervielle

    06-10-2014

    $ARG

    10,814

    45

    17.50%

    6,250

    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, 2014:2015:

     

    Lease Minimum Future Payments

    As of December 31, 2014

    As of December 31, 2016

    Gross Amount

    Interest

    Current Value

    Gross Amount

    Interest

    Amount

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Less than one years

    1,681,160

    1,163,021

    518,139

    Between one and five year

    5,228,658

    4,488,857

    739,801

    Over five years

    28,911,336

    12,776,331

    16,135,005

    0 to 3 months

    368,052

    302,964

    65,088

    3 months to 1 year

    1,050,810

    899,948

    150,862

    Over 1 year to 3 years

    2,603,315

    2,377,942

    225,373

    Over 3 years to 5 years

    2,305,704

    2,161,799

    143,905

    Over 5 years

    28,638,952

    11,507,311

    17,131,641

    Total

    35,821,154

    18,428,209

    17,392,945

    34,966,833

    17,249,964

    17,716,869

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    c)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 maturitingmaturing 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 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 Companydescribe 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.

    F-83


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    (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.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 Viña San Pedro de Tarapacá S.A. was in compliance with the financial covenants required for this public issue.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 maturitingmaturing 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.

     

    F-84


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    (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.

     


    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, 20142016 and December 31, 2013,2015, the Company was in compliance with the financial covenants required for this public issue.

     

     

    F-85


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    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.

     


    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, 20142016 and December 31, 2013,2015, 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)F-86Not 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, 2016 and December 31, 2015, the subsidiary was in compliance with the financial covenants required for this public issue.



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Note 2827Accounts payable – trade and other payables

     

    As ofDecember 31, 20142016 and 2013,2015, the total Accounts payable-trade and other payables are as follows:

     

    As of December 31, 2016

    As of December 31, 2015

    As of December

    31, 2014

    As of December

    31, 2013

    Current

    Non current

    Current

    Non current

    ThCh$

    ThCh$

    ThCh$

    Suppliers

    159,782,385

    149,900,984

    210,160,789

    -

    179,926,026

    -

    Notes payable

    3,940,353

    2,875,895

    2,121,496

    1,082,898

    3,930,657

    1,645,098

    Withholdings payable

    40,429,573

    31,573,106

    47,395,567

    -

    43,880,120

    -

    Total

    204,152,311

    184,349,985

    259,677,852

    1,082,898

    227,736,803

    1,645,098

    Current

    203,782,805

    183,508,115

    Non-current

    369,506

    841,870

    Total

    204,152,311

    184,349,985

     

     

    Note 2928Provisions

     

    As ofDecember 31, 20142016 and 2013,2015, the total provisions recorded in the consolidated statement of financial position are as follows:

     

    As of December 31, 2016

    As of December 31, 2015

    As of December

    31, 2014

    As of December

    31, 2013

    Current

    Non current

    Current

    Non current

    ThCh$

    ThCh$

    ThCh$

    Litigation

    1,023,895

    1,294,570

    409,164

    839,079

    503,440

    839,934

    Others

    1,596,196

    1,673,910

    -

    484,441

    -

    636,584

    Total

    2,620,091

    2,968,480

    409,164

    1,323,520

    503,440

    1,476,518

    Current

    410,259

    833,358

    Non-current

    2,209,832

    2,135,122

    Total

    2,620,091

    2,968,480

     

    The following was the change in provisions during the years ended December 31, 20132015 and 2014:2016:

     

    Litigation

    Others

    Total

    Litigation (1)

    Others

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    As of January 1, 2013

    984,466

    910,663

    1,895,129

    As of December 31, 2013

     

     

    Additions by Business Combination

    149,365

    1,094,095

    1,243,460

    As of January 1, 2015

     

    1,023,895

     

    1,596,196

    2,620,091

    As of December 31, 2015

     

     

     

     

     

    Incorporated

    767,854

    17,953

    785,807

     

    792,724

     

    888

    793,612

    Used

    (364,102)

    (108,349)

    (472,451)

     

    (222,139)

     

    -

    (222,139)

    Released

    (64,635)

    (96,378)

    (161,013)

     

    (31,005)

     

    (801,778)

    (832,783)

    Conversion effect

    (178,378)

    (144,074)

    (322,452)

     

    (220,101)

     

    (158,722)

    (378,823)

    As of December 31, 2013

    1,294,570

    1,673,910

    2,968,480

    As of December 31, 2014

     

     

    As of December 31, 2015

     

    1,343,374

     

    636,584

    1,979,958

    As of December 31, 2016

     

     

     

     

     

    Incorporated

    622,320

    151,966

    774,286

     

    551,167

     

    22,219

    573,386

    Used

    (751,636)

    (1,668)

    (753,304)

     

    (267,704)

     

    (14,173)

    (281,877)

    Released

    (71,667)

    (175,968)

    (247,635)

     

    (124,336)

     

    (67,271)

    (191,607)

    Conversion effect

    (69,692)

    (52,044)

    (121,736)

     

    (254,258)

     

    (92,918)

    (347,176)

    As of December 31, 2014

    (1) 1,023,895

    (2) 1,596,196

    2,620,091

    As of December 31, 2016

     

    1,248,243

     

    484,441

    1,732,684

     

    (1)    SeeNote 3534.

    (2)Correspond mainly to provisions originated in business combination related to Uruguay´s companies.

     

     

    F-87



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    The maturities of provisions at December 31, 2013,2016, were as follows:

     

    Litigation

    Others

    Total

    Litigation

    Others

    Total

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Less than one year

    410,259

    -

    410,259

     

    409,164

     

    -

    409,164

    Between two and five years

    378,090

    1,580,580

    1,958,670

     

    423,863

     

    484,441

    908,304

    Over five years

    235,546

    15,616

    251,162

     

    415,216

     

    -

    415,216

    Total

    1,023,895

    1,596,196

    2,620,091

     

    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 3534.

     

    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 3029Other non-financial liabilities

     

    As ofDecember 31, 20142016 and 2013,2015, the total Other non-financial liabilities are as follows:

     

    As of December

    31, 2014

    As of December

    31, 2013

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    Parent dividend provisioned by the board

    23,278,681

    23,278,681

    24,387,190

    24,387,190

    Parent dividend provisioned according to policy

    36,500,001

    38,239,323

    34,841,553

    36,016,878

    Outstanding parent dividends

    520,145

    532,120

    915,585

    723,259

    Subsidiaries dividends according to policy

    7,764,386

    3,666,451

    11,192,210

    9,725,015

    Others

    833,550

    162,003

    33,434

    89,802

    Total

    68,896,763

    65,878,578

    71,369,972

    70,942,144

    Current

    68,896,763

    65,878,578

    71,369,972

    70,942,144

    Total

    68,896,763

    65,878,578

    71,369,972

    70,942,144

     

     

    Note 3130Employee 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 “Staff“Personnel Expense” item.

     

     

    F-88



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    As ofDecember 31, 20142016 and 2013,2015, 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, 2015

    As of December

    31, 2014

    As of December

    31, 2013

    Current

    Non current

    Current

    Non current

    ThCh$

    ThCh$

    Short term benefits

    17,943,771

    18,839,547

    22,517,220

    -

    21,617,103

    -

    Employment termination benefits

    17,437,222

    16,574,806

    321,008

    21,832,415

    94,956

    18,948,603

    Total

    35,380,993

    35,414,353

    22,838,228

    21,832,415

    21,712,059

    18,948,603

    Current

    17,943,771

    20,217,733

    Non-current

    17,437,222

    15,196,620

    Total

    35,380,993

    35,414,353

     

    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, 20142016 and 2013,2015, the total short-term benefits recorded in the Consolidated Statement of Financial Position are as follows:

     

    Short-Term Employees’ Benefits

    As of December

    31, 2014

    As of December

    31, 2013

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    Vacation

    7,856,572

    7,085,786

    9,405,040

    8,442,610

    Bonus and compensation

    10,087,199

    11,753,761

    13,112,180

    13,174,493

    Total

    17,943,771

    18,839,547

    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 6.0% (6.85%5.52% (6.36% in 2013)2015) and in Argentina 42.43% (31.88%31.88% (39.26% in 2013)2015).

     

    As ofDecember 31, 2014 and 2013,2016, the obligation recorded for severance indemnity is as follows:

     

    Severance Indemnity

    As of December

    31, 2014

    As of December

    31, 2013

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    Current

    -

    1,378,186

    321,008

    94,956

    Non-current

    17,437,222

    15,196,620

    21,832,415

    18,948,603

    Total

    17,437,222

    16,574,806

    22,153,423

    19,043,559

     

    F-89



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    The change in the severance indemnity during the year ended as of December 31, 20132015 and 20142016 was as follows:

     

    Severance Indemnity

    Severance

    Indemnity

    ThCh$

    Balance as of January 1, 20132015

    13,171,26417,437,221

    Current cost of service

    607,4431,023,969

    Interest cost

    1,105,5111,703,107

    Actuarial loss

    469,987947,153

    Paid-up benefits

    (384,186)(1,700,491)

    Past service cost

    430,120131,204

    Others

    1,174,667(498,604)

    Movements of the year

    3,403,5421,606,338

    As of December 31, 20132015

    16,574,80619,043,559

    Current cost of service

    601,0531,650,484

    Interest cost

    1,187,7311,702,662

    Actuarial loss

    1,884,0542,342,336

    Paid-up benefits

    (3,341,434)(2,490,851)

    Past service cost

    1,090,429342,039

    From combinationsConversion effect

    893,608(670,709)

    Others

    (1,453,025)233,903

    Movements of the year

    862,4163,109,864

    As of December 31, 20142016

    17,437,22222,153,423

     

    The figures recorded in the Consolidated Statement of Income as ofDecember 31, 2016, 2015 y 2014, 2013 and 2012, are as follows:

     

    Expense recognized for severance indemnity

    For the years ended as of December 31,

    For the years ended as of December 31,

    2014

    2013

    2012

    2016

    2015

    2014

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Current cost of service

    601,053

    607,443

    523,159

    1,650,484

    1,023,969

    601,053

    Interes cost

    -

    -

    1,274,978

    Past service cost

    1,090,429

    430,120

    304,355

    342,039

    131,204

    1,090,429

    Actuarial (Gain) loss

    -

    -

    (3,492,211)

    Non-provided paid benefits

    5,916,192

    2,860,262

    2,158,029

    7,851,201

    4,377,570

    5,916,192

    Other

    335,808

    1,333,466

    213,499

    1,114,112

    646,502

    335,808

    Total expense recognized in Consolidated Statement of Income

    7,943,482

    5,231,291

    981,809

    10,957,836

    6,179,245

    7,943,482

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    Actuarial Assumptions

     

    As mentioned inNote 2.192.20– 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, 20142016 and 2013,2015, are as follows:

     

    Actuarial Assumptions

    Actuarial Assumptions

    Chile

    Argentina

    Actuarial Assumptions

    Chile

    Argentina

    As of December 31,

    As of December 31,

    As of December 31,

    As of December 31,

    2014

    2013

    2014

    2013

    2016

    2015

    2016

    2015

    Mortality table

    Mortality table

    RV-2004

    RV-2004

    Gam'83

    Gam'83

    Mortality table

    RV-2014

    RV-2004

    Gam '83

    Gam'83

    Annual interest rate

    Annual interest rate

    6.0%

    6.85%

    42.43%

    31.88%

    Annual interest rate

    5.52%

    6.36%

    31.88%

    39.26%

    Voluntary employee turnover rate

    Voluntary employee turnover rate

    1.9%

    1.9%

    n/a

    n/a

    Voluntary employee turnover rate

    1.9%

    1.9%

    “ESA 77 Ajustada - 50%”

    “ESA 77 Ajustada - 50%”

    Company’s needs rotation rate

    Company’s needs rotation rate

    5.3%

    5.3%

    n/a

    n/a

    Company’s needs rotation rate

    5.3%

    5.3%

    “ESA 77 Ajustada - 50%”

    “ESA 77 Ajustada - 50%”

    Salary increase

    3.7%

    3.7%

    36.35%

    26.25%

    Officers

     

    60

    60

    60

    60

    Estimated retirement age for

    Other

    Male

    65

     

    Female

    60

    Salary increase (*)

    Salary increase (*)

    3.7%

    3.7%

    26.25%

    33.32%

    Estimated retirement age for (*)

    Officers

     

    60

    60

    60

    Other

    Male

    65

    65

    65

    Female

    60

    60

    60

    F-90


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

     

     

    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, 2014

    As of December

    31, 2013

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    1% increase in the Discount Rate (Gain)

    1,073,272

    919,483

    1,421,484

    1,164,165

    1% decrease in the Discount Rate (Loss)

    (1,245,219)

    (1,056,061)

    (1,649,255)

    (1,344,213)

     

     

     

    PersonalPersonnel expense

     

    The amounts recorded in the Consolidated Statement of Income for the years ended as ofDecember 31, 2014, 20132016, 2015 and 2012,2014, are as follows:

     

    Personal expense

    For the years ended as of December 31,

    2014

    2013

    2012

    ThCh$

    ThCh$

    Personnel expense

    For the years ended as of December 31,

    2016

    2015

    2014

    ThCh$

    ThCh$

    Salaries

    119,623,310

    108,611,206

    93,673,136

    145,766,757

    138,359,074

    119,623,310

    Employees’ short-term benefits

    18,128,043

    19,887,127

    15,063,545

    23,189,206

    24,693,325

    18,128,043

    Employments termination benefits

    7,943,482

    5,231,291

    981,809

    10,957,836

    6,179,245

    7,943,482

    Other staff expense

    23,636,629

    21,280,818

    18,442,996

    30,971,754

    28,683,507

    23,636,629

    Total (1)

    169,331,464

    155,010,442

    128,161,486

    210,885,553

    197,915,151

    169,331,464

     

    (1)SeeSee Note 109.

    Note 32Non-controlling Interests

    The detail of Non-controlling Interests is the following:

    a.Equity 

    Equity

    As of December

     31, 2014

    As of December

    31, 2013

    ThCh$

    ThCh$

    Viña San Pedro Tarapacá S.A.

    69,856,322

    67,885,985

    Bebidas del Paraguay S.A.

    21,903,962

    -

    Aguas CCU-Nestlè Chile S.A.

    16,389,004

    13,748,080

    Distribuidora del Paraguay S.A.

    701,002

    -

    Compañía Pisquera de Chile S.A.

    4,653,894

    4,735,315

    Compañía Cervecera Kunstmann S.A.

    4,424,495

    3,953,265

    Saenz Briones & Cia. S.A.

    1,145,657

    1,361,643

    Sidra La Victoria S.A.

    1,166

    1,119

    Manantial S.A.

    3,353,256

    3,302,639

    Los Huemules S.R.L.

    116,892

    188,556

    Others

    366,091

    391,820

    Total

    122,911,741

    95,568,422

    F-91

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 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, 2015

    ThCh$

    ThCh$

    Viña San Pedro Tarapacá S.A.

    75,092,267

    72,512,897

    Bebidas del Paraguay S.A.

    17,828,260

    20,403,140

    Aguas CCU-Nestlé Chile S.A.

    16,440,129

    19,891,176

    Compañía Cervecera Kunstmann S.A.

    5,740,305

    4,979,490

    Compañía Pisquera de Chile S.A.

    4,717,811

    4,699,612

    Manantial S.A. (1)

    -

    3,767,028

    Saenz Briones & Cía. S.A.

    799,111

    962,286

    Distribuidora del Paraguay S.A.

    2,197,241

    1,949,490

    Los Huemules S.R.L. (1)

    -

    395,469

    Other

    179,300

    145,185

    Total

    122,994,424

    129,705,773

    (1)SeeNote8.

     

     

    b.  Result

     

    For the years ended as of December 31,

    For the years ended as of December 31,

    Result

    2014

    2013

    2012

    2016

    2015

    2014

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Aguas CCU-Nestlé Chile S.A.

    8,377,672

    7,052,867

    5,408,750

    Viña San Pedro Tarapacá S.A.

    6,003,439

    3,319,366

    3,397,717

    9,887,477

    9,182,843

    6,003,439

    Aguas CCU-Nestlè Chile S.A.

    5,408,750

    4,870,501

    4,884,619

    Compañía Cervecera Kunstmann S.A.

    1,636,906

    1,267,335

    966,212

    Manantial S.A.

    -

    861,072

    684,427

    Compañía Pisquera de Chile S.A.

    889,482

    765,624

    960,778

    790,152

    592,506

    889,482

    Saenz Briones & Cía. S.A.

    11,184

    128,407

    (58,433)

    Distribuidora del Paraguay S.A.

    255,683

    1,144,911

    429,527

    Bebidas del Paraguay S.A.

    253,516

    -

    -

    576,986

    (486,790)

    253,516

    Distribuidora del Paraguay S.A.

    429,527

    -

    -

    Compañía Cervecera Kunstmann S.A.

    966,212

    1,022,346

    1,052,257

    Saenz Briones & Cia. S.A.

    (58,433)

    (733,068)

    (798,955)

    Los Huemules S.R.L.

    -

    (45,370)

    (48,171)

    Sidra La Victoria S.A.

    175

    123

    (8)

    -

    -

    175

    Manantial S.A.

    684,427

    587,119

    -

    Los Huemules S.R.L.

    (48,171)

    (12,624)

    -

    Others

    24,547

    49,156

    47,759

    Other

    88,339

    19,674

    24,547

    Total

    14,553,471

    9,868,543

    9,544,167

    21,624,399

    19,717,455

    14,553,471


    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, 2015

     

     

     

     

    ThCh$

    ThCh$

    Assets and Liabilities

      

    Current assets

    601,165,755

    566,432,064

    Non-current assets

    716,889,536

    727,700,381

    Current liabilities

    368,293,544

    336,696,932

    Non-current liabilities

    146,234,462

    218,031,963

     

     

     

    Dividends 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, 2015

     

     

     

     

    ThCh$

    ThCh$

    Assets and Liabilities

      

    Current assets

    145,866,023

    142,945,036

    Non-current assets

    171,099,295

    165,343,429

    Current liabilities

    70,351,438

    70,099,022

    Non-current liabilities

    33,795,671

    32,681,398

    Net sales

    201,402,052

    189,515,048

    Net 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 3332Common Shareholders’ Equity

     

    Subscribed and paid-up Capital

     

    The Extraordinary Shareholders´Meeting held on June 18, 2013, resolved to increase the capital of the Company in the amount of ThCh$ 340,000,000, through the issuance of 51,000,000 shares of common stock. Such shares are to be issued and paid within a period of 3 years as from June 18, 2013. Also, the Board of Directors, in accordance with the powers granted by the Extraordinary Shareholders´ Meeting, determined the price at which these shares were to be offered. Additionally, the above Extraordinary Shareholders´ Meeting agreed to recognize as part of the Paid-in Capital (Common Stock) the share premium for an amount of ThCh$ 15,479,173. Therefore, the Company´s capital, including the referred capital increase, amounts to ThCh$ 571,019,592, divided into 369,502,872 shares of common stock, without face value, which has been subscribed and paid and  shall be subscribe and paid as follows:

    -ThCh$ 231,019,592, divided into 318,502,872 shares, fully subscribed and paid prior to the date of the Extraordinary Shareholders´ Meeting.

    -ThCh$ 340,000,000, divided into 51,000,000 shares, to be subscribed and paid.

    On July 23, 2013 the Superintendencia de Valores y Seguros authorized the registration of such shares.

    Subsequently, the Board of Director at the meeting held on September 12, 2013, set in $ 6,500 per share the price of the 51,000,000 shares to be placed during the preemptive-rights period, which extended from September 13 to October 12, 2013.

    As of December 31, 2013, the referred capital increase has been fully subscribed and paid, amounting to
    ThCh$ 331,673,754 and generated share premium and issuance and placement costs for ThCh$ 45,176 and ThCh$ 5,055,392, respectively, which are net recorded under item "Other reserves", in Equity. Any difference between the issuance and placement costs of shares must be recognized as a less paid-in capital in the next Extraordinary Shareholders´ Meeting that modifies the capital of the company.

    As of December 31, 20142016 and December 31, 2013,2015, 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 DepositaryDeposcitary Shares), with an equivalence of two shares per ADS ((SeeSee Note 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, 20142016 and 2013.

    2015.

    F-92


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

     

    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.

     


    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, 2012, 20132016, 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 Balance

    Gross Balance

    Tax

    Net Balance

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash flow hedge (1)

    (155,258)

    39,470

    (115,788)

    84,962

    (20,648)

    64,314

    Conversion differences of subsidiaries abroad

    (4,629,683)

    -

    (4,629,683)

    Actuarial gains and losses on defined benefit plans reserves (1)

    (1,884,054)

    501,689

    (1,382,365)

    Total comprehensive income as of December 31, 2014

    (6,668,995)

    541,159

    (6,127,836)

    Conversion 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 Balance

    Gross Balance

    Tax

    Net Balance

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash flow hedge (1)

    256,592

    (51,304)

    205,288

    80,693

    (17,563)

    63,130

    Conversion differences of subsidiaries abroad

    (17,054,187)

    -

    (17,054,187)

    Actuarial gains and losses on defined benefit plans reserves (1)

    (469,987)

    105,151

    (364,836)

    Total comprehensive income as of December 31, 2013

    (17,267,582)

    53,847

    (17,213,735)

    Conversion 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 Balance

    Gross Balance

    Tax

    Net Balance

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Cash flow hedge (1)

    (826,120)

    189,525

    (636,595)

    (155,258)

    39,470

    (115,788)

    Conversion differences of subsidiaries abroad

    (21,230,019)

    -

    (21,230,019)

    Total comprehensive income as of December 31, 2012

    (22,056,139)

    189,525

    (21,866,614)

    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
    reserves

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Increase (Decrease)

    (27,280,176)

    (399,558)

    (2,355,384)

    (30,035,118)

    Deferred taxes

    -

    89,982

    659,198

    749,180

    Reclassification to the result by function

    -

    484,521

    -

    484,521

    Reclassification 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)


    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 reserves

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Increase (Decrease)

    (29,678,944)

    593,993

    (939,433)

    (30,024,384)

    Deferred taxes

    -

    (145,800)

    314,541

    168,741

    Reclassification to the result by function

    -

    (513,298)

    -

    (513,298)

    Reclassification of deferred taxes related to other reserves

    -

    128,235

    -

    128,235

    Total 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.

     

    F-93


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    As of December 31, 2016, 2015 y 2014, 2013 and 2012, 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,

    For the years ended as of December 31,

    2014

    2013

    2012

    2016

    2015

    2014

    Equity holders of the controlling company (ThCh$)

    106,238,450

    123,036,008

    114,432,733

    118,457,488

    120,808,135

    106,238,450

    Weighted average number of shares

    (1) 369,502,872

    (2) 331,806,416

    (3) 318,502,872

    369,502,872

    369,502,872

    369,502,872

    Basic and diluted income per share (in Chilean pesos)

    287.52

    370.81

    359.28

    Basic income per share (in Chilean pesos)

    320.59

    326.95

    287.52

    Equity holders of the controlling company (ThCh$)

    106,238,450

    123,036,008

    114,432,733

    118,457,488

    120,808,135

    106,238,450

    Weighted average number of shares

    369,502,872

     331,806,416

    318,502,872

    369,502,872

    369,502,872

    369,502,872

    Basic and diluted income per share (in Chilean pesos)

    287.52

    370.81

    359.28

    Diluted income per share (in Chilean pesos)

    320.59

    326.95

    287.52

     

    (1)Determined considering 369,502,872 shares outstanding on December 31, 2014.

    (2)Determined considering 331,806,416 shares, equivalents to 318,502,872 shares outstanding on December 31, 2012, plus the weighted average of permanence of shares paid due to increase of capital described in this Note.

    (3)Determined considering 318,502,872 shares outstanding on December 31, 2012.

     

    As of December 31, 2016, 2015 y 2014, 2013 and 2012, 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, 2014.2016.

     


    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, 2012, 20132016, 2015 and 2014, the Company has distributed the following dividends, either or final:dividends:

     

    Dividend Nº

    Payment Date

    Type of Dividend

    Dividends per Share

    Related to FY

    243

    04-20-2012

    Final

    131.70092

    2011

    244

    01-06-2013

    Interim

    63.00000

    2012

    245

    04-19-2013

    Final

    116.64610

    2012

    246

    01-10-2014

    Interim

    63.00000

    2013

    247

    04-17-2014

    Final

    103.488857

    2013

    248

    01-09-2015

    Interim

    63.00000

    2014

     

     

     

     

     

    Dividend Nº

    Payment Date

    Type of Dividend

    Dividends per Share

    Related to FY

    247

    17-04-2014

    Final

    103.48857

    2013

    248

    09-01-2015

    Interim

    63.0000

    2014

    249

    23-04-2015

    Final

    98.78138

    2014

    250

    08-01-2016

    Interim

    66.0000

    2015

    251

    22-04-2016

    Final

    97.47388

    2015

    252

    05-01-2017

    Interim

    66.0000

    2016

     

     

     

     

     

    On April 11, 2012, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 243, amounting to ThCh$ 41,947,122 corresponding to $ 131.70092 per share. This dividend was paid on April 20, 2012.

    On April 10, 2013, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 245, amounting to ThCh$ 37,150,685 corresponding to $ 116.64610 per share. This dividend was paid on April 19, 2013.

     

    On April 9, 2014, at the General Shareholders Meeting it was agreed to pay the final Dividend No. 247, amounting to ThCh$ 38,239,32438,239,323 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.

     

    F-94On 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.

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

     

    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, 2014,2016, it amounts to a negative reserve of ThCh$ 67,782,858120,558,932 (ThCh$ 60,084,19795,435,386 in 20132015 and ThCh$ 44,675,96267,782,858 in 2012)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, 2014,2016, it amounts to a negative reserve of ThCh$ 39,081 (ThCh$ 2,526 in 2015 and ThCh$ 43,370 (positive reserve of ThCh$ 65,109 in 2013 and negative reserve of ThCh$ 98,990 in 2012)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 (ThCh$ 348,673 in 2013)2014), net of deferred taxes.

     

    Other reserves: As of December 31, 2016, 2015 y 2014 2013 and 2012 the amount is a negative reserve of ThCh$ 5,511,629,18,527,810, ThCh$ 5,514,0485,486,086 and ThCh$ 3,371,276,5,511,629, respectively. Such reserves relate mainly to the following concepts:

     

    -              Adjustment due to re-assessment of fixed assets carried out in 1979.1979 (increased ofr ThCh$ 4,087,396).

    -              Price level restatement of paid-up capital registered as of December 31, 2008, according to SVS Circular Letter Nª456.456 (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 paragraph (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-95



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

     

    Note 3433Effects of changes in currency exchange rate

    Current assets are denominated in the following currencies:

    CURRENT ASSETS

    As of December

    31, 2014

    As of December

     31, 2013

    ThCh$

    ThCh$

    Current assets

     

     

    Cash and cash equivalents

    214,774,876

    408,853,267

    CLP

    182,979,978

    402,905,402

    U.F.

    8,410,538

    -

    USD

    6,058,754

    1,578,633

    Euros

    974,179

    1,718,676

    $ARG

    11,728,422

    1,731,888

    UYU

    536,097

    553,915

    PYG

    3,753,420

    -

    Others currencies

    333,488

    364,753

    Other financial assets

    6,483,652

    4,468,846

    CLP

    1,016,032

    2,119,441

    USD

    5,467,620

    2,202,537

    Euros

    -

    143,749

    Others currencies

    -

    3,119

    Other non-financial assets

    18,558,445

    21,495,398

    CLP

    11,576,191

    17,623,617

    U.F.

    28,826

    -

    $ARG

    4,759,154

    3,669,157

    UYU

    1,457,234

    202,624

    PYG

    737,040

    -

    Accounts receivable - trade and other receivables

    238,602,893

    211,504,047

    CLP

    151,677,364

    137,392,333

    U.F.

    2,021

    45,225

    USD

    19,030,421

    23,341,142

    Euros

    10,038,934

    7,263,490

    $ARG

    46,140,278

    37,420,770

    UYU

    4,519,676

    3,856,106

    PYG

    5,477,622

    -

    Others currencies

    1,716,577

    2,184,981

    Accounts receivable from related companies

    11,619,118

    9,610,305

    CLP

    11,474,472

    8,781,223

    U.F.

    101,218

    326,816

    USD

    43,428

    502,266

    Inventories

    175,179,189

    153,085,845

    CLP

    143,970,378

    128,884,391

    USD

    744,544

    2,147,161

    Euros

    189,100

    190,182

    $ARG

    22,684,784

    20,562,043

    UYU

    1,508,208

    1,302,068

    PYG

    6,082,175

    -

    Tax receivables

    19,413,414

    9,139,406

    CLP

    14,443,142

    4,948,667

    $ARG

    4,970,272

    3,821,003

    UYU

    -

    369,736

    Non-current assets held for sale

    758,760

    339,901

    $ARG

    758,760

    339,901

    Total current assets

    685,390,347

    818,497,015

       

     

     

     

    CLP

    517,137,557

    702,655,074

    U.F.

    8,542,603

    372,041

    USD

    31,344,767

    29,771,739

    Euros

    11,202,213

    9,316,097

    $ARG

    91,041,670

    67,544,762

    UYU

    8,021,215

    6,284,449

    PYG

    16,050,257

    -

    Others currencies

    2,050,065

    2,552,853

    Total current assets by currencies

    685,390,347

    818,497,015

     

    F-96

    CURRENT ASSETS

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    Current assets

     

     

    Cash and cash equivalents

    133,789,950

    192,554,239

    CLP

    117,668,934

    171,683,257

    USD

    8,237,893

    5,385,644

    Euros

    786,887

    955,840

    $ARG

    2,187,381

    5,701,754

    UYU

    1,136,782

    948,816

    PYG

    3,269,045

    7,519,619

    Other currencies

    503,028

    359,309

    Other financial assets

    8,406,491

    13,644,105

    CLP

    548,700

    1,052,312

    USD

    7,604,996

    12,495,117

    Euros

    160,875

    57,833

    PYG

    80,846

    7,261

    Other currencies

    11,074

    31,582

    Other non-financial assets

    15,859,137

    17,654,373

    CLP

    11,994,895

    12,083,128

    UF

    139,776

    29,882

    USD

    683,933

    972,718

    Euros

    85,753

    723,216

    $ARG

    2,641,862

    3,780,430

    UYU

    86,842

    7,789

    PYG

    226,076

    57,210

    Accounts receivable - trade and other receivables

    280,766,784

    252,225,937

    CLP

    179,861,356

    158,757,937

    UF

    676,843

    7,102

    USD

    24,449,473

    25,498,590

    Euros

    7,025,446

    7,463,166

    $ARG

    56,347,636

    48,535,814

    UYU

    5,304,719

    4,074,908

    PYG

    5,844,650

    6,111,636

    Other currencies

    1,256,661

    1,776,784

    Accounts receivable from related companies

    3,523,825

    4,788,930

    CLP

    3,373,508

    4,604,853

    UF

    107,162

    104,118

    USD

    43,155

    79,959

    Inventories

    199,290,678

    174,227,415

    CLP

    168,749,946

    147,189,195

    USD

    287,776

    2,474,304

    Euros

    25,634

    237,848

    $ARG

    25,104,485

    18,850,888

    UYU

    1,590,709

    1,645,888

    PYG

    3,532,128

    3,829,292

    Biological assets

    7,948,379

    7,633,340

    CLP

    7,370,852

    7,130,962

    $ARG

    577,527

    502,378

    Tax receivables

    29,423,479

    15,264,220

    CLP

    26,525,628

    11,080,218

    $ARG

    2,897,851

    4,184,002

    Non-current assets held for sale

    2,377,887

    6,319,316

    CLP

    2,046,179

    5,890,543

    $ARG

    331,708

    428,773

    Total current assets

    681,386,610

    684,311,875

     

     

     

     

     

     

    CLP

    518,139,998

    519,472,405

    UF

    923,781

    141,102

    USD

    41,307,226

    46,906,332

    Euros

    8,084,595

    9,437,903

    $ARG

    90,088,450

    81,984,039

    UYU

    8,119,052

    6,677,401

    PYG

    12,952,745

    17,525,018

    Other currencies

    1,770,763

    2,167,675

    Total current assets by currencies

    681,386,610

    684,311,875

     



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Non-Current assets are denominated in the following currencies:

     

    NON-CURRENT ASSETS

    As of December

    31, 2014

    As of December

    31, 2013

    As of December 31, 2016

    As of December 31, 2015

    ThCh$

    ThCh$

    Non-current assets

     

     

     

     

    Other financial assets

    343,184

    38,899

    203,784

    80,217

    USD

    -

    38,899

    Euros

    343,184

    -

    203,784

    80,217

    Accounts receivable non-current

    3,563,797

    -

    CLP

    35,391

    -

    UF

    2,936,552

    -

    $ARG

    426,311

    -

    PYG

    165,543

    -

    Other non-financial assets

    5,828,897

    15,281,111

    5,369,211

    5,220,954

    CLP

    3,303,040

    12,938,869

    3,177,139

    3,034,450

    USD

    669,470

    80,137

    $ARG

    1,762,652

    2,342,242

    1,519,236

    1,839,876

    PYG

    763,205

    -

    3,366

    266,491

    Accounts receivable from related companies

    522,953

    350,173

    356,665

    445,938

    U.F.

    522,953

    350,173

    UF

    356,665

    445,938

    Investments accounted for using the equity method

    31,998,620

    17,563,028

    64,404,946

    49,995,263

    CLP

    31,897,043

    17,474,121

    64,005,129

    49,884,870

    $ARG

    101,577

    88,907

    399,817

    110,393

    Intangible assets different than goodwill

    68,656,895

    64,033,931

    77,678,850

    71,868,007

    CLP

    51,881,835

    50,821,202

    64,981,854

    57,749,615

    U.F.

    41,558

    -

    $ARG

    9,169,249

    10,184,251

    5,508,504

    7,039,283

    UYU

    3,332,682

    3,028,478

    3,247,094

    3,296,510

    PYG

    4,231,571

    -

    3,941,398

    3,782,599

    Goodwill

    86,779,903

    81,872,847

    96,663,023

    99,490,372

    CLP

    63,075,515

    63,075,515

    76,382,543

    76,382,543

    USD

    12,146,454

    5,689,609

    13,402,038

    14,216,606

    $ARG

    11,557,934

    13,107,723

    6,878,442

    8,891,223

    Property, plant and equipment (net)

    833,171,234

    680,994,421

    903,831,702

    872,667,210

    CLP

    715,577,935

    588,473,246

    787,734,139

    763,339,926

    USD

    26,072

    -

    Euros

    971,382

    -

    $ARG

    90,580,368

    84,750,744

    82,920,719

    76,412,324

    UYU

    10,390,332

    7,770,431

    15,436,334

    13,747,872

    PYG

    16,622,599

    -

    16,743,056

    19,167,088

    Biological assets

    18,084,408

    17,662,008

    CLP

    17,660,798

    17,228,999

    $ARG

    423,610

    433,009

    Investment property

    7,917,613

    6,901,461

    6,253,827

    6,838,002

    CLP

    5,783,933

    4,447,209

    5,015,603

    4,401,400

    $ARG

    2,133,680

    2,454,252

    1,238,224

    2,436,602

    Deferred tax assets

    30,207,019

    24,525,361

    31,864,635

    34,529,593

    CLP

    23,496,860

    18,195,456

    29,547,881

    29,392,503

    $ARG

    6,622,426

    6,214,869

    2,108,426

    5,032,803

    UYU

    10,206

    115,036

    156,714

    10,801

    PYG

    77,527

    -

    51,614

    93,486

    Total non-current assets

    1,083,510,726

    909,223,240

    1,190,190,440

    1,141,135,556

     

     

     

     

     

     

    CLP

    912,676,959

    772,654,617

    1,030,879,679

    984,185,307

    U.F.

    564,511

    350,173

    UF

    3,293,217

    445,938

    USD

    12,146,454

    5,728,508

    14,097,580

    14,296,743

    Euros

    343,184

    -

    1,175,166

    80,217

    $ARG

    122,351,496

    119,575,997

    100,999,679

    101,762,504

    UYU

    13,733,220

    10,913,945

    18,840,142

    17,055,183

    PYG

    21,694,902

    -

    20,904,977

    23,309,664

    Total non-current assets by currencies

    1,083,510,726

    909,223,240

    1,190,190,440

    1,141,135,556

     

    F-97



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Current liabilities are denominated in the following currencies:

     

    CURRENT LIABILITIES

    As of December31, 2014

    As of December 31, 2013

    As of December 31, 2016

    As of December 31, 2015

    Until 90 days

    More the 91 days

    until 1 year

    Until 90 days

    More the 91 days

    until 1 year

    Until 90 days

    More the 91 days until 1 year

    Until 90 days

    More the 91 days until 1 year

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Current liabilities

     

     

     

     

    Other financial liabilities

    30,097,822

    35,220,471

    80,554,226

    39,933,962

    19,600,116

    47,079,817

    7,223,935

    36,750,056

    CLP

    1,947,212

    14,909,387

    582,082

    12,893,284

    946,301

    39,944,625

    1,239,182

    17,035,281

    U.F.

    777,020

    2,933,255

    71,901,110

    3,245,208

    UF

    892,328

    2,843,982

    764,199

    2,888,550

    USD

    1,392,180

    5,303,949

    1,004,747

    4,572,358

    11,280,437

    388,874

    303,416

    10,957,905

    Euros

    120,894

    4,611,662

    349,614

    4,512,649

    523,079

    -

    52,368

    -

    $ARG

    24,104,151

    7,462,218

    5,208,701

    14,710,463

    5,542,674

    3,263,782

    4,862,819

    5,523,470

    UYU

    1,740,967

    -

    1,447,337

    -

    Others currencies

    15,398

    -

    60,635

    -

    UYI

    406,353

    638,554

    -

    344,850

    Other currencies

    8,944

    -

    1,951

    -

    Account payable - trade and other payables

    199,697,401

    4,085,404

    182,569,595

    938,520

    258,298,853

    1,378,999

    226,844,826

    891,977

    CLP

    133,274,464

    3,109,019

    123,801,751

    938,520

    166,920,713

    303,060

    148,162,838

    303,060

    U.F.

    3,995

    -

    -

    -

    UF

    30,798

    -

    9,933

    -

    USD

    14,012,905

    -

    13,672,305

    -

    18,281,460

    937,822

    17,676,381

    566,572

    Euros

    7,166,674

    -

    5,010,989

    -

    8,160,258

    -

    6,402,517

    -

    $ARG

    40,867,375

    -

    36,372,742

    -

    59,603,954

    -

    47,686,146

    -

    UYU

    4,371,988

    -

    3,281,466

    -

    3,309,074

    -

    2,607,826

    -

    PYG

    -

    976,385

    -

    -

    1,638,181

    138,117

    3,874,709

    22,345

    Others currencies

    -

    -

    430,342

    -

    Other currencies

    354,415

    -

    424,476

    -

    Accounts payable to related companies

    10,282,312

    -

    7,286,064

    -

    9,530,071

    -

    11,624,218

    -

    CLP

    5,783,103

    -

    3,495,273

    -

    5,329,217

    -

    4,267,123

    -

    USD

    2,196

    -

    151,578

    -

    Euros

    4,486,158

    -

    3,790,791

    -

    4,197,020

    -

    7,205,517

    -

    PYG

    13,051

    -

    -

    -

    1,638

    -

    -

    -

    Other short-term provisions

    380,912

    29,347

    324,290

    509,068

    Other short-term provisons

    339,072

    70,092

    382,152

    121,288

    CLP

    -

    29,347

    -

    509,068

    -

    70,092

    -

    121,288

    $ARG

    380,912

    -

    324,290

    -

    339,072

    -

    382,152

    -

    Tax liabilities

    3,986,966

    7,710,169

    1,591,825

    9,325,040

    7,544,398

    4,262,036

    3,664,162

    8,533,862

    CLP

    3,803,137

    3,872,219

    1,539,101

    5,866,328

    5,316,283

    4,262,036

    3,487,812

    5,802,277

    USD

    22,183

    -

    -

    26,747

    $ARG

    -

    3,837,950

    -

    3,458,712

    1,966,866

    -

    -

    2,704,838

    UYU

    183,829

    -

    52,724

    -

    239,066

    -

    176,350

    -

    Employee benefits provisions

    4,212,481

    13,731,290

    4,776,011

    15,441,722

    22,255,693

    582,535

    21,388,736

    323,323

    CLP

    -

    13,731,290

    -

    15,441,722

    16,579,716

    582,535

    16,558,870

    323,323

    $ARG

    3,909,627

    -

    4,541,954

    -

    5,367,378

    -

    4,437,159

    -

    UYU

    302,854

    -

    234,057

    -

    308,599

    -

    392,707

    -

    Other non-financial liabilities

    24,104,387

    44,792,376

    25,853,399

    40,025,179

    24,421,940

    46,948,032

    28,440,259

    42,501,885

    CLP

    23,278,681

    44,789,042

    25,790,092

    40,025,179

    24,388,426

    46,948,032

    28,350,457

    42,501,885

    $ARG

    825,706

    -

    63,307

    -

    33,514

    -

    89,802

    -

    PYG

    -

    3,334

    -

    -

    Total current liabilities

    272,762,281

    105,569,057

    302,955,410

    106,173,491

    341,990,143

    100,321,511

    299,568,288

    89,122,391

      

     

     

     

     

     

     

    CLP

    168,086,597

    80,440,304

    155,208,299

    75,674,101

    219,480,656

    92,110,380

    202,066,282

    66,087,114

    U.F.

    781,015

    2,933,255

    71,901,110

    3,245,208

    UF

    923,126

    2,843,982

    774,132

    2,888,550

    USD

    15,405,085

    5,303,949

    14,677,052

    4,572,358

    29,586,276

    1,326,696

    18,131,375

    11,551,224

    Euros

    11,773,726

    4,611,662

    9,151,394

    4,512,649

    12,880,357

    -

    13,660,402

    -

    $ARG

    70,087,771

    11,300,168

    46,510,994

    18,169,175

    72,853,458

    3,263,782

    57,458,078

    8,228,308

    UYU

    6,599,638

    -

    5,015,584

    -

    3,856,739

    -

    3,176,883

    -

    PYG

    13,051

    979,719

    -

    -

    1,639,819

    138,117

    3,874,709

    22,345

    Others currencies

    15,398

    -

    490,977

    -

    UYI

    406,353

    638,554

    -

    344,850

    Other currencies

    363,359

    -

    426,427

    -

    Total current liabilities by currency

    272,762,281

    105,569,057

    302,955,410

    106,173,491

    341,990,143

    100,321,511

    299,568,288

    89,122,391

     

    F-98



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Non-Current liabilities are denominated in the following currencies:

     

    NON-CURRENT LIABILITIES

    As of December 31, 2014

    As of December 31, 2013

    More 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

    years

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Non-current liabilities

     

     

     

     

     

     

    Other financial liabilities

    39,224,496

    19,975,758

    75,334,303

    32,305,695

    25,893,393

    84,563,942

    CLP

    16,366,789

    101,334

    -

    621,578

    15,995,088

    -

    U.F.

    5,474,316

    16,650,145

    75,334,303

    7,096,557

    6,727,915

    81,519,913

    USD

    9,307,576

    -

    -

    11,980,811

    -

    -

    $ARG

    8,075,815

    3,224,279

    -

    12,606,749

    3,170,390

    3,044,029

    Other accounts payable

    369,506

    -

    -

    841,870

    -

    -

    CLP

    6,496

    -

    -

    6,148

    -

    -

    USD

    363,010

    -

    -

    835,722

    -

    -

    Accounts payable to related companies

    -

    -

    -

    377,020

    -

    -

    USD

    -

    -

    -

    377,020

    -

    -

    Other long term provisions

    1,484,317

    474,352

    251,163

    1,233,623

    797,604

    103,895

    CLP

    -

    -

    30,617

    -

    -

    32,710

    $ARG

    336,813

    474,352

    220,546

    51,256

    797,604

    71,185

    UYU

    1,147,504

    -

    -

    1,182,367

    -

    -

    Deferred tax liabilities

    20,685,348

    7,525,467

    59,307,885

    17,458,151

    6,671,487

    48,903,776

    CLP

    19,850,278

    6,979,606

    51,690,008

    16,769,961

    6,212,693

    41,108,341

    $ARG

    767,635

    511,757

    5,713,866

    688,190

    458,794

    6,186,202

    UYU

    -

    -

    1,466,456

    -

    -

    1,609,233

    PYG

    67,435

    34,104

    437,555

    -

    -

    -

    Employee benefits provisions

    798,428

    -

    16,638,794

    -

    3,740

    15,192,880

    CLP

    -

    -

    14,202,830

    -

    -

    13,746,509

    $ARG

    -

    -

    2,435,964

    -

    3,740

    1,446,371

    PYG

    798,428

    -

    -

    -

    -

    -

    Total non-current liabilities

    62,562,095

    27,975,577

    151,532,145

    52,216,359

    33,366,224

    148,764,493

           

     

     

     

     

     

     

     

    CLP

    36,223,563

    7,080,940

    65,923,455

    17,397,687

    22,207,781

    54,887,560

    U.F.

    5,474,316

    16,650,145

    75,334,303

    7,096,557

    6,727,915

    81,519,913

    USD

    9,670,586

    -

    -

    13,193,553

    -

    -

    $ARG

    9,180,263

    4,210,388

    8,370,376

    13,346,195

    4,430,528

    10,747,787

    UYU

    1,147,504

    -

    1,466,456

    1,182,367

    -

    1,609,233

    PYG

    865,863

    34,104

    437,555

    -

    -

    -

    Total non-current liabilities by currency

    62,562,095

    27,975,577

    151,532,145

    52,216,359

    33,366,224

    148,764,493

    F-99

    NON-CURRENT LIABILITIES

    As of December 31, 2016

    As of December 31, 2015

    More 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 years

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    ThCh$

    Non-current liabilities

     

     

     

     

     

     

    Other financial liabilities

    36,676,882

    15,610,067

    65,657,084

    40,890,654

    20,356,339

    75,679,552

    CLP

    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

    75,679,552

    USD

    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

    353,639

    CLP

    -

    49,996

    -

    -

    49,996

    15,000

    $ARG

    258,278

    351,058

    415,207

    396,987

    360,077

    338,639

    UYU

    248,981

    -

    -

    314,991

    -

    -

    PYG

    -

    -

    -

    828

    -

    -

    Deferred tax liabilities

    26,487,686

    7,963,522

    52,338,743

    21,787,421

    8,622,777

    59,827,645

    CLP

    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

    4,288,716

    UYU

    -

    -

    1,015,197

    -

    -

    1,154,787

    PYG

    16,769

    4,279

    449,900

    11,028

    2,647

    472,398

    Employee benefits provisons

    335,925

    -

    21,496,490

    643,905

    -

    18,304,698

    CLP

    -

    -

    18,481,842

    -

    -

    15,369,150

    $ARG

    -

    -

    3,014,648

    -

    -

    2,935,548

    PYG

    335,925

    -

    -

    643,905

    -

    -

    Total non-current liabilities

    65,090,650

    23,974,643

    139,907,524

    65,133,771

    29,935,302

    154,165,534

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    CLP

    32,311,880

    8,443,929

    67,306,569

    40,268,035

    10,457,420

    69,295,894

    UF

    17,818,062

    14,983,656

    65,657,084

    5,530,174

    17,335,859

    75,679,552

    USD

    5,537,521

    -

    -

    5,874,088

    142,032

    -

    $ARG

    8,124,907

    542,779

    5,478,774

    10,788,922

    1,997,344

    7,562,903

    UYU

    248,981

    -

    1,015,197

    314,991

    -

    1,154,787

    PYG

    352,694

    4,279

    449,900

    655,761

    2,647

    472,398

    UYI

    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



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Note 3534Contingencies 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, 20142016

    ThCh$

    Within 1 year

    109,909,523175,604,322

    Between 1 and 5 years

    109,153,531272,442,932

    Over 5 years

    62,310,41634,053,398

    Total

    281,373,470482,100,652

     

    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, 20142016 is as follows:

     

    Purchase and supply agreementsistros

    Purchase and supply

    agreements

    Purchase and

    contract related to

    wine and grape

    ThCh$

    Purchase and supply agreements

    Purchase and supply agreements

    Purchase and contract related to wine and grape

    ThCh$

    Within 1 year

    68,311,218

    9,301,580

    128,703,020

    8,713,649

    Between 1 and 5 years

    77,155,761

    10,061,496

    292,815,491

    9,521,391

    Over 5 years

    62,080,459

    943,569

    44,412,317

    157,459

    Total

    207,547,438

    20,306,645

    465,930,828

    18,392,499

     

    Capital investment commitments

     

    As of December 31, 2014,2016, the Company had capital investment commitments related to Property, plantPlant and equipmentEquipment and intangiblesIntangibles (software) for approximately ThCh$ 142,546,112.54,115,404.

     

    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 losslosses contingencies for which an estimate cannot be made have been also considered.

     

    F-100



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Proceedings and claim

     

    Subsidiary

    Court

    Number

    Description

    Status

    Estimated

    accrued loss

    contingency

    Viña San Pedro Tarapacá S.A.Ex Zavala, Viña Misiones de Rengo

    1° Juzgado de Letras del Trabajo de14th Civil Court of Santiago

    655-200928869-2007

    InterpretationBreach of collective bargaining agreementcontract

    Pending practiceAppeal of award liquidation by courtfirst instance verdict

    ThCh$ 15,00050,000

    Compañía Industrial Cervecera S.A. (CICSA)

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 30,50031,000

    Compañía Industrial Cervecera S.A. (CICSA)

    Supreme Court of Tucuman

    -

    Intempestive breach of distribution contract

    Supreme Court review

    US$ 35,000

    Compañía Industrial Cervecera S.A. (CICSA)

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 29,00032,000

    Compañía Industrial Cervecera S.A. (CICSA)

    Appeals court

    -

    Intempestive breach of distribution contract

    On execution phase

    US$ 37,000

    Compañía Industrial Cervecera S.A. (CICSA)

    Court of first instance in Argentina

    -

    Labor trial for layoff

    Judgment pendingOn execution phase

    US$ 34,00036,000

    Compañía Industrial Cervecera S.A. (CICSA)

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 77,00050,000

    Compañía 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$ 506,000

    Saenz Briones y Cía. S.A.

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 32,000

    Saenz Briones S.A.

    Court of first instance in Argentina

    Labor trial for layoff

    On evidentiary phase

    US$ 123,000

    Saenz Briones S.A.

    Court of first instance in Argentina

    Labor trial for layoff

    On evidentiary phase

    US$ 86,000

    Saenz Briones S.A.

    Court of first instance in Argentina

    Labor trial for layoff

    On evidentiary phase

    US$ 34,000

    Saenz Briones S.A.

    Labor trial for layoff

    On evidentiary phase

    US$ 80,000

    Compañía Industrial Cervecera S.A.

    City Council's Administrative Claim related to advertising and publicity feeds

    The process is in pre-final administrative phase

    US$ 628,00067,000

     

     

     

     

     

     

     

     

    F-101



    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    Subsidiary

    Court

    Number

    Description

    Status

    Estimated accrued loss contingency

    Saenz Briones y Cía. S.A.

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 168,000

    Saenz Briones y Cía. S.A.

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 63,000

    Saenz Briones y Cía. S.A.

    Court of first instance in Argentina

    -

    Labor trial for layoff

    On evidentiary phase

    US$ 167,000

    Saenz 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$ 1,023,8951,248,243 and ThCh$ 1,294,570,1,343,374, as of December 31, 20142016 and 2013,2015, respectively ((SeeSee Note 2928).

     

    Tax processes

     

    At the date of issue of these consolidated financial statements, there are no material tax processes.notax litigation that involve significant passive or taxes in claim different to mentioned inNote 25.

     

    Guarantees

     

    As of December 31, 2014,2016, 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 del Estado de Chile, according to the following detail:

     

    Institution

    Amount

    Due date

    Banco PatagoniaSantander Río

    USD 1.600.0001,100,000

    March 22, 2015August 20, 2017

    Banco Patagonia

    USD 1.600.0001,600,000

    March 31, 20152017

    Banco Patagonia

    USD 1,600,000

    July 7, 2017

    Banco San Juan

    USD 1.200.0001,200,000

    March 31, 2015

    Banco Santander Río

    USD 1.100.000

    March 31, 2015April 28, 2017

    Banco BBVA Francés

    USD 1.500.0001,500,000

    October 30, 2015February 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.

     


    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 date

    Banco 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 CITIBANKCitibank 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 3635Environment

     

    Major EnvironmentalDistribution of CCU´s main environmental costs accrued as of December 31, 2014, in the Industrial Units of CCU S.A. are distributed as follows:

    , accumulated to September 2016:

    -      Industrial Waste Water Treatment (IWWT):60.4% 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):27.2%   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.

     

    F-102


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 

    -      Gas Emission Expenses:1.2%    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: 11.2%12,6 %

    These expenses are related to the verification and compliance of Food Safety, Environmental Management and Operational Health & Safety Management Standards (ISO 22000,22.000, ISO 1400014.001 and ISO 1800118.001 OHSAS respectively) in CCU´s industrial sites and distribution centers, which are in different stages of implementation and certification.Theimplementation and certification of those three standards is a corporate goal of CCU S.A.S.A.

    The most relevant investments during the year 2014, are listed below:

    -CCK, construction of an industrial wastewater treatment plant in Valdivia which includes an anaerobic reactor with IC technology (UF 120,695).Other relevant projects are the construction ofconcrete foundations(UF 1,909) and FES type projects (UF 598).

    -VSPT, FES project (second payment 2/3 2014) (UF 9,608), reinforcement of storage tanks-FES (UF 8,386),Industrial Waste Water Treatment (IWWT) plant improvement  (UF 4,804), IWWT plant Isla Maipo (UF 2,882), sludge treatment system (UF 948), solar and led lighting projects plants Molina and Lontué (UF 868), projects related to the management of industrial solid waste (UF 653),  thermal insulation projects (UF 648), axle weighing scale (UF 411), renovation emergency equipment (UF 355), IWWT plant betterment project (UF 259), energy analyzers (240 UF), fire safety net (UF 191), electric meters stage 2 (UF 159), pump IWW vintage courtyard (UF 144), pH correction and flowmeter IWWT plant (UF 132), IWW collecting chamber expansion (UF 115), IWWT panel (UF 110),  bathrooms and lockers (UF 73) and finally hazardous substances storage (UF 70).

    -CCU Chile,Industrial Waste Water Treatment (IWWT) plant in Temuco stage 1 (UF 159,699),IWWT improvement project (UF 10,128), normalizing decree N° 78 Fas (UF 6,497),evaporative coolers (UF 4,802), fire detection system (UF 3,845), energy recovery system (UF 3,094), CO2 and NH3 sensors Elaboration area (UF 2,675), IWWT plant stage 2 (UF 2,253), water channel seclude (UF 1,433), emergency lighting stage 2 (UF 1,360), pavement improvement (UF 1,313), IWWT sludge filter press (UF 1,079), storagetank insulation (UF 960) and finally firefighting system improvements (UF 153).

    -CPCh, FES projects consisting of mechanical reinforcement of process tanks (UF 13,875), concrete reinforcement  (UF 2,225), process equipment Monte Patria as well as Sotaquí and Pisco Elqui (UF 1,032), IWWT discharge improvement Ovalle (UF 975), overhaul IWWT sludge equipment (UF 780), electrical network improvement in Salamanca (UF 682), replacement lamps for saving lights (UF 468), IWWT discharge improvement (UF 387), water recovery system Ovalle (UF 334), IWWT plant in Salamanca (UF 293), IWWT plant in Sotaquí (UF 293), electrical and sanitary improvements (UF 286), plant board betterment (UF 267), water discharge improvements (UF 235) y finally electric adjustment in Pisco Elqui (UF 98).

    -ECCUSA, IWWT study ECCUSA Santiago (UF 4,886), pavement Antofagasta (UF 3,655), firefighting system improvements (UF 3,222), CIP improvements (UF 2,352), emergency lighting system (UF 2,342), IWWT control system (UF 504), electrical network improvement (UF 477), NH3 leakage mitigation system (UF 245), water recovery (UF 193), well capacity (UF 150), IWWT plant Santiago stage 1 (UF 91) and enabling fire brigade (UF 65).

    -CCU Argentina, IWWT plant Salta (UF 7,466), IWWT plant improvements ALLEN (UF 1,195), firefighting system improvements Santa Fe (UF 1,145) and hazardous material storage improvementSanta Fe (UF 250).

    -Plasco,Hazardous material storage improvement project(UF 2,396), process control equipment per line (UF 1,168) and process lighting improvements (UF 739).

    -Aguas CCU-Nestlé, IWWT plant project in Coinco (48,362 UF), hazardous material storage improvement


    (UF 4,900), CO2, water and energy control equipment (UF 3,136),firefighting system improvements (UF 1,372),IWWT plant improvements (UF 441), sanitary installation improvements (UF 266), tank drain sewerage (UF 147) and emergency showers (UF 117).

    F-103


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2014 2016

     

    -TCCU, water improvement project San Antonio (UF 773) and municipal regularization (UF 132).

    The main disbursements of theexpensesof each year, detailed by projects,project, are the following:

     

    Company that

    made the

    disbursement

    Project

    Disbursement incurred during the year

    As of December 31, 2014

    As of December 31, 2013

    Expenditure

    Investment

    Committed

    amount in

     future periods

    Estimated date

    completion of

    disbursements

    Expenses

    Investment

    ThCh$

    ThCh$

    ThCh$

     

    ThCh$

    ThCh$

    CCU Chile Ltda.

    Disposal of industrial solids, liquids and other residues

    1,924,508

    4,224,403

    683,525

    December 2015

    1,519,954

    326,647

    Cía Industrial Cervecera S.A.

    Disposal of industrial solids, liquids and other residues

    1,847,522

    85,013

    162,662

    June 2015

    1,479,161

    83,285

    Cía Pisquera de Chile S.A.

    Disposal of industrial solids, liquids and other residues

    295,382

    137,593

    424,631

    December 2015

    222,216

    745,859

    Transportes CCU Ltda.

    Disposal of industrial solids, liquids and other residues

    297,734

    12,954

    9,334

    December 2014

    270,280

    -

    VSPT S.A.

    Disposal of industrial solids, liquids and other residues

    491,104

    508,254

    256,491

    June 2015

    399,292

    71,607

    Others

    Disposal of industrial solids, liquids and other residues

    1,076,013

    1,307,335

    3,727,102

    December 2015

    789,749

    579,616

     

     

     

     

     

     

     

     

    Company that made the disbursement

    Project

    Expenses

    For the years ended as of December 31,

    2016

    2015

    ThCh$

    ThCh$

    CCU Chile Ltda.

    IWWT

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

    1,319,489

    1,160,516

     

    SIR

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

    666,781

    607,091

     

    Gases

    Management of atmospheric emissions

    21,655

    26,031

     

    Others

    Management of internal and external regulatory compliance.

    233,364

    173,115

    CCU Argentina S.A.

    IWWT

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

    820,999

    1,089,788

     

    SIR

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

    560,710

    602,247

     

    Gases

    Management of atmospheric emissions

    21,847

    2,857

     

    Others

    Management of internal and external regulatory compliance.

    141,379

    167,668

    Cía. Cervecera Kunstmann S.A.

    IWWT

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

    86,515

    87,069

     

    SIR

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

    40,150

    10,633

     

    Others

    Management of internal and external regulatory compliance.

    45,876

    45,781

    Cía. Pisquera de Chile S.A.

    IWWT

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

    237,994

    224,045

     

    SIR

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

    43,059

    78,746

     

    Others

    Management of internal and external regulatory compliance.

    12,582

    15,628

    Transportes CCU Limitada

    IWWT

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

    9,792

    18,687

     

    SIR

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

    288,856

    196,114

     

    Gases

    Management of atmospheric emissions

    13,356

    17,297

     

    Others

    Management of internal and external regulatory compliance.

    141,138

    130,044

    VSPT S.A.

    IWWT

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

    454,828

    381,893

     

    SIR

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

    165,697

    172,089

     

    Others

    Management of internal and external regulatory compliance.

    10,916

    5,227

    Embotelladora Chilenas Unidas S.A.

    IWWT

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

    593,414

    665,990

     

    SIR

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

    421,771

    53,539

     

    Gases

    Management of atmospheric emissions

    156,295

    96,019

     

    Others

    Management of internal and external regulatory compliance.

    14,305

    10,233

    Aguas CCU-Nestlé Chile S.A.

    IWWT

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

    35,550

    29,057

     

    SIR

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

    3,910

    3,661

     

    Others

    Management of internal and external regulatory compliance.

    69,330

    50,904

    Fábrica de Envases Plásticos S.A.

    SIR

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

    21,410

    19,326

     

    Gases

    Management of atmospheric emissions

    129,487

    137,359

     

     

     

     

     

     

     


    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, 2015

    Disbursements made

    Amount committed future periods

    Estimated Completion Date Disbursements

    Disbursements made

    ThCh$

    ThCh$

    ThCh$

    CCU Chile Ltda.

    IWWT

    IWWT Temuco Stage II; IWWT expansion (Screw) Temuco

    Processing

    2,854,428

    156,383

    Dec - 17

    181,077

     

    SIR

    Changing and increasing containers for glass and rubbish

    Finished

    37,602

    -

    Finished

    194,875

     

    Gases

    Change Fuel FO6 to GNL Temuco, Upgrade Odor Control, Thermal Plant Improvements Quilicura, Videoconferencing rooms.

    Processing

    265,248

    103,093

    Dec - 17

    35,728

     

    Others

    DS 10 and RE 43 compliance; Emergency Brigade and Anti Fire Protection System

    Processing

    108,188

    352,424

    Dec - 17

    124,162

    CCU Argentina S.A.

    IWWT

    IWWT Stage 2 and 3, Salta

    Processing

    217,401

    134,386

    Dec - 17

    60,003

     

    Gases

    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

    56,131

    Cía. Cervecera

    IWWT

    New IWWT PTR – IC Technology

    Processing

    2,050,705

    548,710

    Dec - 17

    2,958,767

    Kunstmann 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

    9,712

     

    SIR

    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

    50,356

     

    SIR

    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

    85,825

    Embotelladora 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

    33,684

     

    Others

    Safety Acid Injection; Standardization Kitchen ECCUSA; Autonomous Breathing Equipment to Stgo. and Antofagasta

    Processing

    112,904

    27,843

    Dec - 17

    5,992

    Aguas CCU-Nestlé Chile S.A.

    IWWT

    IWWT Coinco

    Processing

    559,569

    410,347

    Dec - 17

    27,756

     

    Gases

    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

    12,600

    Fábrica de Envases Plásticos S.A.

    Gases

    Control of electrical variables, change of lighting.

    Processing

    187,373

    22,404

    Dec - 17

    47,711

     

    Others

    Risk Mitigation, Reduction weight of PET Bottles, Bathroom Expansion, Various SIG -OCA, Ammonia Sensors

    Processing

    158,522

    47,436

    Dec - 17

    61,401

     

     

     

     

     

     

     

     


    Compañía Cervecerías Unidas S.A. and subsidiaries

    Notes to the Consolidated Financial Statements

    December 31, 2016

    Note 3736Subsequent Events

     

     

    A.a)The Consolidated Financial Statements of CCU S.A. have been approved by the Board Directors on February 3, 2015.27, 2017.

     

    B.b)There are no others subsequent events between the closing date and the filing date of these Financial Statements (February 13, 2015)27, 2017) that could significantly affect their interpretation.

     

    F-123

    F-104