20-F

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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2005

OR

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

Commission file number 33-80138

Embotelladora Andina S.A.

(Exact name of Registrant as specified in its charter)

Andina Bottling Company

(Translation of the Registrant’s name in English)

Republic of Chile

(Jurisdiction of incorporation or organization)
Avenida El Golf 40, Office 401
Las Condes — Santiago, Chile
(Address of principal executive offices)

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

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

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

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

7.000% Notes due October 1, 2007
7.625% Notes due October 1, 2027
7.875% Notes due October 1, 2097

The number of outstanding shares of the issuer’s stock as of December 31, 2005 was 760,274,542 as follows:

380,137,271      Series A Shares

380,137,271      Series B Shares

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

Yes þ            Noo

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

Yes o            Noþ

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.

þ Yes      Noo

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

Large accelerated filer þ      Accelerated filer o      Non-accelerated filero

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

o Item 17            þ 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 o            No þ

TABLE OF CONTENTS

		Page
PART I			1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		1
ITEM 3.	KEY INFORMATION		1
ITEM 4.	INFORMATION ON THE COMPANY		14
ITEM 4A.	UNRESOLVED STAFF COMMENTS		38
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		39
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		57
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		67
ITEM 8.	FINANCIAL INFORMATION		74
ITEM 9.	THE OFFER AND LISTING		76
ITEM 10.	ADDITIONAL INFORMATION		80
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		97
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		99
PART II			100
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		100
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		100
ITEM 15.	CONTROLS AND PROCEDURES		100
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		100
ITEM 16B.	CODE OF ETHICS		101
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		101
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		102
ITEM 16E.	PURCHASERS OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		102
PART III			103
ITEM 17.	FINANCIAL STATEMENTS		103
ITEM 18.	FINANCIAL STATEMENTS		103
ITEM 19.	EXHIBITS		103
EX-8.1: LIST OF OUR SUBSIDIARIES
EX-12.1: CERTIFICATION
EX-12.2: CERTIFICATION
EX-13.1: CERTIFICATION
EX-13.2: CERTIFICATION

INTRODUCTION

References

Unless the context otherwise requires, as used in this annual report:

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

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

• “Refrescos” means the Company’s subsidiary, Río de Janeiro Refrescos Ltda. and its subsidiaries;

• “Edasa” means the Company’s subsidiary, Embotelladora del Atlántico S.A.;

• “Envases CMF” means the Company’s affiliate, Envases CMF S.A.;

• “Vital” means the Company’s subsidiary, Vital S.A.;

• “Vasa” means the Company’s subsidiary, Vital Aguas S.A.; and

• “Multipack” means the Company’s subsidiary, Envases Multipack S.A.

     Likewise, unless the context otherwise requires, “The Coca-Cola Company” means The Coca-Cola Company or any of its subsidiaries, including without limitation Coca-Cola de Chile S.A. (“C-C Chile”), which operates in Chile, Coca-Cola Industrias Ltda. (“C-C Brazil”), which operates in the Federative Republic of Brazil (“Brazil”) and Servicios y Productos para Bebidas Refrescantes S.R.L. (“C-C Argentina”), which operates in the Republic of Argentina (“Argentina”).

In addition, as used in this annual report:

• the “Chilean territory” means the Metropolitan Region of Santiago, Chile and the neighboring provinces of Cachapoal and San Antonio;

• the “Brazilian territory” means the municipality of Río de Janeiro, the state of Espírito Santo, and portions of the neighboring areas of Itaguaí, Mangaratiba, Duque de Caixas and São João de Meriti, Niteroi, Itambi, Campos, Friburgo and Região dos Lagos and Nova Iguaçú; and

• the “Argentine territory” means the provinces of Córdoba, Mendoza, San Juan, San Luis, Entre Ríos, Buenos Aires (San Nicolás and Ramallo, but excluding the federal capital) and most of Santa Fe.

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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION

     Unless otherwise specified, references herein to “dollars,” “U.S. dollars” or “US$” are to United States dollars; references to “pesos,” “Chilean pesos” or “Ch$” are to Chilean pesos; references to “UF” are to Unidades de Fomento, a daily indexed Chilean peso-denominated monetary unit that takes into account the effect of the Chilean inflation rate during the previous month; references to “Argentine pesos” or “AR$” are to Argentine pesos; and references to “real” or “reals” or “R$” are to Brazilian reals. Certain percentages and amounts contained in this annual report have been rounded for ease of presentation.

     For the convenience of the reader, this annual report contains translations of certain Chilean peso amounts into U.S. dollars at specified rates. Unless otherwise indicated, U.S. dollar equivalent information for amounts in Chilean pesos is based on the Observed Exchange Rate (as defined under “Item 3. Key Information—Exchange Rates”) reported by the Banco Central de Chile, which we refer to as the “Central Bank,” for December 31, 2005, which was Ch$512.5=US$1.00. The Observed Exchange Rate for June 28, 2006 was Ch$549.16=US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate in New York City for Chilean pesos. No representation is made that the peso or U.S. dollar amounts shown in this annual report could have been or could be converted into U.S. dollars or pesos, as the case may be, at any particular rate or at all.

Forward-looking information

     This annual report contains or incorporates by reference statements that constitute “forward-looking statements,” in that they include statements regarding the intent, belief or current expectations of our directors and officers with respect to our future operating performance. Such statements include any forecasts, projections and descriptions of anticipated cost savings or other synergies. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” variations of such words, and similar expressions are intended to identify such forward-looking statements. You should be aware that any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties, and that actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, without limitations, the actions of competitors, future global economic conditions, market conditions, foreign exchange rates, and operating and financial risks related to managing growth and integrating acquired businesses), many of which are beyond our control. The occurrence of any such factors not currently expected by us would significantly alter the results set forth in these statements. You should not place undue reliance on such statements, which speak only as of the date that they were made. Our independent auditors have not examined or compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we might issue in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements after filing of this annual report to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

Market Data

     We have computed the information contained in this annual report regarding annual volume and per capita growth rates and levels, and market share, product segment, packaging and population data in bottling and distribution territories, and it is based upon statistics accumulated and certain assumptions we have made. Additional data was obtained from third parties. Sales information presented with respect to soft drinks and beer is based on data supplied by A.C. Nielsen Company (“A.C. Nielsen”) and is believed to be accurate although no assurances to that effect can be given. To the extent estimates are contained in this annual report, we believe that to the best of our knowledge such estimates are reliable. Market data used throughout this annual report were derived from reports prepared by unaffiliated third-party sources. Such reports generally state that the information contained therein has been obtained from sources believed by such sources to be reliable. Certain market data herein (including percentage amounts) may not sum due to rounding.

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

Selected Financial Data

     The following table presents our selected consolidated and other financial and operating information at the dates and for the periods indicated. The selected financial information at December 31, 2004 and 2005 and for each of the three years ended December 31, 2005 has been derived from, should be read in conjunction with, and is qualified in its entirety by reference to our consolidated financial statements and the notes thereto, included elsewhere in this annual report, that we refer to in this annual report as the “Consolidated Financial Statements.” Our Consolidated Financial Statements are prepared in accordance with Chilean GAAP, which differs in certain significant respects from accounting principles generally accepted in the United States which we refer to as “U.S. GAAP.” Note 28 of the notes to the Consolidated Financial Statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP of net income and total shareholders’ equity for the periods and as of the dates covered thereby.

     Our consolidated financial results include the results of our subsidiaries located outside Chile, principally in Brazil and Argentina. Our subsidiaries outside Chile prepare their financial statements in accordance with Chilean GAAP and, for purposes of local taxation, in accordance with accounting principles generally accepted in their country of operation.

     Our Consolidated Financial Statements reflect the Chilean GAAP results of our subsidiaries outside Chile translated into Chilean pesos. Chilean GAAP requires monetary assets and liabilities to be translated at year-end rates of exchange, non-monetary assets and liabilities to be translated at historical rates of exchange as of the date of acquisition or incurrence, as the case may be, and income and expense accounts to be translated at the average monthly exchange rate for the month in which income or expense is recognized. Unless otherwise specified, our financial data is presented herein in constant Chilean pesos (which factors in the purchasing power of the Chilean peso) as of December 31, 2005. See Notes 1(c) and 28(a) and (b) to our Consolidated Financial Statements.

     The following table presents our selected consolidated financial information. This information should be read in conjunction with, and is qualified in its entirety by reference to, our Consolidated Financial Statements, including the notes thereto in Item 18. The selected financial information contained herein is presented on a consolidated basis, and is not necessarily indicative of our financial position or results of operations at or for any future date or period.

1

	Year ended December 31,
	2005			2005			2004			2003			2002			2001
	(in millions of constant Ch$ as of December 31, 2005 and millions of US$, except ratios, per share and per ADS data, and sales volume)
Income Statement Data:
Chilean GAAP:
Net sales	US$	934		Ch$	478,472		Ch$	428,649		Ch$	410,803		Ch$	427,122		Ch$	532,382
Cost of sales		(561	)		(287,395	)		(262,784	)		(262,515	)		(281,719	)		(334,744	)
Administrative and selling expenses		(221	)		(113,169	)		(100,715	)		(97,636	)		(101,411	)		(135,967	)
Operating income		152			77,908			65,150			50,652			44,532			61,671
Non-operating (expense) income, net		(14	)		(7,103	)		(12,270	)		(25,819	)		8,582			(5,317	)
Income taxes and minority interest		(17	)		(8,537	)		(4,090	)		(1,075	)		(9,125	)		(7,990	)
Amortization of goodwill		(12	)		(6,229	)		(7,186	)		(7,028	)		(8,574	)		(11,835	)
Net income	US$	109		Ch$	56,039		Ch$	41,604		Ch$	16,730		Ch$	35,415		Ch$	36,529
Basic and diluted earning per share
Series A	US$	0.14			70.20			52.12			20.96			44.37			45.76
Series B		0.15			77.22			57.33			23.05			48.80			50.33
Basic and diluted earning per ADS(3).
Series A	US$	0.82			421.20			312.71			125.74			266.19			274.56
Series B		0.90			463.31			343.97			138.31			292.80			302.00
U.S.GAAP:
Net income	US$	147		Ch$	75,184		Ch$	53,425		Ch$	18,391		Ch$	45,009		Ch$	11,289
Total number of shares:
Series A		380,137,271			380,137,271			380,137,271			380,137,271			380,137,271			380,137,271
Series B		380,137,271			380,137,271			380,137,271			380,137,271			380,137,271			380,137,271
Dividends declared per share:
Series A	US$	66		Ch$	33,908		Ch$	22,504		Ch$	24,405		Ch$	27,446		Ch$	27,446
Series B		73			37,299			24,755			26,845			30,191			30,191
Basic and diluted earning per share
Series A	US$	0.18			94.18			66.93			23.04			56.38			14.14
Series B		0.20			103.60			73.62			25.34			62.02			15.56
Basic and diluted earning per ADS(3).
Series A	US$	1.10			565.10			401.56			138.23			338.29			84.85
Series B		1.21			621.59			441.70			152.05			372.11			93.33
Balance Sheet Data:
Chilean GAAP:
Total assets	US$	1,026		Ch$	526,050		Ch$	600,602		Ch$	621,664		Ch$	719,262		Ch$	761,924
Short-term debt (1)		82			42,104			34,705			21,524			18,271			24,771
Long-term debt		200			102,257			163,011			182,105			210,502			223,503
Total shareholders’ equity		524			268,437			301,319			321,686			395,893			411,048
U.S.GAAP:
Total shareholders’ equity		565			289,577			311,755			319,993			383,095			393,961
Other Financial Information:
Chilean GAAP:
Cash flows from operating activities	US$	189		Ch$	96,823		Ch$	72,819		Ch$	76,763		Ch$	105,435		Ch$	98,923
Cash flows from investing activities		21			10,908			(38,945	)		(18,913	)		(41,040	)		(36,895	)
Cash flows from financing activities		(223	)		(114,122	)		(45,376	)		(63,008	)		(68,377	)		(98,662	)
Depreciation		57			29,037			32,581			35,004			43,188			44,968
Capital expenditures		53			27,395			26,150			26,912			25,569			24,984
Ratio of total debt to total capitalization (2)		0.35			0.35			0.40			0.39			0.37			0.38
Other Operating Data:
Sales volume of Coca-Cola Soft Drinks (UCs in millions)(5)					360.6			336.3			315.5			301.8			311.1
Sales volume of Other Beverages (UCs in millions) (4)(5)					29.3			27.8			27.0			26.0			27.9

2

(1)	Includes short-term bank liabilities and the portion of long-term bank liabilities and bonds payable within 12 months.
(2)	Total debt is calculated as the sum of short-term and long-term financial debt. Total capitalization is calculated as the sum of total financial debt, minority interest and total shareholders’ equity. Shareholders’ equity under U.S. GAAP differs from Chilean GAAP in certain important respects. For a summary of the principal differences between U.S. GAAP and Chilean GAAP as they relate to us, see “Item 5 — Operating and Financial Review and Prospects - - U.S. GAAP Reconciliation” and Note 28 to our Consolidated Financial Statements.
(3)	Each ADS represents six shares of common stock.
(4)	Includes juices and mineral water (in Chile and Argentina) and beer, juices and mineral water (in Brazil).
(5)	Unit cases (“UCs”) refer to 192 ounces of finished beverage product (24 eight-ounce servings).

Exchange Rates

     The following table sets forth the annual low, high, average and period-end Observed Exchange Rate for U.S. dollars for each year beginning in 2001 and for each month during the six months immediately preceding the month of this annual report, as reported by the Central Bank.

	Daily Observed Exchange Rate Ch$ per US$(1)
Year	Low(2)		High(2)		Average(3)		Period End
2001		557.13		716.62		634.76		654.79
2002		641.75		756.56		689.50		718.61
2003		593.10		758.21		691.04		593.80
2004		557.40		649.45		609.41		557.40
2005		509.70		592.75		559.68		512.50
Month
December 2005		509.70		518.38		514.04		512.50
January 2006		513.18		535.36		525.02		524.37
February 2006		516.91		532.35		525.35		517.33
March 2006		516.75		536.16		529.16		526.18
April 2006		511.44		525.40		516.74		514.97
May 2006		512.76		532.92		521.56		531.87

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

The Observed Exchange Rate on June 28, 2006 was Ch$549.16 US$1.00.

Risk Factors

     We and our subsidiaries outside Chile are subject to various economic, political, social and competitive conditions. Any of the following risks, if they materialize, could materially and adversely affect our business, results of operations, prospects and financial condition.

3

Risks Related to our Company

We rely heavily on our relationship with The Coca-Cola Company which has substantial influence over our business and operations

     Approximately 87% of our net sales in 2005 were derived from the distribution of Coca-Cola soft drinks and 9% of our net sales were derived from the distribution of non-soft drink beverages bearing trademarks owned by The Coca-Cola Company. We produce, market and distribute Coca-Cola products through standard bottler agreements between our bottler subsidiaries, and, in each case, the local subsidiary of The Coca-Cola Company or, in the case of fruit juices and nectars, The Minute Maid Company, a subsidiary of The Coca-Cola Company. The Coca-Cola Company has the ability to exercise substantial influence over our business through its rights under the Bottler Agreements. See “Item 7. Major Shareholders and Related Party Transactions—Bottler Agreements.” Under the Bottler Agreements, The Coca-Cola Company unilaterally sets the prices for Coca-Cola soft drink concentrates and Coca-Cola beverages (in the case of soft drinks pre-mixed by The Coca-Cola Company) sold to us. The Coca-Cola Company also monitors pricing changes we institute and has the right to review and approve our marketing, operational and advertising plans. These factors may impact our profit margins which could adversely affect our net income and results of operations. Our marketing campaigns for all Coca-Cola products are designed and controlled by The Coca-Cola Company. Pursuant to the Bottler Agreements, we are required to submit a business plan to The Coca-Cola Company for prior approval on a yearly basis. In accordance with the Bottler Agreements, The Coca-Cola Company may, among other things, require that we demonstrate financial ability to meet our business plan and may terminate our rights to produce, market and distribute Coca-Cola soft drinks or other Coca-Cola beverages in territories where such approval is withheld. Under the Bottler Agreements, we are prohibited from producing, bottling, distributing or selling any products that could be substituted for, be confused with or be considered an imitation of Coca-Cola soft drinks or other Coca-Cola beverages.

     We depend on The Coca-Cola Company to renew the Bottler Agreements which are subject to termination by The Coca-Cola Company in the event we default or upon expiration of their respective terms. We cannot assure you that the Bottler Agreements will be renewed or extended upon their expiration, and even if they are renewed, there is no assurance that renewal will be granted on the same terms as those currently in force. Termination, non-extension or non-renewal of any of the Bottler Agreements would have a material adverse effect on our business, financial condition and results of operation.

     In addition, any acquisition we make of bottlers of Coca-Cola products in other countries may require, among other things, the consent of The Coca-Cola Company under bottler agreements to which such other bottlers are subject. We cannot assure you that The Coca-Cola Company will consent to any future geographic expansion of our Coca-Cola beverage business. In addition, we cannot assure you that our relationship with The Coca-Cola Company will not undergo significant changes in the future. If such changes do occur, our operations, and financial results and condition could be materially affected.

We are engaged in a highly competitive business that is subject to price competition and that may impact our net profits and margins

     The soft drink and non-alcoholic beverage businesses are highly competitive in each franchise territory where we compete with, among others, bottlers of PepsiCo, Inc., which we refer to as PepsiCo, as well as bottlers of regional brands. Our beverage products also compete generally with, among others, bottlers of other non-alcoholic beverages. Although our management believes that we are well positioned to meet our objective of increasing sales volume at acceptable levels in the Chilean territory, competition is expected to continue, and we cannot assure you that such competition will not intensify in the future which could materially and adversely affect our results of operations. See “Item 4. Information on the Company — Part B. Business Overview— Soft Drink Business—Competition.”

4

     The intense price competition that is characteristic of the Río de Janeiro beverage market has adversely affected our results of operations in the Brazilian territory in previous periods and is expected to continue to adversely affect our results of operations in the future. While we engage in extensive marketing to establish brand differentiation and loyalty, we cannot assure you that such marketing efforts will be sufficient to maintain or increase our Refrescos subsidiary’s current sales volume or market share or that such efforts will not be countered aggressively by the efforts of our competitors, resulting in a drop in either or both of our sales or market share in Brazil. “Item 4. Information on the Company — Part B. Business Overview— Soft Drink Business—Competition.”

     Similarly, the Argentine soft drink market is highly competitive, and brand loyalty and consumer preferences, particularly in our Argentine territory, are less well defined. While our Argentine subsidiary engages in extensive marketing to establish brand differentiation and loyalty, we cannot assure you that our competitors will not increase the amount or effectiveness of their marketing, which would result in a drop in either or both of our sales or market share in Argentina. We cannot assure you that price competition will not become more aggressive, which could adversely affect our margins and earnings levels. See “Item 4. Information on the Company— Part B. Business Overview—Soft Drink Business—Competition.”

Raw material prices may be subject to U.S. dollar/local currency exchange risk which could increase our costs of operations

     Numerous raw materials, including sugar, resin, and aluminum, are used in producing beverages and containers. We purchase raw materials from both domestic and international suppliers. See “Item 4. Information on the Company—Part B. Business Overview—Soft Drink Business—Raw Materials and Supplies.” Because we are often required to purchase raw materials in the international markets using U.S. dollars, we are subject to local currency risk in each of our operations. If the Chilean peso, Brazilian real or Argentine peso were to depreciate significantly against the U.S. dollar, the cost of certain raw materials could rise significantly, which could have an adverse effect on our results of operation. We cannot assure you that these currencies will not lose value against the U.S. dollar in the future.

Instability in the supply of utility services may adversely impact our results of operations

     Our operations are highly dependent on a stable supply of utilities and fuel in the countries where we operate. Given recent economic instability, particularly in Argentina, we cannot assure you that continued institutional instability will not impair our ability to procure required utility services or fuel in the future which could adversely impact our results or operations. The recent increases in oil prices has affected the cost of energy and transportation in the three countries we operate. Some of these cost increase were recognized in 2005. We believe that higher energy prices will not significantly impact our 2006 results.

Perception of risk in emerging economies may impede our access to international capital markets, hinder our ability to finance our operations and adversely affect the market price of our common shares and American Depositary Shares or ADSs

     As a general rule, international investors consider Chile, Brazil and Argentina to be emerging market economies. Consequently, economic conditions and the market for securities of emerging market countries influence investors’ perceptions of Chile, Brazil and Argentina and their evaluation of companies’ securities located in these countries.

     During periods of heightened investor concern regarding emerging market economies, Brazil and Argentina, in particular, have experienced significant outflows of U.S. dollars. In addition, Brazilian and Argentine companies have faced higher costs for raising funds, both domestically and abroad, as well as limited access to international capital markets, which have negatively affected the prices of Brazilian and Argentine securities. Although economic conditions are different in each country, investors’ reactions to

5

developments in one country may affect the securities of issuers in other countries, including Chile. For example, adverse developments in other developing or emerging market countries may lead to decreased investor interest in investing in Chile or in the securities of Chilean companies.

It may be difficult to enforce civil liabilities against us or our directors, executive officers or controlling persons

     We are a sociedad anónima, or stock corporation, organized under the laws of Chile. Some of our directors, executive officers and controlling persons reside in Chile or outside of the United States. In addition, all or a substantial portion of the assets of these persons and of our assets are located outside of the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons, or to enforce against them in U.S. courts judgments predicated upon civil liability provisions of the federal securities laws of the United States or otherwise obtained in U.S. courts. Because our assets are located outside of the United States, any judgment obtained in the United States against us may not be fully collectible in the United States.

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

     We are in the process of assessing the effectiveness of our internal control over financial reporting in connection with the rules adopted by the U.S. Securities and Exchange Commission under Section 404 of the Sarbanes-Oxley Act of 2002. Unless extended, compliance with Section 404 of the Sarbanes-Oxley Act of 2002 will be required in connection with the filing of our Annual Report on Form 20-F for the fiscal year ending December 31, 2006. We began a comprehensive review of our internal controls in 2005 and have identified areas of focus for strengthening our internal controls. A number of processes and systems are currently being changed in order to bring our internal controls into compliance with best practices in the industry. We expect to complete this process by the end of 2006, but we cannot provide assurance that we will be able to do so.

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

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

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

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Risks Relating to Chile

Our growth and profitability depend on economic conditions in Chile

     Approximately 51% of our assets and 46% of our net sales in 2005 were in Chile. Thus, our financial condition and results of operations depend significantly on economic conditions prevailing from time to time in Chile. According to data published by the Central Bank, the Chilean economy contracted at a rate of 0.8% in 1999; and resumed its growth at a rate of 4.3% in 2000, 3.3% in 2001, 2.1% in 2002, 3.8% in 2003, 5.8% in 2004 and 6.0% in 2005.Our financial condition and results of operations could also be adversely affected by changes over which we have no control, including, without limitation:

• the economic or other policies of the Chilean government, which has a substantial influence over many aspects of the private sector;

• other political or economic developments in or affecting Chile;

• regulatory changes or administrative practices of Chilean authorities;

• inflation and governmental policies to combat inflation;

• currency exchange movements; and

• global and regional economic conditions.

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

     Although Chilean inflation has moderated in recent years, Chile has experienced high levels of inflation in the past. High levels of inflation in Chile could adversely affect the Chilean economy and have a material adverse effect on our financial condition and results of operations. The annual rates of inflation (as measured by changes in the consumer price index and as reported by the Chilean National Institute of Statistics) in 2003, 2004, and 2005 were 1.1%, 2.4% and 3.5%, respectively. We cannot assure you that Chilean inflation will not increase significantly. We cannot assure you that, under competitive pressure, we will be able to realize said price increases, which could adversely impact our financial condition and results of operations.

The Chilean peso is subject to depreciation and volatility which could adversely affect the value of an investment in our securities

     The Chilean government’s economic policies and any future changes in the value of the peso against the U.S. dollar could adversely affect our operations and financial results and the dollar value of an investor’s return on an investment in our securities. The peso has been subject to large nominal devaluations in the past and may be subject to significant fluctuations in the future. In the period from December 31, 1997 to December 31, 2005, the value of the peso relative to the U.S. dollar decreased approximately 16.7% in nominal terms (without adjusting for inflation) and increased 10.1% in real terms (adjusting for inflation), based on the Observed Exchange Rates for U.S. dollars on December 31, 1997 and December 31, 2005. See “—Exchange Rates.”

     Our Class A shares and Class B shares are traded in pesos on the Chilean Stock Exchanges. Cash distributions with respect to the shares will be received in pesos by the depositary, currently The Bank of New York (as depositary for the Series A and Series B shares represented by the Series A and Series B ADSs) or depositary, which will convert such pesos to U.S. dollars at the then prevailing exchange rate to make U.S. dollar payments in respect of the ADSs. If the value of the peso falls relative to the U.S. dollar,

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the value of the ADSs and any distributions to be received from the depositary would be adversely affected. In addition, the depositary will incur foreign currency conversion costs (to be ultimately borne by the holders of the ADSs) in connection with the foreign currency conversion and subsequent distribution of dividends or other payments with respect to American Depositary Receipts or ADRs. See “—Exchange Rates.”

Exchange controls and withholding taxes in Chile may limit repatriation of your investment

     Equity investments in Chile by persons who are not Chilean residents are generally subject to various exchange control regulations that govern the repatriation of the investments and earnings. The ADSs are governed by an Agreement among us, the depositary and the Central Bank (the “Foreign Investment Agreement”). The Foreign Investment Agreement grants the depositary and the holders of the ADRs access to Chile’s Formal Exchange Market, permits the depositary to remit dividends it receives from us to the holders of ADSs and permits the holders of ADSs to repatriate the proceeds of the sale of shares withdrawn from the ADR facility, thereby enabling them to acquire on more favorable terms currencies necessary to repatriate investments in the shares and earnings therefrom. See “—Exchange Rates.” Pursuant to current Chilean law, the Foreign Investment Agreement may not be amended unilaterally by the Central Bank, and there are judicial precedents (which are not binding with respect to future judicial decisions) indicating that the Foreign Investment Agreement may not be voided by future legislative changes.

     Dividends received by holders of ADSs are paid net of foreign currency exchange fees and expenses of the depositary and are subject to Chilean withholding tax, currently imposed at a rate of 35%, subject to credits in certain cases as described under “Item 10. Additional Considerations —Tax Considerations Relating to Equity Securities”.

     In order to facilitate capital movements from and into Chile and to encourage foreign investment, the Central Bank eliminated foreign exchange restrictions and adopted the Compendio de Normas de Cambios Internacionales (“Compendium of Foreign Exchange Regulations”) effective April 19, 2001, We cannot assure you that additional Chilean restrictions applicable to the holders of ADRs, the disposition of underlying shares or the repatriation of the proceeds from such disposition or the payment of dividends will not be imposed in the future, nor can we advise as to the duration or impact of such restrictions if imposed. If for any reason, including changes in the Foreign Investment Agreement or Chilean law, the depositary was able to convert Chilean pesos to U.S. dollars, investors would receive dividends or other distributions, if any, in Chilean pesos.

Risks Relating to Brazil

The Brazilian government has exercised and continues to exercise significant influence over the Brazilian economy. This influence, as well as potentially volatile Brazilian political and economic conditions, could adversely affect our business and the market price of our shares and ADSs

     Approximately 32% of our assets and 34% of our consolidated net sales in 2005 were in Brazil. Because demand for soft drinks and beverage products is usually correlated to economic conditions prevailing in the relevant local market, which in turn is dependent on the macroeconomic condition of the country in which the market is located, our financial condition and results of operations to a considerable extent are dependent upon political and economic conditions prevailing from time to time in Brazil.

     Historically, the Brazilian government has changed monetary, credit, tariff, and other policies to influence the course of Brazil’s economy. Such government actions have included wage and price controls as well as other measures such as freezing bank accounts, imposing exchange controls and inhibiting imports and exports. Changes in policy and other political and economic developments could adversely affect the Brazilian economy and have a material adverse effect on our business, financial condition and results of operations. The Brazilian government has exercised and continues to exercise

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substantial influence over many aspects of the private sector. For example, the Brazilian government in the past has imposed domestic price controls on certain products, including price controls on soft drinks and beer. Actions of the Brazilian government in the future could have a significant effect on economic conditions in Brazil, which could adversely affect private sector companies such as Refrescos, and thus, could adversely affect us.

     Brazil’s President, Luiz Inácio Lula da Silva, was elected in October 2002 and took office on January 1, 2003. In the period leading up to and following President Lula’s election, there was substantial uncertainty regarding the policies the new government would pursue, including the potential implementation of macroeconomic policies that differed significantly from those of the prior administration. After three years of government under President Lula, the macroeconomic uncertainty remains, although the level of confidence in the Brazilian market significantly improved resulting in a 4.7% and 11.8% appreciation in the value of the real, during 2004 and 2005 respectively, compared to the U.S. dollar. While President Lula’s government has adopted economic measures that are more conservative than expected by some observers, there is no certainty that these economic stabilization policies will continue. We cannot predict the effect that the policies of the Lula administration may have on Brazilian economic conditions or on our financial condition or results of operations.

Inflation in Brazil may adversely affect the operations of Refrescos which could adversely impact our net income and results of operations

     Brazil has experienced high and generally unpredictable rates of inflation for many years. Inflation itself, as well as the governmental efforts to combat inflation, has had significant negative effects on the Brazilian economy in general. During the last two years Brazil has faced lower inflation rates, in line with the country’s improvement of macroeconomic policies.

     As measured by the Brazilian Índice Nacional de Preços au Consumidor or INPC, inflation in Brazil was 10.4%, 6.1% and 5.1% in 2003, 2004 and 2005, respectively. Inflation, government efforts to control inflation, and public speculation about future governmental actions have had, and can be expected to continue to have, significant impact on the Brazilian economy and on our operations in Brazil. High levels of inflation in the past have resulted in reduced consumer purchasing power and lower sales volumes for our subsidiary Refrescos. We cannot assure you that levels of inflation in Brazil will not increase in future years and have a material adverse effect on our business, financial condition or results of operations. Inflationary pressures may lead to further government intervention in the economy, including the introduction of government policies that could adversely affect the results of operations of Refrescos and consequently the market price of our common shares.

The Brazilian real is subject to depreciation and volatility which could adversely affect our financial condition and results of operations

     Brazil’s rate of inflation and the government’s actions to combat inflation have also affected the relationship of the value of Brazil’s currency to the value of the U.S. dollar. Historically, Brazil’s currency was frequently devalued in relation to the U.S. dollar: 34.3% and 22.3% in 2002 and 2003, respectively. During 2004 and 2005, the real appreciated 4.7% and 11.8%, respectively against the U.S. dollar compared to the prior year period, i.e. 2003 and 2004 respectively. There can be no assurance that the real will not again be devalued relative to the U.S. dollar, or that the real will not fluctuate significantly relative to the U.S. dollar. In the event of a devaluation of the real, the financial condition and results of operations of our Brazilian subsidiaries could be adversely affected.

     Depreciation of the real relative to the U.S. dollar may increase the cost of servicing foreign currency-denominated debt that we have or may incur in the future, which could adversely affect our results of operations and financial condition. Depreciation of the real also creates additional inflationary pressures in Brazil that may negatively affect us. Depreciation generally curtails access to international

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capital markets and may prompt recessionary government intervention. It also reduces the U.S. dollar value of our revenues, distributions and dividends, and the U.S. dollar equivalent of the market price of our common shares. On the other hand, the appreciation of the real against the U.S. dollar may lead to the deterioration of Brazil’s public accounts and balance of payments, as well as to lower economic growth from exports.

The Brazilian government imposes certain restrictions on currency conversions and remittances abroad which could affect the timing and amount of any dividend or other payment we receive

     Brazilian law guarantees foreign shareholders of Brazilian companies the right to repatriate their invested capital and to receive all dividends in foreign currency provided that their investment is registered with the Banco Central do Brazil, which we refer to as the Brazilian Central Bank. We registered our investment in Refrescos with the Brazilian Central Bank on October 19, 1995. Although dividend payments related to profits obtained subsequent to January 1, 1996 are not subject to income tax, after the sum of repatriated capital and invested capital exceeds the investment amount registered with the Brazilian Central Bank, repatriated capital is subject to a capital gains tax of 15%. Under current Chilean tax law, we will realize a tax credit in respect of all Brazilian taxes paid relating to Refrescos. There can be no assurance that the Brazilian government will not impose additional restrictions or modify existing regulations that would have an adverse effect on an investor’s ability to repatriate funds from Brazil nor can there be any assurance of the timing or duration of such restrictions, if imposed in the future.

Risks Relating to Argentina

Our business is dependent on economic conditions in Argentina

     Approximately 17% of our assets and 20% of our net sales in 2005 were from Argentina. Because demand for soft drinks and beverage products usually is correlated to economic conditions prevailing in the local market, which in turn is dependent on the macroeconomic condition of the country in which the market is located, the financial condition and results of operations of our franchise in Argentina are, to a considerable extent, dependent upon political and economic conditions prevailing from time to time in Argentina. In 2005, the Argentine economy continued recovering following the acute economic crisis that prevailed from 1998 through 2003. The Argentine crisis had a material adverse effect on our operations in Argentina. Notwithstanding the positive economic results recorded from 2003 until 2005, we cannot assure you that economic conditions will continue to improve or that our operations in Argentina will continue to experience improved results.

Recent political and economic instability may recur which could have a material adverse effect on our Argentine operations

     In the period from 1998 through 2003, Argentina experienced acute economic problems that culminated with the restructuring of substantially all of Argentina’s sovereign bond indebtedness. During this period, Argentina’s GDP contracted significantly dropping to 10.9% during 2002 compared to 2001. In 2003, 2004 and 2005, the Argentine GDP began to recover at annual rates of 9% . In addition, a succession of presidents were inaugurated during this crisis period and various states of emergency were declared that suspended civil liberties and instituted restrictions on transfers of funds abroad and foreign exchange controls, among other measures.

     The macroeconomic condition in Argentina has been characterized by:

• increased inflation during 2005;

• high nominal exchange rates;

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• primary fiscal surplus and commercial surplus;

• negative real interest rates;

• expansive monetary policy; and

• institutional stability.

     The Argentine economy had three years of recovery between 2003 and 2005, resulting in a cumulative 27% increase in GDP compared to the 2002 GDP.

     During 2005, the Argentine economy continued to exhibit signs of stability. Real GDP growth was 9.1% for the year. The exchange rate was stable during 2005, with variations of -0.7% although inflation showed a significant growth of 12.3 times versus 6.1% in 2004. As of December 31, 2005, the exchange rate was AR$3.03 per U.S. dollar compared to AR$2.98 per U.S. dollar as of December 31, 2004. The employment situation improved as the unemployment rate reached 10.1% during the fourth quarter of 2005, reflecting a decrease from the 12.1% achieved during the fourth quarter of 2004.

     The economy started to recover in the second quarter of 2002 and was followed by fourteen consecutive quarters of growth through the fourth quarter of 2005. A recovery in the international markets resulted in positive economic results for Argentina and led to favorable agricultural export prices, increased oil and industrial exports and increased exports to neighboring Latin American countries. Various sectors of the economy have experienced growth rates during this period, including industrial production which had accumulated a growth rate of 33.5% for the 2003-2005 period, equivalent to an annual rate of approximately 7.8%. Private consumption also experienced significant growth during this period. Investments also recovered with a 22.7% growth in 2005 as compared to 2004.

     Despite the improvement of the Argentine economy from 2003 until 2005 compared to 2002, certain underlying structural problems of the Argentine economy, which have repeatedly caused or contributed to the political crisis in the past, have not yet been resolved. A number of unpopular decisions may need to be made in order to address the continuing problems that Argentina is currently undergoing which may impact popular support for current and future presidential administrations and political instability in Argentina. Unstable economic conditions have had, and can be expected to have, a material adverse effect on our financial condition and results of operation.

Argentina’s default on its public sector debt has deteriorated its financing and coverage capacity should a new crisis arise.

     In the first half of 2005, the Argentine government successfully restructured substantially the majority of its sovereign bond indebtedness by extending an offer to holders of its defaulted bonds to exchange their bonds for new bonds. Although more than 75% of the holders of the Argentine government’s defaulted bonds participated in the exchange offer, those bondholders were forced to accept significantly less than the principal amount of the original debt they held.

     Despite the results of the restructuring, it is impossible to predict the effect that this will have on investor confidence or on the Argentine economy. The Argentine government may again be faced with the possibility of default on its issued bonds if economic recovery abates and a new economic crisis emerges which could again have a material adverse effect on our results of operation and prospects.

     The Argentine government continues to face significant exposure to litigation from holders of its defaulted debt that did not participate in the Argentine government’s exchange offer. At present, there are legal proceedings against the Argentine government in the United States, Italy and Germany. Although it is impossible to determine what the outcome of these proceedings will be, a judgment against the

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Argentine government in such cases could result in a reduction in funding sources and investment capital, which could have a significant effect on the Argentine government’s capacity to implement reforms and reinstate sustainable economic growth, all of which could adversely affect our results of operations.

     The Argentine government imposes certain restrictions on currency conversions and remittances abroad which could affect the timing and amount of any dividends or other payment we receive from our Argentine franchise

     Until December 2001, the Argentine peso was pegged 1-to-1 to the U.S. dollar. From January 2002, the Argentine peso has been allowed to float freely against the U.S. dollar and other foreign currencies.

     Since 2003 and following a series of restrictive measures in the money market and fund movements, the Argentine Central Bank removed several of the foreign exchange restrictions, including elimination of the requirement that the Argentine Central Bank approve the repayment of principal of financial indebtedness, extended the term for the repatriation of export proceeds, allowed earlier payments of imports, and increased up to US$2 million, the monthly amount that Argentine-domiciled individuals or corporations are allowed to purchase and transfer abroad.

     There can be no assurance that the Argentine Central Bank will not once again require its prior authorization for the transfer of funds abroad in the form of dividends or payment of inter-company or third party loans. Any such inability to transfer funds outside of Argentina, in the form of dividends or otherwise, could adversely affect the value of our Argentine operations and the market value of our ADSs.

Inflation in Argentina may adversely affect our operations which could adversely impact our financial condition and results of operations

     Argentina has experienced high levels of inflation in recent decades, resulting in large devaluations of its currency. Argentina’s historically high rates of inflation resulted mainly from its lack of control over fiscal policy and the money supply. The annual rates of inflation (as measured by changes in the consumer price index) in 2001, 2002, 2003, 2004 and 2005 were -1.5%, 41.0%, 3.7%, 6.1% and 12.3%, respectively. High levels of inflation in Argentina could adversely affect the Argentine economy and have a material adverse effect on our financial condition and results of operations.

     The Argentine peso is subject to depreciation and volatility which could adversely affect our financial condition and results of operations

     The Argentine government’s economic policies and any future devaluation of the Argentine peso against the U.S. dollar could adversely affect our financial condition and results of operations. The Argentine peso has been subject to large devaluations in the past and may be subject to significant fluctuations in the future.

     The Public Emergency Law and Foreign Exchange Regime Reform Law of 2002 put an end to more than ten years of U.S. dollar-peso parity and authorized the Argentine government to set the exchange rate. Subsequent to the devaluation of the Argentine peso in early 2002 and since the beginning of the Argentine economic crisis, there have been significant fluctuations in the value of the Argentine peso causing repeated Argentine Central Bank interventions to stabilize the Argentine peso through purchases and sales of U.S. dollars. Since the devaluation of the Argentine peso, the Argentine peso has fluctuated significantly, which has had a negative impact on our results. As of December 31, 2005, the exchange rate was AR$2.91 per U.S. dollar

     We cannot assure you that the policies to be implemented by the Argentine government in the future will stabilize the value of the Argentine peso against foreign currencies. Therefore, the Argentine

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peso may continue to be subject to significant fluctuations and further depreciations which might significantly and adversely affect our financial condition and the results of our operations.

Argentina continues to face political and economic uncertainty

     Although general economic conditions have shown improvement and political protests and social disturbances have diminished considerably in 2005, the rapid and radical nature of the changes in the Argentine social, political, economic and legal environment over the past five years and the absence of a clear political consensus in favor of any particular set of economic policies raises doubts about Argentina’s economic and political future. It is possible that, despite recent economic growth, Argentina could return to a deeper recession, higher inflation and unemployment and greater social unrest. We cannot assure you that laws and regulations implemented by the Argentine government to regulate the economy will not continue to change in the future or that any changes will not adversely affect our business, financial condition or results of operations.

Risk Factors Relating to the ADSs and the Shares

Preemptive rights may be unavailable to holders of our ADSs

     According to the Ley de Sociedades Anónimas No. 18.046 and the Reglamento de Sociedades Anónimas (collectively, the “Chilean Companies Law”), whenever we issue new shares for cash, we are required to grant preemptive rights to holders of our shares (including shares represented by ADSs), giving them the right to purchase a sufficient number of shares to maintain their existing ownership percentage. However, we may not be able to offer shares to United States holders of ADSs pursuant to preemptive rights granted to our shareholders in connection with any future issuance of shares unless a registration statement under the U.S. Securities Act of 1933, as amended, is effective with respect to such rights and shares, or an exemption from the registration requirements of the U.S. Securities Act of 1933, as amended, is available.

     Under the procedure established by the Central Bank, the foreign investment agreement of a Chilean company with an existing ADR program will become subject to an amendment (which will also be deemed to incorporate all laws and regulations applicable to international offerings in effect as of the date of the amendment) that will extend the benefits of such contract to new shares issued pursuant to a preemptive rights offering to existing ADS owners and to other persons residing and domiciled outside of Chile that exercise preemptive rights, upon request to the Central Bank. We intend to evaluate at the time of any rights offering the costs and potential liabilities associated with any such registration statement as well as the indirect benefits to us of enabling United States holders of ADSs to exercise preemptive rights and any other factors that we consider appropriate at the time, and then make a decision as to whether to file such registration statement.

     We cannot assure you that any registration statement would be filed. To the extent holders of ADSs are unable to exercise such rights because a registration statement has not been filed, the depositary will attempt to sell such holders’ preemptive rights and distribute the net proceeds thereof if a secondary market for such rights exists and a premium can be recognized over the cost of any such sale. If such rights cannot be sold, they will expire and holders of ADSs will not realize any value from the grant of such preemptive rights. In any such case, such holder’s equity interest in the Company would be diluted proportionately.

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

     Under the United States federal securities laws, as a foreign private issuer, we are exempt from certain rules that apply to domestic United States issuers with equity securities registered under the United States Securities Exchange Act of 1934, as amended, including the proxy solicitation rules, the

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rules requiring disclosure of share ownership by directors, officers and certain shareholders. We are also exempt from certain of the corporate governance requirements of the Sarbanes-Oxley Act of 2002 and the New York Stock Exchange, Inc., including the requirements concerning independent directors.

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

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

The market for our shares may be volatile and illiquid

     The Chilean securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States. The Bolsa de Comercio de Santiago (the “Santiago Stock Exchange”), which is Chile’s principal exchange, had a market capitalization of approximately US$136,374 million at December 31, 2005 and an average monthly trading volume of approximately US$1,733 million for 2005. The ten largest companies in terms of market capitalization represented, at December 31, 2005, approximately 45.6% of the Santiago Stock Exchange’s market capitalization. We estimate that during 2005, fewer than 14.7% of the companies listed on the Santiago Stock Exchange had their shares traded on an average of 90% or more of the Exchange’s trading days.

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

ITEM 4. INFORMATION ON THE COMPANY

A. History and development of the Company

     Our legal name is Embotelladora Andina S.A. and our commercial name for advertising and publicity purposes is Andina. We were incorporated and organized on February 7, 1946 under the Chilean Companies Law as a sociedad anónima (stock corporation). An abstract of the bylaws is registered with the Registro de Comercio de Santiago (“Public Registry of Commerce of the City of Santiago”) under No. 581 on page 768. The Chilean Treasury Department, upon Decree No. 1,364 of March 13, 1946, which is registered under No. 582 on page 770 of the Public Register of Commerce of the City of Santiago, approved our bylaws, authorized its creation and declared it duly incorporated in Chile. Pursuant to our bylaws, our term of duration is indefinite.

     Our shares of common stock are listed and traded on the Bolsa de Comercio de Santiago and also traded on the Bolsa de Comercio de Valparaiso and Bolsa Electrónica de Chile; ADSs representing our shares are listed on the New York Stock Exchange. Our principal executive offices are located at Avenida El Golf 40, Piso 4, Las Condes, Santiago, Chile. Our telephone number is +56-2-338-0520 and our website is www.koandina.com. Our depositary agent for the ADSs in the United States is The Bank of New York, located at One Wall Street, New York, New York 10286. Our depositary agent’s telephone number is (212) 815-2296. Our authorized representative in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, United States. Puglisi & Associates’ phone number is (302) 738-6680.

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History

     In 1941, The Coca-Cola Company licensed a private Chilean company to produce cola soft drinks in Chile, and production began in 1943. In 1946, the original licensee withdrew from the license arrangement, and a group of U.S. and Chilean investors formed Andina, which became The Coca-Cola Company’s sole licensee in Chile. Between 1946 and the early 1980s, Andina developed the Chilean market for Coca-Cola soft drinks with a system of production and distribution facilities covering the central and southern regions of Chile. In the early 1980s, Andina sold its Coca-Cola licenses for most areas outside the Santiago metropolitan region and concentrated on the development of its soft drink business in the Santiago area. Although no longer the sole Coca-Cola bottler in Chile, Andina has been the principal producer of Coca-Cola soft drinks in Chile for an uninterrupted period of over 50 years.

     In 1985, a majority of Andina’s shares was acquired by Freire and certain related persons. On December 31, 2004, Freire and entities controlled by Freire owned approximately 52.6% of our outstanding Series A shares, which have preferred voting rights and thereby controlled us.

     Refrescos, our Brazilian subsidiary, began production and distribution of Coca-Cola soft drinks in Río de Janeiro in 1942. In June 1994, we acquired 100% of the capital stock of Refrescos for approximately US$120 million and contributed an additional US$31 million to Refrescos’ capital immediately after the acquisition to repay certain indebtedness of Refrescos.

     Production of Coca-Cola soft drinks in the Argentine territory began in 1943 with the start-up of operations in the province of Córdoba, Argentina, through Inti S.A.I.C., which we refer to as Inti. In July 1995, we (through Inversiones del Atlántico S.A., an investment company incorporated in Argentina), which we refer to as IASA, acquired a 59% interest in Edasa, the parent company of Rosario Refrescos S.A., which we refer to as Rosario Refrescos, and Mendoza Refrescos S.A., which we refer to as Mendoza Refrescos, were subsequently merged to create Rosario Mendoza Refrescos S.A., which we refer to as Romesa, the Coca-Cola bottler in the provinces of Entre Ríos, San Luis, San Juan, Mendoza, part of Santa Fe and part of Buenos Aires, in Argentina for approximately US$45 million. During 1997, the operations of Romesa were merged into Inti. In 1999, Edasa was merged into IASA. In 2000, IASA was merged into Inti, which in turn changed its corporate name to Edasa. In December 2002, the board of directors of Edasa and Cipet, our Argentine subsidiary in charge of the polyethylene perephtalate, which we refer to as PET, plastic bottle, packaging business in Argentina, decided to merge Cipet into Edasa.

     In December 1998, we repurchased from The Coca-Cola Company its 49% stake in Vital at a purchase price of US$25.5 million. Concurrently with that transaction, The Coca-Cola Company purchased Vital’s mineral water springs located at Chanqueahue, 80 miles south of Santiago for US$10.7 million. As part of the transaction, the Vital bottler agreement was replaced with a fruit juice bottler agreement with MMII, as well as a new mineral water bottling agreement with The Coca-Cola Company. In addition, the 1995 shareholders’ agreement between us and The Coca-Cola Company regarding ownership of Vital was terminated. The Coca-Cola Company paid us US$22.6 million in consideration for that termination. These transactions generated a one-time net consolidated profit of approximately US$25.8 million for 1998, before taxes. The restructuring of the juice and mineral water business in Chile enhanced our focus on the production of soft drinks, juices and mineral water, that historically have been our core strength.

     On December 22, 2005 the production and packaging business of waters, juices and non-carbonated beverages licensed by The Coca-Cola Company (“TCCC”) in Chile was restructured. Vital Aguas S.A. is created with the purpose of developing the process, production and packaging business of Vital de Chanqueahue Mineral Water and other water and products according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC. Consequently, Vital S.A. will focus on juices and non-carbonated beverages.

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     Accordingly, Embotelladora Andina S.A., Embonor S.A. and Embotelladora Coca-Cola Polar S.A. have taken an interest of 56.5%, 26.4% and 17.1%, respectively, in Vital Aguas S.A., which will conduct the business of the processing, production and bottling of the Vital de Chanqueahue Mineral Water and other water and products, according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC.

     The equity interests of Embonor and Polar in Vital Aguas S.A. were acquired by purchase from Embotelladora Andina S.A. and its subsidiary, Andina Inversiones Societarias S.A., at the prices equivalent to 169,306 Unidades de Fomento and 109,428 Unidades de Fomento, respectively, generating earnings of ThCh$3,890,351 (215,919 Unidades de Fomento), and is presented under Other Non-Operating Income.

     In March 2000, through Refrescos, our Brazilian subsidiary, we purchased from the Coffin Group a Coca-Cola franchise license for a territory in Brazil comprising the State of Espirito Santo and part of the States of Río de Janeiro and Minas Gerais (Nitvitgov Refrigerantes S.A., which we refer to as NVG), for an aggregate purchase price of US$74.5 million. This territory was serviced by the Coffin Group through Perma Industria de Bebidas S.A., which we refer to as Perma. NVG was merged into Refrescos in 2000, and its operations were integrated with Refrescos in 2001. This acquired territory had a total population of approximately 8.8 million inhabitants and represented an increase of 70% in the volume of our operations in Brazil.

     In August 2004, Refrescos entered into a franchise swap agreement with the Brazilian subsidiary of The Coca-Cola Company, Recofarma Industria do Amazonas Ltda., for (1) an exchange of franchising rights, goods and other assets of Refrescos in the territory of Governador Valadares in the State of Minas Gerais, and (2) other franchise rights of The Coca-Cola Company in the territories of Nova Iguaçú in the state of Río de Janeiro, which was previously owned by Companhia Mineira de Refrescos S.A.

     PET Joint Venture. In April 1996, through Multipack, we established Solução PET Ltda., which we refer to as Solução PET, a joint venture with Continental PET Technologies, Inc. (today known as Graham Packaging Company Inc.), which we refer to as Continental, to produce non-returnable PET containers in the Brazilian territory. On March 12, 1997, we and Continental entered into a joint venture, which anticipated the possibility of establishing similar arrangements in other markets in South America. Due to subsequent changes in the Brazilian market, we and Continental agreed to terminate the Solução PET joint venture and to spin-off its assets. On May 31, 2000, we and Continental executed a termination agreement and consummated other accessory obligations thereof.

     Cristalerías Joint Venture. Through their respective subsidiaries, Multipack and Crowpla Reicolite S.A., the Company and Cristalerías de Chile S.A. executed a letter of intent on May 29, 2001 to develop a PET production facility in Chile. On June 29, 2001, we and Cristalerías de Chile S.A. signed a series of contracts forming the joint venture through the formation of Envases CMF S.A. We contributed the assets necessary to further the development of the joint venture from Multipack. Andina Inversiones Societarias S.A. holds a 50% stake in the joint venture while Cristalerías de Chile S.A. retains the other 50% interest.

     Reclassification of Capital Stock. In September 1996, at an extraordinary shareholders’ meeting, our shareholders approved the reclassification, which we refer to as the Reclassification, of Andina’s common stock into two new series of shares. Pursuant to the Reclassification, each outstanding share of Andina’s common stock was replaced by one newly issued Series A share and one newly issued Series B share, which we refer to as the Series A shares and the Series B shares, respectively. The new Series A and Series B shares, which are the only outstanding shares of capital stock of Andina, are principally differentiated by their voting and economic rights: the holders of the Series A shares have full voting power and are entitled to elect six of seven regular and alternate members of the board of directors, and the holders of the Series B shares have no voting rights but for the right to elect one regular and one alternate member of the board of directors. In addition, holders of Series B shares are entitled to a

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dividend 10% greater than any dividend on Series A shares. The Reclassification was consummated on April 7, 1997 and various conversion periods were provided for by our board of directors through 2000.

     On December 23, 1996, the Superintendency of Pension Fund Managers (Superintendencia de Administradores de Fondos de Pensiones) decreed that Chilean pension funds would not be permitted to acquire Series B Shares due to their limited voting rights.

     As a result of the Reclassification, statutory withdrawal rights under Chilean law were triggered that entitled shareholders to withdraw from an issue by returning their shares to the issuer upon the creation of preferred shares such as the Series A shares (preferred voting rights) or the Series B Shares (preferred dividend rights). If exercised, such withdrawal right is set at a price equal to the weighted average trading price over the two-month period prior to the date of the shareholders’ meeting approving the issuance of preferred shares. In November 1996, withdrawal rights were exercised as to 15,458,517 Common Shares for which Andina paid Ch$42,309 million (US$89.8 million). As required under Chilean law, we held the repurchased shares of common stock (subsequently reclassified as Series A shares and Series B shares) as treasury stock with neither voting nor economic rights for 12 months. During 1997, we canceled such shares and reduced shareholders’ equity accordingly.

     From 1997 to 2002, we underwent a significant corporate restructuring targeted at achieving certain administrative and operating efficiencies. During 1997 and 1998, we created Andina Inversiones Societarias, which we refer to as AIS, in Chile to hold our minority interests in each of Easa Chile S.A., Multipack, Transportes Andina Refrescos Ltda., Servicios Multivending Ltda. and Inversiones del Atlántico S.A.; in Argentina, Romesa was merged into Inti and in Brazil, we dissolved EBL Lanches Ltda., a subsidiary of Refrescos.

     From 2001 to 2005, Andina’s corporate restructuring, included:

• the franchise swap agreement entered into in August 2004 by Refrescos with Recofarma Industria do Amazonas Ltda., pursuant to which Refrescos exchange its franchising rights in the territory of Governador Valadares for Recofarma’s franchising rights in the territory of Nova Iguaçú in Rio de Janeiro;

• the merger of Cipet with and into Edasa with Cipet becoming Edasa’s packaging division;

• the acquisition by Andina Bottling Investments S.A. and Andina Inversiones Societarias S.A. of Mercury Equity Corp S.A., a company incorporated in the British Virgin Islands; the transfer, by way of liquidation, of all of the assets and liabilities of The Sterling Pacific Corp S.A. to such company; and its subsequent name change to Abisa Corp S.A.;

• the merger of Edasa into IASA, which in turn was merged into Inti and the simultaneous change in corporate name to Embotelladora del Atlantico S.A.;

• the assignment to Andina Bottling Investments S.A., “Abisa” (formerly known as EASA Chile S.A.) of all of Andina’s interests in its subsidiaries and related companies in Argentina and Uruguay;

• the liquidation of certain related companies which were no longer required, e.g., the Brazilian subsidiary Brazilian Copa Participações Ltda. was merged into Refrescos; and

• the formation of Andina Bottling Investments Dos S.A. on November 22, 2001, which subsequently consolidated all of Andina’s interests in related companies in Brazil.

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Capital Expenditures

     Our total capital expenditures were Ch$27,395 million in 2005, Ch$26,150 million in 2004, and Ch$26,912 million in 2003. In 2005, capital expenditures were principally related to the following:

     Chile

• Investments in bottles returnable (glass and PET bottles) and bottle cases;

• Investment in cooling equipments, freezers, post mix and other point of sale equipments; and

• Investments in new equipment to increase efficiency and production capacity.

     Brazil

• Investments in glass bottles and bottle cases;

• Investment in coolers, freezers, post-mix and other point-of-sale equipment; and

• Investment in adjacent property to the Jacarepaguá plant (Rio de Janeiro) for the expansion of inventories, under the distribution and logistics new design project.

     Argentina

• Investments in bottles (glass and PET bottles) and bottle cases; and

• Investments in new equipment to increase efficiency and production capacity.

Juices and mineral water

     Juice

• Increasing useful life and operating improvements of production lines;

• First stage of RILES treatment plant;

• Increasing capacity; and

• Extending fire extinguishing net.

     Water

• Increasing useful life and operating improvements of production lines; and

• Increasing capacity.

PET Packaging

     Investments in PET package facilities during 2005 included ordinary course maintenance and investment designed to increase efficiency and reliability.

     The following table sets forth our capital expenditures for the periods indicated:

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Capital Expenditures by Territory and by Line of Business

	Year ended December 31,
	2005		2004		2003
	(millions of Ch$)
Soft Drinks:
Chilean territory	Ch$	14,159	Ch$	15,240	Ch$	15,037
Brazilian territory		7,540		7,827		9,183
Argentine territory		4,743		1,716		1,585
Other Beverages:
Vital		666		875		970
PET Packaging:
Argentine territory		287		492		137
Total	Ch$	27,395	Ch$	26,150	Ch$	26,912

     In 2005, we invested approximately Ch$822 million in improvements to industrial processes, industrial waste flow measurement equipment, laboratory analysis, environmental impact consulting services and other studies.

Divestitures

     During 2005, Refrescos sold the warehouse located in Itaóca, Rio de Janeiro, in accordance with the new distribution and logistics project, for a total amount of US 1.3 million.

     As a result of the restructuring on December 22, 2005 of the Water business, Andina sold its 43.5% ownership interest in Vital Aguas S.A. to Embonor S.A. (who acquired 26.4% of Vital Aguas S.A.) and Embotelladora Coca-Cola Polar S.A. (who acquired 17.1% of Vital Aguas S.A.). The total amount of the transaction was ThCh$5,003,887 obtaining earnings of Th$3,890,351, which appears in the income statement under the item “other non-operating income”.

B. Business Overview

     We are the largest producer of soft drinks in Chile and one of the largest soft drink producers in Brazil and Argentina. Our principal business is the production and distribution of Coca-Cola soft drinks, which accounted for 87.2% of our consolidated net sales in 2005. Through Andina, we are the sole producer and distributor of Coca-Cola soft drinks in the Chilean territory; through Refrescos, the sole producer and distributor of Coca-Cola soft drinks in the Brazilian territory; and through Edasa, the sole producer and distributor of Coca-Cola soft drinks in the Argentine territory. In 2004, we recorded consolidated net sales of Ch$417,163 million and total sales volume of 360.6 million unit cases of soft drinks.

     In addition to the Coca-Cola soft drinks business, through Vital, we produce and distribute fruit juices, other fruit-flavored beverages and mineral water in Chile under trademarks owned by The Coca-Cola Company. We also manufacture PET bottles primarily for our own use in the packaging of Coca-Cola soft drinks in Chile and Argentina. In Brazil, we also distribute Kaiser brand beers.

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     Our Products

     We produce, market and distribute the following Coca-Cola trademark beverages and brands licensed from third parties throughout our Chilean, Brazilian and Argentine franchise territories:

	Chile	Brazil	Argentina
Coca-Cola	x	x	x
Coca-Cola Light	x	x	x
Coca-Cola Light Limón	x	x
Fanta Naranja	x	x	x
Fanta Naranja Light	x	x	x
Fanta Mandarina	x
Fanta Limón			x
Fanta Uva		x
Fanta Uva Light		x
Fanta Mix		x
Sprite	x	x	x
Sprite Ice	x
Sprite Zero	x	x	x
Quatro Balance	x
Quatro Pomelo			x
Quatro Limonada			x
Nordic Mist Ginger Ale	x
Nordic Mist Tónica	x
Taí	x
Inka Cola	x
Guaraná Kuat		x
Guaraná Kuat Light		x
Guaraná Kuat Light com Laranja		x
Schweppes Club Soda		x
Schweppes Tónica		x	x
Schweppes Citrus		x	x
Crush Lima-Limón			x
Crush Naranja			x
Crush Pomelo Rosado			x
Cepita Naranja			x
Cepita Manzana			x
Cepita Pomelo Rosado			x
Cepita Multifruta			x
Cepita Saborizada Pomelo			x
Cepita Saborizada Limonada			x
Cepita Saborizada Pomelo Rosado			x
Vital	x
Dasani	x		x
Dasani Citrus	x		x
Kin			x
Soda Kin			x
Bonaqua		x
Caxambu		x
Andina Frut	x
Andina Nectar	x
Andina Hi-C	x		x
Kapo	x	x
Montefiore			x
Carioca			x
Burn		x
Nestea		x

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	Chile	Brazil	Argentina
Kaiser		x
Bavaria		x
Santa Cerva		x
Heineken		x
Chopp		x
Xingu		x

     We produce, market and distribute Coca-Cola soft drinks in our franchise territories through standard bottler agreements between our bottler subsidiaries and the local subsidiary in each jurisdiction of The Coca-Cola Company (collectively, the “Bottler Agreements”). We consider the enhancement of our relationship with The Coca-Cola Company an integral part of our business strategy.

     We seek to enhance our business throughout the franchise territories by developing existing markets, penetrating other soft drink, juice and mineral water markets, forming strategic alliances with retailers to increase consumer demand for our products, increasing productivity, and by further internationalizing our operations.

1. Soft Drink Business

     In 2005, our Coca-Cola soft drinks business accounted for net sales of Ch$417,163 million and operating income of Ch$68,845 million representing 87.2% and 88.4% of our consolidated net sales and operating income, respectively.

     Our Chilean soft drink operations accounted for net sales in 2005 of Ch$185,118 million; the Brazilian soft drink operations for net sales of Ch$148,813 million; and the Argentine soft drink operations for net sales of Ch$83,232 million.

     The following tables sets forth, for the periods indicated, our net sales and volume of Coca-Cola soft drinks sold in our franchise territories for the periods indicated.

Year ended December 31, 2005

Chile

Brazil

Argentina

(in millions of Ch$ and UCs)

Colas

Ch$

147,663

91.3UCs

Ch$

118,306

116.9UCs

Ch$

71,928

74.4UCs

Flavored soft drinks

37,455

22.3

30,507

30.8

11,304

24.9

Total

Ch$

185,118

113.6UCs

Ch$

148,813

147.7UCs

Ch$

83,232

99.3UCs

Year ended December 31, 2004

Chile

Brazil

Argentina

(in millions of Ch$ and UCs)

Colas

Ch$

142,503

88.7UCs

Ch$

98,122

105.7UCs

Ch$

58,561

70.2UCs

Flavored soft drinks

35,010

20.8

22,976

27.8

17,198

23.1

Total

Ch$

177,513

109.5UCs

Ch$

121,098

133.5UCs

Ch$

75,759

93.3UCs

Year ended December 31, 2003

Chile

Brazil

Argentina

(in millions of Ch$ and UCs)

Colas

Ch$

140,115

84.9UCs

Ch$

90,768

99.2UCs

Ch$

48,857

61.1UCs

Flavored soft drinks

34,945

21.1

24,037

28.6

16,996

20.6

Total

Ch$

175,060

106.0UCs

Ch$

114,805

127.8UCs

Ch$

65,853

81.7UCs

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     In Chile, Coca-Cola soft drinks are distributed in returnable and non-returnable glass and PET bottles and aluminum cans of various sizes. Also as Post-mix syrup, which is mixed with carbonated water in a dispenser at the point of sale, is also distributed in stainless steel and bag-in-box containers. In Brazil, Coca-Cola soft drinks are distributed in returnable and non-returnable glass, in PET bottles of various sizes and in aluminum cans. We also produce and distribute Coca-Cola soft drinks as post-mix syrup. In Argentina, Edasa produces and distributes Coca-Cola soft drinks in returnable and non-returnable glass and PET bottles of various sizes, in aluminum cans and as post-mix syrup. Regarding juices, they are distributed in tetra-pack packaging.

     The following table sets forth, for the periods indicated, our sales of Coca-Cola soft drinks in Chile, Brazil and Argentina, by packaging type, measured as a percentage of total sales volume:

Soft Drink Sales by Packaging Type

	Year Ended December 31,
	2005						2004						2003
	Chile		Brazil		Argentina		Chile		Brazil		Argentina		Chile		Brazil		Argentina
	% Total		% Total		% Total		% Total		% Total		% Total		% Total		% Total		% Total
	Mix		Mix		Mix		Mix		Mix		Mix		Mix		Mix		Mix
Returnable		61.7		13.4		48.1		62.5		11.1		44.6		61.7		10.2		40.9
Non-returnable		34.1		83.8		51.0		33.3		85.9		54.4		33.9		86.6		58.2
Post Mix		4.2		2.8		0.9		4.2		3.0		1.0		4.4		3.2		0.9
Total		100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0		100.0

     Sales Overview

     We measure sales volume in terms of unit cases, which we refer to as UCs. Unit cases refer to 192 ounces of finished beverage product (24 eight-ounce servings). The following table illustrates our historical sales volumes for each of our territories:

Soft Drink Sales Volumes

	Year ended December 31,
	2005		2004		2003
	(millions of UCs)
Chile		113.6		109.5		106.0
Brazil		147.7		133.5		127.8
Argentina		99.3		93.3		81.7

     Customers and Distribution

     As of December 31, 2005, we sold our products to approximately 46,779 customers in Chile, 55,577 customers in Brazil, and 42,038 customers in Argentina. Although the mix varies significantly among the franchise territories, our distribution network generally relies on a combination of Company-owned trucks and independent distributors in each territory.

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     The following table sets forth, for the periods indicated, our sales of Coca-Cola soft drinks in Chile, Brazil and Argentina, by type of customer, measured as a percentage of total sales volume:

Soft Drink Sales by Type of Customer

	Year ended December 31,
	2005									2004									2003
	Chile			Brazil			Argentina			Chile			Brazil			Argentina			Chile			Brazil			Argentina
	(%)
Small- and medium-sized retail establishments for takeout		46			22			17			45			19			15			46			16			17
Wholesale distributors		7			23			30			7			24			29			7			29			26
Supermarkets		25			31			15			26			36			16			26			35			19
Restaurants, hotels and bars		6			19			4			6			16			4			6			15			2
Fast food outlets		3			2			1			3			2			1			3			2			1
Convenience stores		7			1			31			8			1			32			7			1			33
Other		6			2			2			5			2			3			5			2			2
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

     Chile. As of December 31, 2005, Andina’s sales force in Chile consisted of 159 salespeople (138 full time and 21 part time) who call on most customers on average 1.6 times per week. For sales to major supermarkets, we employ approximately five key account managers, 12 field supervisors and 396 promoters (326 full time and 70 part time) on-site supervisors who handle our products, monitor displays and track the pricing and marketing strategies of our competitors. Account executives are also assigned to major fast food outlets to work with the customer to develop sales on a consistent basis. Our distribution system for our soft drink products consisted of a group of 12 exclusive distributors, which are independent businesses that collectively deploy approximately 249 trucks, depending on seasonal demand. We own an additional 31 trucks. The 12 distributors collectively service all of our Chilean customers. In most cases, the distributor collects payment from the customer in cash or check. Certain important customers, maintain accounts receivables with us, which are settled on average every 44 days after invoices are issued. Where applicable, the driver also either collects empty returnable glass or plastic bottles of the same type and quantity as the bottles being delivered, or collects cash deposits for the net returnable bottles delivered. This task is particularly significant in the Chilean territory where returnable containers accounted for approximately 61.7% of total unit cases of soft drinks sold in 2005.

     Brazil. As of December 31, 2005, Refrescos’ sales force in Brazil consisted of an average of 357 salespeople, divided into three major groups responsible for: (i) sales to key accounts and fast food chains (who purchase soft drinks in post-mix dispensers, in cans and in bottled form), (ii) sales to supermarkets (consisting of bottle and can sales) and (iii) all other traditional customers. Each of these three groups also manages sales of the other beverages (beer, mineral water, juice, energy drinks and iced tea) distributed by Refrescos. In Brazil, we generally distribute Coca-Cola soft drinks through a distribution system that includes: (i) trucks operated by independent distributors pursuant to exclusive distribution arrangements with us and (ii) trucks operated by independent transport companies on a non-exclusive basis. In 2005, 12.4% were distributed by exclusive distributors, and 87.6% by independent transport companies. Distribution of Refrescos’ beverages (including soft drinks, beer, bottled water, energy drinks and iced tea) takes place from distribution centers and production facilities. High volume customers such as supermarkets are serviced exclusively from the distribution centers located at Refrescos’ production facilities. In 2005, approximately 25% of Refrescos’ soft drink sales were paid for in cash at the time of delivery, 21% were paid by check to be cashed between one and ten days after delivery and 54% were

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paid between 10 and 45 days after delivery by invoice. Payments by both checks and invoices were charged interest.

     Argentina. As of December 31, 2005, our sales force in Argentina consisted of 358 employees, grouped in salespeople, merchandisers, and Contact Center personnel. In 2005, 70% of Edasa’s Coca-Cola soft drinks were distributed by direct distribution (trucking) and 30% by wholesale distribution. All of the direct distribution is done by a group of independent transport companies (each with three or more trucks). In 2005, approximately 74% of Edasa’s soft drink sales were paid for in cash and 26% were credit sales. Approximately 1.2% of credit sales were paid by short-term credit to be paid for within one to eight days after delivery, 17.8% of credit sales were made by simple account and 7% of credit sales were paid for by check.

     Competition

     We face intense competition throughout the franchise territories principally from bottlers of competing soft drink brands. See “Item 3. Key Information—Risk Factors—Risks Related to our Company—We are engaged in a highly competitive business that is subject to price competition and that may impact our net profits and margins.”

     Chile. The soft drink segment of the Chilean beverage industry is highly competitive. The most important areas of competition are product image, pricing, advertising, ability to deliver product in popular bottle sizes, distribution capacity, and the amount of returnable bottles held by retailers or by consumers. Returnable bottles can be exchanged at the time of new purchases in lieu of paying a bottle deposit, thereby decreasing the purchase price. The main competitor in the Chilean franchise territory is Embotelladora Chilenas Unidas or ECUSA, a subsidiary of Compañía Cervecerías Unidas S.A. or CCU, the major brewer in Chile. ECUSA produces and distributes Pepsi-Cola products and its own brands (soft drinks and mineral water).

     Brazil. The soft drink segment of the Brazilian beverage industry is highly competitive. The most important areas of competition are product image, pricing, advertising and distribution capacity (including the number and location of sales outlets). According to A.C. Nielsen, our main soft drink competitor in the Brazilian territory is American Beverage Company or Ambev. As a result of the merger between Companhia Cervejaria Brahma S.A. or Brahma and Industria de Bebidas Antarctica do Río de Janeiro S.A. or Antarctica in 2000, this company has become the largest beer producer and distributor in Brazil and also produces soft drinks, including Pepsi-Cola.

     Argentina. The soft drink segment of the Argentine beverage industry is highly competitive. The most important areas of competition are product image, pricing, advertising, ability to produce bottles in popular sizes and distribution capacity. Embotelladora de los Andes S.A., which is controlled by the Hunicken Group, produced Pepsi-Cola products in the province of Mendoza , and the license expired during 2005. As a result, they launched new softdrinks under the brand Talca, that in the market is a well-known quality product with aggressive prices. Baesa produces Pepsi-Cola products in the provinces of Córdoba, Mendoza and Santa Fe. Pritty S.A. produces and sells Pritty, Doble Cola, Saldán, Switty and Rafting in the provinces of Córdoba, Santa Fe and Mendoza. In the province of Santa Fe, Baggio sells Mocoretá. In the province of Mendoza, San Isidro Refrescos S.A. sells Beach, Royal Crown, Upper 10, Sao, Sunkist and Seagrams products, and Cahiza Hermanos sells Chyc.

     Based on reports by A.C. Nielsen, we estimate that in 2005, our average soft drink market share within our franchise territories reached 68.5%, 55.6%, and 50.6% for Chile, Brazil, and Argentina, respectively.

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

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Market Share

	Year ended December 31,
	2005									2004									2003
	Chile			Brazil			Argentina			Chile			Brazil			Argentina			Chile			Brazil			Argentina
	(%)
Coca-Cola soft drinks		68			56			51			68			53			51			67			52			33
ECUSA soft drinks		19			—			—			19			—			—			20			—			26
Pepsi-Cola and 7 Up products		3			5			17			4			6			17			4			17			19
Pritty products		—			—			10			—			—			10			—			11			2
Antarctica products		—			10			—			—			9			—			—			—			1
Brahma products		—			—			—			—			—			—			—			—			17
Other		10			29			22			9			32			22			9			20			2
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

Source: A.C. Nielsen

     Seasonality

     Each of our lines of business is seasonal. Most of our beverage products have their highest sales volumes during the South American summer (October through March), with the exception of nectar products, which have a higher sales volume during the South American winter (April through September). Our Chilean and Argentine operations generally experience higher levels of seasonal price fluctuations than our Brazilian operations.

     Raw Materials and Supplies

     Numerous raw materials, including, without limitation, sugar, resin, and aluminum, are used in producing our beverages and containers. We have purchased these raw materials from both domestic and international suppliers. Because we are often required to purchase raw materials in the international markets using U.S. dollars, we are subject to local currency risks in each of our operations. If the Chilean peso, Brazilian real or Argentine peso were to lose value against the U.S. dollar, the cost of certain raw materials could rise significantly, which, in turn, could adversely affect our net income and results of operations. We cannot assure you that these currencies will devaluate against the U.S. dollar in the future.

     The principal raw materials used in the production of Coca-Cola soft drinks are concentrate, sweetener, water and carbon dioxide gas. Production also requires glass and plastic bottles, bottle tops and labels. Water used in soft drink production is treated for impurities and adjusted for taste reasons. All raw materials, especially water, are subjected to continuous quality control.

     Chile — Raw Materials. We purchase concentrate at prices established by The Coca-Cola Company. We purchase sugar primarily from Industria Azucarera Nacional S.A., the only producer of sugar in Chile, although we may purchase sugar in the international market when prices are favorable, and have done so on occasion. Chilean sugar prices are subject to a price band established by the Chilean government on an annual basis. Fruticose are purchased from Inducorn S.A. We obtain carbon dioxide gas from Praxair S.A. Andina’s affiliate Envases CMF, produces returnable PET bottles and most of the non-returnable PET bottles we use. We purchase glass bottles principally from Cristalerías de Chile S.A. and Cattorini Hermanos. S.A.I.C.F.e.i, and Vitro Packaging Inc. Bottle tops and labels are purchased from Alusud, Inesa Chile, Metal Gráfica Cearense S.A., Tapón Corona Colombia, Inyecal S.A. and other suppliers.

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     During 2005, 75% of cost of sales for soft drinks produced by Andina corresponded to main raw materials. The cost of each raw material within the total of main raw materials is the following: concentrate represents 64%; sugar and artificial sweeteners 17%; non-returnable bottles 14.0%; bottle caps 4% and carbon dioxide 1.0%. Water does not constitute an important cost as raw material. Additionally, the cost of finished raw materials purchased from third parties is included within the cost of sales of soft drinks. These costs represent 18% of the total costs of sales of soft drinks and correspond to cans and some PET bottles.

     Brazil — Raw Materials. Refrescos purchases concentrate in the city of Manaus at prices established by The Coca-Cola Company. Manaus has been designated as a duty-free development zone by the Brazilian government. Refrescos purchases sugar from Brazilian suppliers, in particular from Copersucar Ltda., carbon dioxide gas from Companhia White Martins Gases S.A. and AGA S.A., bottles PET from Amcor and Edasa’s Packaging Division, glass bottles from Owens Illinois and metal bottle caps from Aro. Refrescos purchases water from the municipality of Río de Janeiro.

     During 2005, 74% of cost of sales for soft drinks produced by Refrescos corresponded to main raw materials. The cost of each raw material within the total of main raw materials is the following: concentrate (including juice used for some flavors) represents 30%; sugar and artificial sweeteners 15%; non-returnable bottles 33.0%; cans 17%, bottle caps 4% and carbon dioxide 1.0%. Additionally, the cost of finished raw materials purchased from third parties is included within the cost of sales of soft drinks. These costs represent 2% of the total costs of sales of soft drinks and correspond to some formats of cans, PET and non returnable glass bottles.

     Argentina — Raw Materials. Edasa purchases concentrate at prices established by The Coca-Cola Company. Edasa purchases sugar from Ing. y Refinería San Martín de Tabacal S.A., Cía. Azucarera Concepción S.A., and C.P.I Argentina SA; sweeteners (light) from Productos de Maíz S.A. and carbon dioxide gas from Praxair S.A. and Air Liquide S.A. Edasa produces non-returnable and returnable PET bottles through Edasa’s Packaging Division, and glass bottles from Cattorini Hermanos, and bottle caps from Alusud S.A., Ravisud S.A., Aluplata S.A. and Metalgráfica Cearense S.A. In the provinces of Córdoba, Edasa owns water wells and extracts water for soft drink production. Edasa buys water from Aguas Cordobesas S.A., for other purposes. Edasa also buys stretch wrap from Manuli S.A. and Urflex S.A; shrink wrap from Plastiandino S.A. and Sanlufilm S.A.; and carton from Zucamor S.A.I.C.F.I. y A. and Cartocor S.A.

     During 2005, 71% of cost of sales for soft drinks produced by Edasa corresponded to main raw materials. The cost of each raw material within the total of main raw materials is the following: concentrate represents 50%; sugar and artificial sweeteners 21%; non-returnable bottles 24%; bottle caps 4% and carbon dioxide 1.0%. Additionally, the cost of finished raw materials purchased from third parties is included within the cost of sales of soft drinks. These costs represent 2% of the total costs of sales of soft drinks and correspond to can formats.

     PET Packaging — Raw Materials. The principal raw material required for production of PET bottles is PET resin imported in the form of pellets from Mexico and Brazil. The principal suppliers of PET resin for the Edasa Packaging Division are Voridian Arg. SRL, Rhodia Ster LTD, Invista SARL, Far Eastern Textile LTD and Nan Ya. In 2005, the Edasa Packaging Division’s costs for PET resin accounted for 95.6% of the total variable cost of its sales of PET bottles.

     Marketing

     We and The Coca-Cola Company jointly promote and market Coca-Cola soft drinks in our franchise territories, in accordance with the terms of our respective bottler agreements. During 2005, we paid approximately 50% of the advertising and promotional expenses incurred by The Coca-Cola Company in our franchise territories. Nearly all media advertising and promotional materials for Coca-

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Cola soft drinks are produced and distributed by The Coca-Cola Company. See “Item 7. Major Shareholders and Related Party Transactions—Bottler Agreements.”

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

     We believe that the implementation of our channel marketing strategy also enables us to respond to competitive initiatives with channel-specific responses as opposed to market-wide responses. This focused response capability isolates the effects of competitive pressure in a specific channel, thereby avoiding costlier market-wide responses. Our channel marketing activities are facilitated by our management information systems. We have invested significantly in creating such systems, including in hand-held computers to support the gathering of product, consumer and delivery information required to implement our channel marketing strategies effectively for most of our sales routes in Chile, Brazil and Argentina. We will continue investing to increase pre-sale coverage in certain of our new territories.

     Marketing Expenditure. Our consolidated total marketing and advertising expenditures in 2005 were Ch$15,322 million.

     Retailer Incentive Programs

     We have implemented incentive programs to provide retailers with commercial refrigerators for the display and cooling of soft drink products and for point-of-sale display materials. We seek, in particular, to increase the distribution of coolers among retailers to magnify the visibility and consumption of our products and to ensure that they are sold at the proper temperature. Sales promotions include sponsorship of community activities, sporting, cultural and social events, and consumer sales promotions such as contests, sweepstakes and product giveaways.

     Advertising

     We advertise in all major communications media. We focus our advertising efforts on increasing brand recognition by consumers and improving our customer relations. National advertising campaigns are designed and proposed by The Coca-Cola Company’s local affiliates, with our input at the local or regional level.

2. Other Beverages

     Chile. In addition to Coca-Cola soft drinks, through Vital, we produce and sell juices and waters in Chile. Juices are produced and sold under the brands Andina Frut, Andina Néctar, Andina Hi-C and Kapo. Waters are produced and sold under the brands Vital (Vital mineral water), Dasani (unflavored purified water) and Dasani Citrus (flavored purified water).

     Brazil. We distribute beer under the Kaiser, Bavaria, Heineken, Santa Cerva and Xingu labels. We also distribute mineral water under the Bonaqua and Caxambu labels and sell and distribute ready-to-drink juices under the Kapo brand name, energy drinks under the Burn brand name and Nestea iced tea.

     Argentina. We distribute ready-to-drink juices under the Hi-C and Cepita brand names, which compete with other recognized brands such as Ades and Baggio. We also produce and sell mineral water under the Kin brand name (with and without gas) and soda Kin, which compete with well-known brands

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such as Villavicencio, Eco de Los Andes and Glaciar. During 2005, we launched Cepita flavored waters aimed towards the segment developed by the brands, Ser, Villa del Sur and Magna.

     The trademarks “Andina Frut”, “Andina Néctar”, “Andina Hi-C”, “Kapo”,”Cepita”, “Kin”, “Bonaqua”, “Vital” and “Dasani” are owned by The Coca-Cola Company. We produce and/or sell non-soft drink beverages bearing these trademarks under bottling agreements with The Coca-Cola Company.

     Juices and Waters in Chile

     Through Vital, we compete in the fruit juice, nectar, mineral mineral water and purified water segments of the beverage market in Chile. Vital sells non-soft drink beverage products under six different brand names: Andina Frut (natural fruit juices), Andina Néctar (fruit nectars), Andina Hi-C (fruit refreshment with vitamins), Kapo (artificially flavored fruit drinks), Vital (mineral water) and Dasani (flavored and unflavored purified water ).

     Sales. In 2005, net sales of juices and mineral water in Chile represented 7.3% of our consolidated net sales. On a consolidated basis, sales of juices and mineral water in Chile were Ch$34,763 million, reflecting additional revenue we received from Vital’s sales to third parties together with Andina’s operating margin realized from the sale and distribution of these products. During 2005, the juice and mineral water industry in Chile experienced a 19.0% increase in sales volume.

     The following table sets forth for the periods indicated, Vital’s net sales and sales by volume of unit cases of juices and mineral water:

Juices and Mineral Water Sales by Net Sales and Volume⁽¹⁾

	Year-ended December 31,
	2005				2004				2003
	(in millions of Ch$ and UCs)
Andina Frut	Ch$	7,039	4.1	UCs	Ch$	6,993	4.0	UCs	Ch$	6,933	3.7	UCs
Andina Néctar		5,836	3.6			5,418	3.2			5,293	3.0
Kapo		3,573	2.8			3,862	3.0			4,205	3.2
Andina HI-C		581	0.3			683	0.4			844	0.4
Dasani (Purified Water ).		1,979	1.6			—	—			—	—
Vital (mineral water)		8,945	9.5			8,995	9.4			8,687	8.6
Total(2)	Ch$	27,953	21.9	UCs	Ch$	25,951	20.0	UCs	Ch$	25,962	18.9	UCs

(1)	Reflects the sale of Vital to bottlers of The Coca-Cola Company.
(2)	Includes sales to related companies which is eliminated upon consolidation.

     Marketing. Marketing and promotional programs, including television, radio and print advertising, point-of-sale advertising, sales promotions and entertainment are developed by The Coca-Cola Company for all Vital products.

     Customers and Distribution. Vital juices and waters throughout Chile are distributed by means of distribution agreements between us and two other Coca-Cola bottlers. In 2005, Andina distributed approximately 55% of Vital’s products, and the other two Coca-Cola bottlers in Chile distributed an aggregate of 45%. Each Coca-Cola bottler in Chile distributes Vital products in its respective franchise territory. Under Vital’s distribution arrangements, each bottler has the exclusive right to distribute juices and mineral water in its territory and each agrees not to distribute competing products.

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     Our management believes that our distribution arrangements for juices and mineral water provide an effective means of distributing those products throughout Chile using the extensive distribution system of the Coca-Cola bottlers. We have a good working relationship with the Coca-Cola bottlers that distribute juices and waters. If any Coca-Cola bottler were to cease distribution, our management believes it could arrange alternative distribution arrangements, but the transition to the new arrangements could involve significant delays in distributing products and would involve additional costs and an initial reduction in sales.

     Competition. Vital’s principal competitor regarding waters is Cachantún, and regarding juices, Watt’s juices, Corpora Tres Montes and four of the leading dairy producers in Chile: Soprole S.A., Loncoleche S.A., Nestlé Chile S.A. and Parmalat. Watt’s and Loncoleche are both subsidiaries of Santa Carolina S.A. The Chilean market for fruit-flavored beverages also includes low-cost, lower-quality fruit juice concentrates and artificially flavored powdered beverage mixes. We do not consider these products to compete with our juice and water business because we believe that these products are of lower quality and value.

     Based on reports by A.C. Nielsen, we estimate that in 2005, our market share within our Chilean franchise territories reached 10% for Kapo, 14% for Andina Nectar, 12% for Andina Frut, and 29% for Vital mineral water.

     Raw materials. The principal raw materials used by Vital in the production of juices and waters are sweetener, fruit pulps and juices, flavors and aromas, and citric acid. Production of carbonated mineral water and purified water requires carbon dioxide gas. In 2005, the cost of raw materials, including packaging, accounted for 82% of the total cost of sales for Vital juices and mineral water and purified water. As a percentage of total Vital raw material costs, the cost of fruit pulp and juices accounted for 8.3%, sugar and artificial sweeteners for 6.1%, flavors aromas and citric acid for 21.3%, containers for 35.1%, packaging material for 5.2%, and carbon dioxide gas for 0.3%.

     Beer, Juices and Mineral Water in Brazil

     Sales. In 2005, net sales of beer, juices, mineral water, iced tea and energy drinks in Brazil were Ch$13,698 million, representing 2.9% of our consolidated net sales.

     Refrescos uses its distribution system to distribute beer in the Brazilian territory. Refrescos started distributing beer in the 1980s as a result of the acquisition of Kaiser by a consortium of Coca-Cola bottlers (including Refrescos) in Brazil. In March 2002, the Canadian brewing company Molson Inc. acquired Cervejarias Kaiser S.A. (“Kaiser”), in which Refrescos indirectly owned a 3.8% interest.

     Refrescos buys beer from Kaiser at a price determined by Kaiser and resells it to its customers at a fixed margin. In the case of certain discount sales that have been approved by Kaiser, Kaiser shares 50% of the cost of such discounts. In 2005, Refrescos’ net sales of beer were Ch$7,659 million, of which Kaiser brand beer accounted for 26%, Santa Cerva for 4%, Bavaria for 71%, Heineken for 6% and Xingu for 20% of net sales.

     Competition. In the beer sector, Refrescos’ main competitor is Ambev. According to A.C. Nielsen, beer sold by Kaiser and Ambev accounted for 2.4% and 78%, respectively, of the total sales of beer by volume in the Brazilian territory in 2005.

     The Distribution Agreements. On March 19, 2002, The Coca-Cola Company, Kaiser, Molson Inc. and the Brazilian Association of Coca-Cola Manufacturers or AFBCC (all distributors, including Refrescos, were represented by AFBCC) entered into an agreement which sets forth the general principles and obligations that will be applied by Kaiser and its distributors, including Refrescos, in the distribution of beer bottled or imported by Kaiser through the Coca-Cola distribution system for a twenty year period,

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which can be renewed for another 20-year period. On May 30, 2003, Kaiser and its distributors executed a new twenty-year distribution agreement which is renewable for another twenty-year period.

     Refrescos is not allowed to produce, bottle, sell or obtain any interest in any bottled or tap beer under any other label or in any bottle or packaging that could be confused with brand beers, except as may be mutually agreed in writing between Refrescos and Kaiser.

     Under the terms of the Kaiser distribution agreement, Kaiser assumes all responsibility for planning and managing advertising, marketing and promotional activities related to Kaiser beer brands. Refrescos, however, is free to undertake marketing or promotional activities with Kaiser’s prior approval. The parties have agreed to assume joint responsibility for the costs of certain promotional activities (radio or television) and for certain outdoor events which take place in the Rio de Janeiro region. Refrescos has agreed to devote at least 3% of its gross sales (net of taxes) of Kaiser products to such promotional activities or events.

     Refrescos is prohibited from assigning, transferring, or otherwise encumbering the Kaiser distribution agreement or any interest therein for the benefit of third parties without prior written consent from Kaiser. Kaiser may terminate the Kaiser distribution agreement immediately in the event that Refrescos (i) declares bankruptcy, is made a party to bankruptcy proceedings or is placed under judicial administration, (ii) is dissolved or liquidated or its assets are nationalized, expropriated, attached or intervened, (iii) undergoes a change of business or of control, (iv) ceases to be a franchisee of The Coca-Cola Company or (v) causes a material breach of the Kaiser distribution agreement. In addition, Kaiser may terminate the Kaiser distribution agreement three months after delivery of notice that Refrescos is not complying with any other terms thereof. Refrescos may terminate the Kaiser distribution agreement in the event of a material breach thereof by Kaiser.

3. PET Packaging

     Overview and Background

     The Edasa Packaging Division was established in 1987 by The Coca-Cola Company and Cía. Argentina Belga S.A., and was acquired by us as part of transactions with The Coca-Cola Company in December 1996. On January 1, 2003, Cipet was merged into Edasa and became Edasa’s packaging division. In 2005, the Cipet division was one of the largest producers of PET products in Argentina. In Brazil, we and Continental established Solução PET as a 50/50 joint venture with total capital of US$34.5 million. This joint venture was terminated on March 31, 2000 by mutual agreement and the operations of Solução PET were discontinued. See “––Part A. History and Development of the Company—History—PET Joint Venture.”

     We produce PET bottles in both returnable and non-returnable formats. The Coca-Cola Company acquired the exclusive right to use certain PET technology from Continental in 1991 and has sub-licensed that technology to certain PET-manufacturers that produce Coca-Cola PET bottles, including Envases CMF in Chile and the Cipet in Argentina. The sublicenses held by Cipet (now Edasa’s packaging division) and CMF Envases expire in December 2006. We cannot assure you that the sublicenses will be renewed after their expiration. As a returnable packaging material, PET is considered superior to glass because it is lightweight, difficult to break, transparent and easily recyclable. In the markets where it has been introduced, PET packaging has almost entirely replaced glass for manufacturing returnable bottles. On average, returnable PET bottles can be used up to 12 times. Non-returnable PET bottles also are produced in various sizes and are used by a variety of soft drink producers and, in Chile, by producers of edible oil products.

     Sales. In 2005, the Edasa Packaging Division had net sales of Ch$26,837 million with sales to affiliates representing 55% of such sales. The Edasa Packaging Division also sold PET bottles to third

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parties accounting for approximately Ch$12,037 million or 45% of the Edasa Packaging Division’s net sales.

     Competition. We are a supplier of returnable PET bottles for Coca-Cola bottlers in Argentina and Chile and, under the terms of our PET contracts with such bottlers, we may produce returnable PET bottles only for Coca-Cola bottlers. Due to pre-existing agreements between The Coca-Cola Company and other Coca-Cola bottlers throughout South America, we must obtain the consent and assistance of The Coca-Cola Company to expand our sales of returnable PET bottles.

     In Chile, we have two principal competitors in the non–returnable PET bottles market: Strong Chemicals Ltda., the principal Chilean manufacturer of polyvinyl chloride or PVC plastic bottles for edible oils, and Plasco S.A., the exclusive supplier of PET bottles for ECUSA.

     In Argentina, we compete principally with Amcor (formerly Schmalbac-Lubeca) that bought Alusud S.A., which we refer to as Alcoa, in Argentina and also bought Schmalbac-Lubeca in Brazil. Another competitor in Argentina is Alpla S.A. The Edasa Packaging Division is the exclusive supplier of returnable PET bottles to all Coca-Cola bottlers in Argentina, Paraguay and Uruguay. In Brazil, Solução PET, which commenced operations in January 1997, was the exclusive supplier for all PET bottle requirements of Refrescos until March 31, 2000, when its operations were discontinued. Since April 2000, Refrescos has purchased all its PET packaging from Braspet, a Brazilian PET bottle manufacturer. Since 2003, Refrescos has purchased 60% of its PET packaging needs from Amcor, a global PET bottle manufacturer, and 40% from the Edasa Packaging Division.

     In addition, various bottle manufacturers produce returnable PET bottles in Chile and other South American countries for competitors of The Coca-Cola Company, and numerous manufacturers in various countries produce non-returnable PET bottles for beverages and other products.

4. Patents and Licenses

     The Company has entered into Bottling Agreements with The Coca-Cola Company, by which it has the license to produce and distribute Coca-Cola brand products within its operating franchise territories in Chile, Brazil and Argentina. The Company’s operations are highly dependent on maintaining and renewing the Bottler Agreements which provide for the production and distribution of Coca-Cola brand products. The duration, renewal and maintenance terms of the Bottler Agreements are set forth in “Item 7 — Major Shareholders and Related Party Transactions — Bottler Agreements.”

5. Regulation

     General

     We are subject to the full range of government regulations generally applicable to companies engaged in business in our franchise territories, including but not limited to labor, social security, public health, consumer protection, environmental, sanitation, employee safety, securities and anti-trust laws. Currently, no material legal or administrative proceedings are pending against us with respect to any regulatory matter in any of our franchise territories except those listed as such in “Item 8. Financial Information—Legal Proceedings.” We believe, to the best of our knowledge, that we are in compliance in all material respects with applicable statutory and administrative regulations relating to our business in each of our franchise territories.

     Chile. There are no special licenses or permits required to manufacture and distribute soft drinks and juices in the Chilean territory. Food and beverage producers in Chile, however, must obtain authorization from (and their activities are subject to supervision by) the Chilean Environmental Protection Services (Servicio Sanitario Metropolitano del Ambiente), which inspects plants and takes liquid samples for analysis on a regular basis. Our permit from the Chilean Environmental Protection

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Authority was obtained on January 8, 1992 and is in effect indefinitely. In addition, production and distribution of mineral water is subject to special regulation such that mineral water may be drawn only from sources designated for such purpose by presidential decree. Certification of compliance with such decree is provided by the National Health Service today the Undersecretary’s Office of the Ministry of Health (Servicio de Salud Metropolitano del Ambiente). Our mineral water production facilities have received the required certification.

     Brazil. Labor laws, in addition to mandating employee benefits, include regulations to ensure sanitary and safe working conditions in our production facilities located in Brazil. Food and beverage producers in Brazil must register their products with and receive a ten-year permit from the Ministry of Agriculture and Provisioning and the Ministry of Health, which oversees diet products, which we together refer to as the Ministries. Our permits from the Ministries are valid and in force for a term of ten years for each product we produce. Although we cannot assure you that they will be renewed, we have not experienced any material difficulties in renewing our permits in the past nor do we expect to experience any difficulties in the future. The Ministries do not regularly inspect facilities but sends inspectors to investigate any complaints it receives.

     Argentina. While most laws applicable to Edasa are enforced at the federal level, some, such as sanitary and environmental regulations, are primarily enforced by provincial and municipal governments. There are no licenses or permits required for the manufacture or distribution of Coca-Cola soft drinks in the Argentine territory. However, our production facilities are subject to registration with federal and provincial authorities and to supervision by municipal health agencies, which certify compliance with applicable laws.

     Environmental Matters

     It is our policy to conduct environmentally sound operations on a basis consistent with applicable laws and with criteria established by The Coca-Cola Company. Although regulation of matters relating to the protection of the environment is not as well-developed in the franchise territories as in the United States and other industrialized countries, we expect that additional laws and regulations may be enacted in the future with respect to environmental matters that may impose additional restrictions on us which could materially or adversely affect our results of operations in the future. There are no material legal or administrative proceedings pending against us in any of the franchise territories with respect to environmental matters, and we believe that, to the best of our knowledge, we are in compliance in all material respects with all environmental regulations applicable to us.

     Chile. The Chilean government has several regulations governing environmental matters relating to our operations. For instance, Law 3,133 regulates discharge of residual industrial waste, and the Sanitary Code contains provisions relating to liquid and solid waste disposal, basic environmental conditions in the workplace, and the protection of water for human consumption. On February 23, 1993, the Chilean government published regulations that updated the provisions of Law 3,133. These regulations place limits on the disposal of harmful substances which may be hazardous to water used in irrigation or water for consumption by people or animals without prior authorization from the Ministry of Public Works and a favorable determination from the Superintendency of Sanitary Services. The regulations also mandate governmental approval of any systems to treat or discharge liquid industrial waste (regulated by Supreme Decree 90 for discharges to open courses and by Supreme Decree 609 for discharges to sewage collectors). In December 1996, we completed a new liquid industrial waste treatment plant to comply in advance with Chilean liquid waste emissions standards, which have been in effect since August 1998.

     Law 19,300, passed in March 1994, addresses general environmental concerns that may be applicable to our activities and which, if applicable, would require us to hire independent experts to conduct environmental impact studies or declarations of any future projects or activities that could be

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impacted by the regulations of Law 19,300. Law 19,300 creates the National Commission on the Environment, which is supported by regional commissions to supervise environmental impact studies and declarations for all new projects, to enforce the regulations of Law 19,300 and to grant discretionary power to regulators. There can be no assurance that future legislative regulatory developments will not impose further restrictions that would be material to our operations in Chile.

     During October of 2005, following pre-certification and certification procedures developed through audits carried out by a third party (SGS), the Company was recommended for the ISO 14001. As a result, the production facility located in Santiago, Chile, has achieved the four Quality System Certifications, Nourishing Security, Environment and Security and Occupational Health, the first plant in Latin America to obtain this achievement.

     During 2003, the plants of Rengo, Carlos Valdovinos and Vital certified for their production processes, Hazard Analysis and Critical Control Point (“HACCP”) system under the Codex Alimentarius.

     We believe that, to the best of our knowledge, we are in compliance, in all material respects, with Chilean environmental standards.

     Brazil. Our Brazilian operations are subject to several environmental laws, none of which currently impose substantial restrictions on us. The Brazilian Constitution establishes the broad guidelines for the new treatment of environmental concerns, dedicating an entire chapter (Chapter VI, Article 225) to the protection of the environment, along with several other articles related to the environmental law and urban law. Environmental issues are regulated at the federal, state and municipal levels and the Brazilian Constitution empowers the public authorities to develop regulations designed to preserve and restore the environment and to control industrial processes that affect human life. Violations of these regulations are subject to criminal, civil and administrative penalties.

     In addition, Law No. 6,938 of August 31, 1981, known as the Brazilian Environmental Policy, introduced an entirely different environmental regime. There is no longer any environmental damage that is exempt from coverage. The legislation is based on the idea that even a polluting waste tolerated under the established standards could cause environmental damage, and therefore subjects the party causing such damage to payment of an indemnity. Moreover, as mentioned above, activities damaging to the environment lead to criminal and administrative penalties, provided for in Law 9,605 of February 12, 1998 or the Environmental Crimes Act.

     Numerous governmental bodies have jurisdiction over environmental matters. At the federal level, the Ministério do Meio Ambiente (the environmental ministry) and the Conselho Nacional do Meio-Ambiente or CONAMA dictate environmental policy, including, without limitation, initiating environmental improvement projects, establishing a system of fines and administrative penalties and reaching agreements on environmental matters with offending industries. The Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis or IBAMA enforces environmental regulations set by CONAMA. In addition, various federal authorities have jurisdiction over specific industrial sectors, but none of these currently affect us. Finally, various state and local authorities regulate environmental matters in the Brazilian territory including the Fundação Estadual de Engenharia do Meio-Ambiente or FEEMA, the principal environmental authority in Rio de Janeiro and the Instituto Estatal del Medio Ambiente y Recursos Hídricos or IEMA, the principal environmental authority in Espiritu Santo. FEEMA and IEMA periodically inspect industrial sites and tests liquid waste for contamination. We believe to the best of our knowledge that we are in compliance in all material respects with the standards established by all the governmental authorities applicable to our operations in Brazil. We cannot assure you, however, that additional regulations will not be enacted in the future, and that such restrictions would not have a material effect on our results or operations.

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     Argentina. The Argentine Constitution, as amended in 1994, allows any individual who believes a third party may be damaging the environment to initiate an action against it. No such action has ever been instituted against us, but we cannot assure you that an action will not be brought in the future. Though provincial governments have primary regulatory authority over environmental matters, municipal and federal authorities are also competent to enact laws on environmental issues. Thus, municipalities are competent on local environmental matters, such as waste management, while the federal government regulates interprovincial environmental issues, such as transport of hazardous waste or environmental matters covered by international treaties.

     On July 2002, the National Congress enacted federal Law No. 25,612, Gestión Integral de Residuos Industriales y de Actividades de Servicios (Integral Management of Industrial Residues and Service Activities) and on November, 2002, Law No. 25,675, Ley General del Ambiente (General Environmental Law) establishing minimum guidelines for the protection of the sustainable environmental management and the protection of biodiversity, applicable throughout Argentina. The law establishes the purposes, principles and instruments of the national environmental policy, the concept of “minimum guidelines,” the judicial competence and the rules governing environmental education and information, citizens’ participation and self-management, among other provisions.

     Provincial governments within the Argentine territory have enacted laws establishing a framework for the preservation of the environment (Law No. 7,343 in Córdoba, Law No. 5,961 in Mendoza and Law No. 11.717 in Santa Fe). These laws contain principles on environmental policy and management, as well as rules on environmental impact assessment. They also give certain agencies competence in environmental issues.

     Almost all provinces as well as many municipalities have enacted laws regarding the use of water, the sewage system and the disposal of liquids into underground flows of water or rivers. There are currently no claims pending against us on this matter. The violation of these laws usually results in fines.

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C. Organizational Structure

     The following table presents information relating to our ownership interest and the percentage of our consolidated total net revenues represented by our principal subsidiaries as of December 31, 2005.

Operating		Country of	Percentage
Subsidiaries	Activity	Incorporation	Ownership
Vital S.A.	Operation of industrial facilities engaged in the manufacture, production, processing, distribution and marketing in general of all food products and particularly of all kinds of juices.	Chile		99.99
Vital Aguas S.A.	Operation of industrial facilities engaged in the manufacture, production, processing, distribution and marketing in general of all food products and particularly of all kinds of mineral and purified water.	Chile		56.50
Servicios Multivending Ltda.	Retail sale of consumer products through automatic vending machines.	Chile		99.99
Transportes Andina Refrescos Ltda.	Provision and exploitation of and management of national and international land transportation	Chile		99.99
Río de Janeiro Refrescos Ltda.	Production and sale of alcoholic and non-alcoholic beverages, mineral water, nectars, syrups, powdered juices and other related semi processed products as well as any related operations.	Brazil		99.99
Embotelladora del Atlántico S.A.	Production, bottling, distribution and sale of non-alcoholic beverages, design, production and sale of plastic products derived from the plastic industry, mainly in the packaging area.	Argentina		99.99
Abisa Corp. S.A.	Investment company.	British Virgin Islands		99.99

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The following chart represents the Company’s direct and indirect ownership participations in subsidiaries and affiliates:

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D. Property, Plants and Equipment

     We maintain production plants in each of the principal population centers that comprise the franchise territories. In addition, we maintain distribution centers and administrative offices in each of the franchise territories. The following table sets forth in square meters, our principal properties and facilities in each of the franchise territories:

		Size
Location	Principal Use	(m2)
Chile:
Santiago	Offices; Coca-Cola soft drinks production; Warehouse		99,512
Renca	Warehouse		265,988
Rancagua	Warehouse; Storage		24,061
San Antonio	Warehouse; Storage		19,842
Renca	Offices; Juice production		40,000
Rengo	Mineral water production		12,375
Brazil:
Itaoca	Warehouse		76,866
Bangú	Warehouse		44,614
Jacarepaguá	Offices; Coca-Cola soft drinks production; Warehouse; Land		248,375
Cachoeiro do Itapemirim	Warehouse		8,000
Vitória	Warehouse; Coca-Cola soft drinks production		93,320
Itambi	Warehouse		131,420
Cabo Frio	Warehouse		1,985
Campos	Warehouse		24,200
Nova Iguaçú	Warehouse		79,958
Argentina:
Mendoza	Offices; Warehouse		41,579
San Juan	Warehouse; Offices		48,036
San Luis	Warehouse; Offices		6,069
Rosario (Santa Fe)	Offices; Warehouse		28,070
Santo Tomé (Santa Fe)	Offices; Warehouse		89,774
Córdoba	Offices; Coca-Cola soft drinks production; Warehouse		923,360
Río IV	Warehouse; Offices		7,482
Buenos Aires	Offices; PET bottle production		27,043

     We own all of our properties which are not subject to material encumbrances.

Capacity by Line of Business

     Set forth below is certain information concerning the installed capacity and approximate average utilization of our production facilities, by line of business.

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	Year Ended December 31,
	2005						2004
					Capacity						Capacity
					Utilization						Utilization
	Annual		Average		During		Annual		Average		During
	Total		Capacity		Peak		Total		Capacity		Peak
	Installed		Utilization		Month		Installed		Utilization		Month
	Capacity		(%)		(%)		Capacity		(%)		(%)
Coca-Cola soft drinks (millions of UCs):
Chile		151		67		86		151		65		86
Brazil		204		72		86		204		66		83
Argentina		129		79		92		129		73		90
Other Beverages (millions of UCs)		45		48		69		45		44		63
PET packaging (millions of bottles)		639		93		100		639		93		100

     Total installed annual production capacity assumes production of the mix of products and containers produced in 2005. In 2005, we continued to modernize and renovate our manufacturing facilities in order to maximize efficiency and productivity. At present, we estimate we have the capacity in each of the franchise territories to meet consumer demand for each product format. Because bottling is a seasonal business with significantly higher demand during the South American summer and because soft drinks are perishable, it is necessary for bottlers to carry significant over-capacity in order to meet the substantially greater seasonal demand. We maintain quality control laboratories at each production facility where raw materials are tested and soft drink samples are analyzed.

     As of December 31, 2005, we had total installed annual production capacity, including soft drinks, fruit juices and mineral water, of 529 million unit cases. Our primary facilities include:

• one soft drink production facility with eight production lines in the Chilean territory, with total installed annual capacity of 151 million unit cases (29% of our total installed annual capacity);

• through Vital in the Chilean territory, one fruit juice production facility, with six production lines and one mineral water production facility with four production lines, with total installed annual capacity of 45 million unit cases (8% of our total installed annual capacity);

• two soft drink production facilities with eleven production lines in the Brazilian territory with total installed annual capacity of 204 million unit cases (39% of our total installed annual capacity); and

• one soft drink production facility with seven production lines in the Argentine territory with a total installed annual capacity of 129 million unit cases (24% of our total installed annual capacity).

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not Applicable

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Basis of Presentation

     The following discussion should be read in conjunction with and is qualified in its entirety by reference to the Consolidated Financial Statements, including the notes thereto. We prepare our financial statements in accordance with Chilean GAAP, which differs in certain important respects from U.S. GAAP. Note 28 of the notes to the Consolidated Financial Statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of net income and total shareholders’ equity.

     Chilean GAAP requires that financial statements recognize the effects of inflation. Accordingly, all of our financial information, unless otherwise indicated, has been restated to eliminate the distorting effects of changes in the purchasing power of the Chilean peso on non-monetary assets and liabilities and shareholders’ equity, such that all such information is presented in comparable monetary terms. The general price-level gain or loss reflected in the income statement indicates the effect of inflation on our net holdings of monetary assets and liabilities during a period of inflation. Assets and liabilities are considered “monetary” for purposes of general price-level accounting if their amounts are fixed by contract or otherwise in terms of number of currency units, regardless of changes in specific prices or in the general price level. Examples of “monetary” assets and liabilities include accounts receivable, accounts payable and cash.

     Income reported on a U.S. GAAP basis differs from that reported in accordance with Chilean GAAP principally due to basic differences in property, plant and equipment, accounting for deferred income taxes, acquisition through the issuance of shares, difference in accounting for investments in related companies and different goodwill amounts, difference in accounting for translation adjustment of foreign investments, difference in joint venture accounting, and differences in amortization periods for goodwill. The effect of inflation accounting under Chilean GAAP has not been reversed in the reconciliation to U.S. GAAP. See Note 28 of the notes to the Consolidated Financial Statements.

Factors Affecting Comparability

     During 2005, there were no changes in the application of Chilean GAAP as compared to the previous year that could materially affect the comparability of the financial statements.

Critical Accounting Estimates

     Discussion of critical accounting estimates

     In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of our results of operations and financial position in the preparation of financial statements in conformity with Chilean GAAP and U.S. GAAP (with respect to the reconciliation of net income and shareholders’ equity and additional disclosures required by U.S. GAAP). We cannot assure you that actual results will not differ from those estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates and assumptions about the effect of matters that are inherently uncertain. For a more detailed discussion of accounting policies significant to our operations, please see Note 1 to our Consolidated Financial Statements.

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     Allowance for doubtful accounts

     We evaluate the collectibility of our trade accounts receivable based on a number of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, a specific reserve for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific identification of potential bad customer debts, bad debt charges are recorded based on, among other factors, our recent loss history and an overall assessment of past due trade accounts receivable outstanding. As of December 31, 2005, our accounts receivable balance was Ch$65,127 million, net of allowances for doubtful accounts of Ch$1,861 million. Historically, on a consolidated basis, doubtful accounts have averaged less than 1% of consolidated net sales.

     Property, plant and equipment

     Property, plant and equipment (excluding the technical reappraisal that occurred in 1979 which was eliminated in the reconciliation to U.S. GAAP) is recorded at cost plus price-level restatements and is depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in circumstances such as technological advances, changes to our business model or changes in our capital strategy could result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of property, plant and equipment should be shortened, we would depreciate the net book value in excess of the estimated salvage value over its revised remaining useful life. Factors such as changes in the planned use of manufacturing equipment, vending equipment, transportation equipment or software could result in shortened useful lives. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The estimate of future cash flow is based upon, among other things, certain assumptions about expected future operating performance. Our estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions and changes to our business model or changes in operating performance. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the asset, the asset will be written down to its estimated fair value. Free cash flows in Brazil and Argentina discounted at a rate of 12% resulted in a higher result than the amount for the corresponding assets (including goodwill) of the Company’s Brazilian and Argentine subsidiaries. Had discounted cash flows been reduced by 15%, the resulting amount would still be sufficient to cover the amount of the corresponding asset.

     Goodwill and other intangible assets

     Goodwill and other intangible assets are recorded at cost plus price-level restatements and are amortized, principally on a straight-line basis, over the estimated future periods benefited (not exceeding 20 years). Intangible assets consist primarily of bottling and distribution rights in specific territories. Goodwill and other intangible assets are periodically reviewed for impairment whenever events or changes occur that indicate the carrying value of the business or assets to which they relate may not be recoverable. As such events or changes occur, management estimates the future cash flows expected to result from the use and, if applicable, the eventual disposition of the assets and related goodwill. The key variables which management must estimate include sales volume, prices, marketing expenses and other economic factors. Significant management judgment is involved in estimating these variables, and they include inherent uncertainties; however, the assumptions used are consistent with our internal planning. Therefore, management periodically evaluates and updates the estimates based on the conditions that influence these variables. If such assets are considered impaired, they are written down to fair value as appropriate. In 2001, we adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” for the purposes of U.S. GAAP reporting. We performed the impairment tests of our goodwill and concluded that no impairment charge was necessary.

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     Deferred tax assets

     We record a valuation allowance to reduce the carrying value of our deferred tax assets to an amount that is more likely to be realized. While we have considered future taxable income and prudent and feasible tax planning strategies in assessing the need for the valuation allowance, should we determine that it would not be possible to realize all or part of net deferred tax assets in the future, an adjustment to the carrying value of the deferred tax assets would be charged to income in the period in which such determination was made.

     Liability for deposits for bottles and cases

     We have a liability for deposits received for bottles and cases provided to our customers and distributors. The liability represents the deposit value that we may be required to remit upon receipt from the customer or distributor of the bottles and cases, in good condition, along with the original invoice. The liability is not subjected to price level restatements as per current agreements with customers and distributors. We estimate the liability for deposits based on an annual inventory of bottles sold to customers and distributors, estimates of bottles in circulation and a weighted average historical deposit value per bottle or case. Additionally, because the amount of bottles and cases has generally increased over time, the liability is presented as a long-term liability. Significant management judgment is involved in estimating the number of bottles in circulation, the deposit value that could be subject to redemption and the timing of disbursements related to this liability.

     Since February 2001, liability for deposits was changed to a system in which customers have five years from the date of invoicing to recover the deposit after returning the bottles and cases to us in good condition together with the original invoice. After that date, if the customer does not exercise the option, the Company is allowed to reverse the liability in accordance with Chilean GAAP. Due to the time elapsed since the adoption of this policy, no material adverse impact is expected with respect to any liability existing before February 2001.

A. Operating Results

Summary of Operations

     The Company primarily produces and distributes Coca-Cola soft drinks in Chile, Brazil and Argentina. In Chile, we also produce and distribute fruit juices, other fruit-flavored beverages and mineral water. In Brazil, we distribute beer, energy drinks, fruit-flavored beverages and Nestea iced tea; and in Argentina, we distribute fruit-flavored beverages and soda water. In addition, we produce PET bottles primarily for our own use and for sale to other Coca-Cola bottlers in Chile and Argentina.

     The following table sets forth, for the periods indicated, the net sales and operating income for the Company’s operations in Chile, Brazil and Argentina, respectively, expressed in each case in millions of Chilean pesos with purchasing power as of December 31, 2005, and as a percentage of consolidated net sales or operating income, as the case may be:

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	Year ended December 31,
	2005					2004					2003
	(amounts in millions of Ch$)
Net sales:
Chile	Ch$	219,881		46.0	%	Ch$	208,928		48.7	%	Ch$	206,186		50.2	%
Brazil		162,510		34.0			132,565		30.9			125,978		30.7
Argentina		100,937		21.1			91,121		21.3			80,895		19.7
Intercountry eliminations(1)		(4,856	)	(1.1	)		(3,965	)	(0.9	)		(2,256	)	(0.5	)
Total	Ch$	478,742		100.0	%	Ch$	428,649		100.0	%	Ch$	410,803		100.0	%
Operating income:
Chile	Ch$	46,495		59.7	%	Ch$	41,960		64.4	%	Ch$	39,507		78.0	%
Brazil		20,480		26.3			13,737		21.1			7,424		14.7
Argentina		10,933		14.0			9,453		14.5			3,721		7.3
Total	Ch$	77,908		100.0	%	Ch$	65,150		100.0	%	Ch$	50,652		100.0	%

(1) Eliminations represent intercompany sales and unrealized profits.

     The following table sets forth, for the periods indicated, the net sales and operating income contributed by each of our business segments, expressed in each case in millions of Chilean pesos with purchasing power as of December 31, 2005, and as a percentage of consolidated net sales or operating income, as the case may be:

	Year ended December 31,
	2005				2004				2003
	(amounts in millions of Ch$)
Net sales:
Soft drinks	Ch$	417,163	87.2	%	Ch$	374,369	87.3	%	Ch$	355,721	86.6	%
Other beverages(1)		49,272	10.3			43,956	10.3			43,123	10.5
Packaging		12,037	2.5			10,324	2.4			11,959	2.9
Total	Ch$	478,472	100.0	%	Ch$	428,649	100.0	%	Ch$	410,803	100.0	%
Operating income:
Soft drinks	Ch$	68,845	88.4	%	Ch$	57,558	88.4	%	Ch$	45,974	90.8	%
Other beverages(1)		6,958	8.9			5,616	8.6			3,926	7.7
Packaging		2,105	2.7			1,976	3.0			752	1.5
Total	Ch$	77,908	100.0	%	Ch$	65,150	100.0	%	Ch$	50,652	100.0	%

(1) Includes, in Chile, juices and mineral water; in Brazil, beer, water, energy drinks, Nestea products and fruit flavored juices; and in Argentina fruit flavored juices and water.

     The following table sets forth, for the periods indicated, information derived from our consolidated income statements, expressed in millions of Chilean pesos with purchasing power as of December 31, 2005:

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	Year ended December 31,
	2005					2004					2003
	(amounts in millions of Ch$)
Net sales	Ch$	478,472		100.0	%	Ch$	428,649		100.0	%	Ch$	410,803		100.0	%
Cost of sales		(287,395	)	(60.1	)		(262,784	)	(61.3	)		(262,515	)	(63.9	)
Gross profit		191,077		39.9			165,866		38.7			148,288		36.1
Administrative and selling expenses		(113,169	)	(23.7	)		(100,716	)	(23.5	)		(97,636	)	(23.8	)
Operating income		77,908		16.3			65,150		15.2			50,652		12.3
Non-operating income (expenses), net		(13,332	)	(2.8	)		(19,456	)	(4.5	)		(32,847	)	(8,0	)
Income taxes, minority interest (net)		(8,537	)	(1.8	)		(4,090	)	(1.0	)		(1,075	)	(0.3	)
Net income	Ch$	56,039		11.7	%	Ch$	41,604		9.7	%	Ch$	16,730		4.1	%

Results of Operations for the Years Ended December 31, 2005 and 2004

	Chile						Brazil						Argentina						Total(1)
	2005			2004			2005			2004			2005			2004			2005			2004
										(in millions of Ch$)
Net sales	Ch$	219,881		Ch$	208,928		Ch$	162,510		Ch$	132,565		Ch$	100,937		Ch$	91,121		Ch$	478,472		Ch$	428,649
Cost of sales		(128,426	)		(123,738	)		(97,091	)		(82,231	)		(66,735	)		(60,779	)		(287,395	)		(262,784	)
Gross profit		91,455			85,190			65,419			50,334			34,203			30,342			191,077			165,866
Administrative and selling expenses		(44,961	)		(43,230	)		(44,939	)		(36,597	)		(23,269	)		(20,888	)		(113,169	)		(100,716	)
Operating income	Ch$	46,494		Ch$	41,960		Ch$	20,480		Ch$	13,737		Ch$	10,933		Ch$	9,453		Ch$	77,908		Ch$	65,150

(1) The total does not equal the sum of all the franchise territories due to intercountry eliminations.

     Net Sales

     Our consolidated net sales in 2005 were Ch$478,742 million, representing a 11.6% improvement over the Ch$428,649 million recorded in 2004. The increase in 2005 was principally due to an increase of 7.1% in consolidated volume sales and a 4.3% increase in net sales per unit case in real terms, given price adjustments carried out in the three countries. Net sales of Coca-Cola soft drinks represented 87.2% of total Consolidated Net Sales, remaining stable compared to year 2004.

     In Chile, total net sales amounted to Ch$219,881 million in 2005, which shows a 5.2% increase when comparing to 2004. The increase of total net sales in Chile was as a result of a 4.7% increase in sales volume amounting to 135.5 million unit cases, and certain price adjustments. In year 2005, our average volume market share in the soft drink market in Chile increased from 67.6% in 2004 to 68.5% primarily due to our effective market strategies which maintain our strong competitive position. This has enabled us to continue increasing our average volume market share in addition to increasing our average value market share from 70.2% in 2004 to 71.0% during 2005.

     Soft drink net sales in Chile amounted to Ch$185,188 million during 2005, representing a 4.3% increase regarding the previous year, principally explained by a 3.8% increase of soft drink volumes.Net sales of fruit juices and water was Ch$34,763 million in 2005, showing an increase of 10.7% from 2004. This significant growth was led by an increase of sales volume of these segments, especially the Water category, with a 17.8% growth. During 2005, we successfully launched Dasani, purified water, in carbonated, non carbonated and flavored versions, which greatly contributed to this significant growth.

     In Brazil, net sales in 2005 reached Ch$162,510 million, 22.6% higher than in 2004. Net sales of Coca-Cola soft drinks in Brazil were Ch$148,813 million, representing a 22.9% increase compared to 2004. This increase is principally explained by the increase in soft drinks volume of 10.6% from 2004, reaching 153.7 million unit cases in 2005 as result of diverse market initiatives, such as launchings of family and individual formats, and a special focus on returnable formats that in the year 2005 represented

43

12.1% of total volume. Price adjustments carried out during 2005 in Brazil and exchange rates that benefited the figures conversion to Chilean GAAP, ended in an 11.1% increase of soft drink net sales per unit case. The 8.1% strengthen of the Chilean end of period exchange rate had a negative impact on the figures conversion to Chilean pesos, but the 16.1% average appreciation of the Brazilian real, over-compensated this effect.

     On the other hand, the Company’s beer, juice and mineral water operations in Brazil generated net sales in 2005 of Ch$13,698 million, representing a 19.5% increase from 2004. Net sales per unit case of the aggregate volume of beer, juice and mineral water grew 18.5% explained by price adjustments as well as by the positive effect of conversion of figures, already explained.

     In Argentina, net sales in 2005 were Ch$100,937 million, representing a 10.8% increase from 2004. This increase is principally explained by a higher total sales volume of 5.7% during 2005 and a 4.8% higher average net sales per unit case in real terms . Net sales per unit case expressed in Argentine pesos, increased by 16.0% (reflecting price increases in Argentina in real terms that were carried out during 2005) and which decreased due to the appreciation of the Chilean peso end of period Exchange rate (8.1%). Sales volume of Coca-Cola soft drinks in 2005 grew 6.3% from 2004, amounting to 99.2 million unit cases of soft drinks sold. This growth was driven mainly by the returnable formats that continued growing as a percentage of the total portfolio products, increasing from 43.7% of total sales volume in 2004 to 48.3% in 2005.

     Net sales of PET packaging in Argentina were Ch$12,037 million in 2005, representing an increase of 16.6% compared to 2004. Sales volume in 2005 were 27,330 tons of resin, which represents a slight increase of 1.4% compared to the 2004 sales volume.

     Cost of Sales

     Cost of sales were Ch$287,395 million in 2005, representing 60.1% of net sales, compared to Ch$262,784 million, or 61.3% of net sales in 2004. The decrease in cost of sales as a percentage of net sales in 2005 was principally due to the cost pressures that we observed during 2005 (that led to a 2.2% increase of the cost of sales per unit case in real terms), were lower than the price adjustments carried out in Chile, Brazil and Argentina. The costs that were mainly affected during 2005 were sugar and resin (dollar-denominated costs), which were compensated by effective negotiations and the average appreciations of 7.9% and 16.1% of the Chilean peso and the Brazilian real, respectively.

     For our Chilean operations, cost of sales represented 58.4% compared to 59.2% of Chilean net sales in 2004. For our Brazilian operations, cost of sales represented 59.7% of Brazilian net sales in 2005, compared to 62.0% in 2004. For the Argentine operations, cost of sales represented 66.1% of Argentine net sales in 2005, compared to 66.7% in 2004.

     Gross Profit

     Due to the aforementioned, gross profit in 2005 increased by 15.2%, reaching Ch$191,077 million, or 39.9% of net sales, compared to Ch$165,866 million, or 38.7% of net sales in 2004.

     Administrative and Selling Expenses

     Selling and administrative expenses amounted to Ch$113,169 million in 2005, this represented 23.7% of net sales for 2005 and a 12.4% growth with respect to the Ch$100,716 million in 2004, that represented 23.5% of net sales for that year. As a percentage of net sales, the Company’s Chilean operations recorded selling and administrative expenses of 20.4% in 2005, maintaining almost the same percentage as in the year 2004. Selling and administrative expenses in our Brazilian operations were 27.7% in 2005 compared with 27.6% in 2004 and the selling and administrative expenses in our Argentine operations were 23.1% in 2005 compared with 22.9% in 2004.

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     In Chile, selling and administrative expenses in 2005 increased by 4.0%, in Brazil 22.8%, and in Argentina 11.4% from 2004. These higher selling and administrative expenses are, in general terms, explained by increases in freight distribution expenses as a result of greater fuel prices and higher volumes. Higher selling and administrative expenses in Argentina were also due to increases in wages due to government decrees and strong pressures from labor unions. Higher selling and administrative expenses in Brazil were primarily due to the figure conversion effect, as a consequence of the higher appreciation of the real over the appreciation of end of period Chilean exchange rate.

     Operating Income

     As a consequence of the aforementioned, operating income increased 19.6% in 2005, amounting to Ch$77,908 million, or 16.3% of net sales, compared to Ch$65,150 million, or 15.2% of net sales in 2004.

     Non-operating Income (Expense), Net

     The following table sets forth, for the periods indicated, the items of non-operating income (expense), net:

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	As of December 31,
	2005			2004
	(millions of Ch$)
Financial income	Ch$	28,522		Ch$	24,156
Share of income from affiliated companies		769			1,024
Other non-operating income		7,313			848
Amortization of goodwill		(6,229	)		(7,186	)
Financial expenses		(21,112	)		(19,830	)
Other non-operating expenses		(7,738	)		(6,395	)
Price-level restatement and exchange gain (loss)		(14,857	)		(12,073	)
Non-operating income (expense), net	Ch$	(13,332	)	Ch$	(19,456	)

     Non-operating income (expense), net, was a loss of Ch$13,332 million in 2005, compared to a loss of Ch$19,456 million in 2004, representing a decrease of 31.5% in 2005 compared to 2004. The principal variances between 2005 and 2004 were the following:

• A greater financial income explained by an extraordinary profit from bond sales out of our investment portfolio, which was carried out at the beginning of 2005, in addition to the positive results obtained in cross currency swap agreements that are in effect since 2003 and 2004.

• A greater non-financial income, reflected in “Other Non-Operating Income”. This was a result of a one time profit obtained through shares sales.

     Income Taxes

     Income taxes in 2005 increased 109.2% to Ch$8,549 million compared to Ch$4,087 million in 2004. The increase is principally explained by:

• Increase in revenues in Brazil which resulted in higher taxable income.

• Increase in revenues in Chile which resulted in higher taxable income.

• Lower credits to results due differed taxes in Argentina, resulting from provisions constituted in 2004, coupled with a difference in income tax affecting Cipet that arose from litigation.

     Net Income

     As a result of the aforementioned, net income in 2005 was Ch$56,039 million, representing 11.7% of net sales and an increase of 34.7% compared to net income of Ch$41,604 million in 2004.

Results of Operations for the Years Ended December 31, 2004 and 2003

	Chile						Brazil						Argentina						Total(1)
	2004			2003			2004			2003			2004			2003			2004			2003
	(in millions of Ch$)
Net sales	Ch$	208,928		Ch$	206,186		Ch$	132,565		Ch$	125,978		Ch$	91,121		Ch$	80,895		Ch$	428,649		Ch$	410,803
Cost of sales		(123,738	)		(124,036	)		(82,231	)		(83,040	)		(60,779	)		(57,695	)		(262,784	)		(262,515	)
Gross profit		85,190			82,150			50,334			42,938			30,342			23,200			165,866			148,288
Administrative and selling expenses		(43,230	)		(42,643	)		(36,597	)		(35,514	)		(20,888	)		(19,479	)		(100,716	)		(97,636	)
Operating income	Ch$	41,960		Ch$	39,507		Ch$	13,737		Ch$	7,424		Ch$	9,453		Ch$	3,721		Ch$	65,150		Ch$	50,652

(1) The total does not equal the sum of all the franchise territories due to intercountry eliminations.

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     Net Sales

     Our consolidated net sales in 2004 amounted to Ch$428,649 million, representing a 4.3% improvement over the Ch$410,803 million recorded in 2003. The increase in 2004 was principally due to a 6.3% higher consolidated volume sales, together with a 1.9% decrease in net sales per unit case in real terms in Chile and a 6.1% appreciation of the Chilean peso compared to the U.S. dollar (that went from Ch$593.8 per U.S. dollar on December 31, 2003, down to Ch$557.4 per U.S. dollar on December 31, 2004. This appreciation affected the Brazilian and Argentine figures when converted through a lower exchange rate at year-end 2004. Our sales volume in 2004 increased 6.3% in comparison to 2003. Net sales of Coca-Cola soft drinks increased 5.2% during 2004, net sales of other beverages increased 1.9% and net sales of PET packaging decreased 13.7%, in each case, as compared to 2003.

     In Chile, net sales were Ch$208,928 million in 2004, representing a 1.3% increase compared to 2003. Net sales of Coca-Cola soft drinks in Chile in 2004 amounted to Ch$177,512 million, representing an increase of 1.4% compared to 2003. The increase in total Chilean net sales was due primarily to a 3.6% increase in volume sales, reaching 129.5 million unit cases, which was partially offset by a 1.9% decrease of net sales per unit case in real terms. During 2004, the average market volume share of our franchise in Chile grew from 66.7% in 2003 to 67.8%, principally due to market strategies focused on increasing consumption opportunities through an adequate pricing and format offerings for each occasion and type of consumer. This situation has enabled us to increase our average volume market share and also to increase our average value market share, which went from 69.0% in 2003 to 70.2% during 2004.

     Net sales of fruit juices and mineral water in Chile were Ch$31,416 million in 2004, representing an increase of 0.9% from 2003. This increase in net sales is explained by higher sales volume of 5.7%, which was offset by a 4.6% decrease in the average income per unit case of these products, due to marketing promotions developed during 2004 to deepen penetration of mineral water products.

     In Brazil, net sales in 2004 were Ch$132,565 million, 5.2% higher than in 2003. Net sales of Coca-Cola soft drinks in Brazil were Ch$121,098 million, representing a 5.5% increase compared to 2003. This increase is principally explained by an increase of soft drinks sales volume of 4.5% from 2003, reaching 133.5 million unit cases in 2004. Net sales per unit case increased 1% in 2004 as a result of price adjustments implemented in the same year. The 6.1% appreciation of the Chilean peso exchange rate versus the U.S. dollar had a negative effect on the conversion of the Brazilian figures to Chilean pesos.

     On the other hand, the Company’s beer, juice and mineral water operations in Brazil generated net sales in 2004 of Ch$11,467 million, representing a 2.7% increase from 2003. Net sales per unit case of the aggregate volume of beer, juice and mineral water grew 8.4% in real terms, offsetting the 5.3% decrease in volume sales of these beverages.

     In Argentina, net sales in 2004 were Ch$91,121 million, representing a 12.6% increase from 2003. This increase is principally explained by a higher total sales volume of 14.1% during 2004 that was partially offset by a drop in average income per unit case of 1.3% in real terms. Net sales per unit case expressed in Argentine pesos, increased 3.7% in real terms. This was partially offset by the effect on the figures conversion to Chilean pesos due to the Chilean exchange rate appreciation. Sales volume of Coca-Cola soft drinks in 2004 grew 14.3% from 2003, reaching 93.3 million unit cases. This growth was driven mainly by the returnable bottle format that, as in 2003, continued to grow as a percentage of the total products of the Company’s portfolio, increasing from 40% of total sales volume in 2003 to 43.7% in 2004.

     Net sales of PET packaging in Argentina were Ch$10,324 million in 2004, representing a decrease of 13.7% compared to 2003. Sales volume in 2004 was 11,527 tons of resin, which represents a decrease of 16.4% as compared to volume sales in 2003.

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     Cost of Sales

     Cost of sales were Ch$262,784 million in 2004, representing 61.3% of net sales, compared to Ch$262,515 million, or 63.9% of net sales in 2003. The decrease in cost of sales as a percentage of net sales in 2004 was principally attributable to effective negotiations which achieved better terms on anticipated raw material purchases (which offsets the resin price increase) and to the average appreciation of local currencies versus the U.S. dollar, which resulted in lower dollar-denominated costs. On average, during 2004, the Chilean peso appreciated by 12%, the Brazilian real by 6% and the Argentine peso by 1.6% in each case per U.S. dollar, as compared to 2003.

     For our Chilean operations, cost of sales represented 59.2% compared to 60.2% of Chilean net sales in 2003. For our Brazilian operations, cost of sales represented 62.0% of Brazilian net sales in 2004, compared to 65.9% in 2003. For the Argentine operations, cost of sales represented 66.7% of Argentine net sales in 2004, compared to 71.3% in 2003.

     Gross Profit

     Due to the aforementioned, gross profit in 2004 increased by 11.9%, reaching Ch$165,866 million, or 38.7% of net sales, compared to Ch$148,288 million, or 36.1% of net sales in 2003.

     Administrative and Selling Expenses

     Administrative and selling expenses increased 3.2% to Ch$100,716 million in 2004 (23.5% of 2004 net sales) compared to Ch$97,636 million in 2003 (23.8% of 2003 net sales). As a percentage of net sales, our Chilean operations had administrative and selling expenses of 20.7% in 2004, which is equivalent to the administrative and selling expenses recorded in 2003. Our Brazilian operations had administrative and selling expenses of 27.6% in 2004 compared to 28.2% in 2003 and our Argentine operations had administrative and selling expenses of 22.9% in 2004 compared to 24.1% in 2003.

     In Chile, administrative and selling expenses in 2004 increased 1.4%, in Brazil 3.1%, and in Argentina 7.2% compared to 2003. These increases are principally explained by higher marketing expenses and increased sales volume in our franchise territories, which translates into higher distribution and freight costs.

     Operating Income

     As a consequence of the aforementioned, operating income increased by 28.6% in 2004, reaching Ch$65,150 million or 15.2% of net sales, compared to Ch$50,652 million, or 12.3% of net sales in 2003.

     Non-operating Income (Expense), Net

     The following table sets forth, for the periods indicated, the items of non-operating income (expense), net:

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	As of December 31,
	2004			2003
	(millions of Ch$)
Financial income	Ch$	24,156		Ch$	32,772
Share of income from affiliated companies		1,024			1,936
Other non-operating income		848			9,674
Amortization of goodwill		(7,186	)		(7,028	)
Financial expenses		(19,830	)		(21,216	)
Other non-operating expenses		(6,395	)		(7,943	)
Price-level restatement and exchange gain (loss)		(12,073	)		(41,042	)
Non-operating income (expense), net	Ch$	(19,456	)	Ch$	(32,847	)

     Non-operating income (expense), net, was a loss of Ch$19,456 million in 2004, compared to a loss of Ch$32,847 million in 2003, representing a decrease of 40.8% in 2004 versus 2003. The principal variances between 2004 and 2003 were the following:

• Financial income: Lower financial income in 2004 was mainly due to: lower profits arising from cross currency swaps agreements as a consequence of appreciation of the Chilean peso, lower average interest rates affecting the reinvestment of our bond portfolio and profit on bond sales and forward agreements in 2003 that did not occur in 2004.

• Other non-operating income: In 2003, the Company received a capital distribution from Embotelladora del Atlantico S.A., which triggered a proportional one-time recognition of income in respect to the cumulative translation reserve. Additionally, in 2003 the effect of the translation of local currency to U.S. dollars of the financial statements, in accordance with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants, resulted in strong positive result, which was not as relevant for 2004. Also in 2003, parts of our contingencies were favorably resolved and the proportion of the corresponding provision was reversed with a one-time positive result in non-operating income. These results did not take place in 2004.

• Price-level restatement and exchange gain (loss): During 2003, the Chilean peso appreciated against the U.S. dollar, which represented a decrease of Ch$124.81 in the exchange rate, negatively affecting our positive U.S. dollar net asset position. In 2004, the Chilean peso against the U.S. dollar decreased by only Ch$36.40 which resulted in a decline of this negative effect.

     Income Taxes

     Income taxes in 2004 increased 281.2% to Ch$4,087 million compared to Ch$1,072 million in 2003. The increase is principally explained by:

• Better results in Brazil which resulted in higher taxable profits. In 2004, our Brazilian subsidiaries applied tax loss carryforwards available from prior periods which, as provided by Brazilian tax laws, were applied up to a maximum of 30% of 2004 taxable profits, whereas in 2003 tax loss carryforwards were applied without limit, also pursuant to Brazilian tax law;

• Higher deferred taxes in Chile as consequence of higher accrued interest income from foreign sources which are taxable on a cash basis according to Chilean law; and

• improved results in Argentina, although these were offset by accumulated tax losses carry forward available from prior years.

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     Net Income

     As a result of the aforementioned, net income in 2004 was Ch$41,604 million, representing 9.7% of net sales and an increase of 148.7% compared to net income of Ch$16,730 million in 2003.

Impact of Inflation

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

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

     Price-level restatement can have a significant effect on our net income. The size of the price-level restatement for any period will primarily depend on the amount of local and foreign currency- denominated monetary assets and liabilities and the effect of inflation and the foreign exchange rate on such assets and liabilities. Periods of both moderate inflation and depreciation of the Chilean peso against the U.S. dollar will tend to result in a modest amount of price-level restatement. Conversely, the real appreciation of the Chilean peso generally leads to a high amount of price-level restatement. Given the unpredictable nature of the foreign exchange markets and, to a lesser extent, inflation, there can be no assurance that price-level restatement will continue to be an insignificant component of net income or that it will not result in income statement expense in the future.

     During the third quarter of 1998, Technical Bulletin No. 64 was approved and applied retroactively to January 1, 1998. In our case, such bulletin required a return to accounting in U.S. dollars for all investments outside Chile. This methodology has an immaterial effect on results for the period and requires that the exchange rate difference be recorded in a reserve sub-account of shareholders’ equity.

     The following table sets forth, for the periods indicated, variations among the consumer price index, UF and U.S. dollar:

	Year ended December 31,
	2005			2004			2003
Consumer price index variation		3.6	%		2.5	%		1.0	%
UF variation		3.8	%		2.3	%		1.1	%
U.S. dollar variation		(8.1	)%		(6.1	)%		(17.4	)%

     The effects of price-level restatement are summarized below:

	Year ended December 31,
	2005			2004			2003
	(millions of Ch$)
Shareholders’ equity	Ch$	(8,056	)	Ch$	(6,791	)	Ch$	(4,236	)
Liabilities		(5,855	)		(3,737	)		(2,171	)

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	Year ended December 31,
	2005			2004			2003
	(millions of Ch$)
Property, plant and equipment		2,699			2,021			777
Other assets		12,255			9,952			6,895
Balance sheet adjustments		1,043			1,445			1,265
Income statement adjustments		(1,613	)		(497	)		139
Foreign exchange (loss) gain		(14,287	)		(13,022	)		(42,446	)
Price-level restatement and exchange (loss) gain	Ch$	(14,857	)	Ch$	(12,073	)	Ch$	(41,042	)

Impact of Foreign Currency Fluctuations

     We use numerous raw materials, including sugar, resin, and aluminum in producing beverages and containers. We purchase these raw materials from both domestic and international suppliers. See “Item 4. Information on the Company—Part B. Business Overview—Soft Drink Business—Raw Materials and Supplies.” Because we often are required to purchase raw materials in the international markets using U.S. dollars, we are subject to local currency risk in each country where we have operations. If the Chilean peso, Brazilian real or Argentine peso were to devalue against the U.S. dollar, the cost of certain raw materials could rise significantly, which, in turn, could adversely affect our net income. We cannot assure you that these currencies will not lose value against the U.S. dollar in the future.

     In Chile we had losses of Ch$14,287 million in 2005 due to the appreciation of the Chilean peso, compared to a negative impact of foreign currency fluctuations in 2004 in the amount of approximately Ch$13,022 million, due to our net asset position in U.S. dollars amounting to a total of approximately US$220 million. In Argentina and Brazil we recognized profits amounting in the aggregate to Ch$456 million in 2004 and Ch$2.909 million in 2005. These resulted from the application of the Argentine and Brazilian exchange rates in the currency conversion undertaken in our financial statements as of December 31, 2004 and 2005, in accordance with the methodology set forth in Technical Bulletin No. 64 issued by the Chilean Institute of Accountants, which are reflected on our consolidated statements of income in other non-operating income.

     We use hedge agreements, including cross-currency swaps and forwards, to protect against foreign currency risk. In 2003, 2004 and 2005, these agreements partially offset the negative effects of the appreciation of the Chilean peso, whose results are recorded in financial income or expense in the consolidated statements of income. For further information about the instruments we use to protect against foreign currency risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”

Impact of Governmental Policies

     Our business is dependent upon the economic conditions prevailing in our countries of operation. Various governmental economic, fiscal, monetary and political policies, such as those related to inflation or foreign exchange, may affect these economic conditions, and in turn may impact our business. These government policies may also affect investments by our shareholders.

     Please refer to “Item 3. Key Information—Risk Factors—Risk Factors Relating to the ADSs and the Shares” and “Item 10. Additional Information,” for a discussion of governmental and political factors that could materially affect investments by U.S. shareholders. Further reference in this respect is made to the factors discussed under “Item 3. Key Information—Risk Factors—Risks Relating to Chile—Exchange controls and withholding taxes in Chile may limit repatriation of your investment.” For a discussion of governmental economic, fiscal, monetary and political policies that could materially affect

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our operations, see “Item 3. Key Information—Risk Factors—Risks Relating to Chile,” “—Risks Relating to Brazil” and “—Risks Relating to Argentina.”

B. Liquidity and Capital Resources

     Capital Resources

     Our principal source of funding is our operations which historically have been a sufficient source of financing. Cash generation is designated to finance working capital and capital expenditure requirements. Cash surplus has been utilized to pay dividends. The main sources to finance future strategic and geographic expansion plans include (i) public equity offerings and privately negotiated share subscriptions; (ii) borrowings from commercial banks, both internationally and in the local markets where we have operations, namely, Chile, Brazil and Argentina; and (iii) debt offerings in the Chilean and foreign capital markets.

     There are no restrictions to transfer funds among our operating subsidiaries. In the past, we have transferred funds from Argentina to Chile through capital reductions and during 2006 we expect to receive dividends from our Brazilian subsidiary.

     Our management believes that, through these sources, we have sufficient financial resources available to maintain our current operations and provide for our current capital expenditure and working capital requirements, scheduled debt payments, interest and income tax payments and dividends to shareholders. The amount and frequency of future dividends will be determined by our board of directors in light of our earnings and financial condition at such time, and we cannot assure you that dividends will be declared in the future, except for the minimum 30% of annual profits required by Chilean law.

     Treasury and Funding Policies

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

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

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

     Derivative instruments are utilized only for business purposes, and never for speculative purposes. Forward currency contracts are used to cover the risk of local currency devaluation relative to the U.S. dollar in an amount approximately equal to our budgeted purchases of U.S. dollar-denominated raw materials. Depending on market conditions, instead of forward currency contracts, from time to time we prefer to utilize our cash surplus to purchase raw materials in advance to obtain better prices and a fixed exchange rate.

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     Investing Activities

     Additions to property, plants and equipment during 2005 totaled Ch$27,395 million. Capital expenditures during 2005 were funded with cash flows from operations.

     At December 31, 2005, we had no material commitments for the purchase of capital assets other than those related to normal replacement of equipment. Our management anticipates that additions to property, plant and equipment in 2006 will be in the range of US$50 million and plans to fund such additions through cash flows from operations.

     We believe that cash flow generated by operations, cash balances, available lines of credit, including from suppliers, and borrowings from third parties, are currently sufficient to meet our working capital, debt service and capital expenditure requirements.

     Financing Activities

     As of December 31, 2005, we had Ch$132,341 million invested in time deposits and other short-term and long-term investments from the proceeds of the issuance of local and Yankee bonds not included as cash equivalents for purposes of Chilean GAAP. As of that date, we had available short-term credit lines in an amount equivalent to approximately Ch$103,223 million (US$201.4 million). The aggregate unused portion of such lines of credit at that date was equivalent to Ch$91,899 million (US$179.3 million).

     Our unused sources of liquidity include 24 lines of credit. In Chile, we have the equivalent of US$82.6 million in credit available from four separate lines. In Brazil, we have the equivalent of US$101.4 million in credit available with 14 lines. In Argentina, we have the equivalent of US$17.4 million in credit available with six lines.

     In 2005, our available cash was principally used for investments in fixed assets of Ch$27,395 million and dividend payments of Ch$72,552 million. In 2004, the principal uses of cash were investments in fixed assets of Ch$26,150 million and dividend payments of Ch$47,403 million.

     Liabilities

     For the period ending December 31, 2005, our total liabilities, excluding minority interest, were Ch$256,495 million, representing a 14.3% decrease compared to December 31, 2004. The decrease in total liabilities resulted principally from a reduction in long-term bank debt and bond debt. As of December 31, 2005, our long term liabilities included (i) long-term bank debt of Ch$455 million, (ii) long-term bond debt of Ch$101,802 million, (iii) long-term notes outstanding of Ch$147 million, and (iv) other long-term accrued liabilities and provisions of Ch$29,330 million, for a total of Ch$131,734 million of long-term liabilities compared to total long-term liabilities of Ch$189,003 million as of December 31, 2004.

     Our short term liabilities, as of December 31, 2005 included (i) short-term bank debt of Ch$27,935 million, (ii) current portion of long-term bank liabilities of Ch$484 million, (iii) current portion of long-term bond debt of Ch$13,684 million, (iv) trade accounts payable of Ch$37,877 million, (v) notes payable to related companies of Ch$8,331 million, and (vi) other short-term liabilities, principally provisions, withholdings and income tax payable, for Ch$36,451 million, for a total of Ch$124,762 million of short-term liabilities compared to total short-term liabilities of Ch$110,226 million as of December 31, 2004.

     Our bond liabilities have a weighted average interest rate of 6.5%. Our bank liabilities have a weighted average interest rate of 6.9%.

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Summary of Significant Debt Instruments

     The following is a brief summary of our significant long-term indebtedness outstanding as of December 31, 2005:

     Unsecured Notes. On October 1, 1997 we entered into an indenture pursuant to which we issued three series of bonds. The indenture imposes certain restrictions on liens, sale and leaseback transactions, assets sales and subsidiary indebtedness and certain conditions in the event of merger or consolidation.

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

• US$150 million of 7.00% Unsecured Notes due 2007;

• US$100 million of 7.625% Unsecured Notes due 2027; and

• US$100 million of 7.875% Unsecured Notes due 2097.

     On July 10, 2001, through our subsidiary The Sterling Pacific Corp, S.A., (now Abisa Corp.), we made an offer to repurchase for cash at par value the notes outstanding and the following notes were tendered:

• US$118 million of the 7.00% Unsecured Notes due 2007;

• US$96 million of the 7.625% Unsecured Notes due 2027; and

• US$100 million of the 7.875% Notes due 2097.

     On June 13, 2001, Andina completed a local bond placement in the Chilean capital markets of two series of bonds as follows:

• UF 3.3 million series of bonds due 2008 with annual interest rate over inflation of 6.20% of which, UF 1.65 million was outstanding at December 31, 2005; and

• UF 3.7 million series of bonds due 2026, with annual interest rate over inflation of 6.50%, being outstanding at December 31, 2005.

     The bond issue and placement in the Chilean market is subject to the following restrictions:

• Andina must maintain a leverage ratio, defined as total debt/consolidated equity, of less than 1.20%. For purposes of calculating the leverage ratio, total debt includes (i) short-term bank liabilities, (ii) the current portion of long-term bank liabilities, (iii) short-term liabilities and promissory notes, (iv) the current portion of bonds payable, (v) long-term bank liabilities, and (vi) long-term bonds payable. Consolidated equity means total shareholders’ equity plus minority interest.

• Andina must maintain consolidated assets free of any pledge, mortgage or other encumbrances for an amount equal to at least 1.30 times the consolidated liabilities that are not guaranteed by the investee.

• Andina may not lease, sell, assign or dispose of the franchise territory in Chile.

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• Andina may not lease, sell, deliver or dispose of its franchise territory in Argentina or Brazil, as long as either territory represents more than 40% of Andina’s consolidated operating cash flows.

C. Research and development, patents and licenses

     Given the nature of the business and the support provided by The Coca-Cola Company as franchisor to its bottlers, the Company’s research and development expenses are not meaningful. For more information on patents and licenses, see “Item 4. Information on the Company — Part B. Business Overview — Patents and Licenses”.

D. Trend Information

     Our results will likely continue to be influenced by changes in the level of consumer demand in the countries in which we operate, particularly Argentina and Brazil, resulting from economic measures that the governments of those countries have implemented, or may implement in the future, to solve present debt and fiscal deficit problems.

     Additionally, principal raw materials used in the production of soft drinks, such as sugar and resin, may experience price increases in the future. Such price increases may affect our results if we are unable to pass the cost increases on to consumers due to depressed consumer demand and/or heightened competition.

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

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

E. Off-Balance Sheet Arrangements

     We do not have any off-balance sheet arrangements.

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F. Contractual Obligations

     The following table summarizes our contractual obligations and commercial commitments as of December 31, 2005:

			Payments Due by Period
			Years
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
			(in millions of constant Ch$ as of December 31, 2005)
Long-term bank debt(1)	Ch$	939	Ch$	484	Ch$	455	Ch$	—	Ch$	—
Short-term bank debt		27,935		27,935		—		—		—
Bonds payable(2)		115,486		13,684		33,245		5,868		62,689
Purchase obligations		287		79		139		69		—
Subtotal-included in our balance sheet		144,647		42,182		33,839		5,937		62,689
Operating lease obligations		1,404		1,229		175		—		—
Purchase obligations		4,712		4,712		—		—		—
Subtotal-not included in our balance sheet		6,116		5,941		175		—		—
Total contractual obligations	Ch$	150,763	Ch$	48,123	Ch$	34,014	Ch$	5,937	Ch$	62,689

(1)	See Notes 14(b) and 15 to the Consolidated Financial Statements for additional information.
(2)	See Note 16 to the Consolidated Financial Statements for additional information.

     The following table presents future expirations for the remaining long term liabilities. These expirations have been made based on accounting estimates because the liabilities do not have specific dates of future payment as allowance for severance indemnities, contingencies, deferred taxes and liabilities for container guarantees are included.

			Maturity
			Years
							More than
	Total		1-3 Years		3-5 Years		5 Years
	(in millions of constant Ch$ as of December 31, 2005)
Provisions	Ch$	21,116	Ch$	16,786	Ch$	—	Ch$	4,330
Other long-term liabilities		8,153		1,327		182		6,644
Total long-term liabilities not included in contractual obligations	Ch$	29,269	Ch$	18,113	Ch$	182	Ch$	10,974

U.S. GAAP Reconciliation

     The principal differences between Chilean GAAP and U.S. GAAP as they relate to us are (i) inflation accounting under Chilean GAAP, which has not been reversed in the reconciliation to U.S. GAAP, (ii) the accounting treatment of the acquisition of Inti and Cipet by us and the subscription of 24,000,000 shares of common stock by The Coca-Cola Company, (iii) the revaluation and depreciation of certain property, plant and equipment on the basis of a technical appraisal, (iv) different goodwill amounts and differences in amortization for goodwill, (v) the treatment of mandatory minimum dividends, (vi) difference in accounting for investments in related companies and joint ventures, (vii) the accounting for deferred income taxes, (viii) the treatment of investment securities, (ix) the treatment of staff severance indemnities, (x) the accounting for the translation adjustment of foreign investments,

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(xi) the translation of financial statements of non-Chilean operations and, (xii) the accounting for derivative instruments. Note 28 of the notes to the Consolidated Financial Statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP of net income and shareholders’ equity.

     Net income after reconciliation to U.S. GAAP was Ch$1,661 million higher in 2003, Ch$11,821 million higher in 2004, and Ch$19,145 million higher in 2005, in each case than net income as reported under Chilean GAAP for each respective year. See Note 28(m) of the notes to the Consolidated Financial Statements. Under Chilean GAAP, shareholders’ equity at December 31, 2004, was Ch$301,319 million, compared to Ch$311,755 million under U.S. GAAP, representing a difference of 3.5%. Under Chilean GAAP, shareholders’ equity as of December 31, 2005 was Ch$268,437 million, compared to Ch$289,577 million under U.S. GAAP, representing a difference of 7.9%.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Management and Board of Directors

     Pursuant to Chilean law, we are managed by executive officers under the supervision of our board of directors. In accordance with our bylaws, the board of directors must consist of seven regular directors and seven alternate directors. Each director is assigned a specific alternate director. The directors may or may not be shareholders and are elected for a term of three years subject to indefinite re-election. In the case of Series A shares, it is necessary to have 14.29% of the total shares represented in a shareholders’ meeting in order to elect a director assuming there is 100% shareholder vote participation. In the case of series B shares, it is necessary to have a total of 50.1% of the total shares represented in a shareholders’ meeting to elect a director if it is also assumed that there is 100% shareholder vote participation. All members of the board of directors are nominated and elected every three years by and during the ordinary annual shareholders’ meeting. Cumulative voting is permitted for the election of directors.

     In the event of a vacancy, the designated alternate director fills the vacancy for the remaining period of the director’s term. If the alternate director is unable or unwilling to serve, the board of directors may appoint a replacement to fill the vacancy, and the entire board of directors must be elected or re-elected at the next regularly scheduled shareholders’ meeting.

     As of December 31, 2005, our board of directors consisted of the following directors and alternate directors:

Juan Claro G.	Chairman of the Board of Directors	Has been a member of the board of directors since April 2004. Principal occupation: Entrepreneur Other directorships: Josefa S.A.; Inmobiliaria Josema S.A.; Volcan Tolhuaca S.A.; Laguna Icalma S.A.; El Magnolio S.A; Inmobiliaria Cauquenes S.A.; Algeciras S.A.; Cauquenes S.A.; Clarial S.A.; Inmobiliaria Volcan Tolhuaca Ltda.; Inmobiliaria Laguna Icalma Ltda.; Soc. Inmobiliaria Crucero; Telefónica Chile CTC Chile S.A.; Emel S.A.; Empresas Melón S.A.; Pesquera Friosur S.A.; Viña Manquehue S.A. Date of birth: November 7, 1950
José Antonio Garcés S., Jr.	Director	Has been a member of the board of directors since May 1991. Principal occupation: General manager of Inversiones San Andrés Ltda. Other directorships: Banvida S.A.; Inversiones San Andrés LT S.A.; Inmobiliaria Fray León S.A. Date of birth: March 1, 1966

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Gonzalo Said H. (1)	Director	Has been a member of the board of directors since May 1993. Principal occupation: General manager and director of Inversiones Santa Virginia Ltda. Other directorships: Director of BBVA Administradora de Fondos Mutuos BHIF S.A., Embotelladora Andina S.A., and of Inmobiliaria Don Aurelio Ltda. Date of birth: October 16, 1964
Salvador Said S. (1)	Director	Has been a member of the board of directors since April 1992. Principal occupation: Executive director of Said Holding Group Other directorships: Edelpa S.A., Parque Arauco S.A., BBVA Administradora de Fondos Mutuos BHIF S.A. and BHIF Administradora de Fondos de Inversión S.A., Inversiones Caburga S.A; Inversiones Delfín S.A.; Grupo Eulen Chile S.A. Date of birth: September 16, 1964
Glenn Jordan S.	Director	Has been a member of the board of directors since April 2001. Principal occupation: Executive vice president and operations director of Coca-Cola Latin America Other directorships: Coca-Cola Embonor Date of birth: January 10, 1957
Arturo Majlis A.	Director	Has been a member of the board of directors since April 1997. Principal occupation: Principal partner of the law offices of Grasty, Quintana, Majlis Compañía Other directorships: Asesorías e Inversiones Til Til S.A.; Banchile Seguros de Vida and HNS Banco Date of birth: April 7, 1962
Albert Cussen M. (2)	Director	Has been a member of the board of directors since April 2004. Principal occupation: Company directorships Other directorships: Viña Concha y Toro S.A.; Fundación Educacional y Cultural La Fuente Date of birth: November 1, 1950
Ernesto Bertelsen R.	Alternate Director to Juan Claro González	Has been a member of the board of directors since April 2005. Principal occupation:Director Banco BBVA. Other directorships: Director Factorline S.A. since November 1993. Date of birth: March 18, 1945
Patricio Parodi Gil	Alternate Director to Juan Antonio Garcés Silva	Has been a member of the board of directors since April 2005. Principal occupation: General manager Consorcio Financiero S.A. and subsidiaries Other directorships: Director of Banmédica S.A.; Isapre Vida Tres S.A.; Help S.A.; Clínica Dávila S.A.; Sociedad Punta del Cobre S.A.; Pacífico V Región S.A.; and Empresas Moletto S.A. Date of birth: April 28, 1963

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Manuel Bezanilla U.	Alternate Director to Gonzalo Said H.	Has been a member of the board of directors since April 2004. Principal occupation: Lawyer at Portaluppi, Guzmán y Bezanilla Asesorías Ltda. Other directorships: Celulosa Arauco S.A., Forestal Arauco S.A., Pesquera Iquique-Guanaye S.A., Inversiones Siemel S.A., Wilisn Corporation, Inversiones Freire Limitada (alternate director), Inversiones Freire Dos Limitada (alternate director) Date of birth: March 17, 1945
José Domingo Eluchans	Alternate Director to Salvador Said S.	Has been a member of the board of directors since April 2005. Principal occupation: Partner at José Domingo Eluchans Asesorías Limitada Other directorships: Director BBVA, Envases del Pacífico S.A. and advisor to the Board of Directors of Parque Arauco S.A. Date of birth: August 6, 1953
Jorge Hurtado G.	Alternate Director to Glenn Jordan S.	Has been a member of the board of directors since January 1998. Principal occupation: Partner of Agricola y Comercial Yerbas Buenas S.A. Other directorships: CMPC Tissue S.A.; Vendomática S.A.; Tecnomix S.A. and Proemsa S.A. Date of birth: March 25, 1946
José Miguel Barros Van Hövel tot Westerflier	Alternate Director to Arturo Majlis A.	Has been a member of the board of directors since April 2005. Principal occupation: Director of Corporate Finance of Larrain Vial since 1993. Other directorships: Director of Bata Chile S.A., Cerámica Santiago S.A., Viña Santa Carolina S.A., Senegocia.com and Blanco y Negro S.A. Date of birth: March 1, 1964
Pedro Vicente M.(2)	Alternate Director to Albert Cussen M.	Has been a member of the board of directors since April 2004. Principal occupation: Director of Capital Consulting Services S.A. Other directorship: Colbún S.A; Campos Chilenos S.A. Date of birth: August 11, 1951

(1)	Salvador Said S. is the cousin of Gonzalo Said H.
(2)	Independent from controlling shareholder pursuant to Article 50 bis, paragraph 6 of the Chilean Public Company Law N° 18,045.

Senior Executives

Jaime García R. Chief Executive Officer Mr. Jaime García has been employed by the Company since 1977, as head of the research-studies department. In 1978, he was appointed general manager of Embotelladora Talca (today part of Embonor S.A.). In 1979, Mr. García was appointed general manager of Embotelladora Concepción (part of Embonor S.A.). In 1983, he became financial manager of Andina, a position he held until 1987, when he was appointed general manager of ISASA (a subsidiary of Andina). In 1990, Mr. García was appointed general manager of Andina, a position he held until 1993, when he became our chief executive officer.
Date of birth: November 24, 1953

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Michael Cooper A.	Chief Operating Officer	Mr. Michael Cooper has been employed by the Company since May 2000, as chief operating officer. In 1989, Mr. Cooper was the chief executive officer of Inchcape Coca-Cola bottling operations, with businesses in Chile, Peru and Russia. In 1999, Embonor S.A. bought Inchcape Chilean and Peruvian bottling operations and Mr. Cooper became chief executive officer of the consolidated entity. Date of birth: May 15, 1948
Osvaldo Garay A.	Chief Financial Officer	Mr. Osvaldo Garay has been employed by the Company since 1997, as controller of Andina. Mr. Garay was appointed as our chief financial officer on October 31, 2002. Prior to joining Andina, he held a similar position with Grupo Claro. Date of birth: April 20, 1948
Pedro Pellegrini R.	Chief Legal & Communications Officer	Mr. Pedro Pellegrini has been employed by the Company since June 1995, as chief legal & communications officer of Andina. From 1986 to 1992, Mr. Pellegrini worked at Carey & Cia., the largest law firm in Chile. From 1992 to 1995, Mr. Pellegrini served as a vice president of Citibank, N.A., and Citicorp-Chile and was in charge of legal corporate matters. Date of birth: January 13, 1965
Raúl Ramírez V.	Chief Technical Officer	Mr. Raúl Ramirez has held the position of chief technical officer, reporting directly to the chief operating officer since 1996. Mr. Ramirez held the position of deputy manager of operations from August 1969 until August 1995. In 1995, Mr. Ramirez was promoted to corporate manager of engineering, a position he held until December 1996. In January 1997, Mr. Ramirez was transferred to our operations in Argentina, Cordoba, Edasa, as technical manager until July 2000. Date of birth: July 24, 1944
German Garib N.	Chief Information Officer	Mr. Germán Garib has been employed with the Company since 1998, as chief information officer. Prior to Andina, he was the marketing manager of IBM Chile. Date of birth: August 28, 1961
Renato Ramírez F.	General Manager of Chilean Soft Drink Operation	Mr. Renato Ramírez has been employed with the Company since 1979, as general manager of Chilean soft drink operations. Mr. Ramírez began working as head of the budget and costs department and, in 1980, was appointed planning assistant manager. From January 1988 to August 1990, he was the commercial manager of Embotelladora Williamson Balfour. From September 1990 to October 1992, Mr. Ramírez served as marketing manager for Telephone Company of Chile. In August 1993, he returned to Andina as commercial manager, a position he held until 1997. Date of birth: July 27, 1952
Carlos A. Lohmann	General Manager of Río de Janeiro Refrescos Ltda.	Mr. Carlos Lohmann has been employed with the Company since August 1997, as general manager of Refrescos, our Brazilian subsidiary. He began his professional career in 1970 at IBM Brazil and throughout his approximately 25-year career at IBM, served in different positions, including human resources manager, commercial operations support manager, branch office operations manager, director of customer

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		services in Brazil and in New York, director of customer financing and general manager of IBM Leasing. In 1992, he was appointed general manager of the PC Company, a joint venture between IBM and Machline Group, in Sáo Paulo, Brazil, and in 1995 he was appointed general manager of the PC Company in Florida, United States. Date of birth: October 20, 1945
Alejandro A. Feuereisen	General Manager of Edasa	Mr. Alejandro Feuereisen has been employed as general manager of Embotelladora del Atlántico S.A. From September 1995 to July 1998, Mr. Feuereisen was a commercial manager of Embotelladora del Atlántico S.A. From 1993 to 1995, he was a sales manager at Andina and, from 1981 to 1992, an officer at Citibank, Santiago de Chile. During the last three years, Mr. Feuereisen was vice president of the International Financial Institutions Group. From 1977 to 1980, he served as financial analyst at Leasing Andino S.A., a subsidiary of Banco de Chile. Date of birth: May 19, 1953
Cesar Vargas P.	General Manager of Vital S.A. and Vital Aguas S.A.	Mr. César Vargas has been employed with the Company since 1978 as general manager of Vital S.A. Mr. Vargas began working as project engineer and head of electric maintenance. In 1985, he was appointed head of the juice division plant of Industrial Sud Andina S.A. in Santiago, a former subsidiary of Andina, where he was subsequently promoted to deputy production manager of the juice and mineral water division. In 1992, Vital S.A. was created and Mr. Vargas was appointed operations manager, a position that he held until 1998, when he was appointed general manager. Date of birth: May 26, 1957

     The majority shareholders’ agreement for the election of directors is contained in Inversiones Freire S.A.’s Shareholder Agreement and further explained on Item 7 “Major Shareholders and Related Companies”. In addition, pursuant to the terms and conditions of the Deposit Agreement, if no instructions are received by The Bank of New York, as depositary, it shall give a discretionary proxy to a person designated by the chairman of the board of directors of Embotelladora Andina with respect to the shares or other deposited securities that represent the ADRs.

     Directors and alternate directors are paid an annual fee for attendance to meetings of the board of directors. The total compensation paid to each director or alternate director during 2005, which was approved by our shareholders, was as follows:

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	Compensation
	(millions of Ch$)(1)
Juan Claro G.		82
Gonzalo Said H.		73
Salvador Said S.		63
Arturo Majlis A.		63
José Antonio Garcés S. Jr.		64
Alberto Hurtado F. (2)		20
José Antonio Garcés S. Sr. (2)		20
José Said S. (2)		20
Glenn Jordan S.		40
Albert J. Cussen M.		43
Pedro A. Vicente M.		16
Manuel E. Bezanilla U.		16
Jorge Hurtado G.		16
Ernesto Bertelsen R.		12
José D. Eluchans U.		12
José M. Barros V.		12
Patricio Parodi G.		12

(1)	The amounts paid to each director and director’s alternate for attendance at board meetings varies in accordance with the position held and the time period during which such position was held.
(2)	Member of the board of directors until April 2005.

     For the year that ended on December 31, 2005, the aggregate amount of compensation we paid to all directors and executive officers as a group was Ch$3,109 million of which Ch$2,523 million was paid to our executive officers. We do not disclose to our shareholders or otherwise make available public information as to the compensation of our executive officers on an individual basis. We do not maintain any pension or retirement programs for our directors or executive officers. See “ — Employees.”

Board Practices

     Our board of directors has regularly scheduled meetings at least once a month, and extraordinary meetings are convened when called by the chairman or when requested by one or more directors. The quorum for a meeting of the board of directors is established by the presence of an absolute majority of its regular directors, without taking alternate directors into consideration, unless regular directors are absent. Resolutions are passed by the affirmative vote of an absolute majority of those directors present at the meeting, with the chairman determining the outcome of any tie vote.

1. Executive Committee

     Company management is counseled by an executive committee comprised of five members, three of which are board members; the chairman of the board who participates by his or her own right, and the chief executive officer of the Company. This committee meets permanently throughout the year and it normally holds an average of two monthly sessions. As counselor to the board of directors, the executive committee proposes company policies in accordance with the results for the respective periods that have been disclosed in the annual reports. On April 26, 2005, Juan Claro González (chairman of the board),

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José Antonio Garcés Silva, Arturo Majlis Albala, Gonzalo Said Handal, Salvador Said Somavía were appointed members of the executive committee.

2. Directors’ Committee

     By resolution approved at the regular shareholders’ meeting held on April 17, 2001, and in accordance with the requirements of the new article 50 bis of the Chilean Public Company Law No. 18,046 in addition to Law N° 19,705, we established a directors’ committee whose purpose has been the strengthening and self-regulation of the Company, exercising more control over management’s activities.

     By resolution approved at the regular shareholders’ meeting held on April 19, 2005, and by resolution of the board of April 26, 2005, Mr. Juan Claro (chairman), Mr. Albert Cussen and Mr. Gonzalo Said Handal were appointed as members of the directors’ committee.

     The main responsibilities of the directors’ committee are:

• to examine the reports of external auditors and account inspectors of the balance sheets and other financial statements presented by the administrators or our liquidators of the Company to the shareholders and to take a position on such reports before they are presented to shareholders for their approval;

• to propose the external auditors and the private risk rating agencies to the board, which are suggested at the shareholders’ meeting. In the event of disagreements with the directors’ committee, the board may make its own suggestion and both shall be submitted to consideration of the shareholders;

• to review information regarding operations as referred to by articles 44 and 89 of law 18,046 or the Chilean Public Company Law and to create a report concerning those operations to be sent to the chairman of the board;

• to examine the remuneration and compensation plans of senior managers and executives; and

• any other matter specified in the Company’s bylaws or required by a regular shareholders’ meeting or by the board of directors.

     The directors’ committee has examined several contingencies arising from the Company’s different operations and has followed internal procedures in order to comply with the new regulations imposed by the Sarbanes-Oxley Act of 2002 of the United States.

3. Audit Committee

     On July 26, 2005, the board of directors agreed that in order to comply with the requirements of the New York Stock Exchange or NYSE and the Securities and Exchange Commission or SEC, it was necessary to establish an audit committee before July 31, 2005, so as to comply with the requirements of the Sarbanes-Oxley’s Act of 2002. On July 26, 2005, Mr. Juan Claro González (chairman), Mr. Albert Cussen Mackenna and Gonzalo Said Handal were elected as members of the audit committee. Our board of directors determined that Mr. Juan Claro González and Mr. Albert Cussen Mackenna comply with the independence standards set forth in the Sarbanes-Oxley Act of 2002, SEC and NYSE regulations.

     The resolutions, agreements and organization of the audit committee are governed, when applicable, by the rules relating to board meetings and to the Company’s directors’ committee. Since its

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creation, the sessions of the audit committee have been held with the directors’ committee, since some of the functions are very similar and the members of both of these committees are the same.

     The duties and responsibilities of the audit committee are defined in the audit committee charter, which is available to all interested parties through our website. Further, the audit committee is responsible for analyzing the Company’s financial statements; supporting the financial supervision and rendering of accounts; ensuring management’s development of reliable internal controls; ensuring compliance by the audit department and external auditors with their respective roles; and reviewing of auditing practices.

     Mr. Albert Cussen Mackenna has been appointed by the board of directors as our “financial expert” as defined in the listing standards of the NYSE and the Sarbanes-Oxley Act of 2002.

Employees

     On December 31, 2005, we had approximately 4,606 employees, including 1,052 in Chile, 2,100 in Brazil, and 1,454 in Argentina. Of these employees, 126 were temporary employees in Chile and 300 in Argentina. During the South American summer, it is customary for us to increase the number of employees in order to meet peak demand.

     On December 31, 2005, 524, 219, and 950 of our employees in Chile, Brazil and Argentina, respectively, were members of unions.

     The following table represents a breakdown of our employees for the years ended December 31, 2005, 2004 and 2003:

	2005
	Chile						Brazil						Argentina
					Non-						Non-						Non-
	Total		Union		Union		Total		Union		Union		Total		Union		Union
Executives		23		—		23		74		2		72		40		—		40
Technicians and professionals		407		154		253		1,008		89		919		241		—		241
Workers		469		370		99		1,018		128		890		894		734		160
Temporary workers		153		—		153		—		—		—		279		216		63
Total		1,052		524		528		2,100		219		1,881		1,454		950		504

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	2004
	Chile						Brazil						Argentina
					Non-						Non-						Non-
	Total		Union		Union		Total		Union		Union		Total		Union		Union
Executives		21		—		21		70		2		68		38		—		38
Technicians and professionals		387		155		232		947		85		862		217		—		217
Workers		482		338		144		994		125		869		845		675		170
Temporary workers		126		—		126		—		—		—		300		279		21
Total		1,016		493		523		2,011		212		1,799		1,400		954		446

	2003
	Chile						Brazil						Argentina
					Non-						Non-						Non-
	Total		Union		Union		Total		Union		Union		Total		Union		Union
Executives		21		—		21		66		1		65		38		—		38
Technicians and professionals		382		156		226		835		60		775		188		—		188
Workers		483		331		152		541		118		423		780		608		172
Temporary workers		124		—		124		—		—		—		341		326		15
Total		1,010		487		523		1,442		179		1,263		1,347		934		413

Management verifies that it has good relations with its employees. For example, in Chile, Andina received two awards from independent organizations in 2003 highlighting our labor relations and the positive effects they have on our business. Andina has been awarded the “2005 National Quality Award” granted by the Ministry of Economy of the Chilean Government through the area of “Chile Calidad” (“Chile Quality”) every year. The process began in the year 2003 with an ambitious Quality Project enabling the unique achievement in Latin America of the four most relevant certifications in terms of quality (ISO). This award is framed within the philosophy of the company’s performance associated with the search of “excellence” aimed towards increasing the value contributed by all the parties involved with the business: clients, employees, suppliers and shareholders.

     Chilean law requires that employees dismissed without cause be entitled to severance pay equal to one month’s salary for every year of employment. We have made the required provisions for labor-related expenses according to approved accounting regulations. In addition, we contribute to a national health insurance system of government and privately operated facilities. We do not contribute to pension funds because employees are subject to mandatory contributions to such funds or, for certain older employees, government-sponsored pension funds.

     In Chile, 72% of employees are affiliated to a labor union. Besides a four-day strike in June 1997, we have not experienced work stoppages in the last 20 years. On June 1, 2005, the Company executed new collective bargaining agreements with Unions No. 1 and No. 2, representing workers and administrative personnel. These collective bargaining agreements expire June 1, 2007. On August 1, 2004, the Company signed a new collective bargaining agreement with Union No. 3, mainly representing sales personnel, which expires on August 1, 2006.

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     In Brazil, collective bargaining agreements are negotiated on an industry-wide basis. Individual companies can therefore negotiate special terms for their affiliates that apply to all employees in each jurisdiction where companies have a plant. Collective bargaining agreements are generally binding for one year. With respect to Refrescos, there are five collective bargaining agreements currently in force: (1) three agreements for employees in the State of Rio de Janeiro; (a) the Drinking Industry Employees’ Union agreement from October 1, 2005 to September 30, 2006; (b) the Salesmen Union agreement from October 1, 2005 to September 30, 2006; (c) the “Stack Machine” Operator Union agreement from May 1, 2005 to April 30, 2006; and (2) two agreements for employees in the State of Espírito Santo: (a) the Nourishment Union agreement from July 1, 2005 to June 30, 2006; (b) the Salesmen Union agreement from December 1, 2005 to November 30, 2006. Such agreements do not require us to increase wages on a collective basis. Selected increases were granted, however, mainly in the manufacturing area. We provide benefits to our employees according to the relevant legislation and to the collective bargaining agreements. Refrescos experienced its most recent work stoppages in January and October 1990, for eight days in each instance.

In Argentina, Edasa’s employees are parties to collective bargaining agreements and 65.5% of them are represented by local workers’ unions associated with a national federation of unions. The Argentine Chamber of Non-Alcoholic Beverages of the Argentine Republic (Cámara Argentina de Industria de Bebidas sin Alcohol de la República Argentina (the “Chamber”) and the Argentine Workers Federation of Carbonated Waters (Federación Argentina de Trabajadores de Aguas Gaseosas) are parties to collective bargaining agreements that expired in April 1997, but continue to be in effect until renegotiated. On March 31, 2005 the Chamber and the Federation entered into a one-year term collective agreement, increasing the minimum wage. This agreement has been extended until June 30, 2006.

     Argentine law requires severance payments upon dismissal without cause, in an amount at least equal to an average of one-month’s wages for each year of employment or a fraction thereof if employed longer than three months. Severance payments are subject to maximum and minimum amounts.

     On January 6, 2001, the Argentine government, as a result of the Argentine economic crisis, enacted Law 25,561 which is designed to seriously limit dismissals of employees by employers for 180 days. Employers, however, can still dismiss their employees if they are willing to compensate the employee with twice the regular severance payment. The effects of these limits were extended until the end of December 2004.

     On December 15, 2004, the Argentine government approved law 25,972 that forces employers to increase the quantity of regular severance payments for dismissals as long as the unemployment rate of Argentina is higher than 10%. Consequently, between January 1, 2005 and November 30, 2005, the quantity of regular severance payments for dismissals increased by 80%. As of December 1, 2005, this increase of regular severance payments for dismissals was reduced and fixed at 50%. However, the employer will be exempted from crediting the increase of regular severance payments for dismissals if the date of hiring of the dismissed employee is later than January 2003 and that his/her hiring had implied an increase in the total number of employees that the employer had as of December 31, 2002.

     In 1999, Edasa completed a new plant in the Province of Córdoba with the latest technological advances consolidating its operations in the new plant. During July 2002, Edasa performed a restructuring process aimed at transforming its productive centers in the Provinces of Santa Fe and Mendoza into logistic centers and at centralizing its production in the Province of Córdoba. Consolidated operations and centralized production in the new plant resulted in greater than normal labor turnover with extraordinary one-time labor costs.

     As of December 31, 2005, Edasa had no pension fund liabilities. Employees contribute, on the basis of automatic withholding, to either the privately administered retirement funds or to the government

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social security system. Most of the health system in the Argentine territory is run by the unions through contributions from union and non-union employees.

Share Ownership of Directors, Members of the Directors’ Committee and Senior Executives

     The following table sets forth the amount and percentage of our shares beneficially owned by our directors, members of the Directors’ Committee and senior executives as of December 31, 2005.

	Series A												Series B
	Beneficial		%		Direct		%		Indirect		%		Beneficial		%		Direct		%		Indirect		%
Shareholder	Owner		Class		Owner		Class		Owner		Class		Owner		Class		Owner		Class		Owner		Class
José Antonio Garcés Silva (junior)		—		—		—		—		—		—		—		—		—		—		1,894,183		0.4983
Arturo Majlis Albalá		—		—		—		—		2,150		0.0006		—		—		5,220		0.0014		—		—
Salvador Said Somavía		—		—		—		—		1,150		0.0003		—		—		—		—		3,539,295		0.9311
Gonzalo Said Handal		50,001,651		13.1536		—		—		—		—		15,488,863		4.0745		—		—		5,585,787		1.4694

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

     The following table sets forth certain information concerning beneficial ownership of our capital stock at December 31, 2005, with respect to the principal shareholders known to us who maintain at least a 5% beneficial ownership in our shares and with respect to all of our directors and executive officers as a group:

	Series A					Series B
Shareholder	Shares		% Class			Shares		% Class
Freire(1)(2)		200,006,603		52.61	%		181,469,184		47.74	%
The Bank of New York(3)		29,738,064		7.82			49,546,596		13.03
The Coca-Cola Company, directly or through subsidiaries		41,962,864		11.04			41,962,864		11.04
AFPs as a group (Chilean pension funds)		69,588,778		18.31			15,970,135		4.20
Principal foreign mutual funds as a group		3,185,103		0.84			7,473,089		1.97
Executive officers as a group		175,474		0.05			215,327		0.06
Directors as a group(4)		50,004,951		13.15			26,513,348		6.97

(1)	The ownership percentages listed above reflect the voting and economic interests of Andina’s shareholders.
(2)	Freire does not hold either directly or indirectly any Series B shares. The amounts set forth correspond to Series B shares held by other companies, members of the controlling shareholder group, including: Inversiones Newport Ltda., Inversiones HB S.A, Inversiones Mar Adentro Ltda., Inversiones Caburga S.A., Inversiones San Andrés Limitada, and Inversiones Ledimor Chile Ltda.
(3)	Acting as depositary for the ADRs.
(4)	Represents shares to which Gonzalo Said Handal, José Antonio Garcés Silva (junior) , Salvador Said Somavía and Arturo Majlis Albalá would claim direct and indirect.

     Inversiones Freire S.A. holds a controlling interest in Andina. Freire is beneficially owned in equal interests by Alberto Hurtado F., José Said S., José Antonio Garcés S.(senior), and Gonzalo Said Handal, the latter also a Director of Andina. Pursuant to an agreement among partners, dated May 29, 1992, which shall remain in effect for so long as Freire is in existence, each partner in Freire shall not, dispose of his pro rata portion of his shares of stock, unless in accordance with the previously mentioned Agreement.

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     At an extraordinary shareholders’ meeting held on September 30, 1996, our shareholders approved the Reclassification whereby each outstanding share of common stock was replaced by one newly issued Series A share and one Series B share. Series A shares have full voting power and are entitled to elect six of seven regular and alternate directors. Series B shares have no voting power besides the power to elect one regular and one alternate director and are entitled to a dividend equal to 10% more than any dividends received by Series A shareholders. The Reclassification was consummated on April 27, 1997. See “Item 4. Information on the Company — Part A. History and Development of the Company — History.” The Company’s major shareholders do not have different voting rights from those granted by the ownership of Series A shares and Series B shares.

     In connection with The Coca-Cola Company’s investment in Andina, the Coca-Cola shareholders and Freire entered into a Shareholders’ Agreement dated September 2, 1996 (the “Shareholders’ Agreement”), providing for certain restrictions on the transfer of shares of Andina capital stock by the Coca-Cola Shareholders and Freire. Specifically, Freire is restricted from transferring its Series A shares without the prior authorization of The Coca-Cola Company. The Shareholders’ Agreement also provides for certain corporate governance and other matters, including the right of the Coca-Cola shareholders collectively to elect one regular and one alternate member of our board of directors so long as The Coca-Cola Company and its subsidiaries collectively own, in aggregate, at least 4% of the Series A shares. In addition, in related agreements, Freire granted the Coca-Cola shareholders an option, exercisable upon the occurrence of certain changes in the beneficial ownership of Freire, to acquire, all but not part, of our Series A shares held by Freire at a price and in accordance with procedures established in such agreements.

     The total number of registered ADR holders Andina had at December 2005 was 25 (12 in the Series A ADRs and 13 in the Series B ADRs). At December 31, 2005, the ADRs represented 10.4% of the total number of our issued and outstanding shares. The Bank of New York, as depositary, is the only U.S. shareholder of record.

Related Party Transactions

     In the ordinary course of our business, we engage in a variety of transactions with certain of our affiliates and related parties. Financial information concerning these transactions is set forth in Note 6 to our Consolidated Financial Statements. Article 89 of the Ley de Sociedades Anónimas (the “Chilean Companies Law”) requires that our transactions with related parties be on a market basis or on similar terms to those customarily prevailing in the market. We are required under Article 89, to compare the terms of any such transaction to those prevailing in the market at the date the transaction is to be entered into. Directors of companies that violate Article 89 are liable for losses resulting from such violation. In addition, Article 44 of the Chilean Public Companies Law, provides that any transaction in which a director has a personal interest or is acting on behalf of a third-party, must be previously approved by the board of directors, which will do so only when it has been informed of such director’s interest and the terms of such transaction are similar to those prevailing in the market.

     Pursuant to an amendment introduced to the Chilean Public Companies Law in December 2000, if the proposed transaction involves material amounts, the board of directors must previously declare that such transaction is consistent with conditions prevailing in the market. If it is not possible to reach such a judgment, the board of directors may appoint two independent evaluators. The evaluators’ final conclusions must be presented to the shareholders’ and directors’ for their consideration for a period of 20 business days, during which shareholders representing 5% or more of the issued voting shares may request the board of directors to call a shareholders’ meeting to resolve the matter by a majority of two-thirds of the issued voting shares. For the purposes of this regulation, the Chilean Public Companies Law provides that the amount of a proposed transaction will be material when it exceeds UF 2,000 and is greater than 1% of the company’s paid in capital and reserves. In all cases, a transaction is considered material when it exceeds UF 20,000. Our directors’ committee is charged with evaluating transactions

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with related parties and to report on these transactions to the full board of directors. See “Item 6. Directors, Senior Management and Employees — Directors’ Committee.”

     All resolutions approving such transactions must be reported to the company’s shareholders at the next annual shareholders’ meeting. Violation of Article 44 may result in administrative or criminal sanctions and civil liability to shareholders or third parties who suffer losses as a result of such violation. However, the violation of Article 44 does not affect the validity of the transaction. Such a violation will grant the business entity, the shareholders or interested third parties the right to be indemnified for damages, and force the director involved in the transaction to make reparations to the business entity in an amount equivalent to the benefits that would have been derived for the business entity, absent negotiations by such director, his relatives, or his representatives, that do not imply other administrative or criminal sanctions.

     Our management believes, to the best of its knowledge, that it has complied, in all material respects with Article 89 and Article 44 of the Chilean Public Company Law in all transactions with related parties. There can be no assurance, however, that the aforementioned regulations will not be modified in the future.

Bottler Agreements

     In the course of our business, we have entered into agreements with The Coca-Cola Company. Bottler Agreements (as defined hereunder) are international standard contracts The Coca-Cola Company enters into with bottlers outside the United States for the sale of concentrates and beverage basis for certain Coca-Cola soft drinks and non-soft drink beverages. We are a party to the following bottler agreements: (i) with respect to the Chilean territory, a bottler agreement entered into between Andina and The Coca-Cola Company (the “Chilean Bottler Agreement”), which was extended for a term of five years as of January 18, 2003; (ii) with respect to the Brazilian territory, a bottler agreement between Refrescos and C-C Brazil with The Coca-Cola Company as an intervening party (collectively, the “Brazilian Bottler Agreement”), which is due to expire on April 2, 2008; (iii) with respect to the Argentine territory, bottler agreements, between Edasa and The Coca-Cola Company (the “Argentine Bottler Agreements”), which are due to expire on December 10, 2006; (iv) with respect to the Chilean territory, a Juice Bottling Agreement was subscribed on December 31, 1998, with Minute Maid International due to expire on December 31, 2008, renewable for a new 7- year period. This agreement was terminated on December 22, 2005 and on that same date a Juice Bottling Agreement was subscribed between Vital S.A. and The Coca-Cola Company for the production, processing, and bottling of products under the brands Andina Frut, Andina Hi-C, Kapo, DASANI (purified water version) which will expire on December 31, 2015; and (v) with respect to the Chilean territory, a Water Manufacturing and Packaging Agreement was subscribed on that same date between The Coca-Cola Company and Vital Aguas S.A. (formerly VA S.A.¹) for the preparation and packaging of beverages that will be in effect until December 31, 2015, regarding the brands Vital, Chanqueahue, Vital de Chanqueahue and DASANI (purified water version).

     Bottler Agreements are renewable upon request by the bottler at the sole discretion of The Coca-Cola Company. We cannot assure you that the Bottler Agreements will be renewed upon their

¹ VASA was incorporated by means of a public deed dated June 14, 2005, before the Notary Public of Santiago, Mr. Cosme Gomila Gatica and through this instrument Embotelladora Andina S.A.’s water business category was restructured. Accordingly, VASA which later modified its legal name to Vital Aguas S.A., currently has the following shareholders: Andina, Embonor and Polar, directly or through their respective subsidiaries, each respectively holding a 56.5%, 26.4% and 17.1% ownership interest. This company will develop the business of processing, producing and bottling Vital Chanqueahue Mineral Water and other waters and products, of whatever nature in accordance with the terms of the agreements that VASA opportunely convenes with TCCC.

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expiration, and even if they are renewed, we cannot assure you that the agreements will be renewed on the existing terms.The Bottler Agreements provide that we will purchase our entire requirement of concentrates and beverage basis for Coca-Cola soft drinks and other Coca-Cola beverages from The Coca-Cola Company and other authorized suppliers. Although under the Bottler Agreements The Coca-Cola Company, in its sole discretion, may set the price of concentrates and beverage basis, among other terms, we set the price of products sold to retailers at our discretion, subject only to certain price restraints.

     We are the sole producer of Coca-Cola soft drinks and other Coca-Cola beverages in its franchise territories. Although this right is not exclusive, The Coca-Cola Company has never authorized any other entity to produce or distribute Coca-Cola soft drinks or other Coca-Cola beverages in such territories, and we expect that it will not do so in the future, although we cannot assure you to that effect. In the case of post-mix soft drinks, the Bottler Agreements explicitly establish such non-exclusive rights.

     The Bottler Agreements include an acknowledgment by us that The Coca-Cola Company is the sole owner of the trademarks that identify the Coca-Cola soft drinks and other Coca-Cola beverages and of any secret formula used in concentrates.

     All distribution must be in authorized containers. The Coca-Cola Company has the right to approve, at its sole discretion, any and all kinds of packages and containers for beverages, including their size, shape and any of their attributes. The Coca-Cola Company has the authority at its sole discretion to redesign or discontinue any package of any of the Coca-Cola products, subject to certain limitations, so long as Coca-Cola soft drinks and other Coca-Cola beverages are not all discontinued. We are prohibited from producing or handling any other beverage products, other than those of The Coca-Cola Company, or other products or packages that would imitate, infringe or cause confusion with the products, trade dress, containers or trademarks of The Coca-Cola Company, or from acquiring or holding an interest in a party that engages in such activities. The Bottler Agreements also impose restrictions concerning the use of certain trademarks, authorized containers, packaging and labeling of The Coca-Cola Company and prohibit bottlers from distributing Coca-Cola soft drinks or other Coca-Cola beverages outside their designated territories.

     The Bottler Agreements require us to maintain adequate production and distribution facilities; inventories of bottles, caps, boxes, cartons and other exterior packaging or materials; to undertake adequate quality control measures prescribed by The Coca-Cola Company; to develop, stimulate, and fully satisfy the demand for Coca-Cola soft drinks and other Coca-Cola beverages and to use all approved means, and spend such funds on advertising and other forms of marketing, as may be reasonably required to meet that objective; and to maintain such sound financial capacity as may be reasonably necessary to assure performance by us and our affiliates of our obligations to The Coca-Cola Company. All Bottler Agreements require us annually to submit our business plans for such franchise territories to The Coca-Cola Company, including without limitation, marketing, management, promotional and advertising plans for the ensuing year.

     The Coca-Cola Company has no obligation to contribute to our expenditures derived from advertising and marketing, but it may, at its discretion, contribute to such expenditures and undertake independent advertising and marketing activities, as well as cooperative advertising and sales promotion that would require our cooperation and support. In each of the franchise territories, The Coca-Cola Company has been contributing approximately 50% of advertising and marketing expenses, but no assurances can be given that equivalent contributions will be made in the future.

     Each bottler is prohibited from, directly or indirectly, assigning, transferring or pledging its Bottler Agreement, or any interest therein, whether voluntarily, involuntarily or by operation of law, without the consent of The Coca-Cola Company, and each Bottler Agreement is subject to termination by

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The Coca-Cola Company in the event of default by us. Moreover, the bottler may not undergo a material change of ownership or control without the consent of The Coca-Cola Company.

     The Coca-Cola Company may terminate a Bottler Agreement immediately, by written notice to the bottler, in the event that, inter alia, (i) the bottler suspends payments to creditors, declares bankruptcy, is declared bankrupt, is expropriated or nationalized, is liquidated, dissolved, changes its legal structure, or pledges or mortgages its assets; (ii) the bottler does not comply with instructions and standards established by The Coca-Cola Company relating to the production of its authorized soft drink products; (iii) the bottler ceases to be controlled by its controlling shareholders; or (iv) the terms of the Bottler Agreement come to violate applicable law.

     Either party to any Bottler Agreement may, with 60 days’ notice thereof to the other party, terminate the Bottler Agreement in the event of non-compliance by the other party with the terms thereof so long as the party in non-compliance has not remedied such non-compliance during this period. In addition, if a bottler does not wish to pay the required price for concentrate for any Coca-Cola products, it must notify The Coca-Cola Company within 30 days of receipt of The Coca-Cola Company’s new prices. In the case of any Coca-Cola soft drink or other Coca-Cola beverages other than Coca-Cola concentrate, the franchise regarding such product shall be deemed automatically canceled three months after The Coca-Cola Company’s receipt of the bottler’s notice of refusal. In the case of Coca-Cola concentrate, the Bottler Agreements shall be deemed terminated three months after The Coca-Cola Company’s receipt of the bottler’s notice of refusal. The Coca-Cola Company may also terminate the Bottler Agreements if the bottler or any individual or legal entity that controls, owns a majority share in or directly or indirectly influences the management of the bottler, engages in the production of any non-Coca-Cola beverage, whether through direct ownership of such operations or through control or administration thereof, provided that, upon request, the bottler shall be given six months to remedy such situation.

PET Contracts

     Envases CMF produces returnable PET bottles pursuant to agreements with The Coca-Cola Company, which we refer to as the PET Contracts, which transfer The Coca-Cola Company’s license to manufacture such bottles using non-proprietary technology provided by Continental PET Technologies Inc., which we refer to as Continental, today known as Graham Packaging Company Inc.. Multipack leased molds from The Coca-Cola Company for returnable PET bottles in the distinctive bottle shapes used for Coca-Cola soft drinks. In May 1995, Multipack obtained the license from Continental to produce non-returnable PET bottles with a high content of recycled material using “multilayer” technology developed by Continental. Multipack has transferred all of such rights to Envases CMF pursuant to the Cristalerías joint venture described below.

     The PET Contracts expire in July 2007 and are automatically renewable for two additional years at the option of Envases CMF. The Coca-Cola Company may terminate the PET Contracts prior to that date if (i) Envases CMF is unable to produce bottles meeting contract specifications, (ii) Envases CMF breaches contract obligations, or (iii) PET bottle production has an adverse impact on The Coca-Cola Company’s trademarks, trade dress or reputation, or exposes The Coca-Cola Company to a material risk of liability. There can be no assurance that the PET Contracts will be renewed following the two-year renewal option.

     On June 29, 2001, through our respective subsidiaries, Multipack and Crowpla Reicolite S.A., we and Cristalerías de Chile S.A. signed a series of contracts forming a joint venture for the development of a PET production facility in Chile through the formation of Envases CMF S.A. We contributed the assets necessary to further the development of the joint venture from Multipack. Our subsidiary Andina Inversiones Societarias S.A. holds a 50% stake in the joint venture while Cristalerías de Chile S.A. retains the other 50% interest.

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     EDASA produces returnable PET bottles in accordance with an agreement with C-C Argentina, which we refer to as the Argentine PET Agreement, which sublicensed to Edasa the C-C Argentina license to manufacture the PET bottles using non-proprietary technology provided by Continental Pet Technologies Inc., today known as Graham Packaging Company Inc. The Argentine PET Agreement expires in December, 2006. There can be no assurance that the Argentine PET Agreement will be renewed after the expiration date.

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Transactions with related companies

Other transactions with related companies are outlined in the following table:

			For the year ended December 31,
			2005					2004					2003
					Effect on					Effect on					Effect on
					income					income					income
					(charge)					(charge)					(charge)
Company	Relationship	Transaction	Amount		credit			Amount		credit			Amount		credit
			(millions of Ch$)
Envases Central S.A.	Equity	Sales of raw materials and supplies	Ch$	1,003	Ch$	—		Ch$	722	Ch$	29		Ch$	1,235	Ch$	117
	Investee	Finished product purchases		13,791		—			12,998		—			14,743	—
Coca-Cola de Chile S.A.	Shareholder Related	Concentrate purchases		40,838		—			38,072		—			36,390	—
		Collection of advertising participation		2,846		(2,846	)		1,784		(1,784	)		2,963		(2,963	)
		Water source rental		1,506		(1,506	)		1,415		(1,415	)		1,369		(1,369	)
		Sales of advertisement		3,191		—			2,412		—			2,419	—
		Others		—		—			—		—			586	—
Coca-Cola de Argentina S.A.	Shareholder Related	Concentrate purchases		—		—			—		—			14,599	—
SPBR S.R.L.	Shareholder Related	Concentrate purchases		20,094		—			17,561		—			—	—
Envases del Pacífico S.A.	Director in common	Purchase of raw materials		780		—			876		—			998	—
Recofarma Industrias do Amazonas Ltda.	Shareholder Related	Concentrate purchases		29,537		—			26,542		—			18,326	—
		Payment of advertising participation		3,128		(3,128	)		3,796		(3,485	)		4,179		(4,179	)
		Other		426		—			276		—			780	—
Envases CMF S.A.	Equity	Container purchases		15,904		—			13,898		—			13,959	—
	Investee	Sale of raw materials		—		—			52		—			1,347	—
		Services rendered		—		—			130		—			295	—
Centralli Refrigerantes S.A.	Equity investee	Finished product purchases		—		—			—		—			900	—
Envases Italprint S.A.	Director in common	Raw material purchases		—		—			—		—			9	—
Embonor S.A.	Shareholder related	Sale of shares		3,039		—			—		—			—	—
Embotelladora Coca Cola Polar S.A.	Shareholder related	Sale of shares		1,964		—			—		—			—	—
Inmobiliaria y Constructora el Golf S.A.	Shareholder in common	Real estate purchase		16		1,811			—		—			—	—
Inversiones Caburga S.A.	Shareholder	Real estate sale		1,024		—			—		—			—	—
Iansagro S.A.	Director in common	Sugar purchase		12,182		—			10,432		—			—	—

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ITEM 8. FINANCIAL INFORMATION

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

Legal Proceedings

     The Company is part of certain legal proceedings that have arisen during the normal course of business, none of which affects the Company’s financial condition, neither individually nor in the aggregate. The following is a summary of the main proceedings to which the Company and its subsidiaries are a party:

     Embotelladora Andina S.A. (Chile)

     As of December 31, 2005, Embotelladora Andina S.A. faces, labor, tax, commercial and other lawsuits. Accounting provisions for potential loss contingencies stemming from these lawsuits amount to ThCh$74,314. The Company considers it unlikely that the contingencies that are not provisioned for will adversely affect the results of the Company in a material manner.

     Vital S.A. (Chile)

     As of December 31, 2005, the Chilean Internal Revenue Service has commenced a penal lawsuit against our subsidiary Vital S.A. and against those ultimately responsible for the application of tax losses. Contemporaneously with this claim, a lawsuit has been filed for the recovery of income tax and the application of accumulated losses. The Company’s legal advisors believe there is a remote or slight likelihood of a negative outcome in both procedures.

     Rio Janeiro Refrescos Ltda. (Brazil)

     When the Company acquired Refrescos in 1994 and the Perma license in March 2000, there were several significant legal proceedings pending in Brazilian courts, mainly regarding certain potential tax liabilities. In accordance with the terms of the acquisition, the previous owners must compensate Refrescos with respect to the portion of those pending tax claims which took place prior to the time the acquisition, mortgage guarantees and letters of credit were established for the benefit of Refrescos. The guarantees are sufficient and the Company has not provisioned any losses from these proceedings because they are covered by the indicated guarantees.

     Additionally, there are legal proceedings relating to Refrescos for labor and tax lawsuits, and in accordance with generally accepted accounting principles, the respective accounting provisions have been made. These provisions amounted to ThCh$6,614,257 at December 31, 2005, which correspond principally to judicial proceedings regarding PIS and COFINS taxes.

     Embotelladora del Atlántico S.A. (Argentina)

     Due to the employee restructuring at the Company’s Cordoba plant in Argentina during the first half of 1999, Edasa was sued by former employees requesting indemnification for alleged job-related diseases. In accordance with generally accepted accounting principles, provisions amounted to ThCh$1,752,274 at December 31, 2005, mainly corresponding to restructuring related lawsuits.

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Provisions

     In accordance with accounting principles, the provisions regarding legal proceedings must be recorded if said procedures are reasonably probable to be resolved against the Company. Management believes that the constituted provisions reasonably cover the risk exposures.

Dividend Policy

     Pursuant to Chilean law, we must distribute cash dividends equal to at least 30% of our annual net income, calculated in accordance with Chilean GAAP, unless otherwise provided for by a unanimous vote of the Series A shareholders. If there is no net income in a given year, we are not legally required to distribute dividends from retained earnings. At the annual meeting of shareholders held in April 2005, the shareholders authorized the board of directors to distribute, at its discretion, interim dividends during July and October 2005 and January 2006. A U.S. holder of Series A or Series B ADSs may effectively be required to receive a cash dividend, in the absence of a registration statement in effect pursuant to the Securities Market Law of Chile or an effective exemption from the requirement for registration according to that law. Series B shareholders will be entitled to a dividend equal to 10% more than any dividend declared for holders of the Series A shares.

     During 2003, 2004, and 2005, the respective shareholders’ meetings approved extraordinary dividend payments to be paid from retained earnings fund in light of significant cash generation. There can be no assurance that dividend payments will be available in the future.

     The following table sets forth the nominal amount in Chilean pesos of dividends declared and paid per share each year and the U.S. dollar amounts on a per share basis actually paid to holders of ADSs, on each of the respective payment dates:

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			Fiscal Year with		Series A				Series B
		Date	Respect to which		Ch$ per				Ch$ per
		Dividend	Dividend was		Share		US$ per		Share		US$ per
Year		Paid	Declared		(nominal)		share		(nominal)		share
	2006	January 26		2005		4.80		0.00907		5.28		0.00998
		April 27		2005		6.48		0.01249		7.13		0.01374
		June 01	Retained earnings			70.00		0.13158		77.00		0.14474
	2005	January 27		2004		4.80		0.00819		5.28		0.00901
		April 28		2004		4.80		0.00824		5.28		0.00906
		May 19	Retained earnings			70.00		0.12079		77.00		0.13287
		July 28		2005		4.80		0.00852		5.28		0.00937
		October 26		2005		4.80		0.00878		5.28		0.00966
	2004	January 29		2003		4.80		0.00804		5.28		0.00885
		April 29		2003		4.80		0.00768		5.28		0.00845
		May 13	Retained earnings			40.00		0.06225		44.00		0.06847
		July 28		2004		4.80		0.00747		5.28		0.00821
		October 28		2004		4.80		0.00780		5.28		0.00858
	2003	January 30		2002		4.80		0.00654		5.28		0.00719
		April 30		2002		4.80		0.00681		5.28		0.00750
		May 15	Retained earnings			45.00		0.06365		49.50		0.07001
		July 29		2003		4.80		0.00684		5.28		0.00752
		October 29		2003		4.80		0.00756		5.28		0.00832

ITEM 9. THE OFFER AND LISTING

     Shares of Andina’s common stock have traded in the United States on the New York Stock Exchange (“NYSE”) since July 14, 1994 in the form of ADSs, each representing six shares of common stock, with the ADSs in turn evidenced by ADRs. The Depositary for the ADSs is The Bank of New York. Shares of Andina’s common stock also trade in Chile on the Bolsa de Comercio de Santiago, the Bolsa de Valores Electrónica and the Bolsa de Valores de Valparaíso.

     The table below shows the high and low daily closing prices of the common stock in Chilean pesos and the trading volume of the common stock on the Santiago Stock Exchange for the periods indicated. It also shows the high and low daily closing prices of the ADSs and the volume traded in the New York Stock Exchange.

	Share Volume				Ch$ per Share
	(in thousands)				Series A				Series B
	Series A		Series B		High		Low		High		Low
2001		15,890		56,229	Ch$	1,650	Ch$	980	Ch$	1,220	Ch$	920
2002		43,783		74,233		1,100		600		900		569
2003		28,270		47,568		1,220		810		1,220		770
2004:
1st Quarter		7,986		13,831		1,250		1,045		1,240		1,040
2nd Quarter		8,066		22,171		1,300		1,110		1,260		1,120
3rd Quarter		7,510		20,380		1,390		1,160		1,245		1,135
4th Quarter		9,958		38,203		1,300		1,181		1,300		1,175
2005:
1st Quarter		14,979		18,829	Ch$	1,300	Ch$	1,135	Ch$	1,370	Ch$	1,166

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	Share Volume				Ch$ per Share
	(in thousands)				Series A				Series B
	Series A		Series B		High		Low		High		Low
2nd Quarter		14,372		43,505		1,260		1,125		1,395		1,235
3rd Quarter		5,696		17,605		1,400		1,188		1,505		1,300
4th Quarter		5,591		19,795		1,384		1,050		1,455		1,140
Last six months:
December 2005		3,292		8,498		1,220		1,050		1,280		1,140
January 2006		5,207		6,819		1,170		1,110		1,265		1,180
February 2006		1,991		6,146		1,191		1,130		1,320		1,202
March 2006		1,466		6,188		1,240		1,160		1,330		1,245
April 2006		4,337		17,709		1,240		1,170		1,324		1,280
May 2006		7,264		27,575		1,275		1,150		1,380		1,225

	ADS Volume
	(in thousands)				US$ per ADS
	Series A		Series A		Series A				Series B
					High		Low		High		Low
2001		51,083		47,046	US$	16.50	US$	8.19	US$	12.88	US$	7.10
2002		29,960		51,386		9.90		4.72		8.25		4.81
2003		19,690		54,887		11.07		6.10		11.40		6.05
2004:
1st Quarter		5,588		11,005		12.55		10.40		12.55		10.35
2nd Quarter		7,918		5,651		12.50		10.50		12.30		10.65
3rd Quarter		7,009		4,671		13.24		11.41		12.14		10.85
4th Quarter		15,063		17,523		13.20		11.96		13.59		11.50
2005:
1st Quarter		5,577		15,944		13.29		11.80		14.14		12.15
2nd Quarter		1,732		11,858		13.00		11.50		14.65		12.47
3rd Quarter		1,429		4,743		15.62		12.25		17.00		13.50
4th Quarter		2,665		4,535		15.70		12.15		16.94		13.27
Last six months:
December 2005		1,201		1,862		13.92		12.15		15.10		13.27
January 2006		1,002		2,063		13.79		12.35		14.85		13.35
February 2006		1,015		3,841		13.80		12.90		15.01		13.67
March 2006		1,520		1,638		14.18		12.75		15.04		13.90
April 2006		1,045		495		14.47		13.35		15.49		14.37
May 2006		648		1,232		14.65		12.61		16.10		13.75

Sources: Santiago Stock Exchange Official Quotations Bulletin and New York Stock Exchange.

     On December 31, 2005, the closing price for the Series A shares on the Santiago Stock Exchange was Ch$1,179 per share (US$13.80 per Series A ADR), and Ch$1,220 for the Series B shares (US$14.28 per Series B ADR). At December 31, 2005, there were 9,956,344 Series A ADSs (equivalent to 29,738,064 Series A shares) and 8,257,766 Series B ADSs (equivalent to 49,546,596 Series B shares). Andina’s ADSs represented at such date 10.4% of the total number of our issued and outstanding shares.

     On April 7, 1997, we completed the Reclassification of our common stock into Series A and Series B shares. See “Item 4. Information on the Company — Part A. History and Development of the Company — Reclassification of Capital Stock.” At that date, we amended the existing depositary agreement with Citibank N.A. relating to the ADR program for the common stock so as to cover the Series A shares and entered into a new depositary agreement with Citibank regarding the Series B shares. As of April 7, 1997, we had registered with the Securities and Exchange Commission and listed on the New York Stock Exchange, (i) the Series A shares in the form of Series A American Depositary Shares (the “Series A ADSs”), each representing six Series A shares, with the Series A ADSs in turn evidenced by Series A American Depositary Receipts (“Series A ADRs”) and (ii) the Series B shares in the form of Series B American Depositary Shares (the “Series B ADSs”), each representing six Series B shares, with the Series B ADSs in turn evidenced by Series B American Depositary Receipts.

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          The Santiago Stock Exchange, established in 1893, is the principal equities exchange in Chile. The Chilean securities markets are substantially smaller, less liquid, and more volatile than major securities markets in the United States. The Santiago Stock Exchange had a market capitalization of approximately US$136,374 million as of December 31, 2005 and an average monthly trading volume of US$1,733 million in 2005. Trading activity on the Santiago Stock Exchange is on average substantially less than that on the principal national securities exchanges in the United States. We estimate that for the year ended December 31, 2005, Andina’s shares were traded on the Santiago Stock Exchange on an average of approximately 96.8% and 100.0% of such trading days, for Series A and Series B shares respectively.

          Pursuant to the terms of the Shareholders’ Agreement dated September 5, 1996 (the “Agreement”), among Inversiones Freire Ltda. and Inversiones Freire Dos Ltda. (together, the “Freire Shareholders”), the Company and the other parties thereto, none of the shareholders, party to the Agreement, may transfer Series A shares of the Company they hold unless it involves:

• Transfers to wholly-owned subsidiaries of any Freire Shareholder, provided that any shares transferred to such entities remain subject to the provisions of the Agreement;

• Acceptance by a Freire Shareholder party to the Agreement of a bona fide offer from a third party to purchase some or all of the shares held by such shareholder, so long as the Freire Shareholder first offers such shares for sale, on the same terms and conditions as those proposed to be sold to the third-party purchaser and to the other shareholder party to the Agreement; and

• A proposal by a shareholder party to the Agreement to sell its shares in a public offering or in a brokers’ transaction, so long as it first offers such shares to the other shareholders party to the Agreement at the price proposed in the public sale notice.

          Other than as discussed above, we are not aware of any other existing contracts or documents that impose material limitations or qualifications on the rights of shareholders of our listed securities.

The Yankee Bonds

          Our 7.00% Notes due 2007, 7⁵/ ₈% Notes due 2027 and 7⁷/ ₈ Notes due 2097 are not listed on any stock exchange or other regulated market. Trading in these notes takes place primarily in the over-the counter market and, accordingly, we are not able to obtain reliable information on trading in these notes.

Debt Securities

          The Chilean Central Bank is responsible, inter alia, for the monetary and exchange control policies of Chile. The Chilean Central Bank has authorized Chilean issuers to offer bonds in Chile and abroad under the terms of “Chapter XIV” and “CNCI,” respectively. The following paragraphs lay out certain rules of the Central Bank regarding bond issuances on international markets denominated in a currency other than Chilean pesos. This summary does not intend to be complete and one must refer to the provisions in Chapter XIV in relation to debt issues.

          Effective April 19, 2001, the new Compendium eased restrictions on certain foreign exchange transactions as described above. The new Chapter XIV, therefore, simplifies the procedure to register capital contributions, investments and foreign loans greatly. The Chilean Central Bank provides that payments or remittances of funds, to or from Chile, that arise or generate from credits secured abroad should be made through the Formal Exchange Market. For this purpose, when the foreign currency from loans or investments or capital contributions is made available to the beneficiary in the country, the intervening bank should issue

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the pertinent “Form” and request information from the debtor, investor or capital contributor, as the case may be, that all of these must provide pursuant to Chapter XIV.

          Payments or remittances of foreign currency as capital, interest, adjustments, profits and other benefits originating in the transactions regulated under Chapter XIV shall be reported to the Chilean Central Bank in the following way: (i) if the pertinent currency represents a remittance made from Chile, the intervening Formal Exchange Market bank should issue the above form; (ii) the issuer or borrower should inform the Chilean Central Bank if the foreign currency used to make the pertinent payments is sourced from credit transactions for which the foreign currency has been used directly abroad or if the corresponding payment obligation is fulfilled abroad using funds other than those indicated in Chapter XIV.

          Any change in the terms of the transaction, substitution of the debtor or creditor, total or partial assignments of credits or rights regarding investments or capital contributions must be reported to the Chilean Central Bank within 10 days after formalization.

          Likewise, in the case of foreign loans obtained through the placement of convertible bonds, the issuer shall inform the Chilean Central Bank in the same manner and term mentioned above, of any increase or decrease in their registered amount as a result of the conversion of convertible bonds denominated and payable in Chilean pesos, for other convertible bonds denominated and payable in foreign currency or shares, as applicable, acquired by foreign investors with proceeds that had entered Chile under the terms of Chapter XIV.

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

          In addition, transactions recorded prior to April 19, 2001 will continue to be governed by the rules in force at the time of their recordation, notwithstanding the right afforded to the parties thereto to subject them to the new regulations, in which case any favorable or adverse effect that may arise by a change in the regulations applicable to this type of foreign exchange transaction need be considered.

          In February 1999, with authorization from the Chilean Central Bank, we accessed the proceeds of the sale of bonds by Andina to Chile, subject to the exchange regulations governing at that time.

          The Chilean Central Bank unilaterally decides whether to grant authorizations for international bond offerings, and although other authorizations of the Central Bank have never been cancelled once issued, the Chilean Central Bank did request that lenders renegotiate the terms of their loans during the renegotiation of the foreign debt of Chile in the eighties.

          We cannot give any assurance that the Chilean Central Bank will impose no future restrictions applicable to the holders of debt securities, nor can we make any evaluation of the duration or impact of those restrictions, if imposed.

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ITEM 10. ADDITIONAL INFORMATION

Memorandum and Articles of Association

Register and Entry Number

An abstract of the Company’s bylaws is registered on page 768, No 581 of the Santiago Registry of Commerce (Registro de Comercio del Conservador de Bienes Raíces ) of 1946, and was published in the Official Daily Newspaper issue No 20,413 dated March 25, 1946. The Chilean Treasury Department, upon Decree No 1,364 of March 13, 1946, which is registered on page 770 No 582 of the Santiago Registry of Commerce of 1946, approved the Company’s bylaws.

Material Contracts

          On October 17, 2005, Andina, Vital, Coca-Cola Embonor S.A. or Embonor and Embotelladoras Coca-Cola Polar S.A. or Polar entered into a letter of intent to carry out the transactions described below in order to re-structure production and packing of products in the business categories of Waters, Juices and Non-Carbonated Beverages, licensed by TCCC in Chile.

          On December 22, 2005, the contracts and documents were signed to implement the above referred letter of intent, resulted in the following:

          a) In the category of Water, Andina, Embonor (through its subsidiary, Embonor S.A.) and Polar have taken an interest of 56.5%, 26.4% and 17.1%, respectively, in Vital Aguas S.A., originally incorporated under the name of VA S.A., which will conduct the business of the processing, production and bottling of the Vital de Chanqueahue Mineral Water and other water and products, according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC.

          The equity interests of Embonor and Polar in Vital Aguas S.A. were acquired by purchase from Andina and its subsidiary, Andina Inversiones Societarias S.A., at the prices equivalent to 178,430 Unidades de Fomento and 115,574 Unidades de Fomento, respectively. Said amounts were adjusted and paid during January 2006.

          In addition, Andina, Vital, Embonor and Polar agreed to the respective contracts and authorizations with TCCC to produce, bottle and sell the product named “Dasani.”

          b) In the category of Juices and Non-carbonated Beverages, contracts were signed whereby Embonor and Polar have become the holders of the rights to acquire products from Vital S.A. under the brands “Kapo,” “Andina Nectar,” “Andina H-C,” “Andina Frut,” and other brands, according to the terms of the contracts agreed upon by each bottler and TCCC. The right to purchase these products from Vital S.A. will be at the prices and under the conditions applicable to volumes and maximum periods determined by the parties that will last, in all cases, until December 31, 2015.

          Embonor and Polar agreed to pay to Andina’s subsidiary, Vital S.A., advances for the aforementioned rights, equal to 196,486 Unidades de Fomento (UF) and 51,981 Unidades de Fomento (UF), respectively. Said amounts were adjusted and paid during January 2006.

          In addition, Andina, Vital, Embonor and Polar have agreed to the respective contracts and authorizations with TCCC to produce, bottle and sell these products at their respective plants.

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          On August 10, 2004, Refrescos entered into an agreement with Recofarma Industria do Amazonas Ltda. or Recofarma, Refrigerantes Minas Gerais Ltds. or RMG and Companhia Mineira de Refrescos S.A. or CMR, and together with Recofarma and RMG, the Counterparties, pursuant to which the parties agreed to swap franchise territories for the production and distribution of Coca-Cola brand soft drinks. Pursuant to the terms of this transaction, which was approved by the respective votes of the shareholders of the companies, Refrescos sold its equity stake in a newly-formed company named Franquia 2299-Atendimento Personalisado Ltda., to which it had previously contributed all of the assets, production and distribution rights for Coca-Cola soft drinks in the territory denominated Governador Valadares in the State of Minas Gerais, to the Counterparties. In consideration for this transfer, Refrescos received all of the Counterparties’ equity interest in Zohhal Industria de Refrigerantes Ltda. or Zohhal, which owned all of the assets, production and distribution rights for Coca-Cola soft drinks in the territory known as Nova Iguaçú in the State of Rio de Janeiro.

          On August 28, 2004, after completion of all operational transitions and adjustments provided for in the agreement, the parties formalized the transfers of their respective territories and Refrescos acquired all rights to produce and distribute Coca-Cola brand products in the Nova Iguaçú territory. As required by Brazilian law, all filings and registrations required in connection with this transaction were presented with the Commercial Board of Rio de Janeiro.

          In March 2000, we finalized negotiations with the Coffin Group for the acquisition of a Coca-Cola franchise license for a territory in Brazil comprising the State of Espirito Santo and part of the States of Río de Janeiro and Minas Gerais, which was serviced by the Coffin Group through Perma. Total control of the Perma franchise license was assumed by Refrescos for a total cost of US$74.5 million.

          The franchise authorizes the production, sale, and distribution of products under The Coca-Cola Company trademark in the above-mentioned territories, which have a population of 8.8 million inhabitants, representing a 70% increase in the volume of operations.

          Refrescos entered into an agreement with Kaiser in December 1993 for the exclusive representation of the Kaiser and Heineken beers in Refrescos’ operating territory. The duration of said agreement was five years, with the possibility of renewal. In November 1998, that term was extended to December 27, 2000, renewable for two years. On December 19, 2000, Refrescos exercised its contractual rights to request the renewal of the agreement through March 31, 2003. Without prejudice to the foregoing, on March 19, 2002, The Coca-Cola Company, Kaiser, Molson and the Association of Brazilian Producers of Coca-Cola soft drinks (of which Refrescos is a member) executed a memorandum of understanding and an agreement with a term of 20 years. This agreement establishes the general principles and obligations applied by Kaiser and the distributors thereof to the distribution of beers produced or imported by Kaiser through the Coca-Cola distribution system with a term of 20 years and renewable for another 20-year period. On May 30, 2003, Kaiser and its distributors (including Refrescos) executed a new twenty-year distribution agreement which is renewable for another twenty-year period.

          In the course of our business, we have entered into agreements with The Coca-Cola Company. Bottler Agreements (as defined hereunder) are international standard contracts The Coca-Cola Company enters into with bottlers outside the United States for the sale of concentrates and beverage basis for certain Coca-Cola soft drinks and non-soft drink beverages. We are a party to the following bottler agreements: (i) with respect to the Chilean territory, a bottler agreement entered into between Andina and The Coca-Cola Company (the “Chilean Bottler Agreement”), which was extended for a term of five years as of January 18, 2003; (ii) with respect to the Brazilian territory, a bottler agreement between Refrescos and C-C Brazil with The Coca-Cola Company as an intervening party (collectively, the “Brazilian Bottler Agreement”), which is due to expire on April 2, 2008; (iii) with respect to the Argentine territory, bottler agreements, between Edasa and The Coca-Cola Company (the “Argentine Bottler Agreements”), which are due to expire on December 10, 2006; and a Juice Bottling Agreement was subscribed on December 31, 1998, with Minute Maid International until December 31, 2008 renewable for a new 7-year period.

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This agreement was terminated on December 22, 2005 and on that same date, a Juice Bottling Agreement was subscribed between Vital S.A. and The Coca-Cola Company for the production, processing, and bottling of products Andina Frut, Andina Hi-C, Kapo and DASANI (purified water version) which will expire on December 31, 2015. A Water Manufacturing and Packaging Agreement was subscribed on that same date between The Coca-Cola Company and VA S.A. for the preparation and packaging of beverages that will be in effect until December 31, 2015, regarding the formats Vital, Chanqueahue, Vital de Chanqueahue and DASANI (purified water version) (the Chilean Bottler Agreement, the Brazilian Bottler Agreement, the Argentine Bottler Agreements and the Vital Bottler Agreements, collectively, the “Bottler Agreements”). Bottler Agreements are renewable upon request by the bottler at the sole discretion of The Coca-Cola Company. We cannot assure you that the Bottler Agreements will be renewed upon their expiration, and even if they are renewed, we cannot assure you that the agreements will be renewed on the existing terms.

Foreign Investment and Exchange Controls in Chile

          The Chilean Central Bank is responsible, among other things, for setting monetary policies and exchange controls in Chile. Equity investments, including investments in shares of stock by non-resident persons and entities, are generally subject to various exchange control regulations restricting both the repatriation of their investments from Chile and the earnings accrued thereon. Registration of foreign investments in Chile, including investments in shares of common stock of Chilean companies, give investors access to the Chilean Formal Exchange Market. Foreign investments can be registered with the Foreign Investment Committee under Decree Law No. 600 of 1974, as amended, or with the Chilean Central Bank under the Central Bank Act and Chapter XIV of the Compendium of Foreign Exchange Regulations (Compendio de Normas de Cambios Internacionales or CFER) of the Chilean Central Bank.

          On April 16, 2001, the Chilean Central Bank agreed that, effective April 19, 2001, prior foreign exchange restrictions would be eliminated and that a new CFER would be enacted. The main purpose of these amendments, as declared by the Chilean Central Bank, is to ease the free flow of capital to and from Chile and to foster foreign investment.

          The Chilean Central Bank deleted Chapter XXVI of the CFER, which regulated the issuance and placement of ADRs by Chilean corporations. Pursuant to the new rules, it is no longer necessary to first seek the Chilean Central Bank’s approval to issue ADRs, nor to enter into a foreign investment contract with the BCC. The issuance of ADRs is now regarded as an ordinary foreign investment and simply requires that the Chilean Central Bank be informed of the transaction, pursuant to Chapter XIV of the CFER, and that the transaction be conducted exclusively through the Formal Exchange Market. The new rules do not derogate the existing Foreign Investment Contract or FIC entered into between Andina and the Chilean Central Bank.

          In the case of Andina, the ADR mechanism was subject to: (a) an agreement entered into between Andina, The Bank of New York (in its capacity as depositary for the shares represented by the ADSs) and the Chilean Central Bank, pursuant to Article 47 of the Central Bank Act, under Chapter XXVI, Title I of the CFER (which, as stated, remained in force until April 18, 2001) governing the issuance of ADSs by Chilean corporations, and; (b) the FIC, which grants the depositary and holders of ADRs access to the Formal Exchange Market. Banco de Chile had acted as custodian since December 31, 2002. On May 5, 2003, Banco Santander Chile replaced Banco de Chile as custodian, as requested by The Bank of New York pursuant to an amendment of Chapter XII (in accordance with Title I of the CFER), which applies to our ADRs.

          Under Chapter XIV of the CFER, if the funds to purchase the common shares underlying the ADSs are brought into Chile, the depositary must deliver, on behalf of foreign investors, an annex providing information on the transaction to the Formal Exchange Market entity involved, together with a

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letter instructing such entity to deliver the foreign currency or the equivalency in pesos, on or before the date the foreign currency is brought or is to be brought into Chile.

          If foreign investors do not invest funds in Chile to purchase the common shares underlying the ADSs, the depositary, on behalf of the foreign investors, must provide the annex and letter, mentioned above, to the Chilean Central Bank directly or through the Formal Exchange Market entity within ten days following the date on which payment is made. Repatriation of amounts received with respect to deposited common shares or common shares withdrawn from deposits on surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying common shares and any rights arising therefrom) need be made through the Formal Exchange Market. The Formal Exchange Market entity intervening in the repatriation must provide certain information to the Chilean Central Bank on the following banking business day.

          Furthermore, Chapter XIV of the CFER provides that payments and remittances of funds from Chile are governed by the rules in effect at the time payments or remittances are made. Therefore, any changes made to Chilean laws and regulations after the date hereof may affect foreign investors who have acquired ADSs. We cannot give any assurance that new regulations of the Chilean Central Bank or further legislative changes to the current foreign exchange control regime in Chile will not affect our ability to remit foreign currency to make the relevant payments.

          Under Chapter XXVI and the FIC, the Chilean Central Bank agreed to grant to the depositary, on behalf of Series A and Series B ADR holders, and to any investor not residing nor domiciled in Chile who withdraws Series A shares or Series B shares upon surrender of Series A or Series B ADRs, which we refer to as the Withdrawn Shares, Formal Exchange Market access to convert Chilean pesos into U.S. dollars (and to remit those dollars outside Chile) with respect to Series A and Series B common shares represented by Series A and Series B ADSs or Withdrawn Shares, including amounts received as:

(1)  cash dividends;

(2)  proceeds from the sale in Chile of Withdrawn Shares;

(3)  proceeds from the sale in Chile of preemptive rights to subscribe for additional Series A and Series B shares;

(4)  proceeds from the liquidation, merger or consolidation of Andina;

(5)  proceeds from the sale in Chile of common shares received as dividends; and

(6)  other distributions, including those in respect of any re-capitalization resulting from holding Series A or Series B shares represented by Series A or Series B ADSs or by Withdrawn Shares. Investors that receive Withdrawn Shares in exchange of Series A or Series B ADRs shall be authorized to re-deposit them in exchange of Series A or Series B ADRs, provided the conditions necessary to re-deposit them are met.

          The guarantee of Formal Exchange Market access under the FIC will extend to the participants of the ADS offering if the following requirements are met: (1) the funds to purchase the Series A shares or Series B shares underlying the ADSs are brought into Chile and converted into Chilean pesos through the Formal Exchange Market; (2) the purchase of the underlying Series A shares or Series B shares is made on a Chilean stock exchange; and (3) within five business days from the conversion of the funds into Chilean pesos, the Chilean Central Bank is informed that the funds thus converted were used to purchase the underlying Series A shares or Series B shares.

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          Chapter XXVI provides that Formal Exchange Market access in connection with dividend payments is conditioned to our certifying to the Chilean Central Bank that a dividend payment has been made and that any applicable tax has been withheld. We agreed to provide this certification. Chapter XXVI also provides that Formal Exchange Market access in connection with the sale of Withdrawn Shares, or distribution thereon, is conditioned upon receipt by the Chilean Central Bank of (1) a certificate by the depositary or custodian, as the case may be, that the Series A shares or Series B shares have been withdrawn in exchange for delivery of the appropriate ADRs, and (2) a waiver of the benefits of the FIC with respect to ADRs (except in connection with the proposed sale of the Series A shares or Series B shares) until the Withdrawn Shares are re-deposited.

          Chapter XXVI and the FIC provide that an entity or person who brings foreign currency into Chile to purchase Series A shares or Series B shares pursuant to the FIC must convert that foreign currency into Chilean pesos on the date of entry into Chile, and must invest in Series A or Series B shares within five banking business days in order to receive the benefits of the FIC. If that entity or person does not invest in Series A or Series B shares within that period, it can access the Formal Exchange Market to reacquire foreign currency, provided that the request is submitted to the Chilean Central Bank within seven banking business days of the initial conversion into pesos. Series A shares or Series B shares acquired as described above may be deposited in exchange for ADRs and the entity or person will receive the benefits of the FIC, subject to: (1) receipt by the Chilean Central Bank of a certificate from the depositary that the Series A or Series B shares have been deposited and that the related ADRs have been issued; and (2) receipt by the custodian of a declaration from the person making the deposit waiving the benefits granted by the FIC with respect to the deposited Series A or Series B shares.

          FEM access under any of the circumstances described above is not automatic. Pursuant to Chapter XXVI, such access needs the Chilean Central Bank’s approval on a request submitted to that end through a banking institution established in Chile. The FIC provides that if the Chilean Central Bank has not acted upon the request within seven banking days, the request is deemed to have been granted.

          Under current Chilean law, the Chilean Central Bank cannot unilaterally change the FIC. Judicial precedent (although not binding on future judicial decisions) also established that the FIC cannot be annulled by future legislative changes. No assurance can be given, however, that additional Chilean restrictions applicable to the holders of ADRs, to the disposition of underlying Series A or Series B shares, or to the repatriation of proceeds from their disposition, will not be imposed in the future; nor can there be any assessment of the duration or impact of any restrictions that might be imposed. If for whatever reason, including changes in the FIC or Chilean law, the Depositary is prevented from converting Chilean pesos into U.S. dollars, the investors shall receive dividends or other payments in Chilean pesos, which shall subject the investors to exchange rate risks. It cannot be assured that the CFER, as amended, or any other exchange regulation will not be amended in the future, or that if new regulations are enacted that they shall have no material bearing on Andina or the holders of the ADS.

          No assurance can be given that Andina will be able to purchase U.S. Dollars in the Informal Exchange Market at any time in the future, nor that any such purchase will be for the amounts necessary to pay any sum due under any of its debt instruments. Likewise, it is not possible to guarantee that changes to the regulations of the Chilean Central Bank or other legislative changes relating to exchange controls will not restrict nor impair Andina’s ability to purchase U.S. Dollars in order to make payment on its debt instruments.

          Exchange Rates

          All payments and distributions regarding the Series A or Series B ADSs must be transacted in the Formal Exchange Market.

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Tax Considerations Relating to Equity Securities

          Chilean Tax Considerations

          The following discussion summarizes the material Chilean income tax consequences of an investment in Andina’s stock or ADSs by an individual who is not domiciled or resident in Chile or a legal entity that is not organized under the laws of Chile and does not have a permanent establishment in Chile (a “foreign holder”). This discussion is based upon Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Servicio de Impuestos Internos (the Chilean Internal Revenue Service or “SII”) and other applicable regulations and rulings that are subject to change without notice. The discussion is not intended as a tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation. Each investor or potential investor is encouraged to seek independent tax advice with respect to consequences of investing in Andina’s stock or the ADSs.

          Under Chilean law, all matters regarding taxation such as tax rates (including tax rates applicable to foreign investors), the computation of taxable income for Chilean purposes, the manner in which Chilean taxes are imposed and collected, and others thereof, may only be imposed or amended by a law enacted by Congress. In addition, the SII is empowered to issue rulings and regulations of either general or specific application, and to interpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who act in good faith relying on such rulings, regulations and interpretations, but the SII may change said rulings, regulations and interpretations prospectively. There is no income tax treaty in force between Chile and the United States.

          Cash Dividends and Other Distributions

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

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

          For purposes of determining the amount of First Category Tax we pay on profits from which the dividends are paid, dividends are attributed to our oldest retained profits.

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

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          Capital Gains

          Gains recognized from the sale or exchange of ADSs (or ADRs evidencing ADSs) by a foreign holder outside Chile will not be subject to Chilean taxation.

          Gains recognized on a sale or exchange of shares of stock (as distinguished from sales or exchanges of ADSs representing such shares) will be subject to both the First Category Tax and the Withholding Tax (the former being credited against the latter) if either (i) the foreign holder has held the shares of common stock for less than one year since exchanging ADSs for the shares of common stock, (ii) the foreign holder acquired and disposed of the shares of common stock in the ordinary course of its business or as an habitual trader of shares or (iii) the foreign holder transfers shares of common stock to a related person, as defined by Chilean tax law. In all other cases, gain on the disposition of shares of common stock will be subject only to the First Category Tax, currently imposed at a rate of 17%.

          The deposit or withdrawal of shares of common stock in exchange for ADSs is not subject to any Chilean taxes. The tax basis of shares of common stock received in exchange for ADSs will be determined in accordance with the valuation procedure set forth in the deposit agreement, which values shares of common stock at the highest reported sales price at which they trade on the Santiago Stock Exchange on the date of the withdrawal of the shares of common stock from the depositary. Consequently, the conversion of ADSs into shares of common stock, and the immediate sale of the shares for the value established under the deposit agreement, will not generate a capital gain subject to taxation in Chile. However, in the case where the sale of the shares is made on a day that is different than the date in which the exchange is recorded, capital gain subject to taxation in Chile may be generated. In connection thereto, on October 1, 1999 the Chilean Internal Revenue Service issued Ruling No. 3708 whereby it allowed Chilean issuers of ADSs to amend the deposit agreements to which they are parties in order to include a clause that states that, in the case that the exchanged shares are sold by the ADSs’ holders on a Chilean Stock Exchange either on the same day in which the exchange is recorded or within the two business days prior to such date, 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. Consequently, should this amendment be included in the deposit agreement, the capital gain that may be generated if the exchange date is different than the date in which the shares received in exchange for ADSs were sold, will not be subject to taxation.

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

          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 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 Chilean withholding taxes.

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          United States Tax Considerations

          The following discussion summarizes certain U.S. federal income tax consequences of an investment in ADSs or shares of common stock. This discussion is based upon U.S. federal income tax laws presently in force. The discussion is not a full description of all tax considerations that may be relevant to a decision to purchase ADSs or shares of common stock. In particular, the discussion is directed only to U.S. holders (as defined below) that hold ADSs or shares of common stock as capital assets, and it does not address the tax treatment of holders that are subject to special tax rules under the Internal Revenue Code of 1986 as amended (the “Code”), such as financial institutions, regulated investment companies, real estate investment trusts, investors in pass-through entities, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, insurance companies, tax-exempt entities, persons holding ADSs or shares of common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, holders of 10% or more of our voting shares, persons liable for alternative minimum tax or persons whose “functional currency” is not the U.S. dollar. Furthermore, the discussion below is based upon the provisions of the Code and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. In addition, the discussion below assumes that the Deposit Agreement, and all other related agreements, will be performed in accordance with their terms. If a partnership holds our ADSs or shares of common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partners in a partnership holding ADSs or shares of common stock should consult their tax advisors. This summary does not contain a detailed description of all the United States federal income tax consequences to a holder in light of its particular circumstances and does not address the effects of any state, local or non-United States tax laws. Prospective purchasers should consult their tax advisors about the federal, state, local and foreign tax consequences to them of the purchase, ownership and disposition of ADSs or shares of common stock.

          As used herein, the term “U.S. holder” means a holder of ADSs or shares of common stock that is (i) an individual U.S. citizen or resident, (ii) a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust (x) that is subject to the primary supervision of a court within the United States and with respect to which one or more U.S. persons have the authority to control all substantial decisions of the trust or (y) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

          ADSs

          If the obligations contemplated by the deposit agreement are performed in accordance with its terms, holders of ADSs (or ADRs evidencing ADSs) generally will be treated for U.S. federal income tax purposes as the owners of the shares of common stock represented by those ADSs. Deposits or withdrawals of shares 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. The U.S. Treasury has expressed concerns that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the analysis of the creditability of Chilean taxes and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by parties to whom the ADSs are released.

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          Cash Dividends and Other Distributions

          Cash dividends (including the amount of any Chilean taxes withheld) paid to U.S. holders with respect to the ADSs or shares of common stock generally will be treated as dividend income to such U.S. holders, to the extent paid out of current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Such income will be includable in the gross income of a U.S. holder as ordinary income on the day received by the Depositary, in the case of ADSs, or by the U.S. holder, in the case of shares of common stock. The dividends will not be eligible for the dividends received deduction allowed to corporations under the Code. With respect to non-corporate U.S. holders, certain dividends received before January 1, 2011 from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. U.S. Treasury Department guidance indicates that our ADSs (which are listed on the New York Stock Exchange), but not our shares of common stock, are readily tradable on an established securities market in the United States. Thus, we do not believe that dividends that we pay on our shares of our common stock that are not backed by ADSs currently meet the conditions required for these reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income’’ pursuant to section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Non-corporate U.S. holders should consult their own tax advisors regarding the application of these rules given their particular circumstances.

          Dividends paid in Chilean pesos will be includable in a U.S. dollar amount based on the exchange rate in effect on the day of receipt by the Depositary, in the case of ADSs, or by the U.S. holder in the case of shares of common stock, regardless of whether the Chilean pesos are converted into U.S. dollars. If the Chilean pesos received as dividends are not converted into U.S. dollars on the date of receipt, a U.S. holder will have a basis in Chilean pesos equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the Chilean pesos will be treated as U.S. source ordinary income or loss, regardless of whether the pesos are converted into U.S. dollars.

          The Chilean Withholding Tax (net of any credit for the First Category Tax) paid by or for the account of any U.S. holder may be eligible, subject to generally applicable limitations and conditions, for credit against the U.S. holder’s federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid with respect to the ADSs or shares of common stock generally will be foreign source income and will generally constitute passive income. Further, in certain circumstances, a U.S. holder that (i) has held ADSs or shares of common stock for less than a specified minimum period during which it is not protected from risk of loss or (ii) is obligated to make payments related to the dividends will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on ADSs or shares of common stock. The rules governing the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

          Distributions to U.S. holders of additional shares of common stock or preemptive rights with respect to shares of common stock that are made as part of a pro rata distribution to all shareholders of the Company generally should not be subject to U.S. federal income tax.

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

          We do not believe that we are, for U.S. federal income tax purposes, a passive foreign investment company (a “PFIC”), and expect to continue our operations in such a manner that we will not be a PFIC. If, however, we are or become a PFIC, U.S. holders could be subject to additional U.S. federal income taxes on gain recognized with respect to the ADSs or shares of common stock and on certain distributions, plus an interest charge on certain taxes treated as having been deferred by the U.S. holder under the PFIC rules of the U.S. federal income tax laws.

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

          Capital Gains

          U.S. holders that hold ADSs or shares of common stock as capital assets will recognize capital gain or loss for federal income tax purposes on the sale or other disposition of such ADSs or shares (or preemptive rights with respect to such shares) held by the U.S. holder or the Depositary. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. holder generally will be treated as U.S. source gain or loss. Consequently, in the case of a disposition of shares of common stock (which, unlike a disposition of ADSs, may be taxable in Chile), the U.S. holder may not be able to use the foreign tax credit for Chilean tax imposed on the gain unless it can apply (subject to applicable limitations) the credit against tax due on other income from foreign sources.

          Estate and Gift Taxation

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

          Information Reporting and Backup Withholding

          In general, information reporting requirements will apply to dividends in respect of ADSs or the shares of common stock or the proceeds received on the sale, exchange, or redemption of the ADSs paid within the United States (and in certain cases, outside of the United States) to U.S. holders other than certain exempt recipients (such as corporations). A backup withholding tax may apply to such payments if

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the U.S. holder fails to provide an accurate taxpayer identification number or certification of other exempt status or fails to report interest and dividends required to be shown on its federal income tax returns. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability provided the required information is furnished to the Internal Revenue Service.

Tax Considerations Relating to Debt Securities

          General

          In October 1997, we issued US$150 million 7% Notes Due 2007 (the “2007 Notes”), US$100 million 7 5/8% Notes due 2027 (the “2027 Notes”) and US$100 million 7 7/8% Debentures Due 2097 (the “2097 Debentures,” together with the 2007 Notes and the 2027 Notes, the “Debt Securities”). The following is a summary of certain Chilean tax and U.S. federal income tax considerations relating to the purchase, ownership and disposition of Debt Securities. The summary does not purport to be a comprehensive description of all tax considerations that may be relevant to a decision to purchase Debt Securities. This summary does not describe any tax consequences arising under the laws of any state, locality or taxing jurisdiction other than the United States and Chile.

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

          There is currently no tax treaty between the United States and Chile.

          Chilean Tax Considerations

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

          Under Chile’s Income Tax Law, because the issuance of the Debt Securities is registered with the Central Bank, payments of interest or premium, if any, that we make in respect of the Debt Securities to a Foreign Holder will generally be subject to a Chilean withholding tax (the “Chilean Interest Withholding Tax”) currently assessed at a rate of 4.0%. If the Debt Securities are issued through our offshore branch, payment to Foreign Holders of Debt Securities by such branch generally will not be subject to the Chilean withholding tax.

          We have agreed, subject to specific exceptions and limitations, to pay to the Foreign Holders of Debt Securities additional amounts (“Additional Amounts”) in respect of the Chilean Interest Withholding Tax mentioned above in order that the interest or premium, if any, the Foreign Holder receives, net of the Chilean Interest Withholding Tax, equals the amount which would have been received by such Foreign Holder in the absence of such Chilean Interest Withholding Tax. See “Item 9. The Offer and Listing—Debt Securities.” Under Chile’s Income Tax Law and regulations thereunder, payments of principal we make with respect to the Debt Securities to a Foreign Holder will not be subject to any Chilean taxes.

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          Chile’s Income Tax Law provides that any capital gains realized on the sale or other disposition by a Foreign Holder of the Debt Securities generally will not be subject to any Chilean income taxes provided that such sale or other disposition occurs outside of Chile (except that any premium payable on redemption of the Debt Securities will be treated as interest and subject to the Chilean Interest Withholding Tax as described above).

          A Foreign Holder will not be liable for estate, gift, inheritance or similar taxes with respect to the Debt Securities unless such Debt Securities (i) are located in Chile at the time of such Foreign Holder’s death or (ii) were purchased or acquired with money obtained from Chilean sources.

          The initial issuance of the Debt Securities is subject to stamp tax of 1.608% of the aggregate principal amount of the Debt Securities, which will be payable by the Company when and if the Debt Securities are brought into Chile. If the Debt Securities are issued through our offshore branch and are not subsequently brought into Chile, no stamp tax will be payable. If the stamp tax is not paid when due, Chilean tax law imposes a penalty up to three times the amount of the tax due plus interest. In addition, until such tax (and any penalty) is paid, Chilean courts would not enforce any action based on the Debt Securities. A Foreign Holder will not be liable for Chilean stamp, registration or similar taxes.

          United States Tax Considerations

          The following summary describes certain U.S. federal income tax consequences of the ownership of Debt Securities by U.S. holders (as defined below) as of the date hereof. Except where noted, it deals only with Debt Securities held as capital assets and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, insurance companies, regulated investment companies, real estate investment trusts, tax-exempt entities, investors in pass-through entities, persons holding the Debt Securities as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons liable for the alternative minimum tax or holders of Debt Securities whose “functional currency” is not the U.S. dollar. Furthermore, the discussion below is based upon the provisions of the Code, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. If a partnership holds our Debt Securities, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partners in a partnership holding our Debt Securities should consult their tax advisors.

          Persons considering the purchase, ownership or disposition of the Debt Securities should consult their own tax advisors concerning the federal income tax consequences in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

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

          Payments of Interest

          Interest on the Debt Securities will generally be taxable to a U.S. holder as ordinary income at the time it is paid or accrued in accordance with the U.S. holder’s method of accounting for tax purposes. In

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addition to interest on the Debt Securities, a U.S. holder will be required to include in income any Additional Amounts and any tax withheld from interest payments notwithstanding that such withheld tax is not in fact received by such U.S. holder. A U.S. holder may be entitled to deduct or credit such tax, subject to applicable limitations in the Code, including that the election to deduct or credit foreign taxes applies to all of the U.S. holder’s foreign taxes for a particular year. Interest income, including Chilean taxes withheld therefrom and Additional Amounts on the Debt Securities, generally will constitute foreign source income and generally will be considered passive income, which is treated separately from other types of income in computing the foreign tax credit that may be allowable to U.S. holders under U.S. federal tax laws. A U.S. holder will generally be denied a foreign tax credit for Chilean taxes imposed with respect to the Debt Securities where such a holder does not meet a minimum holding period requirement during which the holder is not protected from risk of loss. The rules governing the foreign tax credit are complex. We urge investors to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

     Market Discount

          If a U.S. holder purchases a Debt Security for an amount that is less than its principal amount, the amount of the difference will be treated as “market discount” for U.S. federal income tax purposes, unless that difference is less than a specified de minimis amount. Under the market discount rules, the U.S. holder will be required to treat any principal payment on, or any gain on the sale, exchange, retirement or other disposition of, a Debt Security as ordinary income to the extent of the market discount that the U.S. holder has not previously included in income and is treated as having accrued on the Debt Security at the time of its payment or disposition.

          In addition, the U.S. holder may be required to defer, until the maturity of the Debt Security or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness attributable to the Debt Security. A U.S. holder may elect, on a bond-by-bond basis, to deduct the deferred interest expense in a tax year prior to the year of disposition. U.S. holders should consult their own tax advisors before making this election.

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

     Amortizable Bond Premium

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

          Sale, Exchange and Retirement of Debt Securities

          Upon the sale, exchange, retirement or other disposition of the Debt Securities, a U.S. holder will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, retirement or other disposition (less any accrued interest, which will be taxable as such if not previously included in income) and the U.S. holder’s adjusted tax basis in the Debt Securities. A U.S. holder’s tax basis in the Debt Securities generally will be the U.S. holder’s cost therefor, increased by market discount previously included in income, and reduced by any amortized premium. Except as described above with

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respect to market discount, gain or loss realized by a U.S. holder on the sale, exchange, retirement or other disposition of the Debt Securities will generally be capital gain or loss. Gain or loss realized by a U.S. holder on the sale, exchange, retirement or other disposition of the Debt Securities will generally be treated as U.S. source gain or loss. Consequently, a U.S. holder may not be able to claim a credit for any Chilean tax imposed on the sale, exchange, retirement or other disposition of the Debt Securities due to limitations on the foreign tax credit under the Code. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

          Information Reporting and Backup Withholding

          In general, information reporting requirements will apply to certain payments of principal and interest on the Debt Securities and to the proceeds of the sale of the Debt Securities made to U.S. holders other than certain exempt recipients (such as corporations). A backup withholding tax will apply to such payments if the U.S. holder fails to provide its taxpayer identification number or a certification of exempt status, or, in the case of interest payments, fails either to report in full dividend and interest income or to make certain certifications.

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

          Special Tax Considerations Relating to 2097 Debentures

          As a result of the 2097 Debentures’ 100 year term, it is not certain whether such Debentures will be treated as debt or as equity for U.S. federal income tax purposes. We have taken the position that the 2097 Debentures constitute debt for financial reporting and U.S. federal income tax purposes. Our position, however, is not binding on the Internal Revenue Service. Although classification of the 2097 Debentures as equity generally would not significantly affect a U.S. holder’s taxable income resulting from an investment in the 2097 Debentures, the discussion that follows also briefly describes certain U.S. federal income tax consequences that would arise if the 2097 Debentures were not treated as debt for U.S. federal income tax purposes.

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

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Documents on Display

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

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

          We also file reports with the Chilean Superintendencia de Valores y Seguros. You may read and copy any materials filed with the SVS directly from its website http://www.svs.cl. The documents referred to in this annual report can be inspected at El Golf 40 Oficina 401, Las Condes, Santiago, Chile. Chilean law may restrict our shareholders’ right of inspection to certain days and times.

NYSE and Chilean Corporate Governance Requirements

          In accordance with Section 303A.11 of the NYSE’s Listed Company Manual, the following table sets forth significant differences between Chilean corporate governance practices and those corporate governance practices followed by domestic corporations under NYSE listing standards. Significant ways in which our corporate governance practices differ from those followed by U.S. companies under NYSE listing standards are also publicly available on our website at www.koandina.com.

ITEM	NYSE REQUIREMENTS	CHILEAN LAW REQUIREMENTS
303A.01 Independence	Members of the Board of Directors must be independent in their majority.	There is no legal obligation to have a Board of Directors composed mainly of independent members. In addition, according to section 303A regarding Controlled Companies, the requirements of 303A do not apply to our Company.
303A.02 Test of Independence	Members of the Board of Directors must meet the Test of Independence.	No similar legal obligation exists under Chilean law. However, Chilean law defines a director as independent if he is elected by votes of shareholders who are not controlling shareholders or otherwise related to controlling shareholders.
303A.03 Meetings of Non-Management Directors	Non-Management Directors must meet regularly without management of the company.	No similar legal obligation exists under Chilean law. Under Chilean law, the position of director of a corporation is incompatible with the position of manager, auditor, accountant or president of the company. The Non-

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ITEM	NYSE REQUIREMENTS	CHILEAN LAW REQUIREMENTS
		Management Director does not exist under Chilean law. Directors, however, are required to convene in legally established meetings to resolve matters required by Chilean Corporation Law.
303A.04 Corporate Governance Committee	Listed companies must have a Nominating/Corporate Governance Committee composed entirely of independent directors and must have a written charter addressing certain matters.	There is no similar legal obligation under Chilean law. In addition, section 303 A regarding Controlled Companies does not apply to our Company. Chilean Andina has a Directors’ Committee whose functions are set by Chilean Corporation Law.
303A.05 Compensation Committee	Listed companies must have a Compensation Committee composed entirely of independent directors, and must have a written charter addressing certain matters.	There is no similar legal obligation under Chilean law. In accordance with Chilean law, the above-mentioned Directors’ Committee is in charge of reviewing management compensation. In addition, section 303 A regarding Controlled Companies does not apply to our Company.
303A.06 Audit Committee	•     Listed companies must have an Audit Committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. •     The Audit Committee must have a minimum of three members. •      In addition to any requirement of Rule 10A-3(b)(1), all Audit Committee members must satisfy the requirements for independence set out in Section 303 A.02. •      The Audit Committee must have a written charter addressing certain matters. •      An Audit Committee was appointed in accordance with the characteristics, composition and faculties established under Item 16-A of this document.	No similar legal obligation exists under Chilean law. However, in accordance with the Chilean Public Companies Law 18,046, public companies that have a net worth of more than 1.5 million UFs must have a Committee of Directors, formed by three independent board members and the controller. The Committee’s compensation is set by the ordinary shareholders’ meeting, and it performs the following functions: (1) examines reports of account inspectors and external auditors, financial statements and issues an opinion on these reports and statements; (2) proposes external auditors and rating agencies to the Board of Directors; (3) examines conflicts of interest and informs the Board regarding such conflicts; (4) examines compensation systems and plans for directors and executive officers; and (5) any other matters that the bylaws, the shareholders’ meeting or the Board of Directors decides.
303A.07 Internal Audit Function	Listed companies must maintain an Internal Audit Function to	There is no similar obligation under Chilean law. Chilean law requires that

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ITEM	NYSE REQUIREMENTS	CHILEAN LAW REQUIREMENTS
	provide management and the Audit Committee with ongoing assessments of the company’s risk management processes and systems of internal control. A listed company may choose to outsource this function to a third party service provider other than its independent auditor.	companies must have both external auditors and an audit department. However, Andina will designate an Audit Committee in accordance with Rule 10 A.3 before July 31, 2005.
303A.08 Voting on Compensation Plans	Shareholders must have the opportunity to vote on compensation plans regarding board members, executives and employees.	Directors’ compensation is annually approved during the Company’s General Shareholders’ Meeting.
303A.09 Corporate Governance	Listed companies must adopt and disclose Corporate Governance Practices.	Chilean Law does not require the adoption of Corporate Governance Practices because they have been established by Chilean Corporate Law.
303A.10 Code of Business Conduct	A company must adopt a Code of Business Conduct for its directors, officers and employees. Such company must disclose any waiver of its code of conduct that is granted to an officer or director.	There is no legal obligation to adopt a Code of Business Conduct. Chilean law requires that a company have a set of internal regulations which regulate the company and its relations with personnel. Such regulations must contain, among other things, regulations related to ethics and good behavior. Notwithstanding the above, a company may create internal codes of conduct, provided they do not require or prohibit behavior that contravenes Chilean law. In 1996, Andina created a Code of Business Conduct that applies to the entire Company, which does not require or prohibit behavior that contravenes Chilean Law. This Code of Business Conduct is available on our website at http://www.koandina.com/         .
303A.11 Summary of Differences	A company must provide a summary description of significant differences between its home country corporate governance practices and the corporate governance requirements established by the NYSE as applicable to U.S. domestic listed companies.	No similar obligation exists under Chilean law.

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ITEM	NYSE REQUIREMENTS	CHILEAN LAW REQUIREMENTS
303A.12 CEO Certification	•     Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. •      Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any material non-compliance with any of the applicable provisions of Section 303 A.	No similar obligation exists under Chilean law. However, in accordance with Chilean law, the directors of a company must annually submit for approval the company’s annual report and financial statements to its shareholders at the company’s annual shareholders’ meeting. Similarly, public companies must, from time to time, provide all relevant company information by means of the publications and notifications established by law.
	•      Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation each time a change occurs to the Board of Directors or any of the committees subject to Section 303 A. The annual and interim Written Affirmations must be in the form specified by the NYSE.
303A.13 Public Reprimand	The NYSE may issue a Public Reprimand letter to any listed company, regardless of the type of security listed or country of incorporation if it determines the company has violated a NYSE listing standard.	No similar obligation exists under Chilean law, with the exception of sanctions imposed by the Chilean Superintendence of Securities (SVS).

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Market risk generally represents the risk that losses may occur in the values of financial instruments as a result of movements in interest rates, foreign currency exchange rates and commodity prices. We are exposed to changes in financial market conditions in the normal course of our business due to our use of certain financial instruments as well as transacting in various foreign currencies and translation of our foreign subsidiaries’ financial statements into the Chilean peso.

Interest Rate Risk

          Our primary interest rate exposures relate to U.S. dollar denominated long-term fixed rate bond liabilities and other long-term variable and fixed rate bank liabilities. We also invest in certain

97

medium-term bond securities that bear a fixed interest rate. We monitor our exposure to interest rate fluctuations regularly. Currently, interest rates in the market fluctuate around the fixed rate on our bonds.

          The following table provides information about our long-term debt and bond investments that are sensitive to changes in market interest rates as of December 31, 2005.

																						Estimated
																						Fair Market
	Expected Maturity Date																					Value
	2006			2007			2008			2009			2010			Thereafter			Total			Total
	(in millions of Ch$)
Interest Earning Assets
Bonds	Ch$	2,565		Ch$	5,412		Ch$	11,662			—			—		Ch$	65,563		Ch$	85,202		Ch$	84,967
Weighted average interest rate		8.25	%		7.86	%		6.20	%		—			—			6.10	%		6.29	%
Time deposits and credit link	Ch$	34,278		Ch$	3,198		Ch$	5,125			—			—			—		Ch$	42,601		Ch$	43,315
Weighted average interest rate		7.55	%		3.96	%		6.94	%		—			—			—			7.21	%
Interest Bearing Liabilities
Long-term debt
Fixed Rate
Bonds	Ch$	12,852		Ch$	28,302		Ch$	4,943		Ch$	1,956		Ch$	3,912		Ch$	62,689		Ch$	114,654		Ch$	127,259
Weighted average interest rate		6.20	%		6.66	%		6.20	%		6.50	%		6.50	%		6.54	%		6.51	%
Bank liabilities	Ch$	26,997			—			—			—			—			—		Ch$	26,997		Ch$	26,997
Weighted average interest rate		6.62	%		—			—			—			—			—			6.62	%		—
Variable Rate
Bank liabilities	Ch$	478		Ch$	455			—			—			—			—		Ch$	933		Ch$	933
Weighted average interest rate		13.26	%		13.28	%		—			—			—			—			13.26	%

Foreign Currency Risk

          At December 31, 2005, our main long-term interest bearing debt is subject to exchange rate fluctuations between the Chilean peso and the U.S. dollar. We manage such risk by maintaining cash, deposits, money market mutual funds and bonds in U.S. dollars amounting to Ch$128,497 at December 31, 2005, representing 330% of total long-term U.S. dollar debt at such date. Notwithstanding the aforementioned, our dollar-denominated financial assets are protected against fluctuations in the exchange rate for U.S. dollars by means of a “cross currency swap” hedge agreement. The hedged amount totaled Ch$80,174 at December 31, 2005, with which the ratio of the Company’s dollar-denominated liabilities would amount to 124% .

98

          The following table summarizes the financial instruments denominated in foreign currencies we held as of December 31, 2005.

	Expected Maturity Date																		Estimated
													There-						Fair Market
	2006			2007			2008		2009		2010		after			Total			Value
	(in millions of Ch$)
Assets
US$ denominated:
Cash	Ch$	2,847			—			—		—		—		—		Ch$	2,847		Ch$	2,847
Money market mutual funds		2,278			—			—		—		—		—			2,278			2,278
Time deposit and credit link		29,847			3,198			5,125		—		—		—			38,170			38,884
Bonds		2,565			5,412			11,662		—		—		65,563			85,202			84,967
Foreign currency contracts		719			13,743			15,206		—		—		3,053			32,721			32,721
Liabilities
US$ denominated:
Long-term liabilities:
Bonds		—		Ch$	16,439			—		—		—	Ch$	2,050		Ch$	18,489		Ch$	19,353
Weighted average interest rate		—			7.00	%		—		—		—		7.63	%		7.07	%
Bank liabilities	Ch$	20,500			—			—		—		—		—		Ch$	20,500		Ch$	20,500
Weighted average interest rate		6.51	%		—			—		—		—		—			6.51	%

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

          Not applicable.

99

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

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

ITEM 15. CONTROLS AND PROCEDURES

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

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

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

          Our board of directors has determined that Mr. Albert Cussen Mackenna is our “audit committee financial expert” as defined in Item 16A of Form 20-F. Our board of directors has also determined that

100

Mr. Cussen Mackenna is an “independent director” as defined in Section 303 A.02 of the NYSE’s Listed Company Manual.

ITEM 16B. CODE OF ETHICS

          We have adopted a “Code of Business Conduct” that constitutes a code of ethics for our employees. This code applies to our chief executive officer and all senior financial officers of our Company, including the chief financial officer and persons performing similar functions as well as to our directors and other officers and employees. Our code of ethics is available on our websites, free of charge, at www.koandina.com and www.andina.cl. If we make any substantive amendment to the code of ethics or grant any waivers, including any implicit waiver, from a provision of the codes of ethics, we will disclose the nature of such amendment or waiver on the above mentioned website.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

          Fees Paid To Independent Public Accountants

          The following table sets forth, for each of the years indicated, the fees paid to our independent public accountants and the percentage of each of the fees out of the total amount paid to the accountants.

	Year Ended December 31,
	2005					2004
								% of Total
Services rendered	Fees		% of Total Fees			Fees		Fees
			(amounts in millions of Ch$)
Audit fees (1)		245		89			236		77	%
Audit-related fees (2)		16		6			30		10
Tax fees (3)		16		5			40		13
Total	Ch$	277		100	%	Ch$	306		100	%

(1)	Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide.
(2)	Audit-related fees relate to assurance and associated services that traditionally are performed by the independent accountant, including: attest services that are not required by statute or regulation; accounting consultation and audits in connection with mergers, acquisitions and divestitures; employee benefit plans audits; and consultation concerning financial accounting and reporting standards.
(3)	Tax fees relate to services performed by the tax division for tax compliance, planning, and advice.

          Directors’ Committee and Audit Committee Pre-Approval Policies and Procedures

          We have adopted pre-approval policies and procedures under which all audit and non-audit services provided by our external auditors must be pre-approved by our director’s committee and audit committee. Any service proposals submitted by external auditors need to be discussed and approved by the directors’ committee and audit committee during its meetings, which take place at least four times a year. Once the proposed service is approved, we or our subsidiaries formalize the engagement of services. In addition, the members of our board of directors are briefed on matters discussed by the different committees of our board of directors.

101

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

          Not Applicable.

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

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

102

PART III

ITEM 17. FINANCIAL STATEMENTS

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

ITEM 18. FINANCIAL STATEMENTS

          The following financial statements, together with the report of independent registered accounting firm, are filed as part of this annual report:

	Page
Index to Consolidated Financial Statements		F-1
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at December 31, 2005 and 2004		F-3
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003		F-6
Notes to the Consolidated Financial Statements at December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003		F-8

ITEM 19. EXHIBITS

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

EXHIBIT INDEX

Item	Description
1.1	English translation of our Bylaws (filed with the U.S. Securities and Exchange Commission in our annual report on Form 20-F for the fiscal year ended December 31, 1996 and incorporated herein by reference)
8.1	List of our subsidiaries (filed herewith).
12.1	Certification of Jaime Garcia pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
12.2	Certification of Osvaldo Garay pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
13.1	Certification of Jaime Garcia pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
13.2	Certification of Osvaldo Garay pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

103

SIGNATURE

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

EMBOTELLADORA ANDINA S.A.

(ANDINA BOTTLING COMPANY)

/s/ Osvaldo Garay

Osvaldo Garay

Chief Financial Officer

Date: June 30, 2006

104

EMBOTELLADORA ANDINA S.A.
(ANDINA BOTLING COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Index to Consolidated Financial Statements		F-1
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at December 31, 2005 and 2004		F-3
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003		F-6
Notes to the Consolidated Financial Statements at December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003		F-8

F-1

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

Consolidated financial statements

As of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005

CONTENTS

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors, of
Embotelladora Andina S.A.

We have audited the accompanying Consolidated Balance Sheets of Embotelladora Andina S.A. and its subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related Consolidated Statements of Income and of Cash Flows for each of the three years in the period ended December 31, 2005, all expressed in thousands of constant Chilean pesos of December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Chile and the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

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

Accounting principles generally accepted in Chile vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 28 to the consolidated financial statements.

/s/ PricewaterhouseCoopers

Santiago, Chile
June 29, 2006

F-2

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Restated for general price-level changes and expressed in
Thousands of constant Chilean pesos of December 31, 2005)

				At December 31,
ASSETS	Note			2005			2004
				ThCh$			ThCh$
CURRENT ASSETS
Cash					14,412,531			14,324,761
Time deposits		3			25,700,571			7,833,816
Marketable securities		4			14,003,282			16,660,657
Trade accounts receivable (net)		5			34,207,081			32,341,391
Notes receivable (net)		5			11,142,844			10,361,590
Other receivables (net)		5			19,777,487			16,860,558
Accounts receivable from related companies		6a	)		5,587,160			85,029
Inventories (net)		7			17,425,364			21,463,406
Recoverable taxes					9,780,175			5,773,594
Prepaid expenses					1,607,654			1,960,736
Other current assets		9			8,371,365			9,420,072
Total current assets					162,015,514			137,085,610
PROPERTY, PLANT AND EQUIPMENT		10
Land					12,687,024			14,791,171
Buildings and improvements					79,542,528			94,749,077
Machinery and equipment					204,303,414			213,495,853
Other property, plant and equipment					196,549,926			199,205,825
Technical reappraisal of property, plant and equipment					2,014,038			2,014,038
Less: Accumulated depreciation					(355,790,873	)		(365,098,691	)
Total property, plant and equipment					139,306,057			159,157,273
OTHER ASSETS
Investments in unconsolidated affiliates		11			21,386,070			20,733,308
Investments in other companies					54,570			56,202
Goodwill (net)		12			71,393,139			86,832,454
Long-term receivables					110,473			48,638
Accounts receivable from related companies		6a	)		22,492			34,863
Intangibles (net)					175,850			222,639
Deferred income taxes		8b	)		676,498			—
Long-term investments and other long-term assets		13			130,908,934			196,430,537
Total other assets					224,728,026			304,358,641
Total assets					526,049,597			600,601,524

The accompanying Notes 1 to 28 are an integral part of these consolidated financial statements.

F-3

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Restated for general price-level changes and expressed in
thousands of constant Chilean pesos of December 31, 2005)

LIABILITIES, MINORITY INTEREST				At December 31,
AND SHAREHOLDERS' EQUITY	Note			2005			2004
				ThCh$			ThCh$
CURRENT LIABILITIES
Short-term bank borrowings		14a	)		27,935,329			18,954,510
Current portion of long-term bank borrowings		14b	)		484,101			1,990,097
Current portion of bonds payable		16			13,684,254			13,760,409
Dividends payable					3,978,869			4,600,639
Trade accounts payable					37,876,730			35,152,154
Notes payable					—			5,180
Other creditors					2,825,697			3,011,134
Amounts payable to related companies		6b	)		8,330,817			10,370,232
Other accrued liabilities		17			631,543			330,627
Withholdings					16,345,028			14,118,908
Income taxes payable					8,691,404			5,094,059
Unearned income					249,206			—
Deferred income taxes		8b	)		711,623			140,643
Other current liabilities					3,017,376			2,697,431
Total current liabilities					124,761,977			110,226,023
LONG-TERM LIABILITIES
Long-term bank borrowings		15			454,501			47,183,445
Bonds payable		16			101,802,194			115,827,434
Other creditors					146,581			170,455
Other accrued liabilities		17			21,115,867			17,559,882
Deferred income taxes		8b	)		—			393,113
Other long-term liabilities					8,214,357			7,868,242
Total long-term liabilities					131,733,500			189,002,571
MINORITY INTEREST		19			1,117,529			53,749
COMMITMENTS AND CONTINGENCIES		25
SHAREHOLDERS’ EQUITY		20
Paid-in capital					197,904,994			197,904,994
Other reserves					(201,145	)		15,098,813
Retained earnings from previous years					26,334,355			58,711,421
Net income for the year					56,039,346			41,604,440
Interim dividends					(11,640,959	)		(12,000,487	)
Total shareholders’ equity					268,436,591			301,319,181
Total liabilities and shareholders’ equity					526,049,597			600,601,524

The accompanying Notes 1 to 28 are an integral part of these consolidated financial statements.

F-4

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Restated for general price-level changes and expressed in
thousands of constant Chilean pesos of December 31, 2005)

				For the years ended December 31,
				2005			2004			2003
	Note			ThCh$			ThCh$			ThCh$
OPERATING INCOME
Net sales					478,471,736			428,649,371			410,802,664
Cost of sales					(287,394,842	)		(262,783,809	)		(262,514,754	)
Gross profit					191,076,894			165,865,562			148,287,910
Administrative and selling expenses					(113,168,847	)		(100,715,605	)		(97,635,809	)
Operating income					77,908,047			65,149,957			50,652,101
NON-OPERATING INCOME AND EXPENSE
Financial income					28,522,013			24,156,197			32,772,480
Share of gain from unconsolidated affiliates		11			769,536			1,023,865			1,936,370
Other non-operating income		21			7,312,986			847,771			9,674,156
Amortization of goodwill		12			(6,228,916	)		(7,186,162	)		(7,028,030	)
Financial expense					(21,112,171	)		(19,829,540	)		(21,216,995	)
Other non-operating expense		21			(7,738,132	)		(6,394,577	)		(7,943,459	)
Price-level restatement					(570,051	)		948,173			1,404,036
Exchange (losses) gains, net					(14,287,093	)		(13,021,656	)		(42,445,558	)
Non-operating (expense) income					(13,331,828	)		(19,455,929	)		(32,847,000	)
Income before income tax expense and minority interest					64,576,219			45,694,028			17,805,101
Income tax expense		8c	)		(8,549,042	)		(4,086,815	)		(1,072,084	)
Income before minority interest					56,027,177			41,607,213			16,733,017
Income attributable to minority interest		19			12,169			(2,773	)		(3,261	)
Net income					56,039,346			41,604,440			16,729,756

The accompanying Notes 1 to 28 are an integral part of these consolidated financial statements.

F-5

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Restated for general price-level changes and expressed in
thousands of constant Chilean pesos of December 31, 2005)

	For the years ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
CASH FLOWS FROM OPERATING ACTIVITIES
Collection of trade receivables		677,672,086			581,976,500			568,688,151
Financial income received		21,228,508			10,506,732			21,392,619
Dividends and other distributions received		1,402,429			3,562,217			—
Collection of other receivables		24,757			25,135			32,920
Payments to suppliers and personnel		(497,206,835	)		(427,883,620	)		(426,460,054	)
Interest paid		(20,010,363	)		(17,663,990	)		(18,285,439	)
Income tax payments		(4,984,176	)		(4,385,628	)		(5,053,311	)
Other expenses		—			(20,145	)		(24,652	)
VAT and other similar items paid		(81,303,169	)		(73,298,118	)		(63,526,744	)
Net cash provided by operating activities		96,823,237			72,819,083			76,763,490
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from banks		54,681,343			62,253,664			54,825,339
Other financing activities		—			8,507			—
Dividends paid		(72,551,644	)		(47,403,265	)		(54,166,706	)
Payments of loans		(84,572,010	)		(48,567,022	)		(57,801,839	)
Repayments of bonds		(11,679,407	)		(11,667,557	)		(5,945,053	)
Net cash used in financing activities		(114,121,718	)		(45,375,673	)		(63,088,259	)
CASH FLOWS FROM INVESTMENT ACTIVITIES
Proceeds from sales of property, plant and equipment		3,390,445			886,586			986,263
Proceeds from sales of other investments		60,198,268			23,243,235			158,658,437
Additions to property, plant and equipment		(27,395,137	)		(26,149,665	)		(26,911,695	)
Purchases of territory		—			(8,148,051	)		—
Permanent investments		(319,501	)		(936,440	)		—
Purchases of other investments		(24,966,211	)		(27,840,655	)		(151,645,523	)
Net cash used in investing activities		10,907,864			(38,944,990	)		(18,912,518	)
Net cash flows from operating, financing and investing activities		(6,390,617	)		(11,501,580	)		(5,237,287	)
PRICE — LEVEL RESTATEMENT OF CASH AND CASH EQUIVALENTS		(576,499	)		(3,964,578	)		(4,404,158	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,967,116	)		(15,466,158	)		(9,641,445	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		28,116,023			43,582,181			53,223,626
CASH AND CASH EQUIVALENTS AT END OF YEAR		21,148,907			28,116,023			43,582,181

The accompanying Notes 1 to 28 are an integral part of these consolidated financial statements.

F-6

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Restated for general price-level changes and expressed in
thousands of constant Chilean pesos of December 31, 2005)

	For the years ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
RECONCILIATION BETWEEN NET INCOME AND NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income		56,039,346			41,604,440			16,729,756
Income on sales of assets:
Loss (gain) on sale of property, plant and equipment		(249,185	)		291,511			(206,822	)
Gain on divesture of Vital S.A.		(3,890,351	)		—			—
Gain on sale of investments		—			—			(2,033	)
(Gain) loss on sale of other assets		(2,161	)		(5,444	)		(17,845	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		29,037,017			32,581,390			35,003,748
Amortization of intangibles		324,396			275,711			543,881
Write-offs and provisions		1,629,259			5,031,834			2,490,677
Share of income from unconsolidated affiliates		(769,536	)		(1,023,865	)		(1,936,370	)
Amortization of goodwill		6,228,916			7,186,162			7,028,030
Price-level restatement		570,051			(948,173	)		(1,404,036	)
Exchange gains (losses), net		14,287,093			13,021,656			42,445,558
Other credits to income that do not represent cash flows.		(2,908,703	)		(455,849	)		(4,089,224	)
Changes in operating assets
Increase in trade accounts receivable		(2,427,314	)		(3,234,204	)		(6,079,337	)
Decrease (increase) in inventories		2,420,870			(2,186,232	)		(3,803,992	)
Increase in other assets		(28,560,132	)		(19,181,828	)		(24,518,057	)
Changes in operating liabilities
(Decrease) increase in accounts payable related to operating income		(5,698,674	)		(7,119,751	)		2,258,673
Increase (decrease) in interest payable		12,690,895			7,507,714			(5,350,218	)
Increase (decrease) increase in income taxes payable		5,645,867			740,066			(3,958,985	)
Increase in other accounts payable related to non-operating income		5,397,433			3,186,888			15,784,250
Increase (decrease) in VAT and other similar items		7,070,319			(4,455,716	)		5,842,575
Income attributable to minority interest		(12,169	)		2,773			3,261
Net cash provided by operating activities		96,823,237			72,819,083			76,763,490

The accompanying Notes 1 to 28 are an integral part of these consolidated financial statements.

F-7

EMBOTELLADORA ANDINA S.A. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2005 AND 2004

NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Embotelladora Andina S.A. is registered under No. 00124 in the Securities Registry and is subject to the regulations of the Chilean Superintendency of Securities and Insurance Companies (the “SVS”).

The primary activity of Embotelladora Andina S.A. (“Andina”, and together with its subsidiaries, the “Company”) is the production and sale of Coca-Cola products and other beverages. The Company has bottling operations in Santiago, Chile and, through its subsidiaries, in Rio de Janeiro, Espíritu Santo and Nova Iguaçu, Brazil, and Mendoza, Córdoba, and Rosario, Argentina. The Company holds franchises from The Coca-Cola Company covering each of its Chilean, Brazilian and Argentine operations. The franchises for the Chilean Territories expire in 2007. The franchises for the Brazilian Territories expire in 2008. In Argentina, the Company holds franchises for each of the Mendoza, Rosario and Córdoba operations, which expire in 2006. All these franchises may be extended at the option of The Coca-Cola Company. Such franchises are expected to be renewed upon expiration.

Legal reorganizations and joint ventures:

On December 22, 2005 the production and packaging business of waters, juices and non-carbonated beverages licensed by The Coca-Cola Company (“TCCC”) in Chile was restructured. Vital Aguas S.A. was created with the purpose of developing the process, production and packaging business of Vital Mineral Water and other water and products according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC. Consequently, Vital S.A., a consolidated subsidiary of the Company which prior to the creation of Vital Aguas S.A developed and produced water products for the Company, will focus on juices and non-carbonated beverages. As part of the restructuring Embotelladora Andina S.A., Embonor S.A. and Embotelladora Coca-Cola Polar S.A. have taken an interest of 56.5%, 26.4% and 17.1%, respectively, in the newly formed Vital Aguas S.A. See note 11.

On March 21, 2003, at the general and extraordinary shareholders meetings of both Embotelladora del Atlántico S.A. (EDASA) and Complejo Industrial Pet S.A. (CIPET), the shareholders approved and confirmed a Preliminary Merger Agreement, which was effective as of January 1, 2003. On May 23, 2003, the Final Merger Agreement was signed between EDASA and CIPET and was registered in the Public Register of Commerce in Province of Córdoba on October 14, 2003, pursuant to which CIPET was merged into EDASA to became Edasa’s packaging division.

F-8

Accounting policies

a) Presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in Chile (“Chilean GAAP”) and regulations established by the SVS.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures of contingent liabilities. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include: the carrying value of property, plant and equipment, the adequacy of the allowance for doubtful accounts, the carrying value of goodwill and investments in unconsolidated affiliates, the determination of the liability for deposits for bottles and containers and the valuation of deferred income tax assets.

The Company has issued its audited statutory consolidated financial statements in Spanish and in conformity with Chilean GAAP, which include certain notes and additional information required by the SVS for statutory purposes. Management believes that these additional notes and information are not essential for the complete understanding of the consolidated financial statements and accordingly, these notes and additional information have been excluded from the accompanying consolidated financial statements.

Certain minor reclassifications have been made in the 2003 and 2004 amounts to conform with the 2005 presentation.

b) Consolidation

The accompanying financial statements reflect the consolidated results of operations of Andina and its subsidiaries. All significant intercompany transactions have been eliminated on consolidation. The Company consolidates the financial statements of the companies in which it controls a majority of voting shares or has the ability, direct or indirect, to direct the management and policies of the company.

c) Price-level restatement

The financial statements, which are expressed in Chilean pesos, have been restated to reflect the effects of variations in the purchasing power of the Chilean peso during each year. For this purpose and in conformity with current Chilean regulations, non-monetary assets and liabilities and equity accounts have been restated by charges or credits to income. Furthermore, the income and expense accounts have been restated in terms of year-end constant pesos. In accordance with Chilean tax regulations and accounting practices, the restatements were calculated based on the official Chilean Consumer Price Index published by the National Institute of Statistics (the “CPI”), applied one month in arrears, which was 1.0%, 2.5% and 3.6% for the years ended November 30, 2003, 2004 and 2005, respectively. This index is considered by the business community, the accounting profession and the Chilean government to be the index which most closely complies with the technical requirement to reflect the variation in the general level of prices in the country and, consequently, is widely used for financial reporting

F-10

purposes in Chile. The above-mentioned price-level restatements do not purport to present appraisal or replacement values and are only intended to restate all non-monetary financial statement components in terms of local currency of a single purchasing power and to include in the net result for each year the gain or loss in purchasing power arising from the holding of assets and liabilities exposed to the effects of inflation.

Assets and liabilities that are denominated in inflation-indexed monetary units are stated at year-end values. The principal inflation-indexed monetary unit used in Chile is the UF that changes daily to reflect the changes in the CPI. Values for the UF are as follows (historical pesos per UF):

	December 31,
	2005		2004		2003
	Ch$		Ch$		Ch$
Unidades de Fomento (UF)		17,974.81		17,317.05		16,920.00

All amounts in the financial statements and notes are expressed in Chilean pesos of December 31, 2005 purchasing power, unless otherwise stated. For comparative purposes, the 2003 and 2004 financial statements, and the amounts disclosed in the related footnotes, have been restated in terms of Chilean pesos of December 31, 2005 purchasing power. This updating does not change the prior year’s statements or information in any way except to update the amounts to Chilean pesos of similar purchasing power.

d) Assets and liabilities denominated in foreign currencies

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

	December 31,
	2005		2004		2003
	Ch$		Ch$		Ch$
United States dollars (US$)		512.50		557.40		593.80
Argentine pesos (A$)		169.03		187.11		202.66
Brazilian Real (R$)		222.37		209.99		205.52
Euros (€$)		606.08		760.13		744.95

e) Time deposits and marketable securities

Time deposits are shown at cost plus accrued interest, which approximates market value. Marketable securities include money market funds which are stated at market value based on year-end quoted values and bonds stated at cost plus accrued interest.

F-9

f) Allowance for doubtful accounts

The allowance for doubtful accounts consists of a provision determined on the basis of the aging of accounts receivable and additional allowances for specific customers where collection is doubtful. In the opinion of the Company’s management, the allowances are reasonable and the net balances are recoverable.

g) Inventories

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

h) Recoverable taxes

Recoverable taxes represent a net receivable related to value-added taxes on purchases and sales and prepayments based on anticipated income tax.

i) Income taxes and deferred income taxes

Effective January 1, 2000, the effects of deferred income taxes arising from temporary differences between the basis of assets and liabilities for tax and financial statement purposes are recorded in accordance with Technical Bulletins Nos. 60, 68 and 69 of the Chilean Institute of Accountants and Circular No. 1,466 of the SVS. The effects of deferred income taxes at January 1, 2000 that were not previously recorded, were recognized, in accordance with the transitional period provided by Technical Bulletin No. 60, against asset or liability account (“complementary accounts”) and were recorded to offset the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Complementary accounts are amortized to income over the estimated average reversal periods corresponding to underlying temporary differences to which the deferred tax asset or liability related. Deferred income taxes at January 1, 2000 are recognized in income as the temporary differences are reversed.

Deferred income tax assets are reduced by a valuation allowance if, based on the weight of available evidence, some portion or all of the deferred income tax assets will not be realized.

j) Property, plant and equipment and depreciation

Property, plant and equipment are carried at cost plus price-level restatements less accumulated depreciation. Expenditures for significant improvements, or replacement parts, which extend the useful life of an asset for more than one year are capitalized, while maintenance and repair costs are charged to operations as incurred. Gains and losses arising from normal retirement and disposal of property, plant and equipment are reflected in other non-operating income or expense in the consolidated statements of income.

Containers in the Company’s possession at plants and warehouses, as well as bottles and plastic containers held by third parties, are stated at cost plus price-level restatements, net of depreciation. Broken bottles or spoiled containers at warehouses or plants are expensed in each accounting period.

Software currently in use corresponds to computer packages purchased from third parties and programs developed internally. Software purchased from third parties is capitalized and amortized over a

F-11

maximum period of four years. Disbursements incurred for computer system development and for the use of Company resources are charged to expense.

During 1979, the SVS authorized a technical appraisal of certain property, plant and equipment, which is included in technical reappraisal of property, plant and equipment in the consolidated balance sheets.

Depreciation expense, amounting to ThCh$29,037,017, ThCh$32,581,390 and ThCh$35,003,748 for 2005, 2004 and 2003, respectively, was determined using the straight-line method based on the estimated useful lives of the assets, which are as follows:

	Years
Buildings and improvements		25-60
Machinery and equipment		10
Containers		2-5
Other		1-10

k) Deposits for containers

This liability is constituted by cash guarantees paid by customers for containers when they purchase our products. The liability for deposits for containers in circulation is estimated based on an annual inventory count of containers held by customers. The inventory is valued at the average weighted value of the deposit value over the past seven years per container type and any adjustments are recorded in the Company’s operating results for all container guarantees received until January 31, 2001. These guarantees are not adjusted for price-level restatements and have no expiration date, the valuation of this liability considers the aforementioned seven year period.

After January 31, 2001, if the customers does not return the containers for a period of five years from the invoice date, the Company, without any further proceedings, may cash part or all of the deposit. The effect of this operation is recorded in the Company’s operating results.

Considering that the number of new containers in circulation in the market during the year is historically greater than the number of containers returned by clients during the same period this liability of ThCh$7,263,359 and ThCh$6,530,462 at December 31, 2005 and 2004, respectively, is presented in other long-term liabilities in the consolidated balance sheets.

l) Investments in unconsolidated affiliates

Investments in companies in which the Company’s ownership interest exceeds 20% (10% for 2003 and 2002) but is less than 50% are accounted for using the equity method. On January, 1 2004, Technical Bulletin No. 72 was adopted mandating that all investment with ownership interests greater than 20% should be accounted for pursuant to the equity method. The Company’s proportionate share in net income and loss of unconsolidated affiliates is recognized in other non-operating income or expense in the consolidated statements of income, after eliminating any unrealized profits or losses from transactions between related companies.

Investments in which the Company’s ownership interest is below 20% (10% for 2003 and 2002) are accounted for at cost plus price-level restatements, except for subsidiaries in which the Company has significant influence which are also accounted for using the equity method.

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m) Long-term investments

Long-term investments mainly include investments in bonds and time deposits which are recorded at cost plus accrued interest.

n) Goodwill

Until December 31, 2003, the Company classified the cost in excess of book value of the net assets of companies acquired in purchase transactions as goodwill. Effective January 1, 2004, Technical Bulletin No. 72 requires the determination of goodwill and negative goodwill based on the fair value of the acquired company. Goodwill generated on acquisitions is amortized on a straight-line basis over 20 years. Amortization of goodwill amounted to ThCh$6,228,916, ThCh$7,186,162 and ThCh$7,028,030 for the years ended December 31, 2005 2004 and 2003, respectively. The Company evaluates the recoverability of goodwill on a periodic basis.

o) Bonds payable

Bonds payable includes placement of Yankee Bonds in the US markets and placement of bonds in UF in Chile, which are carried at par value. The purchase discounts, the difference in the par value and the proceeds received, are included in other long-term assets in the consolidated balance sheets. This asset is amortized using the straight-line method over the term of the respective obligations.

The issuance and placement costs of bonds are shown in other current assets and other long-term assets in the consolidated balance sheets and are being amortized on a straight-line basis over the life of the respective instruments. Costs include legal fees, reports on risk classification, printing, and commissions on issuance and are presented net of accumulated amortization.

p) Staff severance indemnities

The Company has recorded a liability for long-term severance indemnities in accordance with the collective bargaining agreements entered into with its employees in Chile. The indemnity is payable to employees at the rate of one full month’s salary for every year of service with the Company. This liability is shown at the present value of the projected benefits, considering the impacts of inflation, discounted at a rate of 7%. The benefit accrued as of the end of the year considers the average future service period for all employees covered by such agreement. The staff severance indemnities are included in short-term and long-term other accrued liabilities in the consolidated balance sheets. Beginning in 2005 the Company also maintains a separate management retention plan for select executives. A liability is recorded, under the guidance of this plan. This plan entitles certain selected executives to receive a fixed lump sum payment on a pre-determined date upon completion of service.

q) Sales recognition

The Company records sales revenue based on the physical delivery of finished products to its customers, in accordance with Technical Bulletin No. 70 issued by the Chilean Institute of Accountants.

F-13

r) Franchise incentives

The Coca-Cola Company, in its sole discretion, provides the Company with various benefits and incentives, including advertising and promotional support. The amounts received from The Coca-Cola Company for such support are included within the captions that compose operating income, depending on the nature of the support given.

s) Derivative transactions

The Company enters into hedging contracts including foreign currency forward exchange contracts and cross-currency swap agreements. The contracts are accounted for in accordance with Technical Bulletin No. 57, “Accounting for Derivative Contracts” (“TB 57”) of the Chilean Institute of Accountants. Under TB 57 all derivative instruments are recognized on the balance sheets at their fair value.

Derivative instruments are accounted for as follows:

Hedges of forecasted transaction-Foreign currency forward exchange contracts:

The derivative instrument is stated at its fair value on the consolidated balance sheets and any change in the fair value is recognized on the balance sheets as an unrealized gain or loss in other liabilities or in other assets. When the contract is settled, the unrealized gain or loss on the instrument is recognized in earnings in financial income or expense in the consolidated statements of income.

Hedge accounting-Cross-currency swap agreements:

The hedged item and derivative instrument are measured at fair value on the consolidated balance sheets. Unrealized gains and losses are recorded in earnings in financial income or expense in the consolidated statements of income if the net effect is a loss and deferred and recognized when the contract is settled if it is a net gain.

t) Translation of financial statements in foreign currencies

The Company’s investments in subsidiaries located in Argentina and Brazil are recorded in accordance with Technical Bulletin No. 64 of the Chilean Institute of Accountants. Under this pronouncement, the financial statements of foreign subsidiaries, which operate in countries that are exposed to significant risks, restrictions or inflation/currency fluctuations must first be remeasured into U.S. dollars and then translated into Chilean pesos at the year-end exchange rate of the Chilean peso to the U.S. dollar. As a result, no effect is given to price-level restatements based on inflation in those countries and the U.S. dollar is considered to be the functional currency of these operations. Accordingly, the financial statements of these subsidiaries are prepared in accordance with Chilean GAAP, excluding the application of monetary correction, and then remeasured into U.S. dollars as follows:

•     monetary assets and liabilities are translated at the closing exchange rate for the period;

•     all other assets and liabilities and shareholders’ equity are translated at historical rates of exchange;

•     income and expense accounts are translated at average rates during the period; and

•     the resulting exchange adjustments are included in the results of statements of income.

F-14

The resulting foreign currency amounts are then translated to Chilean pesos at the closing exchange rate at the balance sheet date. The difference between the investments’ equity value arising from the financial statements remeasured as explained above and the net equity value at the beginning of the year restated by Chilean inflation, plus the proportional share of the investments’ income (or loss) for the year, is recorded as a “Cumulative Translation Adjustment” in shareholders’ equity in the consolidated balance sheets.

u) Cash flows

For purposes of the consolidated statements of cash flows, the Company considers all highly-liquid investments with a remaining maturity of less than three months at the closing date of the financial statements to be cash equivalents.

Cash flows from operating activities include all business-related cash flows as well as interest paid, financial income and, in general, all cash flows not defined as from financing or investing activities. The operating concept used in this statement is broader than that in the consolidated statements of income.

NOTE 2 — CHANGES IN ACCOUNTING PRINCIPLES

There are no changes in the application of generally accepted accounting principles in Chile in relation to the previous year which could significantly affect the comparability of these financial statements.

NOTE 3 — TIME DEPOSITS

Time deposits at each year-end consisted of the following:

	At December 31,
	2005		2004
	ThCh$		ThCh$
Foreign currency deposits		25,700,571		7,833,816
Total		25,700,571		7,833,816

F-15

NOTE 4 — MARKETABLE SECURITIES

Marketable securities at each year-end consisted of the followings:

	At December 31,
	2005		2004
	ThCh$		ThCh$
Bonds Teléfonos de México S.A.		2,565,151		—
Bonds Compañía Manufacturera de Papeles y Cartones S.A.		—		5,779,606
Credit link Enersis		9,160,293		—
Credit link Cemex		—		4,923,605
Money market funds		2,277,838		5,957,446
Total		14,003,282		16,660,657

NOTE 5 — RECEIVABLES

Of the portfolio of receivables at December 31, 2005, 95.7% corresponded to the softdrinks business and 4.3% to the container business. Details of receivables are as follows:

	At December 31,
	2005			2004
	ThCh$			ThCh$
Trade accounts receivable		35,603,368			34,352,379
Allowance for doubtful accounts		(1,396,287	)		(2,010,988	)
Subtotal trade accounts receivable (net)		34,207,081			32,341,391
Notes receivable		11,531,991			11,828,526
Allowance for doubtful accounts		(389,147	)		(1,466,936	)
Subtotal notes receivable (net)		11,142,844			10,361,590
Other receivables		19,853,437			16,937,972
Allowance for doubtful accounts		(75,950	)		(77,414	)
Subtotal other receivables		19,777,487			16,860,558
Total receivables		66,988,796			63,118,877
Total allowance for doubtful accounts		(1,861,384	)		(3,555,338	)
Total net receivables		65,127,412			59,563,539

Notes receivable consisted primarily of post-dated checks for the purchases of goods and other receivables consisted primarily of advance payments made to suppliers and amounts due from employees.

F-16

Gross balances outstanding for 90 days or less were ThCh$65,304,811 and ThCh$58,963,166 at December 31, 2005 and 2004, respectively. Gross balances outstanding for more than 90 days were ThCh$1,683,985 and ThCh$4,155,711 at December 31, 2005 and 2004, respectively.

The Company’s bad debt expense totaled ThCh$587,093 in 2005 ThCh$899,030 in 2004 and ThCh$362,028 in 2003.

NOTE 6 — AMOUNTS AND TRANSACTIONS WITH RELATED COMPANIES

Amounts payable and receivable with related companies correspond to product purchases and sales made on market terms. These balances are generally due within approximately 45 days.

a) Amounts receivable

	At December 31,
	Short - term				Long - term
Company	2005		2004		2005		2004
	ThCh$		ThCh$		ThCh$		ThCh$
Embonor S.A.		3,039,414		—		—		—
Embotelladora Coca Cola Polar S.A.		1,964,473		—		—		—
Coca Cola de Chile S.A.		559,825		—		22,492		34,863
Centralli Refrigerantes S.A.		23,448		85,029		—		—
Total		5,587,160		85,029		22,492		34,863

b) Amounts payable

	At December 31,
	Short - term				Long - term
Company	2005		2004		2005		2004
	ThCh$		ThCh$		ThCh$		ThCh$
Envases CMF S.A.		3,834,888		4,159,172		—		—
Recofarma Industrias do Amazonas Ltda.		2,422,475		3,739,389		—		—
SPBR S.R.L		895,299		—		—		—
Envases Central S.A.		843,981		1,102,213		—		—
Envases del Pacífico S.A.		289,970		233,562		—		—
Cican S.A.		44,204		—		—		—
Coca Cola de Chile S.A.		—		582,513		—		—
Coca Cola de Argentina S.A.		—		553,383		—		—
Total		8,330,817		10,370,232		—		—

F-17

c) Transactions with related companies were as follows:

Company	Relation	Transaction	2005		2004		2003
			ThCh$		ThCh$		ThCh$
Envases Central S.A.	Equity investee	Sales of raw materials and
		Supplies		1,002,743		722,331		1,234,686
		Finished product purchases		13,791,158		12,997,297		14,742,909
Coca-Cola de Chile S.A.	Related shareholder	Concentrate purchases		40,837,885		38,072,035		36,389,788
		Collection of advertising
		participation		2,846,149		1,783,636		2,962,970
		Water source rental		1,505,662		1,415,233		1,369,182
		Sales of advertisement		3,190,898		2,412,111		2,419,096
		Others		—		—		585,656
SPBR S.R.L.	Related shareholder	Concentrate purchases		20,094,330		17,560,546		—
Coca-Cola de Argentina S.A.	Related shareholder	Concentrate purchases		—		—		14,599,770
Envases del Pacífico S.A.	Director in common	Purchase of raw materials		780,356		875,698		997,876
Recofarma Industrias do Amazonas Ltda.	Related shareholder	Concentrate purchases		29,537,358		26,541,703		18,325,765
		Payment of advertising
		participation		3,128,398		3,796,172		4,179,414
		Others		426,210		275,557		780,577
Envases CMF S.A.	Equity investee	Container purchases		15,903,837		13,897,947		13,958,606
		Sale of raw materials		—		51,654		1,347,061
		Services rendered		—		130,390		295,236
Embonor S.A.	Shareholder related	Sale of shares		3,039,414		—		—
Embotelladora Coca Cola Polar S.A.	Shareholder related	Sale of shares		1,964,473		—		—
Inmobiliaria y Constructora	Shareholder in
El Golf S.A.	common	Real estate purchase		16,106		1,811,106		—
Inversiones Caburga S.A.	Shareholder	Real estate sale		1,023,777		—		—
Iansagro S.A.	Director in common	Sugar purchase		12,181,560		10,432,092		—
Centralli Refrigerantes S.A.	Equity investee	Finished product purchases		—		—		900,294
				—		—		—
Envases Italprint S.A.	Director in common	Raw material purchases		—		—		9,526

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NOTE 7 — INVENTORIES

Inventories at each year-end consisted of the following:

	At December 31,
			2005							2004
	Gross		Obsolescence			Net		Gross		Obsolescence			Net
	value		provision			value		value		provision			value
	ThCh$		ThCh$			ThCh$		ThCh$		ThCh$			ThCh$
Finished products		8,268,640		(54,725	)		8,213,915		7,524,649		(51,694	)		7,472,955
Products in process		139,105		—			139,105		76,907		—			76,907
Raw materials		8,262,378		(95,890	)		8,166,488		12,178,562		(179,125	)		11,999,437
Raw materials in transit		905,856		—			905,856		1,914,107		—			1,914,107
Total		17,575,979		(150,615	)		17,425,364		21,694,225		(230,819	)		21,463,406

NOTE 8 — INCOME TAXES AND DEFERRED INCOME TAXES

a) General:

At December 31, 2005 and 2004, the Company has no accumulated taxable profits with shareholders credit.

b) Deferred income taxes at each year-end were as follows:

	December 31, 2005										December 31, 2004
	Assets					Liabilities					Assets					Liabilities
	Short-term		Long-term			Short-term		Long-term			Short-term		Long-term			Short-term		Long-term
	ThCh$		ThCh$			ThCh$		ThCh$			ThCh$		ThCh$			ThCh$		ThCh$
Temporary Differences
Allowance for doubtful accounts		235,152		93,456			—		—			447,052		116,192			—		—
Vacation accrual		156,036		—			—		—			123,377		—			—		—
Depreciation of property, plant and equipment		—		—			120,438		4,121,979			—		—			126,440		5,082,176
Staff severance indemnities		39,552		—			38,426		265,873			—		—			5,397		580,917
Provision for assets written-off		134,082		828,958			—		—			166,631		1,030,617			—		—
Provision for labor and commercial lawsuits		—		4,209,886			—		—			—		3,455,073			—		—
Tax loss carryforwards		987,782		8,850,783			—		—			393,556		14,526,290			—		—
Deposits in guarantee		—		—			—		2,618,328			—		—			—		2,753,820
Local bond issue expenses		—		—			—		207,378			—		—			—		206,143
Production expenses		5,496		—			—		—			—		—			—		—
Other		896,563		1,718,798			—		82,990			831,659		2,597,267			—		260,602
Contingency allowance		—		1,716,221			—		—			—		1,576,542			—		—
Social contributions		355,601		2,123,386			—		—			141,681		2,646,227			—		—
Development of containers		—		—			—		—			—		—			—		—
Accrued interest foreign Companies		—		—			3,363,023		—			—		—			2,112,762		—
Others
Complementary accounts, net of Amortization		—		(3,914,861	)		—		(3,093,270	)		—		(3,889,811	)		—		(3,748,210	)
Valuation allowance (*)		—		(10,746,851	)		—		—			—		(17,316,062	)		—		—
Total		2,810,264		4,879,776			3,521,887		4,203,278			2,103,956		4,742,335			2,244,599		5,135,448

Short-term deferred tax assets are presented net of short-term deferred tax liabilities. Long-term deferred tax liabilities are presented net of long-term deferred tax assets.

F-19

(*)The decrease of ThCh$6,569,211 in the valuation allowance between 2005 and 2004 is mainly due to (i) a reversal of ThCh$4,621,111 in tax loss carry-forwards previously included in the allowance due to improved expectation in Argentina and Brazil as these countries experienced an economic recovery during 2005 and 2004, (ii) a translation effect of ThCh$1,948,100 as part of the valuation allowance is denominated in currencies other than the Chilean peso that are translated into Chilean pesos at year-end exchange rates.

c) Income tax expense for each year was as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Current income tax expense		(8,960,706	)		(4,082,771	)		(3,214,132	)
Tax expense adjustment (previous period)		(156,763	)		562,404			675,766
Deferred income tax (expense) benefit over assets or liabilities		(2,955,521	)		(1,398,271	)		721,375
Amortization of deferred income tax asset and liability complementary accounts		(940,921	)		(997,810	)		(638,337	)
Recoverable tax losses		—			—
Change in valuation allowance		4,621,111			2,072,188			1,527,126
Other charges or credits		(156,242	)		(242,555	)		(143,882	)
Total		(8,549,042	)		(4,086,815	)		(1,072,084	)

d) Total income (loss) before income taxes and minority interest arising from different geographic sources is as follows:

Year ended	Chilean								The Company
December 31,	and others		Brazil			Argentina			(consolidated)
	ThCh$		ThCh$			ThCh$			ThCh$
2005		51,568,019		8,499,768			4,508,432			64,576,219
2004		39,317,944		6,233,658			142,426			45,694,028
2003		26,249,366		(5,760,138	)		(2,684,127	)		17,805,101

NOTE 9 — OTHER CURRENT ASSETS

Other current assets at each year-end consisted of the following:

	At December 31,
	2005		2004
	ThCh$		ThCh$
Supplies		4,589,683		3,762,081
Cross currency swap current portion		1,627,431		3,151,427
Other		2,154,251		2,506,564
Total		8,371,365		9,420,072

F-20

NOTE 10 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists principally of land, buildings, improvements and machinery. Machinery and equipment includes production lines and supporting equipment; sugar processing and liquifying equipment; transportation machinery; and computer equipment. The Company has purchased insurance to cover its fixed assets and inventories. These assets are distributed as follows:

Chile	: Santiago, Renca, Rancagua, San Antonio and Rengo
Argentina	: Buenos Aires, Mendoza, Córdoba, and Rosario
Brazil	: Río de Janeiro, Niteroi, Campos, Cabo Frio, Nova Iguazú, Espíritu Santo and Vitoria

a) Principal components of property, plant and equipment at each year-end are as follows:

	Balances at December 31, 2005							Balances at December 31, 2004
						Net property,							Net property,
			Accumulated			plant and				Accumulated			plant and
	Assets		depreciation			equipment		Assets		depreciation			equipment
	ThCh$		ThCh$			ThCh$		ThCh$		ThCh$			ThCh$
Land		12,687,024		—			12,687,024		14,791,171		—			14,791,171
Buildings and improvements		79,542,528		(31,459,675	)		48,082,853		94,749,077		(35,248,640	)		59,500,437
Machinery and equipment		204,303,414		(156,447,928	)		47,855,486		213,495,853		(169,349,661	)		44,146,192
Other property, plant and equipment		196,549,926		(167,277,950	)		29,271,976		199,205,825		(159,905,126	)		39,300,699
Technical reappraisal of property, plant and equipment		2,014,038		(605,320	)		1,408,718		2,014,038		(595,264	)		1,418,774
Total		495,096,930		(355,790,873	)		139,306,057		524,255,964		(365,098,691	)		159,157,273

b) Other property, plant and equipment at each year-end are as follows:

	At December 31,
	2005		2004
	ThCh$		ThCh$
Containers		109,020,038		109,680,495
Refrigeration equipment and other assets		54,015,575		56,006,300
Furniture and tools		3,938,744		4,460,639
Other		29,575,569		29,058,391
Total other property, plant and equipment		196,549,926		199,205,825

F-21

c) Technical reappraisal of property, plant and equipment at each year end was as follows:

	Balances at December 31, 2005							Balances at December 31, 2004
						Net property,							Net property,
			Accumulated			plant and				Accumulated			plant and
	Assets		depreciation			equipment		Assets		Depreciation			equipment
	ThCh$		ThCh$			ThCh$		ThCh$		ThCh$			ThCh$
Land		1,344,922		—			1,344,922		1,346,144		—			1,346,144
Buildings and improvements		188,348		(127,185	)		61,163		186,651		(122,796	)		63,855
Machinery and equipment		480,768		(478,135	)		2,633		481,243		(472,468	)		8,775
Total		2,014,038		(605,320	)		1,408,718		2,014,038		(595,264	)		1,418,774

d) Depreciation for the period amounted to ThCh$29,037,017 and ThCh$22,879,079 are included, under operating costs and ThCh$6,157,938 under sales and administrative expenses in the income statement.

F-22

NOTE 11 — INVESTMENT IN UNCONSOLIDATED AFFILIATES

Investments in related companies and the related direct participation in equity and unrealized results at each year-end were as follows:

		Functional	Ownership(*)																				Book value of
Company	Country	Currency	interest				Accrued income								Participation in Equity				Unrealized losses				investment
			2005		2004		2005			2004		2003			2005		2004		2005		2004		2005		2004
			%		%		ThCh$			ThCh$		ThCh$			ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Envases CMF S.A.	Chile	Chilean pesos		50.00		50.00		272,980			226,903		(517,226	)		18,161,213		17,963,768		1,104,547		1,175,808		17,056,666		16,787,960
Envases Central S.A.	Chile	Chilean pesos		49.91		49.91		(366,805	)		84,251		111,331			2,193,935		2,469,140		220,369		220,369		1,973,566		2,248,771
Kaik Participacoes Ltda.	Brazil	US dollars		11.32		11.32		483,945			587,566		2,404,299			1,301,522		936,124		—		—		1,301,522		936,124
Cican S.A.	Argentina	US dollars		15.20		15.20		379,416			125,145		(62,034	)		1,054,316		760,453		—		—		1,054,316		760,453
Total								769,536			1,023,865		1,936,370			22,710,986		22,129,485		1,324,916		1,396,177		21,386,070		20,733,308

(*) Corresponds to the number of shares and rights of Andina over the total shares and rights in each of the companies. This percentage equals the voting right in each of entity, where there are no preferential shares.

1 The main changes that occurred in the reported periods are the following:

•	On December 22, 2005 the production and packaging business of waters, juices and non-carbonated beverages licensed by The Coca-Cola Company (“TCCC”) in Chile was restructured. Vital Aguas S.A. was created with the purpose of developing the process, production and packaging business of Vital de Chanqueahue Mineral Water and other water and products according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC. Consequently, Vital S.A. will focus on juices and non-carbonated beverages.
	Accordingly, the Company, Embonor S.A. and Embotelladora Coca-Cola Polar S.A. have taken an interest of 56.5%, 26.4% and 17.1%, respectively, in Vital Aguas S.A., which will conduct the business of the processing, production and bottling of the Vital de Chanqueahue Mineral Water and other water and products, according to the terms of the contracts and authorizations agreed upon by Vital Aguas S.A. and TCCC.
	The equity interests of Embonor and Polar in the newly created Vital Aguas S.A. were purchased from the Company, through its subsidiary, Andina Inversiones Societarias S.A., for 169,306 UF ´s and 109,428 UF ´s, respectively. This sale by the Company of a portion of its ownership in Vital Aguas S.A generated earnings of ThCh$3,890,351 (215,919 UF ´s), which is presented in Other Non-Operating Income in 2005.
•	The equity investee Centralli Refrigerante S.A., Brazil, has negative shareholders ´ equity, which is provisioned in the corresponding proportion on the Company’s records. Ownership is 25%.
•	At the Extraordinary Shareholder’s Meeting of the closed stock corporation, Envases Central S.A., which took place on March 30, 2004, the shareholders approved a resolution to increase the company’s capital to ThCh$4,606,133 (historical Chilean pesos), through an issue of an additional 1,743,555 shares, with no nominal value and of the same previously existing series. Andina subscribed and paid for 929,838 shares for a total contribution of ThCh$879,945 (historical Chilean pesos) holding an ownership interest in Envases Central 49.91%.
•	The investment in Envases Central S.A. is presented net of unrealized income generated in December 1996 related to the sale of property located in Renca. The unrealized income amounted to ThCh$220,339 and will be recognized upon sale of the land to a third party.
•	The investment in Envases CMF S.A. is presented with a 50% reduction in earnings generated from the sale of machinery and equipment of the Company ´s subsidiary Envases Multipack

F-23

	S.A. which took place in June, 2001, and will be recognized in earnings during the remaining useful life of the assets sold to Envases CMF S.A. The realized amount is ThCh$71,261 for this year.
•	The results recognized by the investment in Envases CMF S.A., are decreased (unrealized) by earnings generated from the sale of bottles that Envases CMF S.A. sells to Andina and that as of the date of closing of the financial statements are considered assets. The amount for this concept as of December 31, 2005 totals ThCh$1,172,465 (ThCh$893,951 and ThCh$1,267,752 as of December 31, 2004 and 2003, respectively).
•	During 2005, Envases CMF S.A. distributed dividends to Andina amounting to ThCh$1,248,000 (ThCh$372,753 during 2004).
•	During 2005, Kaik Participacoes Ltda. distributed dividends to Refrescos amounting to ThCh$150,829.
•	The Company, through its subsidiary Refrescos, has an indirect equity investment (11.32%) in Kaik Participacoes Ltda. (Kaik). Kaik, in turn, had a 33.5% equity investment in Cervejarias Kaiser S.A., which on March 19, 2002 was sold for US$484.5 million to Molson Inc. a Canadian company. As a result of this transaction, Refrescos recognized a gain of US$15 million. Refrescos received a US$15 million dividend as a result of the payment in cash for this sale. The remaining amount of US$5.7 million, was accrued until May 2003, due to certain unresolved contingencies related to the sale of Cervejarias Kaiser S.A. In June 2003, these contingencies were resolved and the provision was reversed. As a result of the resolution of these contingencies, a gain of US$3.22 million was recognized by Refrescos in 2003.

2	Income available to be remitted by subsidiaries abroad which have not been taxed in Chile amount to US$186.3 million. The Company does not have any current plans to remit such income to Chile.
3	The investment in Kaik Partipacoes Ltda. (Brazil) and in Cican S.A. (Argentina), where The Company holds an indirect ownership of 11.32% and 15.2%, respectively, have been accounted for under the equity method, as described in Note 1 l), because we have the right to designate a director at each company.

F-24

NOTE 12 — GOODWILL

Goodwill at each year-end and the amortization during each year were as follows:

	At December 31,
	2005				2004				2003
	Amortization		Goodwill		Amortization		Goodwill		Amortization		Goodwill
	during the year		balance		during the year		balance		during the year		balance
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Rio de Janeiro Refrescos Ltda.		3,414,723		43,183,996		3,569,011		51,974,728		3,724,500		51,612,811
Embotelladora del Atlántico S.A.		2,685,025		27,563,299		3,025,388		34,082,714		3,303,530		40,519,665
Vital S.A.		129,168		645,844		516,675		775,012		—		1,292,709
Envases Central S.A.		—		—		75,088		—		—		—
Total		6,228,916		71,393,139		7,186,162		86,832,454		7,028,030		93,425,185

Accumulated amortization was ThCh$85,422,126 and ThCh$79,193,210 at December 31, 2005 and 2004, respectively.

F-25

NOTE 13 — OTHER LONG-TERM ASSETS

Other assets at each year-end were as follows:

	At December 31,
	2005		2004
	ThCh$		ThCh$
Long-term investments
Bonds:
Celulosa Arauco S.A.		11,667,149		13,128,102
Enap S.A.		9,168,967		10,447,993
Endesa S.A.		7,806,071		8,858,910
Soberano Chile		7,374,607		8,341,357
Petróleos Mexicanos		7,281,238		13,480,595
Compañía Manufacturera de Papeles y Cartones S.A.		7,085,623		5,090,039
Teléfonos de México S.A.		6,852,357		8,450,532
Codelco		5,265,521		5,972,364
Soberano México		4,794,416		11,254,319
Scotiabank Sud Americano		4,305,747		2,940,937
Federal Home Loan Bank (FHLB)		2,569,144		—
Brasil Telecom S.A.		2,097,851		—
Raytheon Company		2,085,723		—
International Paper Company		2,050,000		—
Altria Group		1,185,225		—
Alcoa Inc.		1,047,797		—
Banco Santander Santiago S.A.		—		8,143,208
Time deposits-Deutsche Bank AG		—		47,574,012
Credit link Enersis		—		11,902,195
Credit link Endesa		5,125,000		5,958,347
Credit link GMAC		1,660,500		1,870,991
Credit link Ford		1,537,500		1,732,399
Cross currency swap receivable		27,315,999		18,580,627
Subtotal long-term investments		118,276,435		183,726,927
Others
Judicial deposits (Brazil)		4,150,826		3,796,170
Bond issuance expense and par value difference		3,276,948		3,639,114
Prepaid expenses		1,697,462		1,620,514
Non-operating assets		910,783		947,556
Recoverable taxes		44,212		50,703
Others		2,552,268		2,649,553
Subtotal others		12,632,499		12,703,610
Total		130,908,934		196,430,537

F-26

NOTE 14 — SHORT-TERM BANK BORROWINGS

a) Short-term bank borrowings were as follows:

	At December 31,
	Currency or indexation adjustment
	Dollars				Other foreign currencies				Non-Indexed Ch$				Total
	2005		2004		2005		2004		2005		2004		2005		2004
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Dexia Bank Belgium		21,011,358		—		—		—		—		—		21,011,358		—
Banco Rio		—		—		2,751,805		—		—		—		2,751,805		—
Banco BBVA Francés		—		—		1,834,122		—		—		—		1,834,122		—
Banco Chile		—		—		—		—		1,426,355		12,310,682		1,426,355		12,310,682
Banco HSBC Roberts		—		—		911,689		—		—		—		911,689		—
Banco Estado		—		—		—		—		—		6,643,772		—		6,643,772
Banco Itaú		—		—		—		56		—		—		—		56
Total		21,011,358		—		5,497,616		56		1,426,355		18,954,454		27,935,329		18,954,510
Principal due		20,500,000		—		5,070,910		56		1,426,355		18,917,360		26,997,265		18,917,416
Weighted average annual interest rate														6.62		3.28

At December 31, 2005 and 2004, the Company had approximately Ch$103,223 million and Ch$110,129 million, respectively, available through short-term lines of credit. The aggregate outstanding amount of these lines of credit at December 31, 2005 and 2004 was approximately Ch$6,253 million and Ch$22,814 million, respectively.

b) Current portion long-term bank borrowings:

	At December 31,
	Currency or indexation adjustment
	US dollars				Other foreign currencies				Total
Bank	2005		2004		2005		2004		2005			2004
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$			ThCh$
Banco Santander		—		—		323,419		309,717		323,419			309,717
BankBoston		—		—		160,682		168,078		160,682			168,078
Banco Itaú		—		—		—		359,944		—			359,944
Dexia Bank Belgium		—		1,152,358		—		—		—			1,152,358
Total		—		1,152,358		484,101		837,739		484,101			1,990,097
Principal due		—		46,197,312		478,275		741,063		478,275			46,938,375
Weighted average annual interest rate										13.26	%		9.95	%

F-27

NOTE 15 — LONG-TERM BANK BORROWINGS

Long — term bank borrowings were as follows:

		At December 31,
		Current year end						Prior year end
						Average				Average
		Years to maturity		Total long		annual		Total long		annual
				term at		interest		term at		interest
Bank	Currency	2007		year end		rate		year end		rate
		ThCh$		ThCh$		%		ThCh$		%
Banco Itaú	Other		—		—		—		14,935		13.50
Banco Boston	Other		13,112		13,112		13.68		167,596		15.56
Banco Santander	Other		441,389		441,389		13.27		803,602		15.60
Dexia Bank Belgium	US dollars		—		—		—		46,197,312		6.51
Total			454,501		454,501		13.28		47,183,445		6.70

The Company partially prepaid its obligation with Dexia Bank Belgium on December 22, 2005 (due August 16, 2006). No gain or loss was recorded regarding this transaction.

NOTE 16 -BONDS PAYABLE

1 Details of bonds payable are as follows:

Next

Placement

Instrument subscription or

Nominal

Interest

Interest

Amortization

Par value

in Chile

identification number

Series

value

Currency

rate

Maturity date

paid

period of capital

2005

2004

or abroad

%

ThCh$

ThCh$

Current portion of bonds payable

Yankee bonds

A

32,076,000

US$

7.000

October 1, 2007

Half yearly

Oct. 2007

287,682

324,149

Foreign

Yankee bonds

B

4,000,000

US$

7.625

October 1, 2027

Half yearly

Oct. 2027

39,078

44,032

Foreign

Register 254 SVS June 13, 2001

A

1,650,000

UF

6.200

June 1, 2008

Half yearly

June 2006

13,002,920

13,038,331

Chile

Register 254 SVS June 13, 2001

B

3,700,000

UF

6.500

June 1, 2026

Half yearly

Dec. 2009

354,574

353,897

Chile

Total current maturities

13,684,254

13,760,409

Long — term portion of bonds payable

Yankee bonds

A

32,076,000

US$

7.000

October 1, 2007

Half yearly

Oct. 2007

16,438,950

18,522,812

Foreign

Yankee bonds

B

4,000,000

US$

7.625

October 1, 2027

Half yearly

Oct. 2027

2,050,000

2,309,866

Foreign

Register 254 SVS June 13, 2001

A

1,650,000

UF

6.200

June 1, 2008

Half yearly

June 2007

16,806,447

28,615,040

Chile

Register 254 SVS June 13, 2001

B

3,700,000

UF

6.500

June 1, 2026

Half yearly

Dec. 2009

66,506,797

66,379,716

Chile

Total long term

101,802,194

115,827,434

Accrued interest included in current portion of bonds payable on the consolidated balance sheets amounted to ThCh$832,265 and ThCh$932,977 at December 31, 2005 and 2004, respectively.

2 Scheduled maturities of the long-term bonds payable at December 31, 2005 were as follows:

													Total long
			Years to maturity										term at
	Series		2007		2008		2009		2010		Thereafter		year end
			ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Yankee Bonds		A		16,438,950		—		—		—		—		16,438,950
Yankee Bonds		B		—		—		—		—		2,050,000		2,050,000
Register 254 SVS June 13, 2001		A		11,863,375		4,943,072		—		—		—		16,806,447
Register 254 SVS June 13, 2001		B		—		—		1,956,083		3,912,166		60,638,548		66,506,797
Total				28,302,325		4,943,072		1,956,083		3,912,166		62,688,548		101,802,194

F-28

The Company’s restrictions regarding the issue of bonds are set forth in Note 25.

3 Risk classification of bonds of the Company currently outstanding is as follows:

BONDS ISSUED IN THE US MARKET

A-   :       Rating issued by Fitch Ratings
BBB+ :   Rating issued by Standard & Poor’s

BONDS ISSUED IN THE LOCAL MARKET

AA   :   Rating issued by Fitch Chile
AA   :   Rating issued by Feller & Rate

4 Bond repurchases.

During 2000, 2001 and 2002, the Company repurchased bonds it issued in the U.S. market through its subsidiary, Abisa Corp S.A.(formerly Pacific Sterling), for a total amount of US$314 million of the US$350 million aggregate principal amount issued. The bonds purchased by Abisa Corp S.A. have not been canceled and remain outstanding. Consequently, corresponding asset and liability have been eliminated on consolidation.

5 Bonds issued by Rio de Janeiro Refrescos Ltda. (“Refrescos”).

The Company ´s subsidiary Refrescos issued bonds for US$75 million maturing in December 2007 which requires semiannual interest payments. At December 31, 2005 and 2004, all such bonds were owned by the Company ´s subsidiary Abisa Corp S.A. (formerly Pacific Sterling). Consequently, corresponding asset and liability have been eliminated on consolidation.

NOTE 17 — OTHER ACCRUED LIABILITIES

Other accrued liabilities at each year-end consisted of the following:

	At December 31,
	Short-term				Long-term
	2005		2004		2005		2004
	ThCh$		ThCh$		ThCh$		ThCh$
Staff severance indemnities		557,061		187,893		4,912,572		2,627,145
Contingency provisions		74,347		79,652		8,218,899		7,835,125
Contingency provision-Brazilian banking taxes		—		—		7,984,396		5,836,432
Others		135		63,082		—		1,261,180
Total		631,543		330,627		21,115,867		17,559,882

F-29

NOTE 18 — STAFF SEVERANCE INDEMNITIES

Movements in the provision for staff severance indemnities were as follows:

	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Beginning balance		2,717,423			2,561,084			2,885,442
Provision for the period		2,988,269			491,204			548,480
Payments		(236,059	)		(237,250	)		(808,811	)
Ending balance		5,469,633			2,815,038			2,625,111

NOTE 19 — MINORITY INTEREST

	For the period ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Equity of minority shareholders of
Vital Aguas S.A.		1,099,917			—			—
Embotelladora del Atlántico S.A.		17,555			—			—
Andina Inversiones Societarias S.A.		57			53,749			51,093
Total		1,117,529			53,749			51,093
Proportional participation included in consolidated statements of income of
Vital Aguas S.A.		13,629			—			—
Embotelladora del Atlántico S.A.		(1,458	)		—			—
Andina Inversiones Societarias S.A.		(2	)		(2,773	)		(3,261	)
Total		12,169			(2,773	)		(3,261	)

F-30

NOTE 20 — SHAREHOLDERS’ EQUITY

a) The movements in shareholders’ equity of the Company during each of the three years ended December 31, 2005 were as follows:

						Retained
						earnings			Net income
	Paid-in		Other			from			for the			Interim
	capital		Reserves			prior years			year			Dividends			Total
	ThCh$		ThCh$			ThCh$			ThCh$			ThCh$			ThCh$
At January 1, 2003		184,523,532		59,566,086			103,658,528			33,021,268			(11,644,791	)		369,124,623
Prior year income allocation		—		—			21,376,477			(33,021,268	)		11,644,791			—
Dividends paid		—		—			(39,754,756	)		—			(11,495,351	)		(51,250,107	)
Price-level restatement of equity		1,845,235		595,661			1,528,631			—			19,159			3,988,686
Cumulative translation adjustment of foreign investments		—		(34,683,152	)		—			—			—			(34,683,152	)
Net income for the year		—		—			—			15,754,549			—			15,754,549
At December 31, 2003		186,368,767		25,478,595			86,808,880			15,754,549			(11,476,192	)		302,934,599
Balance at December 31, 2003 restated in constant Chilean pesos of December 31, 2005		197,904,994		27,055,720			92,182,350			16,729,756			(12,186,568	)		321,686,252
At January 1, 2004		186,368,767		25,478,595			86,808,880			15,754,549			(11,476,192	)		302,934,599
Prior year income allocation		—		—			4,278,357			(15,754,549	)		11,476,192			—
Dividends paid		—		—			(35,763,316	)		—			(11,495,351	)		(47,258,667	)
Price-level restatement of equity		4,659,219		636,965			1,347,335			—			(88,131	)		6,555,388
Cumulative translation adjustment of foreign investments		—		(11,541,416	)		—			—			—			(11,541,416	)
Net income for the year		—		—			—			40,158,726			—			40,158,726
At December 31, 2004		191,027,986		14,574,144			56,671,256			40,158,726			(11,583,482	)		290,848,630
Balance at December 31, 2004 restated in constant Chilean pesos of December 31, 2005		197,904,994		15,098,813			58,711,421			41,604,440			(12,000,487	)		301,319,181
At January 1, 2005		191,027,986		14,574,144			56,671,256			40,158,726			(11,583,482	)		290,848,630
Prior year income allocation		—		—			28,575,244			(40,158,726	)		11,583,482			—
Dividends paid		—		—			(59,711,964	)		—			(11,495,351	)		(71,207,315	)
Price-level restatement of equity		6,877,008		524,669			799,819			—			(145,608	)		8,055,888
Cumulative translation adjustment of foreign investments		—		(15,299,958	)		—			—			—			(15,299,958	)
Net income for the year		—		—			—			56,039,346			—			56,039,346
At December 31, 2005		197,904,994		(201,145	)		26,334,355			56,039,346			(11,640,959	)		268,436,591

F-31

b) Number of shares:

	Subscribed		Paid-in		Shares with
Series	shares		Shares		voting rights
A		380,137,271		380,137,271		380,137,271
B		380,137,271		380,137,271		380,137,271

The preferential rights of each series of shares are as follows:

• Series A: The right to elect 6 of the 7 directors and their respective alternates.

• Series B: The right to receive 10% more of all dividend distributions than Series A shareholders and to elect 1 of the 7 directors.

c) Capital:

	Subscribed		Paid-in
Series	Capital		capital
	ThCh$		ThCh$
A		98,952,497		98,952,497
B		98,952,497		98,952,497
Total		197,904,994		197,904,994

d) Other reserves:

Other reserves at each year-end were as follows:

	2005			2004		2003
	ThCh$			ThCh$		ThCh$
Reserve for cumulative translation adjustments (1)		(1,189,427	)		14,110,531		26,067,438
Reserve for technical reappraisal of property, plant and equipment		166,491			166,491		166,491
Other reserves		821,791			821,791		821,791
Total		(201,145	)		15,098,813		27,055,720

(1) The reserve for cumulative translation adjustments complies with Technical Bulletin No. 64 of the Chilean Institute of Accountants and Official letter No. 5,294 issued by the SVS.

The composition of this reserve was as follows:

						Release /		Balance
	Balance		Foreign exchange gains			transfers of		December 31,
Subsidiary	January 1, 2005		generated during the year			reserve		2005
	ThCh$		ThCh$			ThCh$		ThCh$
Rio de Janeiro Refrescos Ltda		7,975,590		(10,205,741	)		—		(2,230,151	)
Embotelladora del Atlántico S.A.		6,134,941		(5,094,217	)		—		1,040,724
Total		14,110,531		(15,299,958	)		—		(1,189,427	)

F-32

						Release /		Balance
	Balance		Foreign exchange gains			transfers of		December 31,
Subsidiary	January 1, 2004		generated during the year			reserve		2004
	ThCh$		ThCh$			ThCh$		ThCh$
Rio de Janeiro Refrescos Ltda		15,894,743		(7,919,153	)		—		7,975,590
Embotelladora del Atlántico S.A.		10,172,695		(4,037,754	)		—		6,134,941
Total		26,067,438		(11,956,907	)		—		14,110,531

						Release /			Balance
	Balance		Foreign exchange gains			transfers of			December 31,
Subsidiary	January 1, 2003		generated during the year			reserve(*)			2003
	ThCh$		ThCh$			ThCh$			ThCh$
Rio de Janeiro Refrescos Ltda.		37,903,304		(22,008,561	)		—			15,894,743
Embotelladora del Atlántico S.A. (*)		17,105,790		(9,275,556	)		2,342,461			10,172,695
Complejo Industrial Pet S.A. (CIPET) (**)		7,888,384		(3,922,290	)		(3,966,094	)		—
Total		62,897,478		(35,206,407	)		(1,623,633	)		26,067,438

(*)	In December 2003, the Company received a distribution of capital from its subsidiary Embotelladora del Atlántico S.A. in the amount of ThUS$13,800 (ThCh$8,701,676). The distribution of capital triggered a pro-rata recognition in income of the cumulative translation reserve of ThCh$1,623,633.
(**)	As described in Note 1, effective January 1, 2003, CIPET merged with Embotelladora del Atlántico S.A., becoming Edasa’s packaging division.

F-33

NOTE 21 — OTHER NON-OPERATING INCOME AND EXPENSES

Other non-operating income during each year was as follows:

	For the year ended December 31,
	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Gain on sale of Vital Aguas S.A. Shares		3,890,351		—		—
Gain on sale of plant, property and equipment		267,834		—		206,821
Lease of property (offices)		—		29,115		—
Reversal of contingencies provisions		—		—		1,576,391
Realization of reserve for cumulative translation adjustment		—		—		1,625,257
Other income		246,098		362,807		420,988
Subtotal		4,404,283		391,922		3,829,457
Translation adjustment (1)		2,908,703		455,849		5,844,699
Total		7,312,986		847,771		9,674,156

Other non-operating expenses during each year was as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Provision for property, plant and equipment Itaoca		—			(2,995,708	)		—
Provision for labor, tax and commercial lawsuits		(544,448	)		(1,716,919	)		(5,636,175	)
Lawsuit fees		(502,906	)		—			—
Provision PIS Coffins		(2,280,217	)		—			—
Provision for loss of investment in Transora		—			(635,240	)		—
Loss on sale of property, plant and equipment		—			(291,510	)		—
Obsolescence and write-offs of property, plant and equipment.		(1,113,431	)		(128,137	)		(193,170	)
Provision for equity investee in Centralli Refrigerantes S.A.		(60,817	)		(82,053	)		(1,076,400	)
Staff severance indemnities		(2,404,004	)		(2,384	)		(67,132	)
Other expenses		(832,309	)		(542,626	)		(970,582	)
Total		(7,738,132	)		(6,394,577	)		(7,943,459	)

(1) Refers to the effects of the translation of the financial statements corresponding to investment in foreign companies (translation of local currency to US dollars), in accordance with Technical Bulletin No. 64 issued by the Chilean Institute of Accountants, which are recorded on the consolidated statements of income under Other non-operating income or expenses, as appropriate.

F-34

NOTE 22 — FOREIGN CURRENCY

At December 31, 2005 and 2004, the Company had the following assets and liabilities denominated in U.S. dollars, Brazilian reals, Argentine pesos and Euros, which have been translated into Chilean pesos in accordance with Note 1 d) and 1t):

	2005								2004
	US		Brazilian		Argentine				US		Brazilian		Argentine
Assets	dollars		reals		pesos		Euros		dollars		reals		pesos		Euros
	(in thousands)								(in thousands)
Cash		5,554		20,637		18,029		—		5,063		26,054		5,317		20
Time deposits		41,479		19,979		—		—		4		35,998		1		—
Marketable securities (net)		7,791		3,823		—		—		28,851		—		—		—
Receivables (net)		5,138		87,360		22,032		—		156		65,339		27,092		—
Notes and accounts to related companies.		—		105		—		—		—		391		—		—
Inventories		6,095		24,588		18,577		—		2,186		29,941		42,517		—
Other current assets		7,594		42,618		15,060		—		10,246		23,031		11,772		—
Property, plant and equipment		147,031		—		—		—		154,736		—		—		—
Investments in unconsolidated affiliates		2,057		5,853		—		—		1,317		4,303		—		—
Investments in other companies		25		—		—		—		97		—		—		—
Goodwill (net)		138,044		—		—		—		149,026		—		—		—
Other long-term assets		231,126		23,570		17,945		15,114		271,479		38,348		12,926		15,114
Total assets		591,934		228,533		91,643		15,114		623,161		223,405		99,625		15,134

F-35

Liabilities	2005									2004
	US		Brazilian		Argentine					US		Brazilian		Argentine
	Dollars		reals		pesos			Euros		dollars		reals		pesos		Euros
	(in thousands)									(in thousands)
Obligations with banks and financial institutions		40,998		4,221		32,524			—		81,996		8,384		—		—
Accounts payable		4,937		62,857		41,142			—		6,298		70,609		28,471		2
Other accrued liabilities		—		64,986		10,367			—		—		48,176		16,340		—
Bonds payable		36,714		—		—			—		36,714		—		—		—
Other		—		54,018		42,719			—		734		26,493		31,943		—
Total liabilities		82,649		186,082		126,752			—		125,742		153,662		76,754		2
Total net assets (liabilities)		509,285		42,451		(35,109	)		15,114		497,419		69,743		22,871		15,132

NOTE 23 — CONSOLIDATED STATEMENT OF CASH FLOWS

The following investing and financing activities during the period that affect recognized assets or liabilities but that do not result in cash receipts or cash payments:

	For the years ended December 31,
	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Investing activities
Fixed assets additions		2,977,593		3,021,922		3,569,788
Sale of property, plant and equipment		65,910		43,406		—
Financing activities
Dividend payment		3,831,784		3,969,728		4,068,972

NOTE 24 — DERIVATIVE CONTRACTS

In accordance with TB No 57, under Chilean GAAP certain of the following forward contracts have been designated as hedges of forecasted transactions. In conjunction with the Company’s risk management strategy, the Company has recorded a gain of ThCh$9,245,843 as financial income in the consolidated statements of income for the year ended December 31, 2005 (gain of ThCh$9,804,667 in 2004) with the corresponding asset recorded in other current assets and long-term receivables in the consolidated balance sheets at December 31, 2005. Additionally, for the Company’s forward and cross currency swap contracts representing hedges, the Company has recorded an unrealized income of ThCh$3,777,170 for the year ended December 31, 2005 and an unrealized loss of ThCh$664,911 for the year ended December 31, 2004.

F-36

The Company had the following derivative contracts at December 31, 2005 (individual contracts are aggregated and presented according to the quarter they will mature):

		Contract description
			Hedged
	Maturity	Specific	Item		Effect on income
Derivative	Period	Item	Amount		Realized		Unrealized
			ThCh$		ThCh$		ThCh$
Cross Currency Swap	I Quarter 2006	Currency exchange US$		2,565,151		1,218,665		3,785
Cross Currency Swap	I Quarter 2007	Currency exchange US$		2,645,278		1,210,849		144,316
Cross Currency Swap	III Quarter 2007	Currency exchange US$		2,610,970		1,214,602		55,006
Cross Currency Swap	IV Quarter 2007	Currency exchange US$		38,437,500		9,868,071		1,249,962
Cross Currency Swap	I Quarter 2008	Currency exchange US$		7,797,786		3,620,434		341,413
Cross Currency Swap	II Quarter 2008	Currency exchange US$		8,145,570		3,597,802		961,350
Cross Currency Swap	III Quarter 2008	Currency exchange US$		12,680,996		5,790,650		894,039
Cross Currency Swap	I Quarter 2013	Currency exchange US$		5,290,567		2,422,357		631,018
Forward contract	I Quarter 2006	Currency exchange US$		7,122,525		—		(161,928	)
Forward contract	II Quarter 2006	Currency exchange US$		7,209,257		—		(162,922	)
Forward contract	III Quarter 2006	Currency exchange US$		4,666,679		—		(109,468	)
Forward contract	IV Quarter 2006	Currency exchange US$		8,907,941		—		(69,401	)
Total				108,080,220		28,943,430		3,777,170

The Company had the following derivative contracts at December 31, 2004 (individual contracts are aggregated and presented according to the quarter they will mature):

		Contract description
			Hedged
	Maturity	Specific	Item		Effect on income
Derivative	Period	Item	Amount		Realized		Unrealized
			ThCh$		ThCh$		ThCh$
Cross Currency Swap	I Quarter 2005	Currency exchange US$		1,063,935		268,671		—
Cross Currency Swap	II Quarter 2005	Currency exchange US$		5,972,268		1,743,898		—
Cross Currency Swap	IV Quarter 2005	Currency exchange US$		4,914,023		1,445,881		—
Cross Currency Swap	I Quarter 2006	Currency exchange US$		2,887,332		849,556		—
Cross Currency Swap	I Quarter 2007	Currency exchange US$		2,887,332		849,556		—
Cross Currency Swap	III Quarter 2007	Currency exchange US$		2,887,332		848,656		—
Cross Currency Swap	IV Quarter 2007	Currency exchange US$		43,309,980		4,900,533		—
Cross Currency Swap	I Quarter 2008	Currency exchange US$		8,661,996		2,548,669		—
Cross Currency Swap	II Quarter 2008	Currency exchange US$		8,661,996		2,547,768		—
Cross Currency Swap	III Quarter 2008	Currency exchange US$		13,980,462		4,032,318		—
Cross Currency Swap	I Quarter 2013	Currency exchange US$		5,774,664		1,696,548		—
Forward contract	I Quarter 2005	Currency exchange US$		4,673,942		—		(166,449	)
Forward contract	II Quarter 2005	Currency exchange US$		4,968,944		—		(176,255	)
Forward contract	III Quarter 2005	Currency exchange US$		4,380,392		—		(158,112	)
Forward contract	IV Quarter 2005	Currency exchange US$		4,550,232		—		(164,095	)
Total				119,574,830		21,732,054		(664,911	)

F-37

NOTE 25 — COMMITMENTS AND CONTINGENCIES

a. Litigation and other legal actions:

The Company and its subsidiaries are not involved in any material judicial or out-of-court litigation that could result in gains or losses. Current lawsuits are described below.

1)	The Chilean internal revenue service has commenced a penal lawsuit against the Company’s subsidiary Vital S.A. and against those ultimately responsible for the application of tax losses. At the same time, a lawsuit has been filed against Vital S.A. for the recovery of income tax and the application of accumulated losses. Management believes, based on the opinion of its legal counsel, there is only a remote possibility of a negative outcome against the Company in these proceedings.
2)	Embotelladora del Atlántico S.A. faces labor and other lawsuits. Accounting provisions at December 31, 2005 for any probable loss contingency arising from these lawsuits amounted to ThCh$1,752,274. Management believes, based on the opinion of its legal counsel, that these lawsuits will not materially affect the Company’s consolidated financial position, operating results or cash flows when resolved in the future.
3)	Refrescos faces labor, tax and other legal proceedings. Accounting provisions at December 31, 2005 for any probable loss contingency arising from these lawsuits amounted to ThCh$6,614,257 Management believes, based on the opinion of its legal counsel, that these matters will not materially affect the Company’s consolidated financial position, operating results or cash flows when resolved in the future.
4)	Andina faces labor, tax, commercial and other legal proceedings. Accounting provisions for any probable loss contingency stemming from these lawsuits amounted to ThCh$74,314 at December 31, 2005. Management believes, based on the opinion of its legal counsel, that these matters will not materially affect the Company’s consolidated financial position, operating results or cash flows when resolved in the future.

F-38

b. Restrictions

The issue and placement of bonds in the US market of US$350 million imposes certain restrictions on liens, sale and leaseback transactions, assets sales and subsidiary indebtedness and certain conditions in the event of a merger or consolidation.

The bond issue and placement by Andina in the Chilean market in 2001 of UF 7,000,000 in aggregate principal amount of the Company’s 6.20% and 6.50% bonds is subject to the following restrictions:

• Andina must maintain a leverage ratio, defined as total debt/consolidated equity less than 1.20. For purposes of calculating the leverage ratio, total debt includes; (i) short-term bank liabilities, (ii) the current portion of long-term bank liabilities, (iii) short-term liabilities and promisory notes, (iv) the current portion of bonds payable, v) long-term bank liabilities, and (vi) long-term bonds payable. Consolidated equity means total shareholders’ equity plus minority interest.

• Andina must maintain consolidated assets free of any pledge, mortgage or other encumbrance for an amount equal to at least 1.30 times the consolidated liabilities that are not guaranteed by the investee.

• Andina must retain and, in no way, sell, assign or dispose of, to a third party, the geographical zone denominated “Region Metropolitana”, as a franchised territory in Chile of The Coca-Cola Company for the preparation, production, sale and distribution of the products and brands in accordance with the Bottler Agreement with Andina, renewable from time to time.

• The Company must retain and, in no way, sell, assign or dispose of to a third party any other territory in Argentina or Brazil which is currently franchised to a subsidiary of the Company by The Coca-Cola Company for the preparation, production, sale, and distribution of the products and brands of The Coca-Cola Company, as long as the referred territory represents more than 40% of the Company’s consolidated operating cash flows.

At December 31, 2005 and 2004 the Company was in compliance with all covenants.

c. Direct guarantees and restricted assets

Direct guarantees and restricted assets at December 31, 2005 were as follows:

Balances pending

Year of

payment

expiration

Book

at year end

December 31,

Debtor

Assets involved

Value

2005

2004

2006

Guarantee creditor

Name

Relation

Guarantee

Type

ThCh$

ThCh$

ThCh$

ThCh$

Aduana Buenos Aires

Embotelladora del Atlantico S.A.

Subsidiary

Insurance guaranty

Inventories

2,793,734

—

—

—

Uniao Federal

Rio de Janeiro Refrescos Ltda.

Subsidiary

Mortgage

Warehouse

57,050

60,321

58,261

—

Estado Rio de Janeiro

Rio de Janeiro Refrescos Ltda.

Subsidiary

Mortgage

Real State Property

11,542,124

8,891,513

—

—

Poder Judiciario

Rio de Janeiro Refrescos Ltda.

Subsidiary

Judicial deposit

Judicial Deposit

7,795,553

—

—

—

Serv. Nac. de Aduanas

Embotelladora Andina S.A.

—

Guaranty receipt

—

—

92,250

—

92,250

F-39

d. Contractual obligations

The following table summarizes our contractual obligations and commercial commitments as of December 31, 2005:

	Payments due by period
	Maturity
	2006		2007		2008		2009		2010		Total
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Purchase obligations		79,277		99,093		39,954		39,954		28,905		287,183
Subtotal-included in our balance sheet		79,277		99,093		39,954		39,954		28,905		287,183
Operating lease obligations		1,228,657		127,549		46,621		—		—		1,402,827
Purchase obligations		4,712,186		—		—		—		—		4,712,186
Subtotal-not included in our balance sheet		5,940,843		127,549		46,621		—		—		6,115,013
Total contractual obligations.		6,020,120		226,642		86,575		39,954		28,905		6,402,196

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NOTE 26 — GUARANTEES RECEIVED FROM THIRD PARTIES

Guarantees received from third parties at December 31, 2005 were as follows:

	Type of
Guarantor	guarantee	Amount		Currency	Transaction
Soc. Las Ñipas	Policy		6,971	U.F.	Advertising Agreement
Soc. Com. Itahue Ltda.	Policy		5,000	U.F.	Advertising Agreement
Distribuidora Monserrat S.A.	Policy		3,920	U.F.	Advertising Agreement
Soc. Administradora Plaza Cent.	Policy		3,076	U.F.	Advertising Agreement
Iansagro S.A.	Deposit Certificate		4,735,875	ThCh$	Warrants
Iansagro S.A.	Deposit Certificate		3,788,700	ThCh$	Warrants
Iansagro S.A.	Deposit Certificate		2,841,525	ThCh$	Warrants
Peñaloza Ballero Limitada	Receipt		50,000	ThCh$	Purchase Order
Russel W. Coffin	Letter of Credit		39,436,416	USD	Purchase Nitvitgov Refrigerantes S.A.
CONFAB	Mortgage		30,000,000	USD	Purchase Rio de Janeiro Refrescos Ltda.
Several Clients	Deposits		966,180	USD	Container Guaranty
Soc. Com. Champfer	Mortgage		642,970	USD	Distributor Credit
Mac Coke Dist. De Beb.	Mortgage		427,223	USD	Distributor Credit
Tigresa Com. Beb.	Mortgage		286,239	USD	Distributor Credit
Franciscana Dist.	Mortgage		245,653	USD	Distributor Credit
ASXT Fluminense Distrib. Bebidas	Mortgage		239,245	USD	Distributor Credit
Dist. Real Cola (Apucarana)	Mortgage		234,972	USD	Distributor Credit
Dist União De Itaperuna	Mortgage		221,558	USD	Distributor Credit
Rosas de Casimiro	Mortgage		183,706	USD	Distributor Credit
Aguiar Distrib. De Bebidas Ltda.	Mortgage		171,316	USD	Distributor Credit
MBM Distribuidora de Beb.	Mortgage		158,927	USD	Distributor Credit
Ledesma SAAI	Guaranty		133,534	USD	Supplier
Ledesma SAAI	Guaranty		132,689	USD	Supplier
Ledesma SAAI	Guaranty		132,689	USD	Supplier
Ledesma SAAI	Guaranty		132,689	USD	Supplier
Ledesma SAAI	Guaranty		132,689	USD	Supplier
Dibejon Dist. Beb. João Neiva	Mortgage		121,758	USD	Distributor Credit

NOTE 27 — SUBSEQUENT EVENTS

On January 26, 2006, interim dividend number 149 was paid from 2005 revenues as follows:

a) Ch$4.80 for each series A share; and
b) Ch$5.28 for each series B share.

On April 27, 2006, final dividend number 150 was paid from 2005 revenues as follows
a) Ch$6.48 for each series A share; and
b) Ch$7.128 for each series B share.

On June 1, 2006, final additional dividend number 151 was paid from retained earnings as follows:

a) Ch$70.00 for each series A share; and
b) Ch$77.00 for each series B share.

During the month of April 2006, the Company´s subisidiary Refrescos extended the maturity date of its outstanding bonds of $75 million, all owned by the Company ´s subsidiary Abisa Corp S.A (formerly Pacific Sterling) from December 2007 to December 2012. There was no material effect on results of operations for this transaction.

No other significant events have occurred between December 31, 2005 and the issuance date of these financial statements that could significantly affect the presentation of these financial statements.

F-41

NOTE 28 — DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Chilean GAAP varies in certain significant respects from the accounting principles generally accepted in the United States (“U.S. GAAP”). Such differences involve methods for measuring the amounts shown in the financial statements as well as additional disclosures required by U.S. GAAP.

The principal methods applied in the preparation of the accompanying financial statements which have resulted in amounts that differ from those that would have otherwise been determined under U.S. GAAP are as follows:

1 Differences in measurement methods:

a) Inflation accounting

The cumulative inflation rate in Chile as measured by the CPI in the three-year period ended December 31, 2005 was approximately 7.2%.

Chilean GAAP requires that the financial statements be restated to reflect the full effects of the loss in the purchasing power of the Chilean peso on the financial position and results of operations of reporting entities. The method, described in Note 1 c), is based on a model which enables calculation of net inflation gains or losses caused by monetary assets and liabilities exposed to changes in the purchasing power of local currency. The model prescribes that the historical cost of all non-monetary accounts be restated for general price-level changes between the date of origin of each item and the year-end.

The inclusion of price-level adjustments in these financial statements is considered appropriate under the prolonged inflationary conditions affecting the Chilean economy even though the cumulative inflation rate for the last-three years does not exceed 100%. Accordingly, the effect of price-level changes is not eliminated in the reconciliation to U.S. GAAP included under paragraph (n) below.

The price-level restatement was determined under Chilean GAAP by restating the following non-monetary assets and liabilities as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Shareholders’ equity		(8,055,888	)		(6,791,382	)		(4,235,586	)
Liabilities		(5,854,895	)		(3,736,684	)		(2,171,126	)
Property, plant and equipment		2,698,524			2,021,047			776,944
Current assets		2,555,198			1,649,745			11,892
Other assets		9,699,710			8,302,547			6,883,332
Adjustment of balance sheet accounts		1,042,649			1,445,273			1,265,456
Adjustment of income statement accounts		(1,612,700	)		(497,100	)		138,580
Price level restatement income (expense)		(570,051	)		948,173			1,404,036

F-42

b) Translation of financial statements of non-Chilean operations

In accordance with Technical Bulletin No. 64 of the Chilean Institute of Accountants, the financial statements of foreign subsidiaries whose activities do not constitute an extension of the Chilean company’s operations, or which operate in countries that are exposed to significant risks, restrictions or inflation/exchange fluctuations must be remeasured into U.S. dollars and translated into Chilean pesos at the year-end exchange rate. Accordingly, the financial statements of the Company’s subsidiaries in Argentina and Brazil were considered to be operating in countries that are exposed to significant risks, restrictions and exchange fluctuations and were prepared in accordance with Chilean GAAP, with the exception of monetary correction, and then were remeasured into U.S. dollars as follows:

• Monetary assets and liabilities were translated at year-end rates of exchange between the U.S. dollar and the local currency.

• All non-monetary assets and liabilities and shareholders’ equity were translated at historical rates of exchange between the U.S. dollar and the local currency.

• Income and expense accounts were translated at average rates of exchange between the U.S. dollar and the local currency.

• Any exchange differences were included in the results of operations for the period.

The resulting foreign currency amounts are then translated to Chilean pesos at the closing exchange rate at the balance sheet date. The difference between the investments’ equity value arising from the financial statements remeasured as explained above and the net equity value at the beginning of the year restated by Chilean inflation, plus the proportional share of the investments’ income (or loss) for the year, is recorded as other reserves in shareholders’ equity in the consolidated balance sheets.

In the opinion of management of the Company, the Chilean GAAP procedures described above are part of the comprehensive basis of preparation of price-level adjusted financial statements required by Chilean GAAP. Inclusion of inflation and translation effects in the financial statements is considered appropriate under the inflationary conditions that have historically affected the Chilean economy and, accordingly, are not eliminated in the reconciliation to U.S. GAAP.

c) Revaluation of property, plant and equipment

As described in Note 1 j), certain property, plant and equipment has been reported in the financial statements at amounts determined in accordance with a technical appraisal. The revaluation of property, plant and equipment is an accounting principle not generally accepted under U.S. GAAP. The effects of the reversal of this revaluation as well as the related accumulated depreciation and depreciation expense for the year is shown in the Chilean GAAP to U.S. GAAP reconciliation below under paragraph (n).

F-43

d) Income taxes

Under Chilean GAAP, effective January 1, 2000, the Company began applying Technical Bulletin No. 60 of the Chilean Institute of Accountants concerning deferred income taxes. Technical Bulletin No. 60 requires the recognition of deferred income taxes for all temporary differences, whether recurring or not, using an asset and liability approach. A valuation allowance is provided if, based on the weight of available evidence, some portion, or all, of the deferred income tax assets will not be realized. For U.S. GAAP purposes, the Company applied SFAS No. 109, “Accounting for Income Taxes”, whereby income taxes are also recognized using substantially the same asset and liability approach, with deferred income tax assets and liabilities established for temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted rates expected to be in effect when such amounts will be realized. A valuation allowance is provided against deferred tax assets that are not recoverable on a more-likely-than-not basis. In this regard, in 2005 the Company released its valuation allowance related to the net operating losses of its Brazilian subsidiary Refrescos.

The effect of provisioning for deferred income taxes for the differences between the amounts shown for assets and liabilities in the consolidated balance sheets and the tax bases of those assets and liabilities under US GAAP and the remaining effects from the implementation of TB 60 are included in paragraph (n) below and certain disclosures required under SFAS No. 109 are set forth under paragraph 2 a) below.

e) Accounting for investments in related companies

The Company began accounting for its 11.32% interest in Kaik Participacoes Ltda. under the equity method in 1999 as described in Note 11. In prior years, as appropriate financial information was not available, the Company accounted for this investment under the cost method. Under U.S. GAAP, as the Company only holds 11.32% interest and the investee’s shares do not trade on any exchange, the cost method has been applied for all years presented. The effects for the difference in accounting for this investment pursuant to the cost method of accounting for U.S. GAAP for all periods presented are included in the reconciliation of Chilean GAAP to U.S. GAAP included under paragraph (n) below.

f) Goodwill

Under Chilean GAAP, until December 31, 2003, the excess of cost over the net book value of a purchased company was recorded as goodwill (the book value purchase method), which is then amortized to income over a maximum period of twenty years. Amortization of goodwill may be accelerated if the acquired company generates sufficient income to absorb the additional amortization in any given year. The excess of net book value over the cost of an investment is considered to be negative goodwill under Chilean GAAP and is also amortized to income over a maximum period of twenty years. The amortization of negative goodwill may be accelerated if the acquired company sustains losses. Effective January 1, 2004, Technical Bulletin No. 72 requires the determination of goodwill and negative goodwill based on the fair value of the acquired company.

Under U.S. GAAP, goodwill and other intangibles are accounted for under SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method of accounting after this date. With respect to the purchase method of accounting, the cost of an investment is assigned to the tangible and identified intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of cost over the fair value of net assets acquired is recorded as goodwill. If an excess of acquired net assets over cost arises, the excess is allocated to reduce proportionally the values

F-44

assigned to noncurrent assets (except long-term investments in marketable securities) in determining their fair values. If the allocation reduces the noncurrent assets to zero value, the remainder of the excess over cost (negative goodwill) is written off immediately as an extraordinary gain. SFAS No. 141 establishes specific criteria for the recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized).

SFAS No. 142, “Goodwill and Other Intangible Assets” establishes the following:

• The accounting for a recognized intangible asset is based on its useful life to the reporting entity. An intangible asset with a finite useful life is amortized over the life of the asset, but goodwill and other intangible assets with indefinite useful lives are not amortized.

• The remaining useful lives of intangible assets being amortized are evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life.

• Goodwill and other intangible assets with indefinite useful lives that are not subject to amortization are tested for impairment at least annually.

• All goodwill must be assigned to a reporting unit, which is defined as an operating segment or one level below an operating segment.

SFAS No. 142 became effective for years beginning after December 15, 2001. Accordingly, goodwill amortization was ceased for U.S. GAAP purposes beginning in 2002. The effects of eliminating goodwill amortization recognized for Chilean GAAP purposes are included in the reconciliation of Chilean GAAP to U.S. GAAP under paragraph (n) below.

g) Joint venture accounting

In accordance with Chilean GAAP, in June 2001 the Company recognized a gain of ThCh$6,384,722 on the sale of property, plant and equipment to CMF upon the formation of this joint venture with Cristalerías. In addition, the Company wrote-off the basis difference of ThCh$1,887,624 between its investment in and its share of the net equity of the joint venture. Accordingly, the Company recognized a net gain before income taxes of ThCh$4,497,098.

Under U.S. GAAP, a gain can be recognized only if appreciated assets (excluding land) are contributed to a venture, cash or near-cash assets are received, and no other factors exist that could impact realization of the gain (such as guarantees of debt, puts or calls that may result in acquisition of the venture, etc.). Additionally, the gain would be limited to the proportion of the assets deemed sold and any basis difference would be amortized based on the lives of the assets that gave rise to the difference. Finally, all contributions of appreciated assets to the venture would generally be recorded at the carrying value of the joint venture shareholder.

The shareholders’ agreement for CMF that establishes joint control of the venture by the Company and Cristalerías also contains provisions that could require the Company to purchase Cristalerías’ shares of CMF. Accordingly, the gain recognized for Chilean GAAP purposes is not considered realized under U.S. GAAP. The effects of reversing the gain and write-off of the basis difference in the investment, amortizing the basis difference in accordance with U.S. GAAP and adjusting the results of CMF for the Company’s share of the amortization of excess value assigned to the assets of CMF under Chilean GAAP are included in paragraph (n) below.

F-45

h) Investment securities

Under Chilean GAAP, long-term investments in bonds and time deposits held by the Company are carried at cost plus accrued interest. Under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, investment securities, which include debt and certain equity securities, are accounted for as follows:

• Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and are reported at amortized cost.

• Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings.

• Debt and equity securities not classified as either held-to-maturity or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders’ equity.

The Company’s investments in bonds and government securities are classified as available for sale securities for the purposes of SFAS No. 115. The effect of the difference between Chilean GAAP and U.S. GAAP in accounting for the Company’s investment in bonds and government securities is included in the reconciliation of Chilean GAAP to U.S. GAAP in paragraph (n) below.

i) Staff severance indemnities and retention plan

The Company has a severance obligation to its employee’s pursuant to collective bargaining agreements between the Company and certain of its employees and an executive retention plan with certain select employees. Under the employee bargaining agreement the Company is committed to provide a payment to each of these employees based upon total years of service. With regard to the executive retention plan, the Company is required to pay certain executives a fixed amount upon completion a service period, See Note 1 p). Under Chilean GAAP, the financial statements include a liability for the employee plan which is the current monthly salary times the years of services at the closing date, discounted at a rate of 7%. The accrual considers the average future service period for all employees covered by such agreements. The Company also maintains a separate management retention plan for select executives. A liability is recorded, under the guidance of this plan. This plan entitles certain selected executives to receive a fixed lump sum payment on a pre-determined date upon completion of service.

The Company also maintains a separate management retention plan for select executives. A liability is recorded, under the guidance of this plan. This plan entitles certain selected executives to receive a fixed lump sum payment on a pre-determined date upon completion of service.

Under U.S. GAAP, the employee bargaining agreement is considered to be a pension plan, and the liability would be measured by projecting future expected severance payments using an assumed salary progression rate and discounting the resulting amounts to their present value. In practice, the Company believes that the salary progression rate will not differ significantly from the general inflation rate. In the opinion of management of the Company, the application of U.S. GAAP would not have produced results materially different from the acceptable method under Chilean GAAP. With regard to the retention plan, for both Chilean GAAP and US GAAP the cost of accumulating benefits are recognized ratably over the service period as they are earned by the employees through the rendering of service.

F-46

j) Accumulated translation adjustment of foreign investments

As described in Notes 20 and 21, the Company recognized a gain upon the realization of a portion of its accumulated translation adjustment of foreign investments account in accordance with Technical Bulletin No. 64. Under Chilean GAAP, a partial liquidation of an investment in a foreign entity is deemed to have occurred upon the repatriation of capital or of earnings in excess of net income for the year. In the case of a partial liquidation, the proportionate share of the accumulated translation adjustment of foreign investments account related to the foreign investment should be reversed and recorded in the results of the period.

At December 31, 2003, the decrease in capital of the Company’s subsidiary, Embotelladora del Atlántico S.A., of US$13.8 million (ThCh$8,701,676), generated income of ThCh$1,623,633 due to the reversal of the cumulative translation reserve.

Under U.S. GAAP as set forth in SFAS No. 52, “Foreign Currency Translation”, the accumulated translation adjustment of foreign investments account is realized in the results of the period only upon the sale or upon the complete or substantially complete liquidation of an investment in a foreign entity. The effect of reversing this gain is included in the reconciliation of Chilean GAAP to U.S. GAAP in paragraph (n) below.

k) Derivative financial instruments

At December 31, 2005, 2004 and 2003, the Company had derivative contracts consisting of forward contracts to purchase US dollars and cross-currency swap agreements (UF/US$). The forward contracts were obtained principally to protect the Company from foreign exchange risk with respect to future purchases of raw materials denominated in US dollars. The cross-currency swap agreements were obtained to mitigate exchange rate and risk with respect to the US dollar-denominated bond investments held by the Company

Under Chilean GAAP, derivatives are accounted for in accordance with Technical Bulletin N° 57. Under TB N° 57, all derivative financial instruments should be recognized on the balance sheet at their fair value. In addition, TB N° 57 requires that derivative financial instruments be classified as non-hedging (investment) instruments and hedging instruments, the latter further divided into those covering recognized assets or liabilities or an unrecognized firm commitment and those covering forecasted transactions.

Contracts to hedge recognized assets or liabilities or an unrecognized firm commitment act as hedging instruments against the risk of a change in the fair value of a hedged item. The differences resulting from the changes in the fair value of both the hedged item and the derivative instrument should be accounted for as follows:

a.	If the net effect is a loss, it should be recognized in the statements of income in the period of change.
b.	If the net effect is a gain, it should be recognized when the contract is closed and accordingly deferred on the balance sheet.
c.	If the net effect is a gain and net losses were recorded on the transaction in prior years, a gain should be recognized in the statements of income in the current period up to the amount of net losses recorded previously.
d.	If the effect is a net loss and net gains were recorded (as a deferred revenue) on the transaction in prior years, the gain should be utilized to offset the net loss before recording the remaining loss in the statements of income for the year.

F-47

Contracts to hedge forecasted transactions are those that have the objective of protecting cash flow risks of a transaction expected to occur in the future (a cash flow hedge). The hedging instrument should be recorded at its fair value and the changes in fair value should be stated on the balance sheet as unrealized gains or losses. When the contract is closed, the unrealized gains or losses on the derivative instrument should be recognized in earnings without affecting the cost or sales price of the asset acquired or sold in the transaction. However, probable losses arising from purchase commitments should not be deferred.

Non-hedging (investment) instruments should also be presented at their fair value, with changes in fair value reflected in the earnings of the period in which the change in fair value occurs.

Under Chilean GAAP in accordance with TB No. 57, the Company’s forward contracts have been designated as hedges of forecasted transaction.

For U.S. GAAP reconciliation purposes only, the Company has adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS 137, SFAS 138 and SFAS 149 on the same matter (collectively referred to herein as “SFAS 133”). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in its consolidated balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction or to the variability of the cash flows that are to be received or paid in connection with a recognized asset or liability or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, a foreign-currency-denominated forecasted transaction or a recognized asset or liability.

The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

The effect of the differences in accounting for derivative financial instruments are included in the reconciliation of Chilean GAAP and U.S. GAAP in paragraph (n) below. Additional information concerning derivative financial instruments that is required to be disclosed under SFAS 133 is set forth below in paragraph 2 e).

For Chilean GAAP purposes, the Company has recorded a gain of ThCh$9,245,843 in the consolidated statements of income for the year ended December 31, 2005 with the corresponding asset recorded in other current assets and long-term investments in the consolidated balance sheets as of December 31, 2005. Additionally, for the Company’s forward contracts and Cross Currency Swaps agreements representing hedges, the Company has recorded an unrealized gain of ThCh$3,777,170 for the year ended December 31, 2005 and an unrealized loss of ThCh$664,911 for the year ended December 31, 2004.

However, the Company has not completed the documentation necessary to qualify the contracts designated as hedges for Chilean GAAP purpose, as hedges for U.S. GAAP purposes. Accordingly, the unrealized gain deferred under Chilean GAAP of ThCh$3,777,170 in 2005 and unrealized losses ThCh$664,911 in 2004 represent a difference from U.S. GAAP that is included in paragraph (n) below.

l) For U.S. GAAP purposes, effective January 1, 2003, the Company early-adopted SFAS No. 145 “Rescission of FASB Statements No. 4, 44 and 64”; the effect being that the gain on repurchase of Series A, B and C bonds due to the early extinguishment of these bonds, is no longer presented as an extraordinary item.

F-48

m) Mandatory dividend

As required by the Chilean Company law, unless otherwise decided by the holders of a majority of the shares represented at the General Shareholders’ Meeting, the Company has to distribute a cash dividend in an amount equal to at least 30% of the Company’s net income under Chilean GAAP. Since the payment of the dividend out of each year’s net income is a legal requirement in Chile, an accrual would have been made for US GAAP purposes to recognize the dividend obligation under Chilean law. The effect of this accrual would be to decrease Shareholders’ equity by ThCh$5,170,845 at December 31, 2005. At December 31, 2004 the Company has not recorded an accrual for this concept as anticipated dividends were paid during the year.

n) Effects of conforming to U.S. GAAP

The adjustments to reported net income for the periods indicated required to conform with U.S. GAAP are as follows:

	For the year ended December 31,
	2005			2004		2003
	ThCh$			ThCh$		ThCh$
Net income as shown in the Chilean GAAP financial statements		56,039,346			41,604,440		16,729,756
Reversal of additional depreciation on revaluation of property, plant and equipment (paragraph c)		10,056			10,140		10,131
Adjustment to deferred income tax provision (paragraph d)		8,409,192			381,693		1,427,942
Difference in accounting for investments in related companies (paragraph e)		(365,398	)		1,711,897		(2,400,620	)
Amortization of goodwill (paragraph f)		6,228,916			7,186,162		7,028,030
Joint venture accounting (paragraph g)		419,897			419,897		419,897
Accumulated translation adjustment of foreign investments (paragraph j)		—			—		(1,623,633	)
Derivative financial instruments (paragraph k)		4,442,081			2,111,062		(3,200,898	)
Net income in accordance with U.S. GAAP		75,184,090			53,425,291		18,390,605

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Components of other comprehensive (loss) income:
Cumulative translation adjustment for foreign investments		(15,299,958	)		(11,956,907	)		(35,204,782	)
Unrealized (loss) gain on investment securities, net of applicable income tax expense (benefit) of ThCh$ (676,334) in 2005, ThCh$58,959 in 2004 and ThCh$1,565,486 in 2003 (paragraph h)		(3,269,578	)		308,260			7,820,984
Subtotal other comprehensive (loss) income		(18,569,536	)		(11,648,647	)		(27,383,798	)
Comprehensive income (loss) in accordance with U.S. GAAP (paragraph 2 b)		56,614,554			41,776,644			(8,993,193	)

Accumulated other comprehensive income amounted to ThCh$26,454,595, ThCh$45,024,131 and ThCh$56,672,778 as of December 31, 2005, 2004 and 2003, respectively.

F-49

The changes in other comprehensive (loss) income determined under U.S. GAAP were as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Other comprehensive (loss) income, before income tax:
Cumulative translation adjustment for foreign investments		(15,299,958	)		(11,956,907	)		(35,204,782	)
Unrealized gains (loss) on securities
Unrealized holding gains (loss) arising during period		(1,433,455	)		705,851			11,031,082
Less: reclassification adjustment for losses included in net income		(2,512,457	)		(338,632	)		(1,644,612	)
Other comprehensive (loss) income, before income tax		(19,245,870	)		(11,589,688	)		(25,818,312	)
Income tax expenses related to items of other comprehensive income		676,334			(58,959	)		(1,565,486	)
Other comprehensive (loss) income, net of income tax		(18,569,536	)		(11,648,647	)		(27,383,798	)

The Company’s earnings per share under U.S. GAAP is as follows:

	For the year ended December 31,
	2005				2004				2003
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
	Series A		Series B		Series A		Series B		Series A		Series B
Basic and diluted net income per share		94.18		103.60		66.93		73.62		23.04		25.34
Weighted average number of common stock outstanding (thousands of shares)		380,137		380,137		380,137		380,137		380,137		380,137

Since Series B shares are entitled to a 10% higher dividend than Series A shares, Series B shareholders are entitled to 52.38% of earnings, and Series A shareholders are entitled to 47.62% of earnings. In accordance to this calculation, earnings per share are composed as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Net income in accordance with U.S. GAAP		75,184,090			53,425,291			18,390,605
(less): Preferred stock dividend Series B		(39,381,426	)		(27,984,167	)		(9,632,999	)
Basic EPS
Income available to common stockholders		35,802,664			25,441,124			8,757,606
Weighted average number of common shares outstanding (thousands of shares) Series A		380,137			380,137			380,137
Basic and diluted net income per share Series A		94.18			66.93			23.04
Basic EPS
Income available to preferred stockholders		39,381,426			27,984,167			9,632,999
Weighted average number of common shares outstanding (thousands of shares) Series B		380,137			380,137			380,137
Basic and diluted net income per share Series B		103.60			73.62			25.34

F-50

The adjustments required to conform shareholders’ equity to U.S. GAAP are as follows:

	At December 31,
	2005			2004
	ThCh$			ThCh$
Shareholders’ equity as shown in the Chilean GAAP financial statements		268,436,591			301,319,181
Reversal of additional depreciation on revaluation of property, plant and equipment (paragraph c)		(1,408,718	)		(1,418,774	)
Adjustment to deferred income tax provision (paragraph d)		9,472,577			387,051
Difference in accounting for investments in related companies (paragraph e)		1,308,996			1,674,394
Amortization of goodwill (paragraph f)		15,915,652			9,686,736
Joint venture accounting (paragraph g)		(2,519,378	)		(2,939,275	)
Unrealized gain on investment securities (paragraph h)		(235,112	)		3,710,800
Derivative financial instruments (paragraph k)		3,777,170			(664,911	)
Minimum dividend (paragraph m)		(5,170,845	)		—
Shareholders’ equity in accordance with U.S. GAAP		289,576,933			311,755,202

The changes in shareholders’ equity determined under U.S. GAAP were as follows:

	ThCh$
BALANCE AT DECEMBER 31, 2002		383,094,630
Distribution of dividends		(54,108,277	)
Increase in cumulative translation adjustment of foreign investments		(35,204,782	)
Decrease in net unrealized losses on investment securities		7,820,984
Net income for the year		18,390,605
BALANCE AT DECEMBER 31, 2003		319,993,160
Distribution of dividends		(50,014,602	)
Increase in cumulative translation adjustment of foreign investments		(11,956,907	)
Increase in net unrealized losses on investment securities		308,260
Net income for the year		53,425,291
BALANCE AT DECEMBER 31, 2004		311,755,202
Distribution of dividends		(73,621,978	)
Increase in cumulative translation adjustment of foreign investments		(15,299,958	)
Increase in net unrealized losses on investment securities		(3,269,578	)
Minimum dividend		(5,170,845	)
Net income for the year		75,184,090
BALANCE AT DECEMBER 31, 2005		289,576,933

F-51

2 Additional Disclosure Requirements:

a) Income taxes

The accounting for income taxes under Chilean GAAP and U.S. GAAP differs for deferred income taxes. Under U.S. GAAP, as set forth in SFAS No. 109, “Accounting for Income Taxes”, all temporary differences arising from transactions that have different accounting and tax treatments are recognized as deferred tax assets and liabilities as of the balance sheet date. A valuation allowance is provided against deferred tax assets that are not recoverable on a more-likely-than-not basis. Under Chilean GAAP, effective January 1, 2000, the Company began applying Technical Bulletin No. 60 of the Chilean Institute of Accountants concerning deferred income taxes. Prior to the implementation of Technical Bulletin No. 60, only deferred tax assets and liabilities that were expected to materialize in the future were recognized in these consolidated financial statements.

The provisions for income taxes included in the consolidated statements of income were as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Current tax expense as per tax returns		(9,273,711	)		(3,762,922	)		(2,682,248	)
Deferred tax expense as previously calculated under Chilean GAAP		724,669			(323,893	)		1,610,164
Charge for the year under Chilean GAAP		(8,549,042	)		(4,086,815	)		(1,072,084	)
U.S. GAAP adjustments:
Deferred tax effect of applying SFAS 109 to Chilean GAAP results		8,409,192			381,693			1,427,942
(Charge) benefits from continuous operations for the year under U.S. GAAP		(139,850	)		(3,705,122	)		355,858

F-52

The above table can be broken down into geographic sources as follows:

	Chilean									The Company
2005	and others			Brazil			Argentina			(consolidated)
	ThCh$			ThCh$			ThCh$			ThCh$
Current tax expense as per tax return		(5,814,371	)		(2,808,681	)		(650,659	)		(9,273,711	)
Deferred tax (expense) benefit as previously calculated under Chilean GAAP		35,614			906,902			(217,847	)		724,669
(Charge) benefit for the year under Chilean GAAP		(5,778,757	)		(1,901,779	)		(868,506	)		(8,549,042	)
U.S. GAAP adjustments:
Deferred tax effect of applying SFAS 109		(316,536	)		8,617,947			107,781			8,409,192
(Charge) benefit from continuous operations for the year under U.S. GAAP		(6,095,293	)		6,716,168			(760,725	)		(139,850	)

	Chilean									The Company
2004	and others			Brazil			Argentina			(consolidated)
	ThCh$			ThCh$			ThCh$			ThCh$
Current tax expense as per tax return		(2,081,545	)		(1,510,191	)		(171,186	)		(3,762,922	)
Deferred tax (expense) benefit as previously calculated under Chilean GAAP		(2,161,138	)		447,243			1,390,002			(323,893	)
(Charge) benefit for the year under Chilean GAAP		(4,242,683	)		(1,062,948	)		1,218,816			(4,086,815	)
U.S. GAAP adjustments:
Deferred tax effect of applying SFAS 109		89,899			(5,503	)		297,297			381,693
(Charge) benefit from continuous operations for the year under U.S. GAAP		(4,152,784	)		(1,068,451	)		1,516,113			(3,705,122	)

	Chilean							The Company
2003	and others			Brazil		Argentina		(consolidated)
	ThCh$			ThCh$		ThCh$		ThCh$
Current tax expense as per tax return		(2,682,248	)		—		—		(2,682,248	)
Deferred tax (expense) benefit as previously calculated under Chilean GAAP		(683,482	)		811,760		1,481,886		1,610,164
(Charge) benefit for the year under Chilean GAAP		(3,365,730	)		811,760		1,481,886		(1,072,084	)
U.S. GAAP adjustments:
Deferred tax effect of applying SFAS 109		881,843			534,778		11,321		1,427,942
(Charge) benefit from continuous operations for the year under U.S. GAAP		(2,483,887	)		1,346,538		1,493,207		355,858

F-53

Deferred tax assets (liabilities) as of balance sheet dates are summarized as follows:

	For the year ended
	December 31,
	2005			2004
	ThCh$			ThCh$
Deferred tax assets:
Tax loss carryforwards		9,838,565			14,919,846
Social contribution		2,478,987			2,787,908
Tax-credits Argentina currency devaluation		479,997			1,114,448
Provision for labor and trade lawsuits		5,926,107			5,031,615
Provision for assets written-off		1,829,816			1,836,075
Allowance for doubtful accounts		328,608			563,244
Vacation accrual		156,036			123,377
Provisions for employee benefits		496,708			509,681
Joint venture accounting		651,242			759,782
Fair value of derivative not considered to be hedge		—			113,035
Unrealized loss on investments securities		48,966			—
Other		816,928			503,204
Less: Valuation allowance		(2,153,954	)		(17,316,062	)
Total deferred tax assets		20,898,006			10,946,153
Deferred tax liabilities:
Depreciation		4,242,417			4,545,850
Guarantees on bottles		2,618,328			2,753,820
Staff severance indemnities		304,299			586,314
Financial expenses		3,363,023			2,112,762
Fair value of derivative not considered to be hedge		642,119			—
Unrealized income on investments securities		—			627,367
Other		290,368			466,745
Total deferred tax liabilities		11,460,554			11,092,858
Net deferred tax assets (liabilities) under U.S. GAAP		9,437,452			(146,705	)
Net deferred tax assets (liabilities) under Chilean GAAP		(35,125	)		(533,756	)
Effect of U.S. GAAP adjustments on deferred income taxes		9,472,577			387,051

F-54

The provision for income taxes differs from the amount of income tax determined by applying the applicable Chilean statutory income tax rate to pretax income calculated according to U.S. GAAP as a result of the following:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Income tax provision at statutory Chilean tax rates		12,805,070			9,712,171			2,975,733
Increase (decrease) in provision resulting from:
Tax effects resulting from foreign operations.		1,979,057			1,085,356			179,037
Permanent differences		(181,644	)		(3,219,687	)		956,316
Effect of remeasurement to U.S. dollars (Brazil and Argentina)		(990,181	)		(152,612	)		(1,404,440	)
Change in valuation allowance		(13,214,008	)		(2,072,188	)		(1,527,126	)
Adjustments in prior year income taxes		156,763			(562,404	)		(675,766	)
Other		(415,207	)		(1,085,514	)		(859,612	)
Effective tax provision		139,850			3,705,122			(355,858	)

The Chilean statutory first category (corporate) income tax rate was 17.0% for 2005 and 2004 and 16.5% for 2003. In accordance with Chilean law, the Company and each of its subsidiaries computes and pays income taxes on a separate basis.

The Brazilian federal statutory income tax rate was approximately 25% for 2005, 2004 and 2003. Additionally, an additional surtax of 9% for 2005, 2004 and 2003 is charged in Brazil on net income with respect to a social contribution similar in nature to income tax. In view of tax losses for the years ended December 31, 2005, 2004 and 2003, no such levy was due by the Company for such periods.

The Argentine income tax rate was 35% for 2005, 2004 and 2003 in accordance with currently enacted tax legislation.

The Company had net operating tax loss carryforwards related to its Brazilian subsidiaries of approximately ThCh$50,473,545 at December 31, 2005 that can be carried forward indefinitely. The Company had net operating tax loss carryforwards related to its Chilean subsidiaries of approximately ThCh$22,124,133 at December 31, 2005 that can be carried forward indefinitely. The Company had net operating tax loss carryforwards related to its Argentinian subsidiaries of approximately ThCh$11,732,157. The tax losses in Argentina can be imputed to future tax gains up to a 5 year term. Since the total tax loss in Argentina was generated by the devaluation of the Argentine peso in 2002, the expiration of the tax benefit is 2007.

b) Comprehensive income (loss)

Comprehensive income (loss) is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For U.S. GAAP purposes, companies are required to report comprehensive income and its components in a full set of general purpose financial statements. U.S. GAAP requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The information required by this standard is shown in paragraph 1 m), above.

F-55

c) Statements of cash flows

i) For the purpose of the statements of cash flows using U.S. GAAP classifications, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. In accordance with the Company’s policy, certain cash equivalents that are managed as part of the Company’s investment portfolio are excluded from the amount shown as cash and cash equivalents in the statements of cash flows. The detail of cash and cash equivalents is as follows:

	For the year ended December 31,
	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Cash		14,412,531		14,324,761		9,924,227
Time deposits		4,458,538		7,833,816		7,011,099
Money market funds		2,277,838		5,957,446		26,646,855
Total cash and cash equivalents		21,148,907		28,116,023		43,582,181

ii) Additional cash flow disclosure required under U.S. GAAP that are shown net in Chilean GAAP are as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Short-term borrowings with banks and financial institutions		54,681,343			62,253,664			54,479,627
Long term borrowings with banks and financial institutions		—			—			345,712
Repayment of short-term bank borrowings		(62,795,425	)		(47,262,743	)		(56,506,548	)
Repayment of long-term bank borrowings		(21,776,585	)		(1,304,279	)		(1,295,291	)
Net bank borrowings		(29,890,667	)		13,686,642			(2,976,500	)

d) Segment information

The Company operates principally in three segments which comprise the production and sales of goods for (i) Coca-Cola soft drinks, (ii) Other beverages (juices, mineral water and beer), and (iii) Packaging. Total revenues by segment include sales to unaffiliated customers, as reported in the Company’s consolidated income statements, and intersegment sales, which are accounted for at invoice price.

The Company measures its reportable segments and evaluates their performance based on operating income under Chilean GAAP.

The Coca-Cola soft drink segment comprises the production and sales of Coca-Cola, Sprite, Fanta and other Coca-Cola soft drinks. The Other beverages segment includes the sales of mineral water, fruit juices and, in Brazil, beer. The Packaging segment consists of the production of PET containers.

F-56

The accounting policies for the segments are the same as those described in “Note 1 — Nature of operations and summary of significant policies”.

A summary of the Company’s operations by segment calculated under Chilean GAAP is as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Revenue:
Sales to unaffiliated customers:
Soft drinks		417,163,243			374,368,809			355,721,346
Other beverages		49,271,484			43,956,674			43,122,272
Packaging		12,037,009			10,323,888			11,959,046
Subtotal		478,471,736			428,649,371			410,802,664
Intersegment sales:
Soft drinks		—			—			—
Other beverages		15,510,954			14,599,665			14,560,657
Packaging		9,943,905			8,942,607			8,638,328
Eliminations		(25,454,859	)		(23,542,272	)		(23,198,985	)
Subtotal		—			—			—
Total revenue		478,471,736			428,649,371			410,802,664
Operating income:
Soft drinks		68,845,324			57,557,969			45,973,994
Other beverages		6,958,042			5,616,231			3,926,385
Packaging		2,104,681			1,975,757			751,722
Total operating income		77,908,047			65,149,957			50,652,101
Financial income:
Soft drinks		28,516,739			24,153,731			32,674,916
Other beverages		2,816			326			93,502
Packaging		2,458			2,140			4,062
Total financial income		28,522,013			24,156,197			32,772,480
Financial expenses:
Soft drinks		21,012,486			19,605,011			21,178,841
Other beverages		2,996			83,755			1,412
Packaging		96,689			140,774			36,742
Total financial expenses		21,112,171			19,829,540			21,216,995

F-57

	For the year ended December 31,
	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Share of income from unconsolidated affiliates:
Soft drinks		12,611		209,396		49,297
Other beverages		483,945		587,566		2,404,299
Packaging		272,980		226,903		(517,226	)
Total share of income from unconsolidated affiliates Subtotal		769,536		1,023,865		1,936,370
Income tax expenses:
Soft drinks		6,095,335		3,730,788		916,337
Other beverages		1,817,269		137,283		155,747
Packaging		636,438		218,744		—
Total income tax expenses		8,549,042		4,086,815		1,072,084
Depreciation:
Soft drinks		26,984,028		30,014,511		31,591,739
Other beverages		1,124,593		1,251,535		1,223,376
Packaging		928,396		1,315,344		2,188,633
Total depreciation		29,037,017		32,581,390		35,003,748
Segment assets:
Soft drinks		353,151,131		457,183,505		475,068,630
Other beverages		13,817,995		11,116,310		11,524,155
Packaging		10,972,456		13,071,604		14,327,788
Total segment assets		377,941,582		481,371,419		500,920,573
Capital expend:
Soft drinks		26,441,914		24,781,918		25,805,133
Other beverages		665,725		875,727		969,850
Packaging		287,498		492,020		136,712
Total capital expenditures		27,395,137		26,149,665		26,911,695

F-58

A geographical summary of the Company’s operations by segment calculated under Chilean GAAP is as follows:

	For the year ended December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Revenue:
Sales to unaffiliated customers:
Chile		219,880,814			208,927,789			206,185,804
Brazil		162,510,132			132,564,720			125,978,464
Argentina		96,080,790			87,156,862			78,638,396
Total revenue		478,741,736			428,649,371			410,802,664
Operating income:
Chile		46,494,390			41,959,663			39,506,738
Brazil		20,480,289			13,736,839			7,424,247
Argentina		10,933,368			9,453,455			3,721,116
Total operating income		77,908,047			65,149,957			50,652,101
Financial income:
Chile		24,051,048			21,452,912			29,965,255
Brazil		3,671,358			2,639,869			2,742,935
Argentina		799,607			63,416			64,290
Total financial income		28,522,013			24,156,197			32,772,480
Financial expenses:
Chile		13,390,061			10,751,167			10,030,515
Brazil		3,166,703			4,664,515			6,829,608
Argentina		4,555,407			4,413,858			4,356,872
Total financial expenses		21,112,171			19,829,540			21,216,995
Share of income from unconsolidated affiliates:
Chile		(93,825	)		311,154			(405,895	)
Brazil		483,945			587,566			2,404,299
Argentina		379,416			125,145			(62,034	)
Total share of income from unconsolidated affiliates		769,536			1,023,865			1,936,370
Income tax expenses (benefit):
Chile		5,778,757			4,242,683			3,365,730
Brazil		1,901,779			1,062,948			(811,760	)
Argentina		868,506			(1,218,816	)		(1,481,886	)
Total income tax expenses		8,549,042			4,086,815			1,072,084

F-59

	At December 31,
	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Depreciation:
Chile		13,356,474		14,541,939		14,872,446
Brazil		9,008,083		10,580,690		10,215,943
Argentina		6,672,460		7,458,761		9,915,359
Total depreciation		29,037,017		32,581,390		35,003,748
Identifiable long-lived assets:
Chile		174,273,663		248,006,789		270,222,290
Brazil		118,094,276		125,840,660		117,941,277
Argentina		71,666,144		89,668,465		97,771,000
Total identifiable long-lived assets		364,034,083		463,515,914		485,934,567

A reconciliation of total segment assets by product, and long-lived assets by country to total consolidated assets for the years ended December 31, 2005, 2004 and 2003 is as follows:

	At December 31,
Industry	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Total segment assets		377,941,582		481,371,419		500,920,573
Cash		14,412,531		14,324,761		9,924,227
Financial instruments		39,703,853		24,494,473		33,657,953
Amounts due from related parties		5,609,652		119,892		53,689
Recoverable taxes		9,780,175		5,773,594		4,851,913
Deferred income taxes		676,498		—		1,432,558
Investments in related companies		21,386,070		20,733,308		20,617,330
Investment in other companies		54,570		56,202		647,253
Intangible assets (net)		175,850		222,639		333,765
Liabilities deducted from segment assets		56,308,816		53,505,236		49,224,647
Total assets		526,049,597		600,601,524		621,663,908
Identifiable long-lived assets		364,034,083		463,515,914		485,934,567
Current assets		162,015,514		137,085,610		135,729,341
Total assets		526,049,597		600,601,524		621,663,908

F-60

e) Derivative financial instruments

Derivative financial instruments are used by the Company principally in the management of its foreign currency exposures. The Company does not hold or issue derivative financial instruments for trading purposes.

As described in paragraph 1k), under U.S. GAAP, the Company applies SFAS No. 133. SFAS 133 requires that all derivative instruments be recognized on the balance sheet at fair value and that changes in the fair value be recognized in income when they occur, the only exception being derivatives that qualify as hedges. To qualify the derivative instrument as a hedge, the Company must meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge.

During 2005 and 2004, the Company entered into forward and to manage its exposure associated with its foreign currency commitments in US dollars, which were primarily for raw materials purchases. During 2005 and 2004, the Company entered into cross-currency swaps to manage its foreign currency risk exposure associated with its long-term investments in bonds and time deposits. At December 31, 2005 and 2004, the Company had derivative financial instruments outstanding consisting of forward contracts to purchase US dollars and cross currency swap with a notional amount of ThCh$108,080,220 in 2005 all of which mature as per Note 24 and ThCh$119,574,830 in 2004, all of which matured as per Note 24. See Note 24 above for the detail of the derivative instruments at December 31, 2005 and 2004. None of these derivative financial instruments were designed as hedges in accordance with U.S. GAAP.

The financial instruments described above involve elements of market risk and credit risk. Market risk is the possibility that future changes in foreign exchange may make the financial instruments more or less valuable. Credit risk is the possibility of default by the counterparties. The loss that the Company would incur if a counterparty defaulted is significantly less than the instruments’ notional value and the loss exposure is the fair value of the instrument. The Company does not require collateral or other security for the instruments.

F-61

f) Operating income

Under Chilean GAAP, the following income and expenses arising during the years ended 2005, 2004 and 2003 are classified as “Non-operating income and expense” whereas under U.S. GAAP they would be included within “Operating income”:

	At December 31,
	2005			2004			2003
	ThCh$			ThCh$			ThCh$
Operating income as reported under Chilean GAAP		77,908,047			65,149,957			50,652,101
Gain on sale of, plant property and equipment		267,834			—			206,821
Lease of property (offices)		—			29,115			—
Reversal of contingencies provisions (1)		—			—			1,576,391
Provision for property, plant and equipment Itaoca (2)		—			(2,995,708	)		—
Staff severance indemnities (3)		(2,404,004	)		(2,384	)		(67,132	)
Lawsuit fees		(502,906	)		—			—
Provision PIS Coffins		(2,280,217	)		—			—
Provision for labor, tax and commercial lawsuits		(544,448	)		(1,716,919	)		(5,636,175	)
Obsolescence and write-off of property, plant and equipment.		(1,113,431	)		(128,137	)		(193,170	)
Loss on sale of property, plant and equipment		—			(291,510	)		—
Provision for loss of investment in Transora		—			(635,240	)		—
Provision for equity investee in Centralli Refrigerantes S.A.		(60,817	)		(82,053	)		(1,076,400	)
Operating income under U.S. GAAP format		71,270,058			59,327,121			45,462,436

(1)	Refers to a reassessment of contingencies which resulted in a lower assessment of probable losses.
(2)	The Company recognized an impairment charge for the Itaoca plant, since the plant is redundant to the Company’s operations in Brazil. The impairment charge was based on an independent appraisal. The Company intends to sale the plant.
(3)	Retroactive benefit over severance indemnities.

g) Concentrations of credit risk

The assets of the Company that are potentially subject to significant concentrations of credit risk are deposits held with banks and financial institutions, investments in derivative instruments and trade accounts receivable.

The Company holds accounts with a variety of banks and does not hold significant deposits or derivative instruments with any single bank. The Company has a wide customer base and trades with a large number of small customers. Consequently, the Company does not believe that it had any significant concentrations of credit risk at December 31, 2005.

F-62

h) Disclosures regarding the fair values of financial instruments

The estimated fair values of the Company’s financial instruments were as follows:

	At December 31,
	2005				2004
	Carrying		Fair		Carrying		Fair
	value		Value		Value		value
	ThCh$		ThCh$		ThCh$		ThCh$
Cash		14,412,531		14,412,531		14,324,761		14,324,761
Time deposits		25,700,571		25,700,571		7,833,816		7,833,816
Marketable securities		14,003,282		14,005,756		16,660,657		16,760,239
Trade accounts receivable (net).		34,207,081		34,207,081		32,341,391		32,341,391
Notes receivable (net)		11,142,844		11,142,844		10,361,590		10,361,590
Other receivables (net)		19,777,487		19,777,487		16,860,558		16,860,558
Long-term time deposits		—		—		47,574,012		47,574,012
Long-term credits		8,323,000		8,323,000		21,463,932		21,463,932
Long-term investment in bonds		82,637,436		82,399,850		96,108,356		99,719,574
Long-term receivables		110,473		110,473		48,638		48,638
Foreign currency contracts (net)		32,720,600		32,720,600		21,067,143		21,067,143

	At December 31,
	2005				2004
	Carrying		Fair		Carrying		Fair
	Value		Value		value		Value
	ThCh$		ThCh$		ThCh$		ThCh$
Short and long-term term bank borrowings		28,873,931		28,873,931		68,128,052		68,128,052
Bonds payable		115,486,448		128,170,341		129,587,843		144,327,839
Dividends payable		3,978,869		3,978,869		4,600,639		4,600,639
Accounts payable		37,876,730		37,876,730		35,152,154		35,152,154
Notes payable		—		—		5,180		5,180
Other creditors short and long-term		2,972,278		2,972,278		3,181,589		3,181,589

Cash, receivables and account payable: the carrying amounts approximate fair value due to the short-term maturity of this instruments.

Time deposits, marketable securities and deposit credits: Fair value of time deposits and deposit credits was determined using rates currently available in the market and the fair value of marketable securities is based on quoted market prices for the marketable securities.

Long-term investment in bonds: The fair value of the investment in bonds was determined based on quoted market prices.

Bonds payable: The fair value of bonds payable, including current portion, is estimated based on the quoted market price of the Company’s US dollar — denominated bonds payable.

Foreign currency contracts: The estimated fair values of the forward and swaps contracts are based on quoted market prices at year end.

i) Available for sale securities

F-63

The following are required disclosures for investments classified as available for-sale in accordance with SFAS 115. Realized gains and losses are determined using the proceeds from sale less the cost of the investments identified to be sold. Gross gains and losses realized on the sale of available-for-sale securities for the year ended December 31, 2005, 2004 and 2003 are as follows:

	Years ended December 31,
	2005		2004		2003
	ThCh$		ThCh$		ThCh$
Proceeds on realized gains		30,992,120		16,236,933		28,621,350
Realized gains		2,512,457		338,632		1,676,547
Proceeds on realized losses		—		—		15,683,284
Realized losses		—		—		(31,935	)

F-64

The carrying value and market value of securities available-for sale as of December 31, 2005, 2004 and 2003 are as follows:

	Year ended December 31, 2005
			Gross		Gross
			Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	ThCh$		ThCh$		ThCh$			ThCh$
Available-for-sale-investments
Chilean treasury bonds		7,374,607		—		(45,344	)		7,329,263
Other securities of Chilean Institutions		45,299,078		330,474		(518,821	)		45,110,731
Foreign investments		32,528,902		193,936		(195,357	)		32,527,481
Total		85,202,587		524,410		(759,522	)		84,967,475

	Year ended December 31, 2004
			Gross		Gross
			Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	ThCh$		ThCh$		ThCh$			ThCh$
Available-for-sale-investments
Chilean treasury bonds		8,341,357		153,059		—			8,494,416
Other securities of Chilean Institutions		60,361,157		1,672,261		(40,482	)		61,992,936
Foreign investments		33,185,445		2,080,020		(154,058	)		35,111,407
Total		101,887,959		3,905,340		(194,540	)		105,598,759

	Year ended December 31, 2003
			Gross		Gross
			Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	ThCh$		ThCh$		ThCh$			ThCh$
Available-for-sale-investments
Chilean treasury bonds		9,151,767		—		(72,387	)		9,079,380
Other securities of Chilean Institutions		55,126,195		1,902,098		(319,535	)		56,708,758
Foreign investments		25,718,085		1,833,405		—			27,551,490
Total		89,996,047		3,735,503		(391,922	)		93,339,628

F-65

The contractual maturities of securities classified by the Company as available-for-sale are as follows:

	Year ended December 31, 2005
			After one		After five
			year but		years but
	Within		within		within ten		After
	one year		five years		years		ten years		Total
	ThCh$		ThCh$		ThCh$		ThCh$		ThCh$
Available-for-sale-investments
Chilean treasury bonds		—		—		7,374,607		—		7,374,607
Other securities of Chilean institutions		—		9,489,873		35,809,205		—		45,299,078
Foreign investments		2,565,151		10,664,413		19,299,338		—		32,528,902
Total		2,565,151		20,154,286		62,483,150		—		85,202,587

j) Goodwill

The Company has performed the impairment test of goodwill as required by SFAS No.142, which did not result in any impairment.

The table below presents the allocation of the total carrying value of goodwill, net of accumulated amortization calculated up to December 31, 2001 by major line of business of the Company:

Business Segment	ThCh$
Softdrinks		87,308,791

k) Concentrations of other risks

The majority of the Company’s net sales are derived from the distribution of Coca-Cola soft drinks. The Company produces, markets and distributes Coca-Cola soft drinks through standard bottler agreements between the Company’s individual bottler subsidiaries and The Coca-Cola Company. Under the bottler agreements, The Coca-Cola Company unilaterally sets the prices for Coca-Cola soft drink concentrates sold to the Company.

The Company is dependent on The Coca-Cola Company to renew such bottler agreements. The bottler agreements are subject to termination by The Coca-Cola Company in the event of default by the Company or upon expiration in accordance with their respective terms. No assurance can be given that the bottler agreements will be renewed upon their expiration. Termination or non-renewal of the bottler agreements would have a material adverse effect on the Company’s business.

The soft drink and non-alcoholic beverage business is highly competitive in each of the Company’s franchise territories. In each of its franchise territories, the Company competes with bottlers of PepsiCo Inc. as well as bottlers of regional brands. The Company’s soft drink products also compete generally with other non-alcoholic beverages.

F-66

l) Recent Accounting Pronouncements

In May, 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. Accounting Principles Board Opinion 20 previously required that most voluntary changes in accounting principles be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable.

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155 “Accounting for Certain hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140”. This Statement amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. This Statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006.

F-67

EXHIBIT INDEX

Item	Description
1.1	English translation of our Bylaws (filed with the U.S. Securities and Exchange Commission in our annual report on Form 20-F for the fiscal year ended December 31, 1996 and incorporated herein by reference)
8.1	List of our subsidiaries (filed herewith).
12.1	Certification of Jaime Garcia pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
12.2	Certification of Osvaldo Garay pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
13.1	Certification of Jaime Garcia pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
13.2	Certification of Osvaldo Garay pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

EX-8.1

EXHIBIT 8.1

LIST OF SUBSIDIARIES

Subsidiaries	Jurisdiction
Andina Inversiones Societarias S.A.	Chile
Andina Bottling Investments Dos S.A.	Chile
Andina Bottling Investments S.A.	Chile
Envases Multipack S.A.	Chile
Servicios Multivending Ltda.	Chile
Transportes Andina Refrescos Ltda.	Chile
Vital Aguas S.A.	Chile
Vital S.A.	Chile
Rio de Janeiro Refrescos Ltda.	Brazil
Embotelladora del Atlántico S.A.	Argentina
Abisa Corp. S.A.	British Virgen Islands
RJR Investments Corp.	British Virgen Islands

EX-12.1

EXHIBIT 12.1

CERTIFICATION

I, Jaime Garcia, certify that:

1.	I have reviewed this annual report on Form 20-F of Embotelladora Andina S.A.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in Chile;
(c)	evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

5. The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

/s/ JAIME GARCIA

Jaime Garcia
Chief Executive Officer
Embotelladora Andina S.A.
Dated: June 30, 2006

EX-12.2

EXHIBIT 12.2

CERTIFICATION

I, Osvaldo Garay, certify that:

1.	I have reviewed this annual report on Form 20-F of Embotelladora Andina S.A.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

5. The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

/S/ OSVALDO GARAY

Osvaldo Garay
Chief Financial Officer
Embotelladora Andina S.A.
Dated: June 30, 2006

EX-13.1

EXHIBIT 13.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Embotelladora Andina S.A (the “Company”) on Form 20-F for the fiscal year ended December 31, 2005, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Jaime Garcia, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JAIME GARCIA

Jaime Garcia
Chief Executive Officer
Embotelladora Andina S.A.
Dated: June 30, 2006

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.2

EXHIBIT 13.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Embotelladora Andina S.A. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2005, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Osvaldo Garay, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ OSVALDO GARAY

Osvaldo Garay
Chief Financial Officer
Embotelladora Andina S.A.
Dated: June 30, 2006

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.