20-F 1 form20-f.txt FORM 20-F STB COMMENTS 6/24/04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F / / REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 or /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2003 or / / TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-12752 Cristalerias de Chile S.A. (Exact name of Registrant as specified in its charter) Glassworks of Chile Inc. (Translation of Registrant's Name into English) ------------------------------ The Republic of Chile (Jurisdiction of incorporation or organization) Hendaya 60, Oficina 201 Las Condes Santiago, Chile (56-2 787-8888) (Address and telephone number 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 ------------------- ------------------------------ American Depositary Shares, or New York Stock Exchange ADSs, each representing three shares of common stock without nominal (par) value as evidenced by American Depositary Receipts, or ADRs. 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: None ------------------------------ Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock, as of the close of the period covered by the annual report: Common Shares without par value: 64,000,000 ------------------------------ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days: Yes \x\ No \ \ Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 \ \ Item 18 \x\ CRISTALERIAS DE CHILE S.A. TABLE OF CONTENTS TO REPORT ON FORM 20-F

Page Number PART I ITEM 1: Identity Of Directors, Senior Management And Advisers.............................................5 ITEM 2: Offer Statistics And Expected Timetable...........................................................5 ITEM 3: Key Information...................................................................................5 ITEM 4: Information On The Company........................................................................14 ITEM 5: Operating And Financial Review And Prospects......................................................43 ITEM 6: Directors, Senior Management And Employees........................................................59 ITEM 7: Major Shareholders And Related Party Transactions.................................................66 ITEM 8: Financial Information.............................................................................68 ITEM 9: The Offer And Listing.............................................................................70 ITEM 10: Additional Information............................................................................73 ITEM 11: Quantitative And Qualitative Disclosures About Market Risk........................................89 ITEM 12: Description Of Securities Other Than Equity Securities............................................97 PART II ITEM 13: Defaults, Dividend Arrearages And Delinquencies...................................................97 ITEM 14: Material Modifications To The Rights Of Security Holders And Use Of Proceeds......................97 ITEM 15: Controls and Procedures...........................................................................97 ITEM 16: Reserved..........................................................................................98 ITEM 16A. Audit Committee Financial Expert..................................................................98 ITEM 16B. Conduct Ruling....................................................................................98 ITEM 16C. Principal Accountant Fees And Services............................................................98 ITEM 16D. Exemptions From The Listing Standards For Audit Committees........................................99 ITEM 16E. Purchases Of Equity Securities By The Issuer And Affiliated Purchasers............................99 PART III ITEM 17: Financial Statements..............................................................................100 ITEM 18: Financial Statements..............................................................................100 ITEM 19: Exhibits..........................................................................................101 INDEX TO EXHIBITS.................................................................................................102 SIGNATURE.........................................................................................................102 CERTIFICATION.....................................................................................................103 CERTIFICATION.....................................................................................................105 CERTIFICATION.....................................................................................................107 CERTIFICATION.....................................................................................................108 LIST OF SUBSIDIARIES..............................................................................................109 CONDUCT RULING....................................................................................................110 i

INTRODUCTION Cristalerias de Chile S.A. is a public corporation (sociedad anonima abierta) organized under the laws of the Republic of Chile. Unless the context requires otherwise, references herein to "Cristalerias" are to Cristalerias de Chile S.A. and references herein to the "Company" are to Cristalerias together with its consolidated subsidiaries and the companies in which Cristalerias holds significant non-consolidated equity interests. In addition, unless the context requires otherwise: o "Vina Santa Rita" or "Santa Rita" refers to Sociedad Anonima Vina Santa Rita, a consolidated subsidiary 54.1% owned by Cristalerias, together with Santa Rita's consolidated subsidiaries as of December 31, 2003. o "CIECSA" refers to Comunicacion, Informacion, Entretencion y Cultura S.A., a subsidiary 99.9% owned by Cristalerias. CIECSA in turn consolidates with "Megavision" or "Mega", which refers to Red Televisiva Megavision S.A., a consolidated subsidiary, 99.9% owned by CIECSA, together with Megavision's consolidated subsidiaries. o Cristalchile Comunicaciones S.A., is a consolidated subsidiary, 99.9% owned by Cristalerias. This company in turn holds a non-consolidated equity investment of 50% in Metropolis Intercom S.A. o Cristalchile Inversiones S.A., is a consolidated subsidiary, 99.9% owned by Cristalerias. This company in turn holds a non-consolidated equity investment of 40% in Rayen Cura S.A.I.C. (Argentina). o Envases CMF S.A., is a non-consolidated equity method investment in which Cristalerias holds directly a 50% ownership. We completed our initial public offering of common shares in Chile in June, 1904. We listed our common shares on the Santiago Stock Exchange, the Electronic Stock Exchange of Chile and the Valparaiso Stock Exchange under the symbol "Cristales". We also listed our common shares on the New York Stock Exchange under the symbol "CGW" and completed an initial public offering of ADSs in the United States in January 1994. 1 The following chart illustrates the structure of our group of companies as of December 31, 2003: GRAPHICS OMITTED REQUESTS FOR INFORMATION Written requests for copies of this Annual Report should be directed to Cristalerias de Chile S.A., Hendaya 60 oficina 201, Las Condes, Santiago, Chile, Attention: Investor Relations. Telephone inquiries may be directed to (56-2 787-8855). Facsimile requests may be sent to (56-2 787-8800). Email requests may be directed to ir@cristalchile.cl. Additional information, including this Annual Report, may be found on the Company's website at www.cristalchile.com. The contents of the Company's website are not incorporated into this Annual Report. 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This annual report contains, or incorporates by reference, forward-looking statements that involve risks and uncertainties. These forward-looking statements appear throughout this annual report, including, without limitation, under Item 3. "Key Information - Risk Factors," Item 4. "Information on Our Company" and Item 5. "Operating And Financial Review and Prospects". These forward-looking statements relate to, among other things: o our business model, o our strategy, o our current analysis of our risk management activities, o our expectations for entering into strategic relationships and joint ventures, o our expectations for capital expenditures for plant improvements, o our expectations for investing in technological research and development, o demand for wine, beer and non-alcoholic beverages, o the performance of the Chilean economy, o other expectations, intentions and plans contained in this annual report that are not historical fact When used in this annual report, the words "expects," "anticipates," "intends," "plans," "may," "believes," "seeks," "estimates" and similar expressions generally identify forward-looking statements. These statements reflect our current expectations. They are subject to a number of risks and uncertainties, including, but not limited to, change in technology and changes in the marketplace. In light of the many risks and uncertainties surrounding our marketplace, you should understand that we cannot assure you that the forward-looking statements contained in this annual report will be realized nor that they will be accurate. PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION In this annual report, all references to the "company," "Cristalerias," "Cristalchile" "we," "us," or "our" are to Cristalerias de Chile S.A. Unless otherwise specified, all references to "U.S. dollars," "dollars," or "US$" are to United States dollars, and references to "Chilean pesos," "pesos," or "Ch$" 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 of the previous month. We prepare our consolidated financial statements in Chilean pesos, and in accordance with generally accepted accounting principles in Chile, or Chilean GAAP, and the rules of the Superintendencia de Valores y Seguros relating thereto, which together differ in certain important respects from generally accepted accounting principles in the United States, or U.S. GAAP. References to "Chilean GAAP" in this annual report are to Chilean GAAP, as supplemented by the applicable rules of the Superintendencia de Valores y Seguros. Please, see Note 2 for our audited consolidated financial statements included in Item 18 of this annual report. 3 Pursuant to Chilean GAAP, our consolidated financial statements, and all of our other financial information, have been presented in pesos with constant purchasing power, as of December 31, 2003. Unless otherwise indicated, amounts stated in U.S. dollars have been translated from Chilean pesos, at an assumed rate, solely for the sake of convenience, and should not be construed as Chilean peso amounts actually representing such U.S. dollar amounts. The stated Chilean peso amounts can be converted into U.S. dollars at the exchange rate indicated. Unless otherwise stated, such U.S. dollar amounts have been translated from Chilean peso amounts, at a Chilean peso to U.S. dollar exchange rate of Ch$593.80 to US$1.00, which is the Observed Exchange Rate, as defined below in "Exchange Rates," reported by the Banco Central de Chile (the "Central Bank") on December 31, 2003. 4 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 Information The following tables present our selected financial information for each of the periods indicated. The selected financial information set forth below is presented in constant Chilean pesos, as of December 31, 2003. 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, included elsewhere in this Form 20-F. Our consolidated financial statements are prepared in accordance with Chilean GAAP, which differs in certain significant respects from U.S. GAAP. Please, see Note 37 of the Notes for the Financial Statements, which provides descriptions of the principal differences between Chilean GAAP and U.S. GAAP. The information detailed in the following table includes changes in certain accounting policies for the five years ended and as of December 31, 2003, which affect the comparability presented below. Beginning January 1, 2000, the Company adopted new accounting policies concerning the accounting for deferred taxes in accordance with Chilean GAAP. Beginning January 1, 2001 and 2002, the Company adopted new accounting policies concerning the accounting for derivatives and goodwill and intangibles, in accordance with U.S. GAAP. 5 The table below describes Chilean GAAP and U.S. GAAP income statement data, for the years ending on December 31, 1999, 2000, 2001, 2002 and 2003:

AT AND FOR YEAR ENDED DECEMBER 31, Millions of constant pesos and millions of US$ (1) (2) -------------------------------------------------------------------------- 1999 2000 2001 2002 2003(8) 2003(1)(8) ------- ------- ------- ------- -------- ---------- Income Statement Data: Chilean GAAP: Ch$ Ch$ Ch$ Ch$ Ch$ US$ Net Sales 133,751 150,804 147,649 162,668 169,941 286.2 Operating income 24,357 32,096 33,899 42,026 37,642 63.4 Non-operating income (loss) 2,207 (7,235) (8,786) (13,132) (28,027) (47.2) Equity in net income of related companies 1,047 (2,912) (7,693) (8,991) (4,539) (7.6) Interest income (expense), net 552 (2,208) (4,257) (4,329) (4,236) (7.1) Other non-operating income (expense), net (843) (971) 4,123 (2,838) (1,385) (2.3) Price-level restatement, net 1,450 (1,144) (961) 3,027 (17,868) (30.1) Income tax and minority interest (4,364) (6,582) (8,482) (11,057) (3,189) (5.4) Net income 22,200 18,279 18,487 17,838 6,427 10.8 Net income per share (3) (in Ch$) 346.85 285.60 288.86 278.71 100.41 0.17 Net income per ADS (3)(4) 1,040.54 856.79 866.58 836.12 301.24 0.51 Cash dividends per share (3)(5) 138.24 142.19 143.66 138.72 70.20 0.12 Cash dividends per ADS (3)(4)(5) 414.72 426.56 430.99 416.17 210.60 0.35 U.S. GAAP: Ch$ Ch$ Ch$ Ch$ Ch$ US$ Net Sales 133,751 150,804 147,649 162,668 169,941 286.19 Operating income 24,712 32,689 38,846 39,786 40,138 67.6 Non-operating income (loss) 3,349 (6,288) (15,353) (10,092) (31,289) (52.69) Equity in net income (loss) of related companies 1,648 (3,110) (9,505) (8,796) (4,518) (7.61) Interest income (expense), net 396 (2,081) (3,075) (3,963) (4,236) (7.13) Other non-operating income (expense), net (300) 46 (1,813) (359) (4,667) (7.86) Price-level restatement (1,130) (2,212) (2,361) (1,971) (803) (1.35) Exchange differences 2,735 1,068 1,401 4,997 (17,065) (28.74) Income tax and minority interest (4,516) (6,899) (8,291) (11,815) (3,578) (6.03) Income from continuing operations 23,545 19,501 15,202 17,889 5,271 8.88 Income from continuing operations per share 367.89 304.71 237.54 279.36 82.36 US$0.14 Income from continuing operations per ADS 1,103.68 914.12 712.61 838.09 247.08 US$0.42 Net income 23,545 19,501 15,202 17,879 (5,271) 8.88 Net income per share (3) (4) 367.89 304.71 237.54 279.36 82.36 US$0.14 Net income per ADS (3) (4) 1,103.68 914.12 712.61 838.09 247.08 US$0.42 --------------------- (1) Financial information for the years ended December 31, 1999, 2000, 2001 and 2002 is restated in terms of constant pesos, as of December 31, 2003. Chilean peso amounts have been translated into U.S. dollars at the rate of Ch$593.80 to US$1.00, the Observed Exchange Rate on December 31, 2003. (2) Except per share, per ADS and Other Data amounts. (3) For the years 1999, 2000, 2001, 2002 and 2003 net income and dividends per share have been computed on the basis of 64,000,000 fully-paid shares outstanding, the weighted-average number of shares of common stock outstanding during each fiscal period. (4) Calculated on the basis of one ADS for three shares of common stock. (5) Dividend amounts represent amounts paid in the year earned, restated in Constant Chilean pesos of December 31, 2003. (6) Includes portion of long-term bank liabilities and bonds payable. (7) Shown as a percentage of net sales. (8) Financial statements for years 2001, 2002 and 2003 do not include the consolidation of Envases CMF S.A. (formerly Crowpla-Reicolite S.A.), an equity method investment, because the ownership percentage in that company is 50% and Cristalerias does not have control.

6 The table below describes Chilean GAAP and U.S. GAAP balance sheet data, as of December 31, 1999, 2000, 2001, 2002 and 2003:

AT AND FOR YEAR ENDED DECEMBER 31, Millions of constant pesos and millions of US$ (1) (2) (8) ---------------------------------------------------------------------- 1999 2000 2001 2002 2003 2003(1) ------- ------- ------- ------- ------- ------- Balance Sheet Data: Chilean GAAP: Ch$ Ch$ Ch$ Ch$ Ch$ US$ Total assets 307,925 378,538 408,971 457,003 437,946 737.5 Long-Term debt (6) 16,982 73,734 86,724 134,352 122,970 207.1 Shareholders' equity 201,223 211,500 221,988 233,643 228,322 384.5 U.S. GAAP: Total assets 314,626 388,131 415,207 464,887 446,323 751.6 Long-term debt (6) 16,982 73,734 86,723 130,890 119,852 201.8 Shareholders' equity 209,000 221,889 228,511 238,990 233,322 392.9 Operating Data (7): Chilean GAAP: Gross margin 34.50% 37.40% 38.40% 41.20% 37.81% --- Operating margin 18.20% 21.30% 23.00% 25.80% 22.15% --- Net margin 16.60% 12.10% 12.50% 11.00% 3.78% --- Financial Ratios: Chilean GAAP: Total liabilities/Total assets 0.35x 0.44x 0.46x 0.49x 0.48x --- Current assets/Current liabilities 2.69x 2.46x 2.38x 4.51x 4.44x --- ----------------- (1) Financial information for the years ended December 31, 1999, 2000, 2001 and 2002 is restated in terms of constant pesos, as of December 31, 2003. Chilean peso amounts have been translated into U.S. dollars at the rate of Ch$593.80 to US$1.00, the Observed Exchange Rate on December 31, 2003. (2) Except per share, per ADS and Other Data amounts. (3) For the years 1999, 2000, 2001, 2002 and 2003 net income and dividends per share have been computed on the basis of 64,000,000 fully-paid shares outstanding, the weighted-average number of shares of common stock outstanding during each fiscal period. (4) Calculated on the basis of one ADS for three shares of common stock. (5) Dividend amounts represent amounts paid in the year earned, restated in Constant Chilean pesos of December 31, 2003. (6) Includes portion of long-term bank liabilities and bonds payable. (7) Shown as a percentage of net sales. (8) Financial statements for years 2001, 2002 and 2003 do not include the consolidation of Envases CMF S.A. (formerly Crowpla-Reicolite S.A.), an equity method investment, because the ownership percentage in that company is 50% and Cristalerias does not have control.

Exchange Rates Chile's Ley Organica Constitucional del Banco Central de Chile N(0) 18,840, known as the Central Bank Act, enacted in 1989, relaxed restrictions on buying and selling foreign currencies in Chile. Prior to 1989, the law authorized the purchase and sale of foreign currencies in only those cases explicitly authorized by the Central Bank. The Central Bank Act provides that the Central Bank may determine that certain purchases and sales of foreign currencies specified by law must be carried out in the market formed by banks and other institutions authorized by the Central Bank for such purposes (the "Formal Exchange Market"). The Central Bank reports an exchange rate ("Observed Exchange Rate") which for any given date is computed by averaging prices from the previous day's transactions in the Formal Exchange 7 Market. Banks and other institutions may effect purchases and sales of foreign currencies in the Formal Exchange Market at such rates as they freely determine from time to time. Since 1989, the Central Bank has also made use of a referential daily rate ("Reference Exchange Rate") that factors in domestic and foreign inflation as well as variations in the parity between the peso and the U.S. dollar, the Euro and the Japanese Yen. As of December 30, 2003, the Reference Exchange Rate was Ch$547.85 to US$1.00. The Central Bank buys or sells foreign currency in the Formal Exchange Market to maintain the average exchange rate within certain limits. In order to promote exchange rate flexibility, however, as of September 2, 1999, the Central Bank decided to suspend its formal commitment to intervene in the foreign exchange market to maintain the limits on the range of exchange rates. It was, therefore, agreed that the Central Bank would intervene in the exchange rate market only in exceptional cases and that it would report such decisions. The Central Bank will continue to calculate and publish the daily referential exchange rate according to the regulations in effect as a medium-term benchmark for the market and for its use in contracts still in effect with that exchange rate. The Central Bank has ruled that certain foreign currency transactions, including those transactions associated with foreign investment, may be effected only through the Formal Exchange Market. While authorized to effect transactions within a given pre-established range of exchange rates surrounding the Reference Exchange Rate, the Central Bank operates at the cash rate. Foreign exchange transactions that may be effected outside the Formal Exchange Market can be carried out in the so-called Mercado Informal (the "Informal Exchange Market"), which is an accepted currency market in Chile. There are no limits imposed on the extent to which the rate of exchange in the Informal Exchange Market can fluctuate above or below the Observed Exchange Rate. The following table sets forth the high, low, average and year-end Observed Exchange Rates for U.S. dollars for the periods indicated as expressed in pesos per US$1.00, as reported by the Central Bank. No indication is made that the Chilean peso or U.S. dollar amounts referred to in this annual report actually represent, could have been or could be converted into, U.S. dollars or Chilean pesos, as the case may be, at the rates indicated, at any particular rate or at all. The Federal Reserve Bank of New York does not report a daily 12:00 P.M. buying rate for Chilean pesos: Observed Exchange Rate (3) ------------------------------------------------------------------------------ Year Low (1) High (1) Average (2) Year End ---------------- ------------ ------------ -------------- ------------ 1999 470.23 550.93 512.85 530.07 2000 501.04 580.37 542.08 573.65 2001 557.13 716.62 636.39 654.79 2002 641.75 756.56 694.46 718.61 2003 593.10 758.21 691.40 593.80 December 2003 593.10 621.27 602.90 593.80 January 2004 559.21 593.80 573.64 N/A February 2004 571.35 598.60 584.31 N/A March 2004 588.04 623.21 603.91 N/A April 2004 596.61 624.84 608.19 N/A May 2004 622.25 644.42 635.76 N/A (1) Reflects pesos at historical values rather than constant pesos. (2) The average of Observed Exchange Rates for pesos on the last day of each full month during the relevant period. (3) Transactions carried out on the previous bank business day reported by the Central Bank of Chile. Source: The Central Bank of Chile (http://www.bcentral.cl). The Chilean government's economic policies and any future changes in the value of the Chilean peso against the U.S. dollar could have a material adverse effect on the dollar value of an investor's return on investment. The Chilean peso has been subject to large devaluations in the past and may be subject to significant fluctuations in the future. 8 Cash distributions with respect to shares of common stock received by the depositary (currently The Bank of New York), will be received in Chilean pesos. The depositary will attempt to convert such pesos to U.S. dollars at the then prevailing exchange rate for the purpose of making dividend and other distribution payments with respect to the ADSs. If the value of the Chilean peso falls relative to the U.S. dollar between the declaration of dividends on the common stock and the distribution of such dividends by the depositary, the amount in U.S. dollars distributed to holders of ADRs will decrease. Consequently, the value of the ADSs and any distributions to be received from the depositary could be materially adversely affected by reductions in the value of the peso relative to the dollar. RISK FACTORS Investors in our common shares should carefully consider, in light of their own financial circumstances and investment objectives, the following risk factors and the other information contained in this annual report. Risks Relating to Our Company We are controlled by the Elecmetal Group whose interest may be contrary to the interest of other holders of our common share or of our ADSs. Compania Electrometalurgica S.A., a member of the group of companies that make up what is known as the Elecmetal Group, is our parent company. As of December 31, 2003, Compania Electrometalurgica S.A., together with other members of the Elecmetal Group, is the beneficial owner of approximately 52.1% of the outstanding shares of our company's common stock and thereby controls a majority interest of the company. Compania Electrometalurgica S.A. is a Chilean publicly-held corporation engaged in the steel foundry business in Chile and the U.S. and, through its related companies, a wide range of other business activities in Chile. Consequently, the Elecmetal Group has the power to elect a majority of our company's directors and to determine the outcome of substantially all matters to be decided by a vote of shareholders. The decision of the Elecmetal Group to dispose of a significant number of its shares could adversely affect the trading price of our shares and ADSs. A disposal by the Elecmetal Group of a significant portion of its shares of common stock or a perception that they would dispose of such shares could materially and adversely affect the trading price of the common stock on the Chilean stock exchanges (including the Bolsa de Comercio de Santiago, the "Santiago Stock Exchange"), the price of the ADSs and control of our company. See "Item 7. Major Shareholders--Control of Registrant". There can be no assurance that the Elecmetal Group will not dispose of shares of our company in the future. We rely on a small number of customers for our net sales, and small changes in demand could affect our level of sales. We sold our glass containers to more than 450 customers in 2003. Sales to our leading 10 customers accounted for approximately 68.3% of our net sales in 2003. Our three largest customers,[1] Vina Concha y Toro, Vina San Pedro and Compania Cervecerias Unidas, accounted for an aggregate of approximately 40.5 our sales of glass containers in 2003. ____________________ [1] All these customers are located in Chile. There are no major customers outside Chile as measured by net sales. 9 We are not party to any long-term supply contracts with our principal customers but, from time to time, enter into non-binding, annual letters of understanding with certain customers. Purchases are made by individual purchase orders or short-term contracts. Tiny changes in demand by our customers, among other changes, could affect our levels of sales and accordingly could have a material adverse impact on our company. There can be no assurance that our relationships with our customers will not undergo significant changes in the future. Our sales levels are highly dependent on the level of Chilean wine exports. The overall level of sales of our glass container operations and Sociedad Anonima Vina Santa Rita, are each highly dependent on the general levels of sales, and, in particular, on the level of exports, of the Chilean wine industry. We estimate that in 2003, approximately 78.0% of net sales of wine bottles (which represented 62.3% of overall 2003 net sales) were attributable to exports by the Chilean wine industry. Vina Santa Rita's sales are also dependent on Chilean wine exports, as approximately 54.5% of its net sales in 2003 were derived from the export market. There can be no assurance that conditions in the Chilean wine industry, including changes in the wine export market, will not change in the future or that changes will not have a material impact on our business. Our former use of Arthur Andersen - Langton Clarke as our independent accountants may pose risks to us and may limit the ability of our security holders to seek potential recoveries from them related to their work. On June 15, 2002, Arthur Andersen LLP ("Arthur Andersen"), the U.S. member firm of Andersen Worldwide S.C. was convicted of federal obstruction of justice arising from the government's investigation of Enron Corp., and on August 31, 2002, Arthur Andersen ceased its audit practice before the United States Securities and Exchange Commission (the "SEC"). Our former independent accountant Arthur Andersen - Langton Clarke, was the Chilean member firm of Andersen Worldwide S.C. and as a result also ceased its audit practice before the SEC. As a foreign SEC registrant, we are required to file with the SEC annual financial statements audited by an independent public accountant registered to practice before the SEC. We engaged Ernst & Young Servicios Profesionales de Auditoria y Asesoria Limitada, independent accountants and a member firm of Ernst & Young Global, to serve as our independent auditor for 2002. Arthur Andersen had audited our financial statements for the years ended December 31, 2001, and had consented to the incorporation by reference of their reports covering those financial statements in our Annual Report on Form 20-F for the year ended December 31, 2001, filed with the SEC. Our Annual Report on Form 20-F for the years ended December 31, 2002 and 2003 includes the financial statements audited by Arthur Andersen for our 2001 fiscal year. If the SEC ceases to accept financial statements audited by Arthur Andersen, we could experience additional costs or delays in making filings with the SEC. In addition, our securities holders may have no effective remedy against Arthur Andersen or Arthur Andersen - Langton Clarke in connection with a material misstatement or omission in our 2001 financial statements. You may be unable to exercise preemptive rights in certain circumstances. Law 18,046, known as the Chilean Companies Act, requires a Chilean company to offer shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage of such company whenever such company issues new shares. U.S. holders of ADSs may not be able to exercise these preemptive rights for common stock underlying their ADSs, thereby resulting in a dilution of the ADS holders' percentage interest in our company, unless a registration statement under the U.S. Securities Act of 1933, as amended, is effective with respect to such rights or an exemption from the registration requirement thereunder is available. 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 10 indirect benefits to the company of thereby enabling the exercise by the holders of ADSs of the preemptive rights for common stock underlying their ADSs, and any other factors we consider appropriate at that time, in making a decision as to whether to file such a registration statement. No assurance can be given that any registration statement would be filed. If we elect not to file a registration statement, the depositary will attempt to sell affected ADS holders' preemptive rights in a secondary market (if one exists for such rights) and distribute the net proceeds to the affected ADS holders. Should the depositary not be permitted or otherwise be unable to sell such preemptive rights, the rights may be allowed to lapse with no consideration to be received by the holders of ADSs. Additionally, ADS holders' percentage ownership in our company would be diluted. Risks Relating to Chile Currency fluctuations could adversely affect our business and the value of our ADSs. The Chilean government's economic policies and any future changes in the value of the Chilean peso against the U.S. dollar could have a material adverse effect on the dollar value of an investor's return on investment. The Chilean peso has been subject to devaluations in the past and may be subject to fluctuations in the future. See "Exchange Rates". The common stock underlying the ADSs is traded in Chilean pesos on the Santiago Stock Exchange and the Electronic Stock Exchange of Chile. Cash distributions with respect to shares of common stock received by the depositary will be received in Chilean pesos. The depositary will attempt to convert such pesos to U.S. dollars at the then prevailing exchange rate for the purpose of making dividend and other distribution payments in respect of the ADSs. If the value of the Chilean peso falls relative to the U.S. dollar between the declaration of dividends on the common stock and the distribution of such dividends by the depositary, then the amount of U.S. dollars distributed to holders of ADRs could decrease. Consequently, the value of the ADSs and any distributions to be received from the depositary could be adversely affected by reductions in the value of the peso relative to the dollar. There can be no assurance that the Chilean peso/U.S. dollar exchange rate will not fluctuate in the future, the Chilean peso will not lose value against the U.S. dollar or that such fluctuations in the exchange rate will not have a material impact on our business and the value of the ADSs. Inflation could adversely affect our financial condition, results of operations and the value of our shares and ADSs. Although Chilean inflation has moderated in recent years, Chile has experienced high levels of inflation in the past. A rise in inflation could adversely affect the Chilean economy, our company, the value of the common stock and the value of the ADSs. In addition, our results of operation and financial condition may be affected if the rate of Chilean inflation exceeds the rate of inflation experienced in the United States or other major countries or trading partners of Chile, and the Chilean peso is not sufficiently devalued relative to the currencies of such countries. In these circumstances, the costs of imports from such countries may become more attractive to our domestic customers or exports packaged in our products may become less attractive to purchasers of such exports. There can be no assurance that the performance of the Chilean economy, our operating results or the value of the ADSs will not be adversely affected by continuing or increased levels of inflation or that Chilean inflation will not increase significantly from current levels. See "Item 5. Operating and Financial Review and Prospects". 11 The market for our common stock may be volatile and illiquid. Trading activity on the Santiago Stock Exchange, is on average, substantially less in volume, less liquid and often more volatile than that on the principal national securities exchanges in the United States. For the year ended December 31, 2003, only approximately 12.6% of securities listed in the Santiago Stock Exchange traded 90% or more of the total trading days. During 2003, our shares were traded on the Santiago Stock Exchange on an average of approximately 77.1% of such total trading days. The trading activity on the Santiago Stock Exchange may also be influenced by economic conditions of other Latin American countries as well as the trading activity on such countries' stock exchanges. If Chile imposes controls on foreign investment and repatriation of investments, that may affect your investment in, and earnings from, our ADRs. Currently, equity investments in Chile by non-Chileans are generally not subject to any exchange control restrictions affecting registration or repatriation of the investments and earnings therefrom, except for investments governed by Decree Law 600 of 1974 ("DL 600"), where the invested capital must remain in Chile for at least one year before it can be remitted abroad. In fact, as of April 19, 2001, general non DL 600's investments are subject to only two requirements. Transactions (and all payments arising thereunder) must be performed exclusively through the Chilean Mercado Cambiario Formal ("Formal Exchange Market"), and they must be reported to the Central Bank. The ADR facility, however, as governed by the foreign exchange regulations in effect prior to April 19, 2001, was and is the subject of an agreement among The Bank of New York (as the legal successor of Citibank N.A., in its capacity as depositary for the shares of common stock represented by ADSs), our company and the Central Bank, executed pursuant to Article 47 of the Central Bank Act and to Chapter XXVI, Title I of the former Compendium of Foreign Exchange Regulations. This agreement is known as the Chapter XXVI agreement. The Chapter XXVI agreement is intended to grant the depositary and the holders of the ADRs access to the Formal Exchange Market. See "Exchange Rates." According to local law, the Chapter XXVI agreement may not be unilaterally amended by the Central Bank. Additionally, legal precedent indicates that Chapter XXVI agreements are not subject to future or current legislative changes. No assurances can be made, however, that additional Chilean restrictions applicable to holders of ADRs, the disposition of underlying shares of common stock or the repatriation of the proceeds from such disposition may not be imposed in the future, nor can there be any assessment of the duration or impact of such restrictions, if imposed. If for any reason, including changes in the Chapter XXVI agreement or Chilean law, the depositary is unable to convert Chilean pesos to U.S. dollars, investors would receive dividends or other distributions in Chilean pesos, which would likely subject the distributions to foreign exchange risk of the peso. (See "Foreign Exchange Controls in Chile"). Chile has different corporate disclosure, governance and accounting standards than those you may be familiar with in the United States. The securities laws of Chile which govern open or publicly listed companies (such as our company) principally aim to promote disclosure of all material corporate information to the public, but Chilean disclosure requirements differ from those in the United States in important respects. In addition, although Chilean law imposes restrictions on prohibited activities such as insider trading and price manipulation, the Chilean securities markets are not as highly regulated and supervised as the U.S. securities markets. There are important differences between Chilean and U.S. accounting and reporting standards. As a result, Chilean financial statements and reported earnings may differ from those reported based on U.S. accounting and reporting standards. See Note 37 of the consolidated financial statements. 12 There can be no assurance that Chilean or U.S. securities laws or accounting standards, or both, will not be modified or supplemented in the future. You may have fewer and less well-defined rights as a shareholder than you might have in the United States. Our by-laws (Estatutos) and the laws of Chile govern our corporate affairs. Principles of law applicable to our company and our shareholders may differ from those that would apply if we were incorporated in a jurisdiction in the United States. In addition, our shareholders may have fewer or less well-defined rights under Chilean corporate law to protect their interests against actions by our board of directors or principal shareholders than they might have as shareholders of a corporation subject to U.S. securities laws. The by-laws require the submission of certain shareholder and managerial disputes to arbitration in Chile. There can be no assurance that Chilean securities laws will not be changed to reduce protections afforded to investors of Chilean securities or that the Estatutos could be modified which could have a material adverse impact on our company and the value of the ADSs. You may not be able to fully exercise your withdrawal rights. In accordance with Chilean laws and regulations, any shareholder that votes against certain actions or does not attend the meeting at which such actions are approved (but communicates in writing to the company its dissenting vote within a give time frame) may withdraw from our company and receive payment for our shares according to a prescribed formula if that such shareholder exercises its rights within certain prescribed time periods. Such actions triggering withdrawal rights include the approval of: o the transformation of our company, specifically into an entity that is not a corporation (sociedad anonima) governed by the Chilean Companies Law; o our merger with or into another company; o the sale of 50% or more of our assets, whether or not our liabilities are included, or the formulation of a business plan contemplating a sale on those terms; o creation of personal securities or asset-backed securities for the purpose of guaranteeing third-party obligations in excess of 50% of our assets; o the creation of preferential rights for a class of shares or an amendment to those already existing rights, in which case the right to withdraw only accrues to the dissenting shareholders of the class or classes of shares adversely affected; o the remedy of nullification of our documents of incorporation caused by a formality or an amendment to such documents that results in the granting of a right to such remedy; and o such other cases as may be established by the Bylaws (no such additional cases currently are specified in the Bylaws). However, because of the absence of legal precedent as to whether a shareholder that has, at the same time, voted both for and against a proposal (such as the depositary) may exercise withdrawal rights with respect to those shares voted against the proposal, there is doubt as to whether holders of ADSs will be able to exercise withdrawal rights either directly or through the depositary. 13 ITEM 4: Information on the Company DESCRIPTION OF BUSINESS General Cristalerias de Chile S.A. is a corporation organized under the laws of the Republic of Chile. We were incorporated in 1904, and we completed our initial public offering of common shares in Chile in June 1904. We listed our common shares on the Santiago Stock Exchange, the Electronic Stock Exchange of Chile and the Valparaiso Stock Exchange. We also listed our common shares on the New York Stock Exchange under the symbol "CGW" and completed an initial public offering of ADSs in the United States in January 1994. The Company is the largest Chilean glass container producer comprising an integrated packaging-wine and media operation. It participates in diverse industries through different companies. For the reader's convenience we present a list with what we consider our main subsidiaries only, as follows (a complete list of subsidiaries is presented at the end of this report):

Company Name Jurisdiction ------------ ------------ a. Consolidated subsidiaries: Sociedad Anonima Vina Santa Rita and subsidiaries (Production, bottling Chile and distribution of wine for Chilean and foreign markets) Comunicacion, Informacion, Entretencion y Cultura S.A. (99.9% owner of Megavision) Chile (Operation of a TV station network, production and broadcasting of open TV and printed publishing material) Cristalchile Inversiones S.A. (has a 40% equity investment in Rayen Cura S.A.I.C.) Chile (Glass packaging production in Mendoza, Republic of Argentina) Cristalchile Comunicaciones S.A. (50% equity investment in Metropolis Intercom S.A.) Chile (Operation of a cable company offering cable TV, internet and IP telephonic services in Chile) b. Direct equity investment: Envases CMF S.A. (50% owned by Cristalerias) Chile (Production of plastic containers and pre forms -mainly PET- for the Chilean soft drinks, beverages, wine, beer, edible oils and cleaners industries) Chile

We are the largest producer of glass containers in Chile, as measured by volumes as well as net sales. We estimate that during each of the last five years, we have supplied more than 80% of all glass containers produced in Chile, as measured by weight. Through an affiliate company, we also produce plastic containers, caps and crates. We are also involved in Chile's wine, media and communications industries. We are a member of the Elecmetal Group under its parent company, Compania Electrometalurgica S.A. We, and other companies in the Elecmetal Group, hold a controlling interest in one of Chile's largest producers and exporters of bottled wine and in one of the three largest television networks in Chile. Moreover, since 1994, we have been involved in the cable television business through the acquisition, merger and operation of certain Chilean cable television companies. In October 1995, we participated in a joint venture with Intercom S.A., thus forming one of the two main broadband cable television companies currently operating in Chile. 14 History We commenced operations in 1904 under the name Fabrica Nacional de Vidrios S.A. as a manufacturer of glass containers and dishware. Between 1904 and 1971, we expanded our operations, and in 1929 adopted our present name. In 1971, we came under direct control of the Chilean government through the Corporacion de Fomento de la Produccion (CORFO). In 1975, as part of a national program of privatization, Elecmetal, a private steel foundry business, acquired a 46% interest our company from CORFO and in 1976, acquired an additional 7.5% interest in our company from other shareholders. In order to consolidate our position as the leading Chilean producer of glass containers, we entered into a technical assistance agreement in 1977 with a subsidiary of Owens-Illinois Inc. to acquire state-of-the-art glass bottle manufacturing technology. In 1980, we acquired a 50% interest in Cristal Owens Plasticos Ltda., a joint venture with Owens-Illinois, to manufacture disposable plastic bottles for the non-alcoholic beverage market. In 1982, we began to diversify beyond the container business by acquiring operations from other members of the Elecmetal Group. These acquisitions included a 20% interest in Vina Santa Rita, one of the largest Chilean producer exporters of bottled wine. In 1992, Vina Santa Rita established Vina Carmen S.A., which produces fine wines and in which Vina Santa Rita has a 99.9% stake. Continuing our expansion in the packaging business, in 1988, we acquired a 50% interest in Reicolite S.A., a company engaged in the manufacturing and selling of plastic packaging products. In 1988, Owens-Illinois sold its 50% interest in Cristal Owens Plasticos Ltda. to Grupo Themco, a Chilean industrial group. In January 1996, we acquired an additional 49.99% interest in both Cristal Owens Plasticos Ltda. and Reicolite S.A. from Grupo Themco, thus increasing our interest in both companies to 99.99%. Cristal Owens Plasticos Ltda. and Reicolite S.A. were subsequently merged to form Crowpla Reicolite S.A., which commenced joint operations in January 1997. Through a public auction in 1989, we acquired from a Chilean government-owned company a concession to operate a national television-broadcasting network through a 99.9%-owned subsidiary. The concession was subsequently transferred to Comunicacion, Informacion, Entretencion y Cultura S.A. As of December 31, 2003, we hold a 98.5% interest in Comunicacion, Informacion, Entretencion y Cultura S.A. As of December 31, 2003, Comunicacion, Informacion, Entretencion y Cultura S.A. held the following interests in media and communications companies: o a 49.9% interest in Editorial Zig-Zag S.A., a publishing company; o a 50.0% interest in Ediciones Chiloe S.A., which, in turn, holds a 74.8% interest in Ediciones Financieras S.A., the publishing company for Diario Financiero, a Chilean financial newspaper; and most significantly; o a 99.99% interest in Red Televisiva Megavision S.A., one of the three largest television broadcasting networks in Chile. In December 1991, Grupo Televisa, S.A. de C.V. of Mexico, acquired a 49.0% interest in Red Televisiva Megavision S.A. In January 1994, we issued 4,020,000 ADRs, each representing three shares of our common stock without par value, for approximately US$96 million in two concurrent offerings in the United States and Chile. On January 31, 1994, we commenced a preemptive rights offering to certain of our shareholders who had not waived such rights and, in connection therewith, sold an additional 590,858 15 shares of our common stock to such shareholders for approximately US$4.8 million. Between May and July 1995, we issued 2,399,642 shares of common stock for the aggregate historical price of Ch$7,481 million. Since July 6, 1995, we have had 64,000,000 common stock shares outstanding, representing our total registered stock capital. We expanded our participation in the television and entertainment sector through the burgeoning cable television market. As part of our expansion plan, Cordillera Comunicaciones Ltda., known commercially as "Metropolis," was created in 1994 in association with worldwide cable TV leader TCI-Bresnan (which subsequently became Liberty Media Corporation). In July 1995, we formed Constructora Apoger S.A. with a capital contribution representing 80% of its equity. Constructora Apoger S.A. was formed to build and sell approximately 16,500 square meters of office space in an 18-story building in Las Condes, Santiago. This building was completed in December 1997. As of December 31, 2003, 100% of the building's office space had been sold. In October 1995, Cordillera Comunicaciones Ltda. agreed to a merge with Intercom S.A., a cable firm owned at that time by Compania de Telecomunicaciones de Chile S.A. and El Mercurio, creating Metropolis-Intercom S.A. In 1996, Vina Santa Rita issued US$20 million of its common stock, which we partially subscribed. During the second half of 1996, Vina Santa Rita acquired a 39.35% interest in Vina Los Vascos S.A., an important Chilean wine producer and exporter linked to Les Domaines Barons de Rothschild (Lafite), for approximately US$5.8 million. In September 1997 Vina Santa Rita invested abroad for the first time, creating Vina Dona Paula S.A. in the Republic of Argentina. On September 30, 1999, for approximately US$16.2 million, we acquired a 40% interest in Rayen Cura S.A.I.C., a glass container company located in Mendoza, Argentina, from Vicasa S.A., a Spanish company. Vicasa S.A. currently holds the remaining 60% interest in Rayen Cura S.A.I.C. In 1999, Vina Santa Rita acquired an additional 3.65% interest in Vina Los Vascos S.A. for approximately US$700,000. In May 2000, we announced that we had settled an arbitration proceeding with Compania de Telecomunicaciones de Chile S.A. The arbitration was initiated in May 1998 to resolve our dispute with Compania de Telecomunicaciones de Chile S.A. over the development of internet services through Metropolis-Intercom S.A. Under the terms of the agreement, our unconsolidated subsidiary, Cordillera Comunicaciones Ltda., acquired the remaining 40% of Metropolis-Intercom S.A. and the latter acquired 100% of the HFC network it used from Compania de Telecomunicaciones de Chile S.A. Both acquisitions amounted to US$270 million. As of December 31, 2003, Cristalchile and Liberty Media Corporation each owned 50% of Cordillera Comunicaciones Ltda. During 2001, Vina Santa Rita acquired the "Terra Andina" brand from Pernod Ricard. Sur Andino S.A. was created as a subsidiary of Vina Carmen S.A. to administer this brand. As of December 31, 2003, Cristalerias owned 54.1% of Vina Santa Rita's outstanding shares and the Elecmetal Group, as a whole, held a 77.6% interest in Sociedad Anonima Vina Santa Rita. On June 29, 2001, Cristalerias de Chile S.A., and Embotelladora Andina S.A. - the main bottler of the Coca-Cola system in Chile - executed contracts to establish a partnership or joint venture 16 forming Envases CMF S.A., for the PET container business (previously carried out through their respective subsidiaries, Crowpla-Reicolite S.A. and Envases Multipack S.A.). The partnership was established by the incorporation of Andina Inversiones Societarias S.A. with 50% of the shares in that company through a capital increase. The remaining 50% of the shares are controlled by Cristalerias. The transaction allowed Crowpla-Reicolite S.A. to obtain assets from Multipack to develop the PET container business. On August 27, 2002, Comunicacion, Informacion, Entretencion y Cultura S.A. purchased Televisa S.A. de C.V Mexico's stake in Red Televisiva Megavision S.A., increasing its participation in Red Televisiva Megavision S.A. to 99.99%. BUSINESS STRATEGY Our general business philosophy is consistent with that of the Elecmetal Group. The philosophy has been as follows: o to make controlling investments in companies believed to be undervalued or to develop new businesses in Chile when these businesses are believed to have significant growth potential; and o to actively manage such companies to maximize long-term growth and value. The Elecmetal Group typically focuses on each company's core business and seeks to maximize its cash flow and profitability by installing experienced management from companies within the Elecmetal Group, as well as by establishing strategic relationships with relevant international business leaders. Our strategy with respect to our packaging operations is: o to maintain our dominant position in the production and sale of returnable and disposable glass containers in Chile by being more efficient in the production of glass containers through scale production and cost cutting; o to promote the wider use of glass containers in Chile; and o to increase our share of the Chilean market for plastic and certain other packaging products. Our business strategy with respect to the media and communications business and the wine business is together with our partners: o to develop Metropolis-Intercom S.A. into an important broadband provider, through technological innovation, providing top quality consumer service and by being present in the main national markets; o to improve the quality and variety of Red Televisiva Megavision S.A.'s program offerings and increase its share of the Chilean broadcast television advertising market; and o to strengthen the market position of Sociedad Anonima Vina Santa Rita through continued emphasis on the production and export of premium wines. In accordance with our past practice and as a member of the Elecmetal Group, we seek to take advantage of additional growth opportunities by establishing new businesses, or by making 17 investments in companies, that it believes would benefit from the Elecmetal Group's management expertise and business philosophy. Consistent with our prior experience in the packaging and the media and communication arenas, we anticipate that any new investments may be made in association with experienced international companies capable of contributing financial, operating and technical assistance, to strengthen the competitive position and long-term prospects of the targeted business. PACKAGING BUSINESS The following chart illustrates our interests in the Chilean and Argentine (through an equity investment) packaging sectors as of December 31, 2003: GRAPHIC OMITTED I. Glass Containers We are the largest producer of glass containers in Chile and estimate that we have supplied more than 80% of all glass containers produced in Chile, as measured by weight, during each of the past five years. We work closely with our customers to design and manufacture bottles in accordance with the changing needs of Chilean (especially Chilean wine producers) and foreign customers. We sell our products to several important sectors of the Chilean economy, including the wine, non-alcoholic beverage, beer, liquor, food and pharmaceutical industries. The following table sets forth our glass container sales by market sector as a percentage of net sales revenues for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 -------------------- ------ ------ ------ ------ ------ Product Sector: Wine 61.7% 60.1% 59.2% 61.8% 62.3% Beer 11.0% 10.7% 14.1% 14.9% 15.1% Non-alcoholic beverages 12.2% 16.3% 14.9% 13.0% 12.3% Liquor 10.4% 9.4% 8.3% 7.5% 7.7% Food 3.7% 2.7% 2.7% 2.2% 2.1% Pharmaceuticals 1.0% 0.8% 0.8% 0.6% 0.5% ------ ------ ------ ------ ------ TOTAL 100% 100% 100% 100% 100% ----------------- (1) Each respective year ends December 31. 18 i. Wine Chile is a country with a long tradition of wine production. Historically, Chilean winemakers targeted the domestic market where wine was widely sold in returnable bottles, jugs and other inexpensive containers. Since the 1990s, however, the focus of many wineries has shifted to the production of higher quality wines for export and domestic consumption. The Chilean wine industry, is dominated by four companies: o Vina Concha y Toro S.A. o S.A. Vina Santa Rita o Vina San Pedro S.A., and o Vina Santa Carolina S.A. These companies account for approximately 62.4% of total net sales of wine in Chile (69.4% as measured by liters) in 2003. We currently supply most of the glass containers for these four companies, as well as other Chilean wine producers. Largely as a result of the increased exports of Chilean wines, unit sales of our wine bottles increased 50.7% between 1998 and 2003, representing 51.4% of our unit sales in 2003. In 2003, the number of cases of wine in glass bottles exported by Chilean winemakers rose by 8.3% (22.6 million in 2002 to 24.5 million in 2003). Net sales increased by 10.2% (US$523 million in 2002 and US$576 million in 2003). The four export leading vineyards and their subsidiaries experienced an aggregate increase in exported sales volume of 8.0%, while the remaining wine producers' export volume increased by 8.8%. For 2003, primary destinations of Chilean bottled wine exports as measured by net sales included the United States (21.7%), the United Kingdom (20.5%), Canada (6.0%), Denmark (5.9%), Ireland (5.3%), Germany (5.1%), Holland (3.9%), Japan (3.9%), Brazil (3.0%) and Sweden (2.4%). The following table shows the growth of Chilean non-bulk wine exports: YEAR (1): 1999 2000 2001 2002 2003 ------------------- -------- -------- -------- -------- -------- Export Cases Glass bottles (2) 18,043 20,596 21,416 22,622 24,508 Other containers 852 1,000 1,631 1,878 2,050 -------- -------- -------- -------- -------- TOTAL 18,895 21,596 23,047 24,500 26,558 ----------------- (1) Each respective year ends December 31. (2) In thousands of cases containing 9 liters per case. Source: Chilean Export Association. We believe that approximately 78% of our net sales of wine bottles in 2003 were attributable to wine exports. The following table shows the number of units we sold and net sales related to the wine sector for the periods indicated: 19 YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Units (2) 241,107 273,744 289,855 308,635 339,458 Net Sales (3) Ch$33,228 Ch$37,348 Ch$40,511 Ch$44,343 Ch$46,421 ----------------- (1) Each respective year ends December 31. (2) Units are set forth in thousands and include all glass containers sold in this sector regardless of size. (3) Net sales are set forth in millions of constant pesos. ii. Non-alcoholic Beverages The non-alcoholic beverage market in Chile currently consists of soft drinks, mineral water and fruit-based juices. Based on industry sources, we estimate that these products accounted for approximately 87.4%, 6.9% and 5.7% of the non-alcoholic beverage market in 2003, respectively (87.2%, 7.1% and 5.7% in 2002), as measured by volume. We estimate glass containers represented approximately 17.0% of the Chilean non-alcoholic beverage container market, as measured by liters of beverages sold during 2003 (15.8% during 2002). Sales of bottles for non alcoholic beverages (soft drinks, mineral water, juice) as a whole decreased by 1.5% due to lower sales of one-way formats, partially compensated by higher sales of returnable formats due to the launching of a 237cc crown-top bottle. In 2003, the demand for soft drinks grew by approximately 4.8% over 2002. Approximately 16.5% of the Chilean market for soft drinks, measured in liters, was bottled in glass containers (15.1% in 2002). The remainder was bottled in PET bottles and one-way aluminum cans. In 2003, the demand for mineral water grew by 0.8% with respect to 2002. Approximately 17.7% of the Chilean market for mineral water, measured in liters, was bottled in glass containers (18.7% in 2002). The remainder was bottled in PET and one-way PVC containers. In 2003, the demand for fruit-based juices grew by 6.0% with respect to 2002. Approximately 24.0% of the Chilean market for fruit-based juices, measured in liters, was bottled in glass containers (23.7% in 2002). The following table sets forth the number of returnable and disposable glass units we sold and our related net sales in the non-alcoholic sector for the periods indicated: YEAR (1) 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Units (2) 74,444 128,945 115,910 119,169 118,334 Returnable 15,892 18,426 18,208 15,972 25,208 Non- Returnable 58,552 110,519 97,702 103,197 93,126 Net sales (3) Ch$6,596 Ch$10,138 Ch$10,175 Ch$9,304 Ch$9,162 ----------------- (1) Each respective year ends December 31. (2) Units sold are set forth in thousands and include all glass containers sold in this sector regardless of size. (3) Net sales are set forth in millions of constant pesos. iii. Beer During 2003, per capita consumption of beer in Chile increased moderately. Nevertheless, unit sales of non-returnable bottles posted a strong growth of 19.6%, due to an increase in 20 the share of non-returnable containers in total containers used for beer. On the other hand, returnable bottles sales increased by 2.3% in 2003 with respect to 2002 in unit terms. As a whole, demand for glass containers in the sector rose during 2003. Our net sales to the beer sector grew by approximately 5.2% during 2003. As a result, net sales to the beer sector increased from 14.9% of our net sales in 2002 to 15.1% in 2003. The following table sets forth the number of units we sold and our related net sales to the beer sector for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Units (2) 54,882 69,859 88,728 104,108 121,907 Returnable 19,458 13,402 17,532 15,247 15,591 Non-Returnable 35,424 56,457 71,196 88,861 106,316 Net sales (3) Ch$5,893 Ch$6,654 Ch$9,679 Ch$10,698 Ch$11,258 ----------------- (1) Each respective year ends December 31. (2) Units are set forth in thousands and include all glass containers sold in this sector regardless of size. (3) Net sales are set forth in millions of constant pesos. iv. Liquor The Chilean domestic liquor industry currently consists primarily of the pisco segment, a local grape-based spirit, and all other domestically produced liquor. Net sales of liquor bottles increased by 7.5% during 2003 due to the introduction of a new pisco brand. The following table sets forth the number of units we sold and our related net sales to the liquor sector for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Units (2) 53,827 54,183 50,483 48,285 52,257 Net Sales (3) Ch$5,625 Ch$5,856 Ch$5,687 Ch$5,359 Ch$5,760 ----------------- (1) Each respective year ends December 31. (2) Units are set forth in thousands and include all glass containers sold in this sector, regardless of size. (3) Net sales are set forth in millions of constant pesos. v. Food We are currently a principal supplier of glass containers to some of Chile's leading producers of packaged foods. In the Chilean glass-packaged food sector, glass containers are used primarily for tomato sauce, baby foods, jams, fruits and oil. The following table sets forth the number of units we sold and our related net sales to the glass-packaged food sector for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Units (2) 30,400 23,848 26,051 22,693 21,356 Net sales (3) Ch$1,979 Ch$1,656 Ch$1,858 Ch$1,606 Ch$1,554 ----------------- (1) Each respective year ends December 31. (2) Units are set forth in thousands and include all glass containers sold in this sector, regardless of size. (3) Net Sales are set forth in millions of constant pesos. 21 In general, the use of glass containers for packaging food is significantly less in Chile than in more developed economies. In 2003, net sales for the packaged food container sector decreased by 3.3% from 2002, while unit sales decreased about 5.9%. This decrease was due to adjustments experienced by this market and due to a lower demand for containers resulting from the sluggish economic recovery of the country. vi. Pharmaceuticals Glass containers produced for the Chilean pharmaceutical sector are primarily used for cough suppressants, vitamins, antiallergenics and antibiotics, which are usually in the form of liquid syrup. We currently provide containers for these products to the principal pharmaceutical companies. Pharmaceuticals accounted for approximately 0.5% of our net sales of glass containers in 2003. In 2003, net sales for this segment decreased by 13.5%. The following table sets forth the number of units we sold and our related net sales to the pharmaceutical sector for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Units (2) 14,449 13,115 13,049 8,918 7,192 Net Sales (3) Ch$534 Ch$485 Ch$525 Ch$457 Ch$396 ----------------- (1) Each respective year ends December 31. (2) Units are set forth in thousands and include all glass containers sold in this sector, regardless of size. (3) Net sales are set forth in millions of constant pesos. II. Plastic Containers As of December 31, 2003, we had a 50.0% equity investment in Envases CMF S.A., a company engaged in the production of plastic containers, caps and crates. Envases CMF manufactures a variety of plastic containers for such industries as non-alcoholic beverages, edible oils, wine, cleaning products, chemicals, lubricants, and agricultural business. Envases CMF's general business strategy is to diversify its line of products, to maintain its position as a leading Chilean producer of PET bottles and preforms and to diversify its production capacity to include new plastic products for the packaging market. In 2003, Envases CMF was audited to convert norm ISO 9001:1994, with which it was certified in 2001, to the new version 9001:2000. The audit was successful, therefore, the Company was recommended again to maintain its quality certification. The following table sets forth the volumes sold by Envases CMF and the related net sales revenues for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Metric Tons (2) 9,064 9,553 19,272 24,147 23,252 Net Sales (3)(4) Ch$10,806 Ch$13,134 Ch$28,006 Ch$35,682 Ch$34,543 Net Profit Ch$506 Ch$631 Ch$1,912 Ch$2,576 Ch$1,414 ----------------- (1) Each respective year ends December 31. (2) Metric tons include all plastic products sold in this sector, regardless of form. (3) Figures for years 1998 through 2000 only consider Crowpla-Reicolite S.A. Figures for year 2001 include Crowpla plus Multipack for half of the year. Years 2002 and 2003 consider operations for both companies, since we became 50% owners of this joint venture in June 2001. (4) Net sales and net profit are set forth in millions of constant pesos. 22 There are a variety of producers of PET bottles in Chile and one of them is owned by a beverage producer. As a manufacturer approved by The Coca-Cola Company, Envases CMF supplies a significant percentage of bottles and preforms sold to the bottlers of the Coca-Cola system in Chile. Envases CMF's principal customers are the Coca-Cola bottlers, who in 2003, accounted for approximately 77.7% of net sales. During 2003, total sales in the plastic container business totaled Ch$34,543 million, compared to Ch$35,682 million in 2002. During 2003, Envases CMF's sales measured in tons decreased by 3.7% compared with 2002 (23,252 tons in 2003 vs. 24,147 tons in 2002). This decrease was primarily due to changes in sales composition of some Coca-Cola bottlers in Chile, a decrease of preforms volume exports and lower sales of the national oil sector, which was affected by imports of finished product from Argentina. Total volume sales of PET formats decreased by 2.0% compared with 2002. Sales of PET non-returnable bottles increased by 1.0%, while sales of PET returnable bottles decreased by 8.0%. PET preform sales increased by 7.0%. Sales of PET bottles for the edible oil, wine, and cleaners market decreased by 34.0%. Envases CMF's web page can be accessed at the following internet address: http://www.cmf.cl. III. S.A. VINA SANTA RITA WINERY The following chart illustrates our interests in the Chilean and Argentine wine sectors on December 31, 2003: GRAPHICS OMITTED History In 1980, the Elecmetal Group and Owens-Illinois Inc., the world's leading glass bottle producer, acquired the Vina Santa Rita property, including its brands, the Alto Jahuel plant and 50 hectares of vineyard adjacent to the plant. The Elecmetal Group invested heavily in Vina Santa Rita in a number of areas. In production, significant investments were made in technology, and pioneering winemaking techniques were introduced. In 1985-1986, Vina Santa Rita wines began making significant inroads into worldwide markets. In 1987, Vina Santa Rita acquired Vina Carmen, a winery with a good reputation in the domestic market. In 1988, the Elecmetal Group purchased 23 Owens Illinois' share of Vina Santa Rita and took over full control of Vina Santa Rita. Subsequently, in 1991, Vina Santa Rita. was transformed administratively from a limited partnership into a listed stock corporation, and trading of its common stock commenced on key Chilean exchanges. In the late 1980s and early 1990s, Vina Santa Rita experienced significant expansion due to growth in its exports and the excellent reputation that its products developed. In July 1996, Vina Santa Rita purchased a 39.35% interest in Vina Los Vascos for approximately US$5.8 million. Vina Los Vascos is a relevant player in the Chilean wine exports market, due to the quality of its wines and the expertise of its principal shareholder, Les Domaines Barons de Rothschild (Lafite). To finance this acquisition and to expand Vina Santa Rita's wine and grape production capacity, during July and August of 1996 it issued 165 million additional shares of its common stock at a price of Ch$50 per share, increasing equity by approximately US$20 million. In this offering, we purchased 95,200,000 shares of Vina Santa Rita's common stock for Ch$4,793 million. In September 1997, Vina Santa Rita expanded beyond Chilean borders, forming the company Vina Dona Paula S.A. in the Republic of Argentina. This expansion included the acquisition of two properties, one in Ugarteche, in the region of Lujan de Cuyo and another in Cordon de Plata, in the region of Tupungato, both in the province of Mendoza. Dona Paula now has approximately 231 hectares of wine grape plantations. In September 1999, Vina Santa Rita increased its ownership interest in Vina Los Vascos S.A. by 3.65% to 43%, paying a total of Ch$392 million (US$700,000). Subsequently, Vina Los Vascos S.A. received capital contributions in 1999, from all its partners (of Ch$479 million or US$900,000), therefore, Santa Ritas ownership remained at 43%. In 2000, Vina Santa Rita increased its shareholder's equity by Ch$5,810 million by issuing 83 million shares of stock. In the first phase, 70% was subscribed and paid for accordingly. The remainder was due within 3 years of April 12, 2000, but was not subscribed. In 2001 the board of directors of Vina Santa Rita decided to transfer the commercial administration and its 99.9995% ownership stake in Vina Dona Paula to Vina Carmen, Vina Santa Rita's subsidiary. That same year, Vina Santa Rita acquired the Terra Andina brand, which has been administered through Sur Andino S.A., a subsidiary of Vina Carmen. As of December 31, 2003, we held a 54.1% interest in Vina Santa Rita and the Elecmetal Group, as a whole, held a 77.6% interest in the winery. Chilean Wine Industry Chile's wine production fluctuated considerably in the 1960s and 1970s, due to changing economic and regulatory policies. Wine production peaked in 1986, at 460 million liters, leading to excess supply and low prices. At the same time, favorable conditions in the Chilean fruit market led to the elimination of vineyards in a move from planting wine grapes to planting other fruits. Also, a significant number of landholding families sold their vineyards to larger wineries, many of which implemented modernization programs to produce premium wines. The success enjoyed by premium Chilean wines in international markets offered a growth opportunity for many Chilean wineries, resulting 24 in a significant dedication of Chilean production facilities to production of higher quality fine wines for export. In 2003, net sales of wine exports by Chilean winemakers grew 11.5% over 2002, generating export revenues of US$671 million. The following table sets forth the volume of Chilean wine exports and related net sales revenues for the periods indicated: YEAR (1): 1999 2000 2001 2002 2003 ------------------ --------- --------- --------- ---------- --------- Liters exported (2) 234,156 264,750 308,941 348,590 394,604 Net Sales (3) US$526 US$573 US$588 US$602 US$671 ----------------- (1) Each respective year ends December 31. (2) Set forth in thousands. (3) Set forth in millions of nominal U.S. dollars. Source: Chilean Exports Association. According to the "Organizacion Internacional del Vino" (International Wine Organization), the Chilean wine export market has been experiencing a boom for several years and our management believes that Vina Santa Rita has been a key participant in that growth. In 2003, net sales of wine increased because of a rededication in production toward the more profitable export market. This rededication included increases in advertising and promotional expenditures abroad. Chilean wines are experiencing increasing competition in the international markets, from certain low cost producers, including winemakers in the so-called New World such as New Zealand, Australia, Argentina, South Africa and other countries. In this competitive scenario, high-quality products at affordable prices are essential for continued growth in international markets. General In 2003, Vina Santa Rita disputed leadership in the domestic market and was the third largest exporter of wine in Chile, as measured in net sales. Production, sales and marketing efforts are aimed principally at fine wines (mainly for the export market), and at wines for mass consumption (exclusively for the domestic market). From 1999 to 2003, Vina Santa Rita's total net sales have increased at an average annual rate of approximately 7.1%, largely as a result of the significant growth in exports of bottled wines. The following table sets forth certain financial information regarding Vina Santa Rita for the periods indicated: 25 YEAR (1): 1999 2000 2001 2002 2003 ------------------- --------- --------- ---------- ---------- --------- Net Sales (2) 57,000 64,482 67,698 72,439 74,940 Cost of Sales (37,832) (41,127) (41,797) (45,002) (47,550) Gross Margin 19,169 23,355 25,901 27,436 27,390 SG&A Expenses (11,038) (13,456) (14,270) (15,690) (17,660) Operating Income 8,129 9,898 11,631 11,746 9,730 Non-operating Income (2,576) (2,286) (2,368) 25 (5,156) (loss) Net Income 5,181 6,452 7,511 9,356 3,915 Total Assets 94,183 97,983 119,188 123,300 122,381 ----------------- (1) Each respective year ends December 31. (2) Figures are set forth in millions of constant pesos, and exclude any intercompany or other eliminations. Vina Santa Rita - Strategy Vina Santa Rita's overall business strategy is to continue to differentiate its products from those of its competitors. Vina Santa Rita distinguishes itself by producing and selling wine of the highest quality in each market segment. Each element of Vina Santa Rita's business strategy is designed to enhance its ability to produce high quality wines of exceptional value. To implement this strategy, Vina Santa Rita plans to do the following: o maintain its emphasis on the production of "premium" wine through continued investments in improved equipment and technology and through the engagement of expert winemakers; o control grape supply for the development of its fine wines; o promote sales of Chilean wines in the international market through efforts coordinated with other leading exporters of Chilean wine; and o maintain its dominant domestic market position of its "120" and "Bodega Uno" brands and increase overall market share through market segmentation with the introduction of new brands and products. Description of Vina Santa Rita's Business In the last five years, Vina Santa Rita's physical sales in liters in the domestic market have increased at an average annual rate of 10.4%. The increased volume has been offset by lower prices in line with the decreasing cost of raw materials. As a result, real prices have fallen by 31.0% in the last 5 years. There has also been a strong marketing strategy and the launching of new products. In 2003, case sales in the domestic market rose by 3.3% from 2002, compared with a 2.0% increase in wine consumption of the market overall. Increases in case sales were achieved through the success of the introduction of new products, such as: o Carmenere 120 Reserva Especial; o Medalla Real Cabernet Sauvignon - Syrah; o Floresta Cabernet Sauvignon - Merlot; 26 o Carmen Insigne Carmenere - Cabernet Sauvignon; o 120 Tres Medallas Carmenere; and o Carmen Reserva Syrah; o Premium wines of Terra Andina. Approximately 25% of Vina Santa Rita's total consolidated revenues for year 2003 came from wines introduced during the last five years. These efforts have been complemented by aggressive marketing campaigns. In the export market, Vina Santa Rita's results were favorable despite the recessions in the world's leading economies. Sales measured in cases increased an average of 6.7% per year in the last five years, while net export sales have grown 9.6% in real terms during that period. This has been achieved by exports to more than 60 countries and higher price levels. Export volumes for 2003 rose by 4.1% over 2002. Bottled wine exports from Chile as a whole increased by 8.3% on average. The following table sets forth Vina Santa Rita's sales volume, both overall and in the domestic and export sales individually for the periods indicated:

YEAR (1): 1999 2000 2001 2002 2003 --------- ---- ---- ---- ---- ---- Domestic market Cases (2) 4,822 5,531 6,154 6,942 7,172 Net Sales (3) Ch$31,728 Ch$34,181 Ch$33,165 Ch$32,632 Ch$32,389 Export market: Cases (2) 1,397 1,593 1,626 1,738 1,809 Net Sales Ch$24,268 Ch$29,006 Ch$33,105 Ch$37,969 Ch$40,841 Total Cases 6,219 7,124 7,780 8,680 8,981 Net Sales (4) Ch$55,996 Ch$63,187 Ch$66,270 Ch$70,601 Ch$73,230 ----------------- (1) Each respective year ends December 31. (2) In thousands of cases, each of which contains twelve 750 cc. bottles (9 liters). (3) In millions of constant pesos. Bulk sales are not included. (4) In millions of constant pesos. Figures do not include Other sales.

Vina Santa Rita offers a broad selection of wines in the premium and popular wine segments of the table wine market. For the export market, Vina Santa Rita produces and markets wines under the following brand names: Casa Real, Medalla Real, Reserva, "120", Floresta (ultra premium wines), Carmen and Terra Andina. In the domestic market, the following brands are produced and marketed: Casa Real, Medalla Real, Cepas Finas, 120 (used for premium and popular wines), Bodega Uno, Frizz, Hermanos Carrera, Tolten, Floresta and the Carmen product line. Each of these brands is factored into Vina Santa Rita's overall domestic and international marketing strategy. In the domestic market, Vina Santa Rita's efforts focus on establishing an image of quality and good value, given the shift toward the consumption of finer quality wines in Chile. In the international market, Vina Santa 27 Rita has joined other Chilean producers in an advertising effort to promote the price-quality value of Chilean wines. In addition, Vina Santa Rita has concentrated its efforts on affluent countries that recognize and value quality wines, including the United States, United Kingdom, Canada, Denmark and Germany, among others, outstanding in particular the opening of Santa Rita Europe Limited, with an office based in Oxford, UK, which strengthened the network with its most relevant distributors. This strategy has enabled Vina Santa Rita to raise prices higher than the rest of the industry, with prices of US$33.1 per case, 41% higher than the Chilean industry average of US$23.5 [2] per case during 2003. The export market includes exports of Vina Santa Rita, Vina Carmen and Sur Andino. Vina Carmen's production is almost exclusively targeted to the export market. Vina Carmen has its own winery, which was built in the first half of 1993 and has sufficient capacity to support the growth it has projected for the next few years. Cases exported by Vina Carmen increased an approximate 2.2% in 2003. The marketing of Vina Santa Rita wines varies according to the market segments. In the domestic market, all marketing is coordinated with its own sales force of more than 70 salespeople, working in the main office in Santiago and in seven locations throughout Chile - Antofagasta, La Serena, Vina del Mar, Rancagua, Concepcion, Temuco, Puerto Montt. In the international market, a network of exclusive distributors located in each of the markets where the wine is exported as well as the recently inaugurated office in the UK coordinate marketing efforts of European and Asian markets. During 2003, Vina Santa Rita employed 1,244 people. Vineyards and Winemaking Vina Santa Rita's emphasis on quality begins in the vineyards and focuses on growing premium and ultra premium varietal grapes, including Cabernet Sauvignon, Carmenere, Petit Syrah, Chardonnay, Merlot and Sauvignon Blanc. Wine production is subject to certain risks, including, but not limited to, changes in weather and invasive pests, such as phylloxera (a pest that feeds on susceptible grape rootstock that has infected French and Californian vineyards). As of 2003, there have been no cases of phylloxera in Chilean vineyards. An essential component in the quality of the wine is strict supervision of the grapes and vineyards. Vina Santa Rita's investment strategy has included the acquisition and planting of additional vineyards. In 1988, less than 20% of the grapes used in the elaboration of Vina Santa Rita's premium wines were grown in its own vineyards. Grapes purchased from third parties are carefully controlled for quality, not only by shipment, but also by geographic source and growing technique. Vina Santa Rita's objective is to grow nearly 50% of the grape supply for its premium wines by 2008. As of December 31, 2003, nearly 34.3% of the grape supply for Vina Santa Rita's premium wines came from its own vineyards. As of December 31, 2003, Vina Santa Rita and its subsidiaries owned 1,825 hectares, and in addition it has 296 hectares under long-term contracts, totaling 2,121 planted hectares. Out of this total, 890 hectares are located in Chile (1,001 hectares in the Maipo valley, 384 hectares in the Rapel valley, 193 hectares in the Curico valley and 312 hectares in the Casablanca valley); and 231 in Argentina (176 hectares in Ugarteche and 55 hectares in Tupungato). In addition, __________________ [2] Source: Chilean Exports Association. 28 Vina Santa Rita owns 853 hectares of land suitable to be planted, of which 363 are located in Chile and 490 in the province of Mendoza, Republic of Argentina. Vina Santa Rita believes that diminished dependence on grapes purchased from third parties will significantly reduce its costs and enhance the profitability of operations. The following table sets forth the planted vineyards owned by Vina Santa Rita and subsidiaries for the periods indicated:

2002(2) 2003(2) ------- ------- Location (1) Acres Hectares Acres Hectares ------------ ----- -------- ----- -------- Maipo Valley 2,472 1,001 2,472 1,001 Rapel Valley 988 400 948 384 Casablanca Valley 771 312 771 312 Curico Valley 477 193 477 193 Ugarteche (Argentina) 435 176 435 176 Tupungato (Argentina) 136 55 136 55 ------ ------- --- -- TOTAL 5,279 2,137 5,239 2,121 (1) Sociedad Anonima Vina Santa Rita has a long-term rental contract for 326 hectares. (2) Figures only include land that has been planted. Land occupied by roads, buildings and other such facilities is excluded.

The wineries' web sites can be accessed at the following internet addresses: http://www.santarita.com; http://www.donapaula.com.ar; http://www.carmen.com; http://terraandina.com. IV. MEDIA AND COMMUNICATIONS General In accordance with our general strategy to invest in potential growth sectors of the Chilean market, we have pursued opportunities in the Chilean media and communications sectors since 1989. Through our 98.5% interest in Comunicacion, Informacion, Entretencion y Cultura S.A. (CIECSA), we have interest in a variety of media companies, including: (i) a 50% interest in Ediciones Chiloe S.A., which in turn holds a 74.8% interest in Ediciones Financieras S.A., which publishes Diario Financiero, a Chilean financial newspaper; (ii) a 49.9% interest in Editorial Zig-Zag S.A., which is a publishing company; and most significantly, (iii) a 99.99% interest in Red Televisiva Megavision S.A., which is one of Chile's three largest broadcast television networks. In addition, through Cristalchile Comunicaciones S.A., the Company has a 50.0% interest in Cordillera Comunicaciones Ltda., which owns a 99.99% interest in Metropolis-Intercom S.A., one of the two Chilean cable television companies, which has approximately 33% market share at national level in the video business. The following chart illustrates our interests in the Chilean media and communications sectors on December 31, 2003: GRAPHICS OMITTED 29 i. Television Broadcasting and Other Media History In November 1989, we acquired a perpetual concession to operate 21 stations of nationwide television frequency ("Channel 9" in Santiago) via public auction, under the name "Red Televisiva Megavision S.A.". Since the liberalization of the Chilean media sector, this was the first concession granted that allowed direct competition with the state-owned Television Nacional de Chile ("Channel 7") and Corporacion de Television Universidad Catolica de Chile ("Channel 13") operated by the Catholic University. Beginning in January 1990, Red Televisiva Megavision S.A.'s management designed a broadcast system, constructed studios, purchased and installed network equipment and assembled a team of network technicians and professionals. Only ten months after its incorporation, Red Televisiva Megavision S.A. began broadcasting in Santiago, Valparaiso and Vina del Mar. Since that time, Red Televisiva Megavision S.A. has continued to pursue an aggressive program of network expansion and development and currently owns and operates modern, technologically advanced broadcast equipment and facilities. Currently, the network links 71 transmitters and relay stations and covers over 98% of Chilean territory. Consistent with the our strategy of establishing strategic alliances with leading international corporations, in December 1991, we entered into a joint venture with Grupo Televisa S.A. de C.V. of Mexico, the world's largest Spanish-speaking television network. Pursuant to the terms of the joint venture, our company and other members of the Elecmetal Group sold a 49% interest in Red Televisiva Megavision S.A. to Grupo Televisa S.A. de C.V. of Mexico. In January 1992, our company and the other members of the Elecmetal Group transferred their interests in Red Televisiva Megavision S.A. to Comunicacion, Informacion, Entretencion y Cultura S.A., a company formed to manage our investments in the communications area. In 1991, Comunicacion, Informacion, Entretencion y Cultura S.A. diversified its media holdings through the acquisition of a 50% interest in Multimedia S.A., a Chilean publishing company and a 40% interest in a radiobroadcasting network owned by Radiodifusion y Sonido S.A, which was sold in March 1995. In April and November 1994, Comunicacion, Informacion, Entretencion y Cultura S.A. acquired 34.15% of the capital stock of Ediciones Financieras S.A., a Chilean company engaged in the publication of a financial newspaper. Subsequently, during the fourth quarter of 1995, Comunicacion, Informacion, Entretencion y Cultura S.A. increased its interest in Ediciones Financieras S.A. to 59.65%. In April 1995, we acquired 30.4% of the capital stock of Comunicacion, Informacion, Entretencion y Cultura S.A. from Navarino S.A., another member of the Elecmetal Group, increasing our total interest in Comunicacion, Informacion, Entretencion y Cultura S.A. to approximately 80.4%. In March 1996, we formed Ediciones Chiloe S.A. in partnership with the Pearson Group (owners of the Financial Times, among other important financial publications), through its subsidiary Recoletos Chile Ltda. Upon the formation of Ediciones Chiloe S.A., Comunicacion, Informacion, Entretencion y Cultura S.A. contributed its 59.65% interest in Ediciones Financieras S.A. to Ediciones Chiloe S.A., acquiring a 75% interest in Ediciones Chiloe S.A., leaving Recoletos Chile Ltda. with a 25% interest in Ediciones Chiloe S.A. During April 1997, Red Televisiva Megavision S.A. received an equity investment of US$6 million, of which 51% was provided by Comunicacion, Informacion, Entretencion y Cultura S.A. 30 and the remaining 49% by Televisa. Red Televisiva Megavision S.A.'s ownership structure remained unchanged. At the same time, we increased our ownership interest in Comunicacion, Informacion, Entretencion y Cultura S.A. from 80.39% to 88.84%. In December 1997, Multimedia S.A. was dissolved, distributing the shares that it owned in Zig-Zag S.A. to its shareholders. Zig-Zag S.A. received a capital infusion of Ch$526 million, 33% of which was subscribed by Comunicacion, Informacion, Entretencion y Cultura S.A., increasing Comunicacion, Informacion, Entretencion y Cultura S.A.'s interest in Zig-Zag S.A. to 39.9%. In January 1998, Comunicacion, Informacion, Entretencion y Cultura S.A. received a capital infusion of US$2.7 million. This capital investment was provided and paid for by our company, raising our ownership in Comunicacion, Informacion, Entretencion y Cultura S.A. from 84.84% to 91.6%. In addition, during February 1998, the shareholders of Red Televisiva Megavision S.A. approved a capital investment of US$5.0 million, 51% of which was subscribed and paid for by Comunicacion, Informacion, Entretencion y Cultura S.A.. In November 1998, Comunicacion, Informacion, Entretencion y Cultura S.A. received a capital investment of US$4 million, which was provided and paid for by our company, resulting in an increase in ownership interest to 94.48%. Comunicacion, Informacion, Entretencion y Cultura S.A. and Televisa agreed to invest US$8 million in Red Televisiva Megavision S.A.. Of the total, 51% was provided and paid for by Comunicacion, Informacion, Entretencion y Cultura S.A. in December 1998. Grupo Televisa S.A. de C.V. Mexico did not exercise its right to subscribe and pay for shares, which expired on June 30, 1999 and Comunicacion, Informacion, Entretencion y Cultura S.A.'s interest in Red Televisiva Megavision S.A. was, thereby, increased from 51% to 62.64%. In July 1999, Comunicacion, Informacion, Entretencion y Cultura S.A. received a capital investment of US$5.7 million, which was provided and paid for by our company, resulting in a 96.6% ownership interest. On the same date, Red Televisiva Megavision S.A. received a capital investment of US$4.0 million, which was provided and paid for by Comunicacion, Informacion, Entretencion y Cultura S.A., increasing its interest in that company to approximately 69.6%. In April 2000, the extraordinary meeting of shareholders agreed to invest US$ 5.0 million in Red Televisiva Megavision S.A. As a result, Comunicacion, Informacion, Entretencion y Cultura S.A. S.A.'s stake in this company rose from 69.6% to 78.01%. On September 27, 2001, Comunicacion, Informacion, Entretencion y Cultura S.A. sold shares in Ediciones Chiloe and Ediciones Financieras to Recoletos Chile Ltda., leaving Comunicacion, Informacion, Entretencion y Cultura S.A. and Recoletos with a 50% ownership interest in Ediciones Chiloe. Comunicacion, Informacion, Entretencion y Cultura S.A. does not maintain a direct stake in Ediciones Financieras. However, Ediciones Chiloe has a 74.8% stake in Ediciones Financieras. On August 27, 2002, Comunicacion, Informacion, Entretencion y Cultura S.A. purchased shares of Red Televisiva Megavision S.A. from Grupo Televisa S.A. de C.V. of Mexico, increasing its participation in Red Televisiva Megavision S.A. to 99.99%, for a total of US$4.2 million. Broadcast Television - Description of Business Red Televisiva Megavision S.A. is a television network that offers a full array of broadcast services. As of December 2003, Red Televisiva Megavision S.A. had 71 transmitters and retransmitters, covering approximately 98% of the Chilean territory. 31 Approximately 40.8% of Red Televisiva Megavision S.A.'s air time was dedicated to syndicated programming during 2003 (54.9% in 2002), which includes soap operas and other dramatic series, films, comedies and other special events. Red Televisiva Megavision S.A. also produces its own programs, focusing on news and current events, sports and other programming suitable for family audiences. To view programming details please visit the network's web site at the following internet address: http://www.mega.cl. Red Televisiva Megavision S.A. competes primarily with five networks: four national competitors (Channel 7, Channel 13, Channel 11, and Channel 4) and one citywide station, located in Valparaiso. Red Televisiva Megavision S.A. has become one of Chile's top three stations measured by market share, with an audience share of approximately 23.9% during 2003 (26.1% in 2002)[3]. Red Televisiva Megavision S.A.'s programming has enabled it to maintain a stable audience share of approximately 21.7% over the last five years. The following table sets forth Red Televisiva Megavision S.A.'s monthly audience share:

MEGA - Monthly Audience Share (1) ---------------------------------------------------------------------------------------------------------------------- Annual Jan. Feb. Mar Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Avg. ---- ---- --- ---- --- ---- ---- ---- ---- ---- ---- ---- ---- 1999 20.3 24.7 18.3 17.5 18.6 19.5 19.7 20.5 20.9 20.2 19.2 19.1 19.8 2000 18.8 17.1 19.7 20.2 19.5 18.7 19.3 19.7 19.0 20.3 19.2 19.6 19.3 2001 20.6 19.1 18.3 16.4 17.0 18.0 18.4 18.7 20.4 22.1 22.7 21.6 19.4 2002 23.3 21.8 22.1 25.4 27.8 26.1 28.5 29.3 29.2 27.5 26.2 26.8 26.1 2003 25.3 21.9 21.5 22.1 24.9 22.8 22.8 21.3 25.0 25.2 26.1 28.2 23.9 Source: Time Media (1) Monthly share data based upon average audience figures from Monday through Sunday, measured between 9:00 a.m. and 1:00 a.m. Starting in the month of October, monthly figures for year 2002 were measured between 7:30a.m. and 1.30 a.m. Annual average for years 2002 and 2003 measured between 7:30a.m. and 1:30 a.m.

During 2003, the Chilean TV industry grew by approximately 0.5%. Red Televisiva Megavision S.A. increased net sales by 5.6% in 2003, reaching Ch$26,182 million. During 2003 higher internal productions resulted in higher costs, therefore producing an operating income during the year of Ch$3,505 million, compared with Ch$6,024 million in 2002. Red Televisiva Megavision S.A. reported a net income of Ch$2,607 million in 2003, compared with a Ch$3,708 million net income in 2002. The following table sets forth the relative audience share of Chilean television broadcasters in the Santiago Metropolitan Region for the periods indicated: ____________________ [3] Measured between 7:30AM and 1:30AM, (i.e.: 18 hours daily) from Monday through Sunday. 32

Relative Audience Share (1) --------------------------- BROADCASTERS 1999 (2) 2000 (2) 2001 (3) 2002 (3) 2003 (3) ------------ -------- -------- -------- -------- -------- Channel 2 2.3 1.6 1.1 1.1 0.7 Channel 4 5.6 8.6 9.1 8.9 11.2 Channel 5 1.3 1.2 1.1 1.0 1.0 Channel 7 30.0 28.7 31.0 29.1 26.1 MEGA (CH 9) 19.8 19.3 19.1 26.1 23.9 Channel 11 12.3 12.7 12.2 12.2 12.6 Channel 13 28.6 28.0 26.4 21.6 24.6 100% 100% 100% 100% 100% (1) Each respective year ends December 31. (2) Share based on average audience figures between Monday through Sunday, from 9:00 a.m. to 1:00 a.m. (3) Share based on average audience figures between Monday through Sunday, from 7:30 a.m. to 1:30 a.m.

The following table sets forth net sales and net income for the Chilean open TV industry for the periods indicated: Chilean Open TV Industry Sales and Net Income (Th Ch $)

2001 2002 2003 ------------------------- ------------------------- ------------------------- Sales Net Income Sales Net Income Sales Net Income ------- ---------- ------- ---------- ------- ---------- CHANNEL 2* - -171 - -223 - -421 ------------------ CHANNEL 4 3,398 -2,506 4,489 -1,028 6,242 304 CHANNEL 7 57,137 2,579 62,996 3,405 51,352 1,491 MEGA (CH 9) 16,772 -701 24,802 3,708 26,182 2,607 CHANNEL 11 9,497 -1,142 10,594 -1,899 12,916 450 CHANNEL 13 47,880 -3,965 44,649 -6,443 51,538 1,071 TOTAL 134,683 -5,906 147,531 -2,482 148,230 5,502 * Channel 2 does not register sales for any of the years shown. Source: Companies' FECUs filed with the SVS.

It is noteworthy that Mega's share in Chilean open TV industry sales increased from 12.5% in 2001 to 17.7% in 2003, and has leaded net income during 2002 and 2003. Publishing Our publishing operations are conducted through Comunicacion, Informacion, Entretencion y Cultura S.A., which as of December 31, 2003, had a 49.9% interest in Zig-Zag and a 50.0% interest in Ediciones Chiloe S.A. Zig-Zag S.A. is engaged in the publishing of educational material for children and the distribution of encyclopedias and other books. As of December 31, 2003, Ediciones Chiloe S.A. had a 74.8% interest in Ediciones Financieras S.A., which publishes Diario Financiero, a Chilean financial newspaper that enjoys nationwide circulation. During 2003, Ediciones Chiloe S.A. and Zig-Zag S.A. recorded a net loss of Ch$155 million and a net profit of Ch$48 million respectively, as compared to a net loss of Ch$90 million and a net profit of Ch$86 million in 2002, respectively. To access Diario Financiero's internet edition please access the following internet address: http://www.diariofinanciero.cl . ii. Cable Business History Since April 1994, we have participated in the Chilean cable television business through a joint venture with TCI-Bresnan (which subsequently changed its name to Liberty Media Corporation). We entered the cable television business by acquiring several cable companies in Santiago and Vina del Mar. In keeping with an agreement reached between our company and TCI-Bresnan, in June 1994 both parties acquired four additional cable television companies with operations in the southern region of Chile. In December 1994, our company and TCI-Bresnan created Cordillera Holdings Comunicaciones Ltda. Our company and TCI-Bresnan each contributed to Cordillera Comunicaciones Ltda. their respective interests in the cable television companies mentioned above, concentrating all cable television operations in Cordillera Comunicaciones Ltda., known commercially as Metropolis. In October 1995, we announced an agreement between Cordillera Comunicaciones Ltda. and Intercom, a corporation 80%-owned by Compania de Telecomunicaciones de Chile S.A. and 20%-owned by El Mercurio. This agreement sought to integrate the Metropolis and Intercom cable systems into a new company named Metropolis-Intercom S.A. Under the agreement, Cordillera Comunicaciones Ltda. sold its cable television network to Compania de Telecomunicaciones de Chile S.A. for approximately US$100 million and granted to Compania de Telecomunicaciones de Chile S.A. the right 33 to operate the Metropolis-Intercom S.A. cable systems and provide information transmission services, in accordance with a thirty-year renewable contract to supply service. In January 1996, both systems commenced operations under the name of Metropolis-Intercom S.A., which was 60% owned by Cordillera Comunicaciones Ltda. and 40% owned by Intercom. Along with its expansion, the cable industry has experienced significant changes in its structure. Originally, cable television services were provided by smaller companies, which built systems without significant investments. In 1994, larger corporations began acquiring and consolidating existing cable TV companies, thus leaving the Chilean cable television market with six main participants at the end of 1994: (i) Cordillera Comunicaciones Ltda.; (ii) Intercom (Compania de Telecomunicaciones de Chile S.A. and El Mercurio); (iii) TV Max (VTR); (iv) CableVision (United International Holdings); (v) Cable Express (Sonda and IM Trust); and (vi) Multivision (United International Holdings). By the end of 1996, the Chilean cable TV market consolidated leaving two major participants: Metropolis-Intercom S.A. and VTR Cable Express (formed as a result of the merger of TV Max, CableVision, Cable Express and Multivision). In 1996, Metropolis-Intercom S.A. focused on integrating accounting, programming and customer service systems of the merged companies. In June 1996, the cable television subscription fee in Chile became subject to the 18% value-added tax. In 1998, Metropolis-Intercom S.A. launched its "Premium" service in the Metropolitan and Fifth Regions of Chile. Premium customers pay an additional fee for access to additional "Premium" movie and entertainment channels. During 1999, the "Pay Per View" system, which allows customers to watch movies at peak times, was established. In April 2000 Metropolis was the first company in South America to launch digital service, which includes: NVOD (Near Video on Demand), IPG (Interactive Programming Guide), Digital Quality and Digital Music. In May 2000, Cristalchile announced it had settled an arbitration proceeding with Compania de Telecomunicaciones de Chile S.A., initiated in May 1998 to resolve the dispute between the parties over the development of Internet services through Metropolis-Intercom S.A. Under the terms of the agreement, our unconsolidated investment in Cordillera Comunicaciones Ltda., acquired the remaining 40% of Metropolis-Intercom S.A. and the latter acquired 100% of the HFC network it used from Compania de Telecomunicaciones de Chile S.A., both transactions for a total amount of US$ 270 million. This agreement allowed Metropolis-Intercom S.A. to offer advanced video, both analog and digital, Internet and data transmission services, among others, to the residential and corporate markets. As 34 of December 31, 2003, Cristalchile and Liberty Media Corporation each owned 50% of Metropolis-Intercom S.A. Cable TV - Description of Business Cable television is a relatively new business in Chile. The Chilean cable television industry started in 1992 with approximately 20,000 subscribers and one cable television provider. Since then, the industry has grown substantially to approximately to 786,000 subscribers at the end of 2003 (including satellite television). Despite this growth, the market is far from saturated. Metropolis-Intercom is a national broad-band operator that offers an array of services which include television, in its Basic, Premium, and Pay Per View plans -analog and digital platforms-, broad band Internet with Cable Modem, ADSL and, as of June 2003, wireless Wi - Fi and Internet voice over internet services. Its geographical coverage expanded during 2003, adding operations in the cities of Concepcion, Los Andes and San Felipe to its original coverage (Metropolitan and Fifth Regions, in addition to the cities of Iquique, Rancagua, Los Angeles, Temuco, Valdivia and Puerto Montt). The Company's national market share in the video business is approximately 33%. In the city of Santiago, this figure is close to 50%. In the residential broad-band Internet business the Company's market share is close to 12%. In July 2003, Metropolis launched IP (Internet Protocol) Telephony services, becoming the first Latin American cable operator to offer this service to homeowners and ending the year with approximately 3,639 clients. In the broadband business, 46% growth was attained during 2003, ending the year with 34,462 clients. In the video business, the Company was affected by a high unemployment and strong competition, ending the year with 231,925 basic service subscribers. In addition, the Company managed to maintain its Premium subscribers, ending the year with 23,716 analog clients and 7,783 digital clients. The Company improved results by restructuring costs, implementing new information systems, modifying processes and concentrating on sustainable growth in the broadband business. During 2003, the Company focused on expanding geographical coverage from the strong base it already had in the country's main cities, expanding the Internet business, reorienting the various processes towards a better customer service, applying an aggressive rationalization and cost-reduction program and developing new products such as IP Telephony. In a letter dated January 9, 2004, the Company informed the Chilean Superintendency of Securities and Insurance (SVS) that the subsidiary Cristalchile Comunicaciones S.A., owner of 50% of Metropolis Intercom S.A., had reached a preliminary agreement with Liberty Media, which is the owner of the remaining 50% of Metropolis Intercom S.A. as well as a majority shareholder of VTR S.A.; to merge Metropolis Intercom S.A. and VTR S.A. The preliminary agreement reached is subject to diverse conditions; among others, the negotiation and subscription of definite contracts, the approval of the Board of Liberty Media, including its subsidiary UGC and its independent directors, the approval of the Chilean Anti-Trust Commission, the approval of the Board of Cristalchile Comunicaciones S.A. and other required approvals. If the agreement materializes, Cristalchile Comunicaciones S.A. would be entitled to 20% of the shares of the merged company and would designate one of a total of five of its directors. It is not currently possible to quantify the financial effects of this operation for Cristalerias de Chile S.A. To access Metropolis Intercom S.A.'s web page please visit the following internet address: http://www.metropolis.cl. 35 Cable TV - Regulation Chilean regulations classify cable television services as "limited telecommunications services." Only Chilean-based companies are currently permitted to install, operate and/or provide these services after being granted a license by the Chilean Under-Secretary of Telecommunications. Licenses are granted no later than sixty days after the application has been made and have indefinite terms. Chilean regulations apply the following restrictions to limited telecommunications services: (i) they must be provided for specific persons, entities, or companies that have previously entered into a contract with the service provider; and (ii) they can be provided only within Chile. However, cable television companies can apply for a license to provide "intermediate telecommunications services," which consist of renting their network to other telecommunications companies. Thus, a cable television company's network can be used by third parties to provide public telecommunications services including basic telephonic services. V. CUSTOMERS In 2003, wine producers, beer producers, soft drink bottlers, liquor producers and packaged food producers comprised approximately 99% of industry demand for glass containers in Chile. We currently have leading positions within these customer groups and believe that our market position gives us the ability to take advantage of new opportunities and areas of growth in each customer segment. We sold our glass containers to more than 450 customers in 2003. Sales to our leading ten customers accounted for approximately 68.3% of our net sales in 2003. The three largest customers, Vina Concha y Toro, Vina San Pedro and Compania Cervecerias Unidas, accounted for approximately 40.5% of the our net sales of glass containers in for 2003. Sales of wine bottles to Sociedad Anonima Vina Santa Rita, an affiliate controlled by us, accounted for 7.7% of our net sales in 2003. Generally, we do not enter into long-term supply contracts with our main clients, but do enter into non-binding annual letters of understanding with certain key customers from time to time. These letters of understanding allow us to estimate demand, as well as to plan production accordingly. Individual orders are made on the basis of purchase orders and short-term contracts of less than one year. Any sustained interruption, curtailment of production, or use of alternative packaging products by any major customers could affect our sales levels and accordingly, could have a material adverse impact on our company. Santa Rita's local customers include retailers, restaurants, hotels and specialized wine shops. Europe is the main export market reaching exports of 567 thousand cases during the year, which represents 48% of Santa Rita's total export volume. In general, products are sold through distributors in each relevant market. Capital Expenditure Program i. Glass Business Our capital expenditure program for the glass container business is designed to achieve greater cost efficiencies and preserve our leadership in the glass container market in Chile. In 2001, 2002 and 2003 we invested US$33 million, US$14.3 million and US$33.3 million respectively. The latter 36 included total reconstruction of furnace B, a new productive line for this furnace and equipment to reduce nitrous oxide emissions. Furnace B is equipped with the highest melting, forming, quality control and packaging technology. It has a glass melting capacity of 300 tons per day, which compares to a previous capacity of 130 tons per day for former furnace B. In addition, to complement the glass packaging production process, during the year the Company incorporated a new labeling unit and a bottle-painting machine, which allows us to deliver different color packaging to our customers. Over the next five years, we expect to invest approximately US$5 million to US$7 million per year in general plant improvements for the glass container facility located in Padre Hurtado. In addition, we are considering an estimated US$110 million investment to increase the Company's production capacity. ii. Wine Business Since 1988, Vina Santa Rita has pursued a strategy of investing in its grape production and winemaking facilities to improve the quality of its wines and, at the same time, increase exports. Consequently, in 1992, Vina Santa Rita initiated a capital expansion and improvement program aimed at increasing both the quality and quantity of its wines. Vina Santa Rita has invested approximately US$37.1 million since 1999, primarily in the acquisition of new land, winemaking machinery, winery operations and investments in Argentina. In 2003, US$8.1 million were invested to increase Vina Santa Rita's wine making capacity (through the acquisition of technologically advanced equipment) to increase the capacity of fine wine cellars, to increase the planted lands owned by our company, and to modernize production processes. This was accomplished by installing new stainless steel tanks and by acquiring high-tech equipment. These investments represent a key facet of Vina Santa Rita's strategic plan and have led to significant increases in productivity. In the agricultural area, Vina Santa Rita maintained its fine varieties plantings, all of them with pure clones of the highest quality. In addition, it continued improvements of an extensive technified irrigation system in its planted areas. In the oenologic area investments were made in civil works and winemaking equipment such as tanks, pumps, filters and cooling systems in the facilities located in Alto Jahuel, Palmilla and Vina Carmen. These investments were aimed at increasing and renovating the fine winemaking facilities and increase fine wine storage capacity. During 2003, Vina Santa Rita increased its wine making and storage capacity through the lease of a cellar in Pirque which has a storage capacity of 2.4 million liters. With this the rented capacity reaches 21.5 million liters. iii. Television Broadcasting Business In 2003, Red Televisiva Megavision S.A. (CIECSA's main subsidiary), invested approximately US$1.8 million, mainly in broadcasting equipment. Competition During each of the last five years, we have accounted for more than 80% of all glass containers produced in Chile, as measured by weight. Significant direct domestic competition in the glass container business is currently limited to a single Chilean manufacturer with an approximate estimated total capacity of 50,000 to 60,000 metric tons per year. Other significant current competitors are 37 Argentine glass container manufacturers, whose production has historically exceeded domestic demand. Accordingly, Argentine glass container manufacturers have from time to time sold certain excess production in Chile. Although there are currently no legal or regulatory barriers to entry into the Chilean market for glass containers, substantial investment is required to establish or acquire production and distribution facilities. Practical barriers, such as the development of client relationships and the need for economies of scale, may make the entry of additional direct domestic competitors more difficult. Nevertheless, there can be no assurance that new competition will not emerge. Our primary competition comes from manufacturers of non-glass containers or glass substitutes. These containers include plastics, aluminum cans, steel cans, and tetra-packs. An increase in use of these containers may cause a reduction in demand for our glass containers. Local production and imports of different types of containers into the Chilean market may be expected to continue to heighten competition in the container industry during 2004 and beyond. This could materially and adversely affect profit margins of our sales of glass containers in the Chilean market and, accordingly, could materially affect our operating results. Regarding the wine business competition is strong in the domestic market, mainly coming from two other main Chilean wineries. However, Vina Santa Rita increased its market share to 23.7% (as measured in volume) and 22.1% (as measured by net sales) which makes it industry leader in terms of net sales. In the export market, Vina Santa Rita is the third largest Chilean exporter of bottled wine, with an average export price 41% higher than the Chilean bottled wine industry. Competition in the export market is strong too, facing competitors from various countries such as traditional producers from Europe, such as France, Italy and Spain, as well as producers from the "New World", such as USA, Australia and South Africa. New Products - Research and Development We seek to provide our glass customers with innovative product alternatives to meet their packaging needs. However, no single new product, refinement, or group of new products and refinements, has been introduced recently or is scheduled for introduction that would require significant or material investment in research and development. We do not anticipate significant investment in technological research and development in the near future. Rather, we intend to continue market research and to purchase established technologies in order to update and diversify our product line. Vina Santa Rita has a policy of continued product innovation and line extension. During the year, in the local market, priority was given to the introduction of new varieties and fine wine blends that, while complementing existing lines, add value to brands. During the year, the following products were introduced: 120 Reserva Especial Carmenere, Medalla Real Cabernet Sauvignon-Syrah, Floresta Cabernet Sauvignon-Merlot, Carmen Insigne Carmenere-Cabernet Sauvignon, 120 Tres Medallas Carmenere and Carmen Reserva Syrah. In addition the Terra Andina brand was incorporated at year end with its line of fine wines. Raw Materials i. Glass Business The primary raw materials used in manufacturing our glass containers are soda ash, silica, limestone and recycled glass. We obtain most of the silica sand we require from our own extraction facilities and processing plants located in the San Sebastian and El Turco districts in Cartagena, Chile. 38 We obtain other raw materials from Chilean suppliers, with the exception of soda ash, which is obtained from foreign suppliers. The most significant materials in terms of cost are energy (natural gas and/or fuel oil and electricity) and soda ash. We maintain relations with a variety of suppliers of our other raw materials and obtain materials from each of them on the basis of current market conditions and advantages. All contracts or other agreements between third party suppliers of our principal raw materials and us contain customary commercial terms and conditions. We do not believe that we are dependent on any one supplier for a significant portion of any of our raw materials, with the exception of electrical power and natural gas, which are supplied by local utilities companies. During the previous ten years, we have not experienced any significant difficulties in obtaining adequate supplies of necessary raw materials at satisfactory prices. On May 2004, we received a letter from our natural gas supplier regarding restrictions to our natural gas supply for the year. This was the result of a national contingency that affected Chilean imports of natural gas, which are currently bought from Argentina. Nevertheless, our glass producing facility is enabled to replace natural gas needs either partially or totally with fuel oil. The use of recycled glass in the manufacturing process offers environmental and cost advantages over the use of other raw materials. In 2003, approximately 34.7% of our requirements for raw materials were supplied by recycled glass. We promote a recycling campaign and have operated a processing plant for recycled glass since 1995. ii. Wine Business In the case of Vina Santa Rita, our investment strategy has included the acquisition and planting of additional vineyards to reduce the dependence on third parties for grapes and to improve the quality of wines. In 1988, less than 20% of the grapes used in the makeup of Sociedad Anonima Vina Santa Rita's premium wines were grown in its own vineyards. The grapes we purchase from third parties are carefully controlled for quality, not only by shipment, but also by geographic source and growing technique. Vina Santa Rita's objective is to grow nearly 50% of the grape supply for its premium wines by year 2008. Currently, Sociedad Anonima Vina Santa Rita enters into purchase contracts with local growers to ensure the company has sufficient amounts of fine quality grapes to be used in its wine production. In 2003, approximately 36.4% of Sociedad Anonima Vina Santa Rita's grapes were obtained from these purchase contracts, while another 30.5% were obtained from Vina Santa Rita's own vineyards and an additional 33.1% was purchased at market. These purchase contracts require Vina Santa Rita to purchase the grapes delivered only to the extent they meet specific quality standards. Prices of raw materials, particularly grapes, are volatile since they depend on weather conditions in Chile as well as supply and demand conditions. Prices of raw materials such as labeling and packaging are indexed to the exchange rate fluctuations. iii. Television Broadcasting Business Red Televisiva Megavision S.A. produces its own programs, focusing on news and current events, sports and other programming suitable for family audiences. In addition, approximately 40.8% of Red Televisiva Megavision S.A.'s air time was dedicated to syndicated programming during 2003 (54.9% in 2002), which includes soap operas and other dramatic series, films, comedies and other special events, which is purchased from third parties. 39 Patents and Licenses In our glass container business we have a number of patents for a variety of products and are a licensee under several patents owned by Owens-Illinois Inc. While in the aggregate our patents are of material importance to our business, we do not consider any one patent, or group of patents, relating to a particular product, or process, to be of material importance to the business as a whole. Technical Assistance agreement Our technical advisor in the glass container business is Owens Illinois Inc., a company incorporated under the laws of the State of Ohio, United States of America. Pursuant to a 1977 technical assistance agreement, Owens Illinois supplies manufacturing, engineering and other technical assistance, licensing of technology for the enhancement and modernization of the design and manufacturing of glass containers and related assistance in marketing, sales and administration. The agreement, which was renewed in 1994 for a period extending through September 2004, provides for the payment of quarterly royalties by us to Owens-Illinois Inc., and separate compensation for additional services received or equipment purchased from Owens-Illinois. The agreement may be terminated by Owens Illinois Inc. if we default in our obligations or certain events occur constituting a change in control of our company. This advisory relationship is representative of the Elecmetal Group's philosophy of seeking long-term strategic relationships with leading global companies in relevant business segments. We consider our relationship with Owens-Illinois Inc. to be on good terms. Seasonality Sales of wine, beer and non-alcoholic beverage containers are seasonal. In the case of wine, shipments are typically greater in the third quarter due to the proximity of Christmas and New Year's Eve. For beer and non-alcoholic beverages, shipments are typically greater in the fourth quarter of each year, due to an increase in expected demand during warm summer months in the southern hemisphere. Our other products are subject to less seasonality. Government Regulation We are subject to the full range of governmental regulation and supervision generally applicable to companies engaged in business in Chile including, without limitation, labor laws, tax laws, social security laws, public health laws, consumer protection laws, environmental laws, securities and corporate laws and antitrust laws. These include regulations to ensure sanitary and safety conditions in manufacturing plants. Pursuant to Law No. 19,705 enacted in December 2000 (which amended the Chilean Securities Act No. 18,045), the controlling shareholders of a publicly traded corporation will have to sell their controlling shares only 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 said law, when the price to be paid is substantially higher than the market price. The price to be paid is considered substantially higher than market price when the price paid is higher than the average market price for stock transactions performed during the 90th stock busines day and the 30th stock business day before the date in which the proposed transaction (acquisiton) shall take place, plus 10% to 15% as annually determined by the Superintendencia de Valores y Seguros. Transitory Article 10 of Law No. 19,705 established a term of three years during which the controlling shareholders of publicly traded corporations would be authorized to directly sell their controlling shares to a third party without requiring the buyer to issue a tender offer to all shareholders, if the authorization to sell was granted by a General Shareholders Meeting held within a six-month period after the enactment of the said Law. We did not address Transitory Article 10 of Law No. 19,705 within the prescribed six-month period, and thus, the three-year transition period under Transitory Article 10 does not apply to our shareholders. 40 There are currently no material legal or administrative proceedings pending against our company with respect to any regulatory matter and we believe, to the best of our knowledge, that it is in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business. We cannot guarantee, however, that present regulations will not be modified or that new regulations will not be enacted in the future which could materially affect the company. Although we do not expect any we cannot give assurances that the government will not institute proceedings against our company based on existing regulations. Environmental Matters Our operations are subject to both national and local regulations for the protection of the environment. The Chilean Health Code establishes minimum health standards and provides for regulation of air and water quality and sanitary landfills. The Ministry of Health has issued various regulations to control atmospheric pollution in the Santiago Metropolitan Region, which allow that in cases of emergency due to high levels of air pollution, the Santiago Metropolitan Regional section of the Servicio de Salud del Ambiente, a division of the Ministry of Health, has the authority to order the temporary reduction or cessation of the activities of companies in the Region that produce emissions. After a thorough review, we installed an electrostatic precipitator (scrubber) at our Padre Hurtado glass plant with sufficient capacity to reduce the cumulative emissions of all four furnaces to levels below the highest particulate emissions permissible, according to the Ministry of Health regulations to control atmospheric pollution in the Santiago Metropolitan Region as implemented in 1997. In 2000 we also purchased a second electrostatic precipitator for US$2.0 million, which enables our company to comply with current standards for particulate material. Operation of this precipitator began during the second quarter of 2000. There are no material legal or administrative proceedings pending against our company with respect to any environmental matters and we believe, to the best of our knowledge, that we are in compliance in all material respects with all applicable environmental regulations. The regulation of matters relating to environmental protection is not as well developed in Chile as it is in the United States and other countries. Our operations are now subject to Ley 19.300, Sobre Bases Generales del Medio Ambiente, or Law No. 19,300, Environmental Framework Law, which was enacted in 1994. This Chilean environmental legislation requires us to hire independent experts to conduct environmental impact assessments of any future projects, modifications to the existing facilities or activities that are likely to have a significant detrimental impact on the environment. The regulation also creates a National Environmental Commission, as well as regional commissions, to supervise any required environmental impact assessments for all new projects, including those of our company. While we believe, to the best of our knowledge, that we will continue to be in compliance with all applicable and environmental regulations, there can be no assurances that future legislative or regulatory developments will not impose restrictions on our company that would have a material effect on our operating results. Likewise, we also cannot give assurances that any governmental agency or third party will not institute proceedings against our company based on existing regulations. In addition there are no site removal or restoration costs. VI. Description of Property i. Glass Business We own all our principal glass production facilities and properties. Our principal properties include the corporate offices located in Las Condes, Santiago, the Padre Hurtado production facility on the outskirts of Santiago and the two sand mining and processing facilities located in San 41 Sebastian and El Turco, Cartagena, Chile. Our main glass production facility is located at our Padre Hurtado industrial complex in the Santiago Metropolitan Region. The Padre Hurtado facility, the largest of its kind in Chile, consists of four furnaces, equipped with highly automated functions for electronically forming, blowing, cooling, cleaning and packaging glass containers through electronically-controlled processes. The plant was initially built in 1964 and has been renovated and expanded periodically ever since. Our company, together with other members of the Elecmetal Group and a French insurance group, constructed an office building in Santiago to house their respective central administrative offices. We own one floor and certain retail locations in this office building and relocated our executive offices from our Padre Hurtado complex to the Santiago location in March 1994. ii. Vina Santa Rita Vina Santa Rita has six production facilities. The primary cellar is located in Alto Jahuel, in the town of Buin, where fine wine is made, aged and bottled. The facility can store 17.1 million liters and includes sophisticated vinification machinery and modern bottling lines for fine wines. In Los Lirios, Rancagua, the winery owns a family-style winemaking facility with a capacity of 25.5 million liters and a plant for vinification and bottling of family wines. In Pirhuin, in the locality of Lontue, the winery owns a vinification plant dedicated exclusively to the production of fine wines, with a capacity of 8.7 million liters. In Palmilla, in the province of Colchagua, Vina Santa Rita owns a modern cellar with vinification and aging facilities for 13.2 million liters of fine red wines exclusively. In addition, in Alto Jahuel north of Vina Santa Rita's facilities, are Vina Carmen's facilities with a plant comprising modern winemaking and storage equipment and storage capacity of 8.6 million liters of fine wines. Finally, in Ugarteche, Republic of Argentina, Vina Dona Paula has a plant with machinery and vinification systems with a capacity of 760,000 liters. Complementarily, Vina Santa Rita has 4 winemaking and storage plants leased with a total capacity of 21.5 million liters located at Isla de Maipo, Quinta de Tilcoco, Cumpeo and Pirque. In 1992, Vina Santa Rita purchased the original Hacienda Vina Santa Rita and the surrounding estate, which included more than 1,764 plantable acres (714 hectares), a chapel, a colonial manor and a 54-acre (22-hectare) park landscaped in the nineteenth century. Vina Santa Rita has remodeled the manor and refurbished the grounds for use as a guesthouse and business retreat. In addition, during the third quarter of 1997, Vina Santa Rita incorporated a subsidiary in Argentina, Vina Dona Paula S.A., which at the time, included acquiring approximately 800 hectares of land in the Mendoza province. In addition, during the last quarter of 1997, Constructora Apoger S.A., a construction company in which we own an 80% interest, completed the construction of an 18-story office building with 16,500 square meters of usable space at the intersection of Av. Apoquindo and Av. Gertrudis Echenique in Santiago. Vina Santa Rita owns two floors (the 6th and 7th) of the neighbouring Edificio Metropolis to house its respective central administrative offices. The 16th floor in the same building, which is used by Vina Carmen, belongs to Cristalerias de Chile. iii. Television Broadcasting Business Red Televisiva Megavision S.A. operates its television broadcasting station from wholly-owned facilities on Av. Vicuna Mackenna, in Santiago. 42 ACHS Award 2003: "Vision Empresarial" (Entrepreneurial Vision) During 2003 the Company's President, Mr. Ricardo Claro Valdes, received the award "Vision Empresarial", granted by the ACHS (Asociacion Chilena de Seguridad), which highlights the entrepreneur's permanent and enthusiastic concern for risk prevention, a concept always present in the formation, development and strategy of his companies. ITEM 5: Operating and Financial Review and Prospects Management's Discussion and Analysis of Financial Condition and Results of Operation General The following analysis should be read in conjunction with our consolidated financial statements, and the notes thereto, included in this annual report. We prepare our financial statements in accordance with Chilean GAAP, which differs in certain important respects from U.S. GAAP. See Note 37 for the audited consolidated financial statements. In addition, all financial information regarding our company contained in this Form 20-F, unless otherwise indicated, has been presented in constant pesos. Chilean peso amounts have been rounded to the nearest million pesos, unless otherwise indicated, and certain tabular information and percentage amounts may not add to 100% due to rounding. We are the largest producer of glass containers in Chile and also produce plastic containers through related companies, making us one of Chile's largest manufacturers of packaging products. In addition to our packaging operations, we have operations in Chile's wine, media and communications, and real estate industries, through our interests in Vina Santa Rita, Comunicacion, Informacion, Entretencion y Cultura S.A., Cristalchile Comunicaciones S.A. and Constructora Apoger S.A., respectively. The following table sets forth the percentage of net sales attributable to each of our lines of business for the periods indicated:

Results by Business Area (1) Millions of constant pesos and percentages ------------------------------------------ 2001 2002 2003 ---- ---- ---- Ch$ % Ch$ % Ch$ % --- --- --- --- --- --- Glass Packaging 68,435 46.3 71,768 44.1 74,549 43.9 Wine (Vina Santa Rita) 67,698 45.9 72,438 44.5 74,940 44.1 Media & Communications (CIECSA S.A.) 16,772 11.4 25,063 15.4 26,545 15.6 Real Estate (Apoger) 1,181 0.8 --- (2) ---(2) --- (2) --- (2) Adjustment (1) (6,437) (4.4) (6,601) (4.1) (6,093) (3.6) TOTAL 147,649 100.0 162,668 100.0 169,941 100.0 ----------------- (1) Adjustments are made to reflect the net effect of inter-company transactions. In the consolidated financial statements, adjustments have been made to reflect third party sales in each business sector. (2) Constructora Apoger S.A. did not have any sales in 2002 and 2003 because 100% of its office space was sold by 2001.

The results of our packaging and media and communications operations are dependent on the general level of economic activity in Chile, and, in particular, on sales levels in the wine, non-alcoholic beverages and beer sectors of the Chilean economy. The Chilean economy, including these 43 sectors, has experienced growth during recent years, which has resulted in increased overall demand for our packaging products. Sales of wine bottles accounted for 62.3% of net sales of our glass containers during 2003 and 61.8% of net sales during 2002. Sales are dependent in large part on levels of Chilean wine exports to Europe, North America, Asia and other countries in Latin America. Among other factors, our results and prospects may be materially and adversely affected if the rate of Chilean inflation exceeds the rate of inflation experienced in the United States (or other major trading partners of Chile), and the Chilean peso is not sufficiently devalued relative to the currencies of such countries. If this occurs, the costs of imports from such countries may become more attractive to our Chilean customers and the price of Chilean exports packaged in our containers, and Vina Santa Rita's wines may become less attractive to purchasers of these exports. In particular, approximately 54.5% of Santa Rita's consolidated revenues came from exported wines, which depend primarily on the exchange rate's evolution. At the same time, most of its costs are mainly related with Chile's rate of inflation. Therefore, fluctuations of the exchange rate could have favorable or unfavorable effects on Santa Rita's results. During the last several years, our packaging operations have experienced a concentration in sales in the wine, beer and non-alcoholic sectors. This shift is largely attributable to an increase in wine exports, the introduction of new containers, growth in consumption in all sectors and increasing competition from non-glass containers comprised mostly of plastic substitutes. Over the same period, Vina Santa Rita's sales have increasingly relied upon the continued strength of export markets. The following table sets forth the percentage of net sales of our company's glass container operations attributable to each of our company's glass container products for the periods indicated. See "Item 4. "Information on the company" for the actual net sales for each product: YEAR (1): 2001 2002 2003 --------- ---- ---- ---- Product Sector Wine 59.2% 61.8% 62.3% Beer 14.1 14.9 15.1 Soft Drinks 14.9 13.0 12.3 Liquor 8.3 7.5 7.7 Food 2.7 2.2 2.1 Pharmaceuticals 0.8 0.6 0.5 --------- ------ ------ TOTAL 100% 100% 100% --------------------- (1) Each respective year ends December 31. 44 The following table sets forth certain financial information as a percentage of our net sales for the periods indicated:

Year ended December 31, ------------------------------------------- YEAR: 2001 2002 2003 ----- ---- ---- ---- Net Sales 100.0% 100.0% 100.0% Cost of Sales (61.6) (58.8) (62.2) Gross Margin 38.4 41.2 37.8 Selling & Administrative expenses (15.4) (15.3) (15.7) Operating income 23.0 25.8 22.2 Non-operating income (loss) (6.0) (8.1) (16.5) Equity in net income (loss) of related companies (5.2) (5.5) (2.7) Interest income (expense), net (2.9) (2.7) (2.5) Other non-operating income (expense), net 2.8 (1.7) (0.8) Price-level restatement (0.7) 1.9 (10.5) Income tax (3.5) (4.0) (0.8) Extraordinary items 1.3 -- -- Minority interest (2.2) (2.8) (1.1) ---- ---- ---- Net Income 12.5% 11.0% 3.9% ----------------- (1) Set forth in millions of constant pesos of December 31, 2003 purchasing power.

Critical Accounting Estimates Financial Reporting Release No. 60, as updated by Financial Reporting Release No. 72, which were released by the Securities and Exchange Commission, requires all companies to include a discussion of critical accounting estimates and assumptions used in the preparation of the financial statements that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. It should be noted that in many cases, the accounting treatment of a particular transaction is specifically dictated by Chilean GAAP. Additionally, significant differences can exist between Chilean GAAP and U.S. GAAP, as explained in the section "U.S. GAAP Reconciliation" below. There are also areas in which management's judgment in selecting available alternatives would not produce materially different results. For a summary of significant accounting policies and methods used in the preparation of the financial statements, see Note 2 of the consolidated financial statements. The preparation of the financial statements required us to make assumptions, estimates and judgments that affected the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. There can be no assurance that actual results will not differ from these estimates under different assumptions or conditions. Impairment of Long-lived assets We assess the impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Long lived assets include property, plants, equipment, investments in other companies, intangible and other assets. Factors we consider important, which could trigger an impairment review include the following: o significant underperformance relative to expected historical or projected future operating results; 45 o significant changes in the manner of use of the acquired assets or the strategy for our overall business; and o significant negative industry or economic trends. When we determine that the carrying value of long- lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we evaluate the future cash flows to determine if we need to take an impairment charge. If the sum of the expected future cash flows (undiscounted) is less than the carrying amount of the assets, we recognize an impairment loss. The measurement of the impairment loss is based on the fair value of the long-lived assets which we generally determine using a discounted cash flow approach, stock valuations and recent comparable transactions in the market. In order to so estimate future cash flows, we must make assumptions about future events that are uncertain at the time of estimation. For example, we make assumptions and estimates about future interest rates, foreign exchange rates, price increases, and cost trends such as taxes and plant repair and maintenance and programming costs. As a result, the actual cash flows may materially differ from our estimate and we may be required to record impairment charges in the future. Net long-lived assets amounted to Ch$160,859 million as of December 31, 2003 and Ch$157,202 million as of December 31, 2002. During 2001, 2002 and 2003, we did not record impairment charges. Impairment of Goodwill We assess the impairment of goodwill in a similar manner as long-lived assets. The measurement of the impairment loss is based on the fair value of the investment, which we generally determine using a discounted cash flow approach, stock valuations and recent comparable transactions in the market. In order to estimate fair value, we must make assumptions about future events that are uncertain at the time of estimation. The results of these analyses show that the goodwill in consolidated subsidiaries were not impaired. Net goodwill amounted to Ch$8,978 million and Ch$9,822 million as of December 31, 2003 and 2002, respectively. Impairment of Investments in Related Companies We have ownership participation in several companies in the wine, glass container, plastic packaging and cable and communications industries that are accounted for using the equity method. Under the equity method, an investor recognizes its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements. An investor adjusts the carrying amount of an investment for its share of the earnings or losses of the investee subsequent to the date of investment including any impairment charges determined by the investee and reports the recognized earnings or losses in income. Dividends received from an investee reduce the carrying amount of the investment. Thus, the equity method recognizes increases or decreases, measured by generally accepted accounting principles in the economic resources underlying the investments. In addition to the test for impairment performed by the investee, we also review our equity method investments to determine if an other-than temporary loss has occurred. A series of operating losses of an investee or other factors may indicate that an other-than temporary decrease in the value of the investment has occurred, which should be recognized in our results of operations even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. We have analyzed each of our investments in related companies, concluding that none have other-than temporary decreases in value and therefore no additional impairments have been recorded in our investments in related companies. Investments in related companies amounted to Ch$103,059 million and Ch$110,749 million as of December 31, 2003 and 2002, respectively. 46 Income and Deferred Taxes In accordance with Chilean law, our company and each of our subsidiaries compute and pay tax on a separate basis. We estimate our actual current tax exposure, together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. As a transitional provision under Chilean GAAP, we recorded a contra asset or liability offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such contra asset or liability amounts must be amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax asset or liability relates calculated using the tax rates in effect at the time of reversal. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is unlikely, we establish a valuation allowance. Revisions to the estimated realizable value of deferred tax assets, estimated average reversal periods of contra assets or liabilities, or any other relevant assumptions could cause our provision for income taxes to vary significantly from period to period. The net deferred tax liability was Ch$2,970 million and Ch$2,855 million as of December 31, 2003 and 2002, respectively. Fair value of Financial Derivative Instruments Our financial derivative instruments consist of short duration foreign currency forward exchange contracts to purchase and sell U.S. dollars and Chilean Unidades de Fomento (UFs). We record these forward contracts at fair value. Generally, fair values under Chilean GAAP are estimated using the closing spot exchange rate at the period end, because listed forward market prices between these currencies are not widely available in the Chilean market, and spot rates are the accepted local standard used to estimate fair value. If methods used to assess fair value were to change in the future, our net position as it relates to our forward foreign exchange contracts could also change. The net liability related to forward contracts was Ch$2,398 million and Ch$629 million as of December 31, 2003 and 2002, respectively. Argentine peso to U.S. dollar Exchange Rate From 1991 through 2001, the Argentine peso was pegged to the U.S. dollar at a rate of 1 Argentine peso to 1 U.S. dollar. In early December 2001, restrictions were put in place that prohibited cash withdrawals from banks and currency exchange activity was effectively halted. In January 2002, the Argentine government announced its intent to create a dual currency system with an "official" fixed exchange rate of 1.4 pesos to 1 U.S. dollar for import, and export transactions and a "free" floating exchange rate for other transactions. On January 11, 2002, the exchange rate market holiday ended and closing new "free" floating exchange rates ranged from 1.6 to 1.7 pesos to 1 U.S. dollar. On February 3, 2002, the Argentine government issued a decree that (1) eliminates the fixed exchange rate; (2) establishes one free floating exchange rate for the Argentine peso; and (3) requires U.S. dollar-denominated obligations be converted to peso-denominated obligations using mandated conversion rates, depending on the type of obligation. The market for the floating exchange rate opened on February 11, 2002. According to Oficio Circular No. 81 of the Chilean Superintendencia de Valores y Seguros, dated January 22, 2002, the subsidiary Cristalchile Inversiones S.A. adjusted financial statements of Rayen Cura S.AI.C. as of December 31, 2001, considering an exchange rate of 1.7 Argentine pesos per U.S. dollar. The accounting charge to results as a consequence of the devaluation of 47 the Argentine peso using this exchange rate was Ch$2,316 million as of December 31, 2001. If a different exchange rate had been used, a materially different adjustment could have resulted. Chilean Technical Bulletin No. 64 on Foreign Investments In accordance with BT 64, described in Note 2(o) to the consolidated financial statements, the financial statements of foreign subsidiaries that operate in countries exposed to significant risks, and which are not considered to be an extension of the parent company's operations, are measured in U.S. dollars. We have remeasured our foreign investments into U.S. dollars under this requirement as follows: o Monetary assets and liabilities are translated at year-end rates of exchange between the United States dollar and the local currency. o All non-monetary assets, liabilities, and shareholders' equity are translated at historical rates of exchange between the United States dollar and the local currency. o Income and expense accounts are translated at average rates of exchange between the United States dollar and the local currency. o The effects of any exchange rate fluctuations are included in the results of operations for the period. Under BT 64, the investment in the foreign subsidiary is price-level restated, the effects of which are reflected in income, while the effects of the foreign exchange gain, or loss, between the Chilean peso and the U.S. dollar are reflected in equity in the account "Cumulative Translation Adjustment"; as the foreign investment itself is measured in U.S. dollars. In our opinion, 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. 2003 Compared with 2002 Our consolidated results include the results of each of Vina Santa Rita, Comunicacion, Informacion, Entretencion y Cultura S.A., Cristalchile Comunicaciones S.A., Cristalchile Inversiones S.A. and Constructora Apoger S.A. All companies contribute to sales and operating results except for Cristalchile Comunicaciones S.A. and Cristalchile Inversiones S.A., which do not contribute to sales or operating results because they are not controlled and are therefore accounted for under equity method. Net Sales Our consolidated sales reached Ch$169,941 million (US$286.2 million), which represents a 4.5% increase over year 2002. This increase is primarily explained by higher sales in the glass container business (3.9%), Vina Santa Rita (3.5%), and Comunicacion, Informacion, Entretencion y Cultura S.A. (5.9%). During 2003, net sales from the glass container operations, Vina Santa Rita and Comunicacion, Informacion, Entretencion y Cultura S.A. were 40.3%, 44.1% and 15.6% of total consolidated net sales, respectively. 48 In 2003, the glass container operations reported sales of Ch$74,549 million (US$125.5 million), a 3.9% increase over 2002. Sales volume measured in tons increased by 6.2% to 259,639 tons during 2003, while average prices per ton as measured in constant pesos decreased approximately 2.2% during 2003. Net sales of glass containers to the wine industry showed a 4.7% growth over 2002, due to an 8.3% increase in exports of bottled wine, which reached 24.5 million cases in 2003. Net sales to the non-alcoholic beverage sector decreased by 1.5% due to lower sales of one-way formats, partially compensated by higher sales of returnable formats due to the launching of a 237cc crown top bottle. Net sales in the beer sector increased by 5.2% during the year due to higher sales of one-way formats, partially compensated by lower sales of returnable formats. Liquor bottle net sales increased by 7.5% due to the launching of a 700cc format for a new pisco brand. Net sales of containers to the food industry decreased by 3.3% due to the sluggish economic recovery. Vina Santa Rita's consolidated net sales increased by 3.5% reaching Ch$74,940 million (US$126.2 million) in 2003. Vina Santa Rita's wine sales in liters to the domestic market grew by 3.3%, while export volumes increased by 4.1% during 2003. Prices in the local market dropped by 3.9% in real terms as a result of strong competition. Net sales in constant pesos to the domestic market decreased by 0.7% while net export sales rose strongly by 7.6% as a result of the volume increase and also due to the appreciation of the EURO and other export currencies against the U.S. dollar during the year. This volume sales increase in the export market was due to increased exports to Canada, 11.7%; Asia plus Africa, 38.6% and Latin America, 16.9%; partially offset by lower sales to Europe, 0.2% and the United States, 0.5% during the year. Vina Santa Rita sold its wines for an average price of US$33.1 per case, an increase of 8.1% over 2002. This average price per case is 41% higher than the average export price per case for the Chilean bottled wine industry as a whole, which averaged US$23.5 per case in 2003 (US$23.1 in 2002). Comunicacion, Informacion, Entretencion y Cultura S.A.'s net sales during 2003 reached Ch$26,545 million (US$44.7 million), representing a 5.9% increase over 2002, coming from its main subsidiary, Red Televisiva Megavision S.A. This sales increase was attributable to Mega's higher proportional participation in total Chilean TV advertising spending during 2003. Red Televisiva Megavision S.A. achieved an average audience share of 23.9% in 2003 compared with 26.1% in 2002. Cost of Sales Cost of sales for our glass and plastic container operations include, among other things, the cost of raw materials, such as silica sand, soda ash, limestone, recycled glass, energy (natural gas and electricity), PET, HDPE, depreciation expenses attributable to production, wages, other employment expenses associated with production and certain overhead expenses and for Vina Santa Rita also include, among other things, grapes, packaging materials (such as corks and labels), glass bottles, chemical products and Tetra packs. For Comunicacion, Informacion, Entretencion y Cultura S.A., costs of sales also include, among other things, programming costs. Consolidated cost of sales during 2003 was Ch$105,686 million, representing a 10.4% increase over 2002. Cost of sales as a percentage of net sales was 62.2% in 2003 and 58.8% in 2002. Cost of sales for the glass container operations was Ch$44,636 million during 2003, representing a 6.6% increase over 2002. Cost of sales as a percentage of net sales for the glass packaging operations increased from 58.3% in 2002 to 59.9% in 2003. This increase is due to products imported while furnace B was reconstructed. Cost of sales for Vina Santa Rita totaled Ch$47,550 million in 2003, representing a 5.7% increase over 2002. Higher volumes in both the export and local markets help 49 explain this increase. Cost of sales as a percentage of net sales increased from 62.1% in 2002 to 63.5% in 2003 due to higher costs of wine grape musts. Cost of sales for Comunicacion, Informacion, Entretencion y Cultura S.A. totaled Ch$19,273 million in 2003, compared to Ch$15,466 million in 2002, a 24.6% increase. Cost of sales as a percentage of net sales increased from 61.7% in 2002 to 72.6% in 2003, as higher internal productions resulted in higher costs. Selling and Administrative Expenses Consolidated selling and administrative expenses in 2003 totaled Ch$26,614 million, representing a 6.8% increase over 2002. As a percentage of sales, however, selling and administrative expenses increased slightly (15.7% in 2003 and 15.3% in 2002). Selling and administrative expenses for the glass container operations totaled Ch$5,567 million in 2003, representing a 2.0% decrease as compared with 2002. As a percentage of sales, SG&A expenses were 7.5% (7.9% in 2002). Selling and administrative expenses for Vina Santa Rita totaled Ch$17,660 million in 2003, representing a 12.6% increase over 2002. As a percentage of net sales, selling and administrative expenses were 21.7% in 2002 and 23.6% in 2003. This increase was mainly attributable to higher sales along with additional promotional and marketing efforts in the local and export markets. Selling and administrative expenses for Comunicacion, Informacion, Entretencion y Cultura S.A. totaled Ch$3,750 million in 2003, representing a 3.6% increase from 2002. As a percentage of net sales however selling and administrative expenses were 14.1% in 2003 and 14.4% in 2002. Operating Income Consolidated operating income for 2003 was Ch$37,642 million (US$63.4 million), which represents a 10.4% decrease compared with 2002. Consolidated operating margin was 22.1% during 2003 (25.8% in 2002). Operating income from the glass container operations totaled Ch$24,347 million (US$41.0 million) in 2003, 0.5% over 2002. Operating margin decreased from 33.8% in 2002 to 32.7% in 2003, mainly due to higher costs of sales due to products imported while furnace B was reconstructed. Operating income for Vina Santa Rita decreased by 17.2% to Ch$9,730 million during 2003. Operating margin decreased from 16.2% in 2002 to 13.0% in 2003, as a result of higher costs of musts, lower prices in the domestic market and higher marketing expenditures to support export and domestic sales. Comunicacion, Informacion, Entretencion y Cultura S.A. reached an operating income of Ch$3,521 million in 2003, compared to an operating income of Ch$5,978 million in 2002. This is due to a decrease in the operating result at Red Televisiva Megavision S.A. While sales increased, operating income at Mega decreased reaching Ch$3,505 million (US$5.9 million) in 2003, compared with Ch$6,024 million operating income in 2002. Operating margin at CIECSA decreased as well, from 23.9% in 2002 to 13.3% of net sales in 2003, due to higher costs at Mega from more internal productions. Non-operating Income (Loss) 50 During 2003, we recorded a consolidated non-operating loss of Ch$28,027 million, compared with a Ch$13,132 million non-operating loss during 2002. The following table sets forth the non-operating income (loss) detail for the periods indicated: Year Ending December 31, (Million constant pesos) ------------------------------ 2002 2003 ---------- ---------- Ch$ Ch$ Equity in net loss of related companies (8,991) (4,539) Goodwill amortization (653) (577) Interest expense, net (4,330) (4,236) Price-level restatement, net (1,971) (803) Foreign currency translations, net 4,998 (17,065) Other non-operating income (expense), net (2,185) (808) ---------- ---------- TOTAL non-operating loss (13,132) (28,027) The increase in the non-operating loss is mainly attributed to the following: in 2003, we registered a loss from exchange differences of Ch$17,065 million compared to income of Ch$4,998 million in 2002. The loss from exchange differences was originated by a decrease of the U.S. dollar/Chilean peso exchange rate that affected the Company's net positive foreign currency position. The net positive foreign currency position results from the following: U.S. dollar-denominated financial assets plus foreign currency future exchange contracts, minus foreign currency-denominated liabilities. The aforementioned loss was partially compensated by a lower net loss from unconsolidated subsidiaries of Ch$4,539 million (Ch$8,991 million loss in 2002), mainly due to improved results at Rayen Cura and Vina Los Vascos and a lower loss at Metropolis-Intercom. The net loss from subsidiaries includes a Ch$4,175 million charge (Ch$4,096 million charge in 2002) corresponding to goodwill amortization, which does not constitute cash flow. Minority Interest During 2003, minority interest participation in income was Ch$1,841 million compared to Ch$4,596 million during 2002. This decrease is primarily explained by lower performance at Vina Santa Rita and Comunicacion, Informacion, Entretencion y Cultura S.A. during 2003. Income Taxes Our individual tax expense was Ch$1,464 million in 2003 compared to Ch$4,075 million in 2002. Our effective tax rate was 18.6% in 2003 and 18.6% in 2002. Taxes are imposed separately on each company. Income is not consolidated for tax purposes. Net Income During 2003, our net income was Ch$6,427 million (US$10.8 million), compared to Ch$17,837 million in 2002. At consolidated level, this is explained by a lower operating income but mainly by a higher non-operating loss that reached Ch$28,027 million in 2003 (Ch$13,132 million loss in 2002). This was partially compensated by lower charges for income tax and minority interest in 2003 51 (Ch$1,348 million and Ch$1,841 million respectively, compared to Ch$6,462 million and Ch$4,596 million charges in 2002, respectively). 2002 Compared with 2001 Our consolidated results include the results of each of Vina Santa Rita, Comunicacion, Informacion, Entretencion y Cultura S.A., Cristalchile Comunicaciones S.A., Cristalchile Inversiones S.A. and Constructora Apoger S.A. All companies contribute to sales and operating results except for Cristalchile Comunicaciones S.A. and Cristalchile Inversiones S.A., which do not contribute to sales or operating results because they are not controlled and are therefore accounted under equity method. Net Sales Our consolidated sales reached Ch$162,668 million (US$273.9 million), which represents a 10.2% increase over year 2001. This increase is primarily explained by higher sales in the glass container business (4.9%), Vina Santa Rita (7.0%), and Comunicacion, Informacion, Entretencion y Cultura S.A. (49.4%). During 2002, net sales from the glass container operations, Vina Santa Rita and Comunicacion, Informacion, Entretencion y Cultura S.A. were 42.4%, 42.7% and 14.8% of total consolidated net sales, respectively. In 2002, the glass container operations reported sales of Ch$71,768 million (US$120.9 million), a 4.9% increase over 2001. Sales volume measured in tons increased by 4.1% to 244,402 tons during 2002, while average prices per ton as measured in constant pesos increased approximately 0.7% during 2002. Net sales of glass containers to the wine industry showed a 9.5% growth over 2001, due to a 5.6% increase in exports of bottled wine, which reached 22.6 million cases in 2002. Net sales to the non-alcoholic beverage sector decreased by 8.6% despite an increase in net sales of one-way containers due to stock build-ups from client returnable formats during 2001. Net sales in the beer sector increased significantly by 10.5% during the year due to the success of non-returnable (one-way) formats, namely the 250 cc and 1,000 cc bottles. Net sales of containers to the food industry decreased by 13.5% due to lower food exports within Latin America. Vina Santa Rita's consolidated net sales increased by 7.0% reaching Ch$72,439 million (US$122.0 million) in 2002. Sociedad Anonima Vina Santa Rita's wine sales in liters to the domestic market grew by 13.0%, while export volumes increased by 7.0% during 2002. Prices in the local market dropped by 13.0% in real terms as a result of strong competition and lower raw material costs due to a large harvest, which caused an oversupply of wine. Net sales in constant pesos to the domestic market decreased by 2.0% while net export sales rose by 15.0% during the year as a result of the volume increase and a 9.7% depreciation of the Chilean peso against the U.S. dollar during 2002. This volume sales increase in the export market was due to increased exports to Europe, 7.3%; the United States, 8.7% and Canada, 21.8%; partially offset by lower sales within Latin America, 7.5%; and Asia plus Africa, 8.8% during the year. Vina Santa Rita sold its wines for an average price of US$30.6 per case, an increase of 1.6% without considering the favorable increase in the U.S. dollar to Chilean peso exchange rate. This average price per case is 32% higher than the average export price per case for the Chilean wine industry as a whole, which averaged US$23.1 per case in 2002 (US$23.9 in 2001). Comunicacion, Informacion, Entretencion y Cultura S.A.'s net sales during 2002 reached Ch$25,064 million (US$42.2 million), representing a 49.4% increase over 2001, mainly coming from its main subsidiary, Red Televisiva Megavision S.A. This considerable sales increase was attributable to a higher viewership share resulting from increased acceptance of new live programming, which led to 52 increased advertising spending. Red Televisiva Megavision S.A. achieved an average audience share of 26.1% in 2002 compared with 19.1% in 2001. Constructora Apoger S.A. did not record sales in 2002 since the previous year it had sold the remaining unsold space in the office building it constructed in the district of Las Condes in Santiago. Cost of Sales Cost of sales for our glass and plastic container operations and for Vina Santa Rita include, among other things, the cost of raw materials, such as silica sand, soda ash, limestone, recycled glass, energy (natural gas and electricity), PET, HDPE, grapes, packaging materials, depreciation expenses attributable to production, wages, other employment expenses associated with production and certain overhead expenses. For Comunicacion, Informacion, Entretencion y Cultura S.A., costs of sales also include, among other things, programming costs. Consolidated cost of sales during 2002 was Ch$95,726 million, representing a 5.2% increase over 2001. However, as a percentage of sales, costs decreased to 58.8% of sales, down from 61.6% in 2001. Cost of sales for the glass container operations was Ch$41,860 million during 2002, representing a 1.1% increase over 2001, due to higher costs coming from the depreciation of the Chilean peso against the U.S. dollar, which had a direct effect on the cost of energy and imported materials. Cost of sales as a percentage of net sales for the glass packaging operations decreased from 61% in 2001 to 58% in 2002. Cost of sales for Vina Santa Rita totaled Ch$45,002 million in 2002, representing a 7.7% increase over 2001. Higher volumes in both the export and local markets help explain this increase. Cost of sales as a percentage of net sales increased from 61.7% in 2001 to 62.1% in 2002 due to higher dry costs (dry costs include corks, bottles and labeling). Cost of raw materials, such as grape musts, in the local market dropped 6.1% in real terms as a result of the 2002 harvest, which surpassed that of 2001 and caused an oversupply of grape musts in the Chilean wine market. Cost of sales for Comunicacion, Informacion, Entretencion y Cultura S.A. totaled Ch$15,466 million in 2002, 14.6% over 2001. However, cost of sales as a percentage of net sales decreased from 80.0% in 2001 to 62.0% in 2002. Selling and Administrative Expenses Consolidated selling and administrative expenses in 2002 totaled Ch$24,916 million, representing a 9.5% increase over 2001. As a percentage of sales, however, selling and administrative expenses remained flat(15.4% in 2001 and 15.3% in 2002). Selling and administrative expenses for the glass container operations totaled Ch$5,679 million in 2002, representing a 4.2% increase over 2001. However, as a percentage of sales, SG&A expenses remained flat at 8.0%. Selling and administrative expenses for Vina Santa Rita totaled Ch$15,690 million in 2002, representing a 10.0% increase over 2001. This increase was mainly attributable to higher sales along with additional promotional and marketing efforts in the local and export markets. As a percentage of net sales, selling and administrative expenses were 21.7% in 2002 and 21.1% in 2001. 53 Selling and administrative expenses for Comunicacion, Informacion, Entretencion y Cultura S.A. totaled Ch$3,619 million in 2002, representing a 38.6% increase from 2001 due to the considerably higher sales level reached in 2002. As a percentage of net sales however selling and administrative expenses were 14% in 2002 and 16% in 2001. Operating Income Consolidated operating income for 2002 was Ch$42,026 million (US$70.8 million), which represents a 24.0% increase compared with 2001. Consolidated operating margins increased to 25.8% during 2002 (23.0% in 2001). Operating income from the glass container operations totaled Ch$24,229 million (US$40.8 million) in 2002, a 12.3% increase over 2001. Operating margin increased from 31.5% in 2001 to 33.8% in 2002, mainly due to increased sales volume, better efficiencies and decreased sales of lower-margin imported products. Operating income for Vina Santa Rita increased by 1.0% to Ch$11,746 million during 2002. Operating margin for Vina Santa Rita decreased from 17.2% in 2001 to 16.2% in 2002, as a result of higher marketing expenditures to support export and domestic sales. Comunicacion, Informacion, Entretencion y Cultura S.A. reached an operating income of Ch$5,978 million in 2002, compared to an operating income of Ch$661 million during 2001. This is due to improved operating results at Red Televisiva Megavision S.A. Improved programming produced more advertising sales and increased operating income at Mega reaching Ch$6,024 million (US$10.1 million) in 2002, compared with Ch$661 million operating income in 2001. Operating margin increased importantly as well, from 3.9% in 2001 to 23.9% of net sales in 2002. Non-operating Income During 2002, we recorded a consolidated non-operating loss of Ch$13,132 million, compared with an Ch$8,786 million loss during 2001. The following table sets forth the non-operating income detail for the periods indicated: Year Ending December 31, --------------------------- (Millions of constant pesos) 2001 2002 -------- -------- Ch$ Ch$ Equity in net loss of related companies (7,692) (8,991) Goodwill amortization (855) (653) Interest expense, net (4,257) (4,330) Price-level restatement, net (2,361) (1,971) Foreign currency translations, net 1,401 4,998 Other non-operating income (expense), net 4,978 (2,184) -------- -------- TOTAL non-operating loss (8,786) (13,132) The increase in the non-operating loss is mainly attributed to the following: in 2001, we registered an extraordinary income generated from the sale of investment shares of CGE (Compania General de Electricidad), which generated a Ch$3,007 million income, and the association in the plastic container market through a joint venture between Crowpla-Reicolite S.A. and Multipack, which generated a Ch$2,071 million gain on the transfer to joint-venture during 2001. In 2002, we recorded a higher net loss from investments in related companies that amounted to Ch$8,991 million (Ch$7,692 million in 54 2001), mainly due to higher losses in Rayen Cura S.A.I.C. (Ch$2,145 million in 2002, Ch$1,841 million in 2001) as a consequence of the Argentine peso devaluation [4] and in Cordillera Comunicaciones Ltda. The latter net loss includes a Ch$4,096 million charge (Ch$4,114 million charge in 2001) that corresponds to goodwill amortization, which does not constitute cash flow. The aforementioned was partially compensated by a higher income from foreign currency translations (Ch$4,998 million in 2002 compared to Ch$1,401 million in 2001). Minority Interest During 2002, minority interest participation in income was Ch$4,596 million compared to Ch$3,299 million during 2001. This increase is primarily explained by improved performance at Vina Santa Rita, and Comunicacion, Informacion, Entretencion y Cultura S.A. during 2002. Income Taxes Our individual tax expense was Ch$4,075 million in 2002 compared to Ch$3,475 million in 2001. Our effective tax rate was 18.6% in 2002, as compared to 17.3% in 2001. Taxes are imposed separately on each company. Income is not consolidated for tax purposes. Extraordinary Items In 2002 we did not record extraordinary items. In 2001 we had a Ch$1,857 million income from extraordinary items, corresponding to a reversal of a maintenance provision for Furnace C in the glass container business. Net Income During 2002, our net income was Ch$17,837 million (US$30.0 million), compared to Ch$18,486 million in 2001. Despite achieving a 24.0% higher operating income, net income was lower. This is explained by a higher non-operating loss that reached Ch$13,132 million in 2002 (Ch$8,786 million in 2001), a higher income tax (Ch$6,462 million in 2002 compared to Ch$5,183 million in 2001), and an increase in the participation of minority interest in results from operations in subsidiaries (Ch$4,596 million in 2002 compared to Ch$3,299 million in 2001) and the absence of extraordinary items during year 2002 (Ch$1,857 million income in 2001). Liquidity and Capital Resources (2003 compared with 2002) We generated a net cash flow from operations of Ch$35,435 million in 2003 and Ch$49,870 million in 2002. At December 31, 2003, we had working capital of Ch$127,707 million, compared with working capital of Ch$139,338 million at December 31, 2002. We have historically financed our working capital requirements with cash generated from operations. In the future, we expect to continue to finance our working capital requirements from cash generated by operations. Our management believes that our working capital is sufficient for our present requirements. In the event that cash generated from operations is at any time insufficient to finance our working capital requirements, we would seek to finance such working capital needs through new debt financing. __________________ [4] Considering an exchange rate of 3.32 Argentine pesos per US dollar. 55 Current assets decreased by Ch$14,194 million, or 7.9% over the previous year, primarily due to decreases in time deposits and marketable securities of Ch$8,847 million and Ch$8,523 million, offset by an increase of Ch$3,139 million in recoverable taxes. The decrease in marketable securities is primarily due to the depreciation of the US Dollar to Chilean Peso exchange rate from Ch$718.61 to Ch$593.80 per US Dollar. Shareholders' consolidated equity was Ch$228,322 million as of December 31, 2003 and Ch$233,643 million as of December 31, 2002. Our ratio of total debt to equity was 0.92:1 on December 31, 2003 and 0.96:1 at December 31, 2002. In August 2002 Cristalerias effected a long-term bond placement for 4,100,000 Chilean Unidades de Fomento, or ChUF, (equivalent to US$90.1 million) in the local market. Of the total, ChUF 2,000,000 were placed with a final maturity of 6 years at an annual interest rate of 5.3% and ChUF 2,100,000 were placed with a final maturity of 21 years at an annual interest rate of 6.5%. During September 2002, part of the funds obtained from the bond issuance were used to prepay half (US$50 million) of an existing syndicated loan. The remaining balance of the syndicated loan (US$50 million) was renegotiated during October 2002 with nine international financial institutions, with a final maturity of 5 years, amortizations beginning 42 months from the closing date and at an annual interest rate of LIBOR plus 0.8%. Total indebtedness owed to banks and financial institutions and to the public in the form of bonds for our company, including accrued interest, was Ch$128,813 million on December 31, 2003 and Ch$140,735 million at December 31, 2002. Short-term indebtedness with financial institutions and the public was Ch$5,843 million at December 31, 2003, which represented the short-term debt and current portion of long-term debt and Ch$6,383 million on December 31, 2002. At fiscal year end 2003, long-term indebtedness owed to banks and financial institutions and to the public in the form of bonds (excluding the short-term portion) totaled Ch$122,970 million of which Ch$ 33,294 million was long-term obligations with banks and financial institutions and Ch$89,676 million in long-term obligations to the public represented by bonds. We believe that the terms and conditions of our debt agreements are not out of the ordinary and that we are in compliance in all material respects with such terms and conditions. For further information with respect to the material terms of our and our subsidiaries' indebtedness, see Notes 17 and 19, of the consolidated financial statements. During 2003, we incurred capital expenditures of Ch$25,644 million at a consolidated level. The aforementioned figure included Ch$19,763 million (US$33.3 million) related to the glass container business. The latter included total reconstruction and capacity increase of one of our four glass melting furnaces (furnace B) and the incorporation of a new production line (which now total twelve). During 2003, Ch$ 4,830 million (US$8.1 million) were invested to increase Vina Santa Rita's wine making capacity (through the acquisition of technologically advanced equipment) to increase the capacity of fine wine cellars, to increase the planted lands owned by our company, and to modernize production processes. This was accomplished by installing new stainless steel tanks and by acquiring high-tech equipment. In 2003, Red Televisiva Megavision S.A. (CIECSA's main subsidiary), invested approximately Ch$ 1,051 million (US$1.8 million), mainly in broadcasting equipment. In 2002, we incurred capital expenditures of Ch$15,654 million at consolidated level, which included Ch$10,403 million (US$17.5 million) related to the glass container business. The latter included the partial refurbishing of furnace A and its glass-forming machines. In 2002, Santa Rita invested Ch$ 4,728 million (US$8.0 million) mainly in the agricultural and oenologic areas, aimed at increasing and renovating the fine winemaking facilities and increase fine wine storage capacity. In 2002, Red Televisiva Megavision S.A. invested approximately Ch$ 521 million (US$0.9 million), mainly in broadcasting equipment. In 2001, we incurred capital expenditures of Ch$ 34,049 million (US$57.3 million) at consolidated level. This figure included Ch$ 26,739 million (US$45.0 million) for the glass container business, which mainly included reconstruction and capacity increase of Furnace C. In 2001 Santa Rita invested Ch$ 7,900 million (US$13.3 million) in supplementing the vineyard's planted land holdings by expanding winemaking capacity through the installation of new stainless steel tanks and the acquisition of equipment; in addition to a new wine cellar in Alto Jahuel. In 2001 Red Televisiva Megavision S.A. invested Ch$303 million (US$ 0.5 million) mainly in broadcasting equipment. 56 As of December 31, 2003, at a consolidated level we had Ch$67,394 million (US$113.5 million) in cash, time deposits and marketable securities, a substantial portion of which is available to us for future investments. We believe that cash flow from operations, cash balances, and available lines of credit, will enable our company to meet working capital, capital expenditure and debt service requirements for 2004. Moreover, an integral part of our financial policy is to maintain adequate liquidity while maximizing shareholder value through strategic investments and alliances. As of December 31, 2003, there were no significant restrictions on dividends or cash. Moreover, there are no significant commitments for the use of funds in the future. The following table presents schedules of contractual obligations and commercial commitments as of December 31, 2003:

As of December 31, 2003 ------------------------------------------------------------------ Less than 1 After 5 Contractual Obligations Total year 1-3 years 4-5 years years --------- --------- --------- --------- --------- (Ch$ millions) Long-term Debt 150,545.4 7,731.1 65,157.7 11,686.3 65,970.3 Capital Lease Obligations -- -- -- -- -- Operating Leases -- -- -- -- -- Unconditional Purchase Obligations 6,059.2 6,059.2 -- -- -- Total Contractual Cash Obligations 156,604.6 13,790.3 65,157.7 11,686.3 65,970.3

Liquidity and Capital Resources (2002 compared with 2001) We generated a net cash flow from operations of Ch$49,870 million in 2002 and Ch$40,873 million in 2001. At December 31, 2002, we had working capital of Ch$139,338 million, compared with working capital of Ch$72,339 million at December 31, 2001. We have historically financed our working capital requirements with cash generated from operations. In the future, we expect to finance our working capital requirements from cash generated by operations. Our management believes that our working capital is sufficient for our present requirements. In the event that cash generated from operations is at any time insufficient to finance our working capital requirements, we would seek to finance such working capital needs through new debt financing. Total individual assets for the glass container operations increased by 15.0% from Ch$316,978 million in 2001 to Ch$364,371 million in 2002. This increase in assets is primarily explained by an increase in current assets as a consequence of short-term investments made with part of the funds obtained from a UF 4,200,000 (US$97.9 million, historic) long-term bond issue effected in the local market in August, 2002. Vina Santa Rita's total consolidated assets increased by 3.4% from Ch$119,188 million on December 31, 2001, to Ch$123,300 million on December 31, 2002, reflecting the purchase of winemaking equipment, expansion of the wine storing capacity, planting of land owned by the winery and modernization of productive processes. Comunicacion, Informacion, Entretencion y Cultura S.A.'s total consolidated assets increased to Ch$33,382 million on December 31, 2002 from Ch$28,408 million at December 31, 2001. Shareholders' consolidated equity increased to Ch$233,643 million as of December 31, 2002 from Ch$221,988 million as of December 31, 2001. Our ratio of debt to equity increased from 0.84:1 on December 31, 2001 to 0.96:1 at December 31, 2002. The main reason behind this increase is a long-term bond placement for 4,100,000 Chilean Unidades de Fomento, or ChUF, (equivalent to US$90.1 million) effected by Cristalerias in August 2002, in the local market. Of the total, ChUF 2,000,000 were 57 placed with a final maturity of 6 years at an annual interest rate of 5.3% and ChUF 2,100,000 were placed with a final maturity of 21 years at an annual interest rate of 6.5%. During September 2002, part of the funds obtained from the bond issuance were used to prepay half (US$50 million) of an existing syndicated loan. The remaining balance of the syndicated loan (US$50 million) was renegotiated during October 2002 with nine international financial institutions, with a final maturity of 5 years, amortizations beginning 42 months from the closing date and at an annual interest rate of LIBOR plus 0.8%. Total indebtedness with financial institutions and the public for our company, including accrued interest, was Ch$138,769 million on December 31, 2002 and Ch$105,775 million at December 31, 2001. Short-term indebtedness with financial institutions and the public was Ch$6,383 million at December 31, 2002, which represented the short-term debt and current portion of long-term debt owed to banks and financial institutions and to the public in the form of bonds. At fiscal year end 2002, long-term indebtedness (excluding the short-term portion) totaled Ch$44,721 million in long-term obligations to banks and financial institutions and Ch$89,631 million in long-term obligations to the public represented by bonds. We believe that the terms and conditions of our debt agreements are not out of the ordinary and that we are in compliance in all material respects with such terms and conditions. For further information with respect to the material terms of our and our subsidiaries' indebtedness, see Notes 14 and 15, of the consolidated financial statements. As of December 31, 2002, at consolidated level we had Ch$83,700 million (US$141.0 million) in cash, time deposits and marketable securities, a substantial portion of which is available to us for future investments. An integral part of our financial policy is to maintain adequate liquidity while maximizing shareholder value through strategic investments and alliances. As of December 31, 2002, there were no significant restrictions on dividends or cash. Moreover, there are no significant commitments for the use of funds in the future. 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--Risks Relating to Chile," for a discussion of governmental and political factors that could materially affect investments by U.S. shareholders. Trend Information Our financial results will likely continue to be influenced by factors such as changes in the level of consumer demand for glass containers and wine, government policies regarding containers, wine and media and communications industries, and the raw materials' costs associated to each (please refer to Item 4 - Raw Materials). In addition, we expect our financial results in 2004 to be influenced by: o increased or decreased competition from glass containers substitutes and direct competitors (Please refer to Item 4 - Competition); o exchange rate fluctuations, particularly increases and decreases in the value of the Chilean peso relative to the U.S. dollar and other foreign currencies (Please refer to Item 11 - Exchange rate risks); o increases or decreases in per capita consumption of the main sectors that our company serves (such as wine, beer, and soft drinks), of increased or decreased demand in Chile for glass containers, as well as projected increases or decreases in Chilean wine consumption in the Chilean and World markets, each of which could increase or decrease sales. Research and Development We seek to provide our glass customers with innovative product alternatives to meet their packaging needs. However, no single new product, refinement, or group of new products and refinements, has been introduced recently or is scheduled for introduction that would require significant or material investment in research and development. We do not anticipate significant investment in technological research and development in the near future. Rather, we intend to continue market research and to purchase established technologies in order to update and diversify our product line. U.S. GAAP Reconciliation The principal differences between Chilean GAAP and U.S. GAAP as they relate to our company are the elimination of reappraisals of fixed assets, the inclusion of overhead costs in inventories, the elimination of provisions for future furnace repairs, the recording of a liability to reflect minimum dividend payments required by law, the recording of deferred taxes, the capitalization of mold equipment, differences in equity-method investments, the accounting for derivatives and the differences in recognition criteria and amortization policies for goodwill. For a more detailed explanation of these differences between Chilean GAAP and U.S. GAAP, see Note 37 of the consolidated financial statements. Pursuant to Chilean GAAP, our financial statements recognize the effects of inflation in accordance with BT 64. As permitted by Form 20-F, the effect of inflation accounting under BT 64 has not been reversed in the reconciliation to U.S. GAAP. Net income under U.S. GAAP for the years ended December 31, 2001, 2002 and 2003 was Ch$15,202 million, Ch$17,879 million and Ch$5,271 million respectively. Net income under Chilean GAAP for the years ended December 31, 2001, 2002 and 2003 was Ch$18,487 million, Ch$17,837 million and Ch$6,427 million respectively. Net income under U.S. GAAP was 17.8% lower than under Chilean GAAP in 2001 and 0.2% higher than under Chilean GAAP in 2002. Net income under U.S. GAAP was 18.0% lower than under Chilean GAAP in 2003. Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements. 58 ITEM 6: Directors, Senior Management and Employees Directors and Officers of Registrant Our company is managed by the board of directors, which, in accordance with the company's by-laws, must consist of ten directors who are elected at the general shareholders' meeting. The entire board of directors is elected every three years. The board of directors may appoint replacements to fill any vacancies that occur during periods between elections. Our company's executive officers are appointed by the board of directors, and hold office at the discretion of the board of directors. There are regularly scheduled meetings of the board of directors once a month, and, occasionally, extraordinary meetings are called when needed by the Chairman of the board of directors. The current board of directors was elected on April 15, 2003, for a three-year tenure. Our company's directors and executive officers, as of December 31, 2003, are as follows:

Current Position Name Position Held Since ------------------------------------ -------------------------------------------- ----------------- Ricardo Claro Valdes(1) Chairman of the Board and Director 1975 Baltazar Sanchez Guzman(2) Vice Chairman of the Board and Director 1995 Joaquin Barros Fontaine Director 1990 Jaime Claro Valdes(1) Director 1988 Patricio Claro Grez Director 1997 Gustavo De La Cerda Acuna Director 2003 Cristian Eyzaguirre Johnston Director 2003 Juan Agustin Figueroa Yavar Director 1994 Patricio Garcia Dominguez Director 1975 Alfonso Swett Saavedra Director 1981 Cirilo Elton Gonzalez Chief Executive Officer 1990 Eduardo Acuna Donoso Technical Manager 1992 Benito Bustamante Castagnola Comptroller 1981 Eduardo Carvallo Infante Quality Control Manager 2003 Jose Miguel Del Solar Concha Human Resources Manager 2001 Juan Jose Edwards Guzman Commercial Manager 1995 Danilo Jordan Franulic Commercial Manager 1989 Daniel Navajas Urbina Operations Manager 1992 Rodrigo Palacios Fitz-Henry Chief Financial Officer 2001 ----------------- (1) Ricardo Claro Valdes and Jaime Claro Valdes are brothers. Please, see "Item 7. Major Shareholders and Related Party Transactions--Control of Registrant", for further illustration. (2) Mr. Sanchez has been a director of our company since 1990.

Set forth below is a brief biographical description of the directors and executive officers of our company: Ricardo Claro Valdes. Mr. Claro is an attorney and has been a Director and Chairman of the board of directors of our company since 1975. He is a senior partner of Claro y Cia., a Santiago law firm and currently serves as a director and Chairman of the board of directors of Elecmetal S.A. and other companies within the Elecmetal Group, including Compania Sud Americana de Vapores S.A., Vina Santa Rita, Red Televisiva Megavision S.A., Metropolis-Intercom S.A., Ediciones 59 Financieras S.A. and Navarino S.A. He is also a director of Sudamericana Agencias Aereas y Maritimas S.A., Vice-President of Fundacion Mar de Chile and director of Fundacion Andes. From 1973 to 1975, Mr. Claro was Economic Advisor to the Minister of Foreign Affairs serving as Ambassador-at-large. Baltazar Sanchez Guzman. Mr. Sanchez holds a degree in business administration and has been a Director of our company since 1990, and was elected Vice Chairman of the board of directors in April of 1995. He is Executive Vice President of Red Televisiva Megavision S.A., director of Navarino S.A., Elecmetal S.A., Quemchi S.A., Compania Sud Americana de Vapores S.A., Sudamericana Agencias Aereas y Maritimas S.A., Sociedad Anonima Vina Santa Rita, Metropolis-Intercom S.A., Ediciones Financieras S.A., ME Global Inc. (U.S.A)(all within the Elecmetal Group), and a member of the board of directors of Inversiones Siemel S.A. and Siglo XXI. Mr. Sanchez was the General Manager (Chief Executive Officer) of Vina Santa Rita (from 1980 to 1983) and of Compania de Petroleos de Chile S.A. (COPEC) (from 1985 to 1990). Joaquin Barros Fontaine. Mr. Barros has been a Director of our company since 1990, and is a Director of Navarino S.A. and Envases CMF S.A, Metropolis-Intercom S.A., Red Televisiva Megavision S.A. and Compania Sud Americana de Vapores S.A. within the Elecmetal Group. He is also Executive President of Quilicura S.A. and Compania de Inversiones La Central S.A. He is Chairman of the board of directors of the Instituto Sanitas S.A., Sociedad Anonima Jahuel Aguas Minerales y Balnearios and Productos Quimicos Tanax S.A.C. e I. He is also a director of Vina Santa Emiliana. Patricio Claro Grez. Mr. Claro is an industrial civil engineer and has been a Director of our company since 1997. He is also a director of Industrias Forestales S.A., Compania Chilena de Fosforos S.A., Bicecorp S.A. and Banco Bice. Jaime Claro Valdes. Mr. Claro is an industrial civil engineer and has been a Director of our company since 1988. He is President of ME Global Inc. (U.S.A) and of Quemchi S.A., Vice-President of Elecmetal S.A. and Navarino S.A., Director of Vina Los Vascos S.A., Compania Sud Americana de Vapores S.A., Sudamericana Agencias Aereas y Maritimas S.A., and Envases CMF S.A. within the Elecmetal Group. He is also a director of Southern Peru Copper Corporation (U.S.A). Gustavo De La Cerda Acuna. Mr. De La Cerda has been a Director of our company since 2003. He is a director of Elecmetal S.A., Quemchi S.A., Navarino S.A., Vina Santa Rita, within the Elecmetal Group. He is also a member of the firm De La Cerda y Hatton S.A. and a director of Banco Bice and Bicecorp S.A. Cristian Eyzaguirre Johnston. Mr. Eyzaguirre is an economist and has been a Director of our company since 2003. He is also a director of Inversiones Cousino Macul S.A., Empresas Almacenes Paris S.A., Besalco S.A., Wenco S.A., Camara Chilena Norteamericana de Comercio A.G. and The Grange School. Juan Agustin Figueroa Yavar. Mr. Figueroa is an attorney and has been a Director of our company since 1994. He is Chairman of the board of directors of Maritima de Inversiones S.A. and a Director of Elecmetal S.A., Quemchi S.A., Navarino S.A. and Vina Santa Rita within the Elecmetal Group. He is a senior partner of Figueroa y Coddou, a Santiago law firm. He is also Chairman of the board of directors of Termas de Puyehue S.A. and Full Professor of Procedural Law at the Universidad de Chile. He is also President of the Fundacion Pablo Neruda and Chairman of the Board of Trustees of the Universidad de Santiago. He is a member of the Constitutional Tribunal. From 1990 to 1994, Mr. Figueroa was Minister of Agriculture of the Chilean Government. 60 Patricio Garcia Dominguez. Mr. Garcia has been a Director of our company since 1975. Mr. Garcia also serves as a director of Elecmetal S.A., Quemchi S.A., Navarino S.A., Compania Sud Americana de Vapores S.A. and Sudamericana Agencias Aereas y Maritimas S.A. within the Elecmetal Group, as well as Industrias Alimenticias Carozzi S.A., Empresas Cabo de Hornos S.A., Inversiones Union Espanola S.A., Inversiones Unespa S.A., Inversiones Covadonga S.A., Cia. de Inversiones La Espanola S.A. and Inversiones Hispania S.A. Alfonso Swett Saavedra. Mr. Swett has been a Director of our company since 1981. He serves as a Director of Elecmetal S.A., Quemchi S.A., Navarino S.A., Red Televisiva Megavision S.A. and Vina Santa Rita within the Elecmetal Group. Mr. Swett is Chairman of the board of directors of Forus S.A. and Costanera S.A.C.I. and is Adviser to Sociedad de Fomento Fabril (SOFOFA) and Generacion Empresarial. Cirilo Elton Gonzalez. Mr. Elton holds a degree in business administration and has been our company's General Manager (Chief Executive Officer) since 1990. He serves as Vice-President of Rayen Cura S.A.I.C., and as director of Maritima de Inversiones S.A. within the Elecmetal Group. Prior to joining our company, he was Chief Executive Officer of Elecmetal S.A., starting in 1982. Eduardo Acuna Donoso. Mr. Acuna is a chemist from the Pontificia Universidad Catolica de Chile. He joined our company in 1963 and has served as our company's Technical Manager since 1992. Benito Bustamante Castagnola. Mr. Bustamante is a certified public accountant from the Universidad de Chile. He has served as our company's Comptroller since 1981. Eduardo Carvalllo Infante. Mr. Carvallo is an industrial civil engineer from the Pontificia Universidad Catolica de Chile and has served as our company's Quality Control Manager since 2003. Jose Miguel Del Solar Concha. Mr. Del Solar holds a degree in business administration from the Universidad de Chile and has served as our company's Human Resources Manager since 2001. Juan Jose Edwards Guzman. Mr. Edwards holds a degree in business administration from the Universidad de Chile. He has served as our company's Sales Manager since 1995, and has been employed by the company since 1988. Danilo Jordan Franulic. Mr. Jordan holds a degree in business administration from the Universidad de Chile. He has served as our company's Sales Manager since 1989 and has been employed by the company since 1974. Daniel Navajas Urbina. Mr. Navajas is an industrial civil engineer from the Pontificia Universidad Catolica de Chile. He has served as our company's Operations Manager since 1992 and has been in the company since 1969. Rodrigo Palacios Fitz-Henry. Mr. Palacios holds a degree in business administration from the Pontificia Universidad Catolica de Chile. He has served as our company's Chief Financial Officer since 2001. Compensation of Directors and Officers 61 For the year ending December 31, 2003, the aggregate amount of gross compensation paid by our company to all executive officers was Ch$933 million. Members of the board of directors receive per diem fees and participate in our company's net profits. As a group, directors received aggregate payments of Ch$701 million corresponding to participation in fiscal year 2002 net income. The Chairman of the board of directors receives twice the amount received by any other director. Our company does not maintain any pension or retirement programs for our directors or executive officers. We do not otherwise disclose to our shareholders or make available to the public, information concerning compensation of individual executive officers. Board of Directors Practices We maintain an Audit Committee composed of three members who are also members of the board of directors, and the board of directors appoints them. Members serve for the same amount of time as they serve as directors of Cristalerias de Chile and can be re-elected. According to Article 50 BIS of the Chilean Companies Act, the majority of the members of the Audit Committee must be independent of the controlling shareholder, if possible. The Audit Committee may appoint independent personnel to carry out certain functions. The board of directors, at a meeting held on April 15, 2003, appointed the members of the Audit Committee as follows: o Mr. Juan Agustin Figueroa Yavar; President; o Mr. Joaquin Barros Fontaine; and o Mr. Patricio Claro Grez. The main duties of the Audit Committee conducts monthly meetings and its main duties are, among others: o Supervising and controlling the proper functioning of our operations; o Examining transactions with directors or related companies pursuant to the terms of Article 44 and Article 89 of the Chilean Companies Act; o Reviewing the audit reports prepared by the internal controller and supervising the appropriateness of the Controlling Division's attributions; and o Interacting with, and approving the appointment of, the independent auditors and rating agencies. Compliance with NYSE Listing Standards on Corporate Governance On November 4, 2003, the Securities and Exchange Commission approved new rules proposed by the New York Stock Exchange (the "NYSE") intended to strengthen corporate governance standards for listed companies. These new corporate governance listing standards supplement the corporate governance reforms already adopted by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002. Pursuant to NYSE Rule 30A(11), the significant ways in which our corporate governance practices differ from those followed by US companies under NYSE listing standards are publicly available on our Web site, www.cristalchile.com. We will also provide a printed copy of our Corporate Governance Guidelines to our shareholders upon request. The new NYSE rules do not change the NYSE traditional approach permitting listed companies that are foreign private issuers to follow their home jurisdiction governance practice where it 62 differs from the NYSE requirements. However, pursuant to NYSE Rule 303A(11), listed companies that are foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by US companies under NYSE listing standards. Differences in our corporate governance practices and the NYSE rules are identified in the table below.

ITEM NYSE Rules Applicable to U.S. Listed Our Company's Practice Companies ---------------------------------------- -------------------------------------- ---------------------------------- Directors Majority of Board must be There is no legal requirement as to independent (NYSE 303A(1) and (2). the independence of the members of the Board. Corporate Governance Company must adopt corporate There is no legal obligation to governance guidelines and post them adopt or publish principles of on its website. The company's corporate governance. Chilean law annual report must state that this establishes the composition, information is available on its duration, and responsibilities of website, and that the information is the Board and its members, as well available in print to any as the obligation of the general shareholder who requests it. (NYSE shareholder meeting (junta de 303A(9)). accionistas) to set the members' remuneration annually, if the by-laws establish that their duties are to be compensated. Company must disclose whether it has There is no legal obligation to adopted a code of ethics for senior adopt a code of ethics. Chilean law executive officers and senior establishes the obligation of the financial officers, and must make entire company to comply with the code publicly available either internal regulations (reglamento in its 20-F filing, or on its interno) that govern the company and website (together with a note in the its relations with personnel. Among annual report disclosing that this other things, these regulations information is posted on the website contain standards related to ethics and listing the website address), or and loyalty. Notwithstanding, with instructions in its 20-F filing companies may create internal codes on how to obtain a copy without of ethics, but these may not be in charge. Company must also disclose conflict with the internal changes to, or waivers from, its regulations. code of ethics. If the company has not adopted a code of ethics, it must explain why it has not done so. (Sarbanes 406). Internal Audit Function Company must maintain an internal There is no similar legal audit function to provide management obligation, but companies do have an and the audit committee with ongoing audit department, in parallel with assessments of the company's risk the function of outside auditors management processes and system of required by Chilean law. internal control. A company may choose to outsource this function to a third party service provider other than its independent auditor. (NYSE 303A(7)(d)). 63 Meetings of Non-management Directors Non-management Directors must meet There is no similar legal obligation. regularly without management (NYSE However, according to Chilean law, a 303A(3)). a Director of a listed corporation (sociedad anonima abierta) may not also be a manager. Likewise, the title of manager is not compatible with auditor, accountant, or president of that same corporation. The Directors always meet in legally constituted sessions to resolve matters within their competency. Nominating and Corporate Governance Company must have a fully There is no similar legal obligation. The Committee independent nominating/corporate Board is responsible for determing the governance committee and administration of the company. This power compensation committee (NYSE may be delegated to the Board itself, or to the 303A(4), 303A(5), 303A(6), management in whole or in part, or to members of 303A(7)(c)). the Board, or, for specific purposes, to other persons, such as the accountant or lawyers of the corporation. Additionally, the Directors of listed corporations must examine the remuneration systems (sistemas de remuneraciones) and compensation plans (planes de compensacion) for management and principal executives of the corporation. Audit Committee Company must establish an audit There is no similar legal obligation. However, committee composed of at least three according to S.A. law 18.046, listed corporations independent Directors (Sarbanes 301, with a net worth of more than UF 1.5 million must NYSE 303A(6) and 303A(7)(a)); such have a committee of Directors (comite de committee shall have control over directores), formed by three members, the majority the auditors and auditing process of which shall be independent from the controlling (Sarbanes 301, NYSE entity (controlador), unoless the number of 303A(7)(c)(iii)). Each member of independent directors is not enough to achieve such the audit committee must be majority. the members of the committee are financially literate (NYSE remunerated as set at the general shareholder 303A(7)(A)), and at least one member meeting. The committee fulfills the following must be considered a "financial functions: (1) examines reports prepared by expert," based on their (1) accounts inspectors and outside understanding of GAAP and financial auditors, balance sheets, and other 64 statements; (2) experience in financial statements, and opine on them; preparing and auditing financial (2) proposes to the Board, the outside auditors statements of generally comparable and risk ratings agencies; (3) examines related issuers, and applying such parties and those in which the directors may have principles to accounting for an interest and reports on these to the Board; estimates, accruals, and reserves; (4) examines remuneration systems and (3) experience with internal compensation plans for managers and accounting controls; and (4) main executives; and (5) other understanding of audit committee matters required by the corporate functions. (Sarbanes 407). If the by-laws, the general shareholder committee does not have a "financial meeting, or the Board. expert," it must explain why it does not have one. (Sarbanes 407). CEO Certification CEO must certify compliance with There is no similar legal NYSE governance standards annually obligation. However, Chilean law requires (NYSE 303A(12)(a)). This the Board to submit, on a yearly basis, certification is in addition to the the annual report, balance sheet and one required by Sarbanes 302. cash flow statement (memoria, balance y estado de resultados) to the regular shareholders meeting for its approval. Furthermore, listed corporations must regularly and permanently disclose any other relevant information, by means of publications and advisories established by law or the authority. Notification of Non-compliance by the CEO must promptly notify the NYSE, There is no similar legal CEO to the NYSE in writing, of any material obligation. Please refer to the non-compliance with the NYSE above comment. corporate governance standards (NYSE 303A(12)(b)). Material Differences in Corporate Foreign private issuers must provide There is no similar legal obligation. Governance Standards a brief, general summary disclosing any material differences between their corporate governance practices and applicable NYSE corporate governance listing standards (NYSE 303A(11)).

Employees As of December 31, 2003, our glass container husiness has on average 715 permanent employees, approximately 73.6% of whom were represented by two different labor unions in collective bargaining negotiations with 65 our company. As of December 31, 2003, the average tenure of our full time employees was approximately 14.1 years. We consider our relations with our employees to be good. Chilean law protects the right of our workers to bargain collectively and to strike if agreements on labor contracts are not negotiated and reached on a timely basis. We meet periodically with each of the two unions to negotiate the renewal of the current collective bargaining agreements covering our company's employees. Good relationships with workers are reflected through the signing of a 4-year collective bargaining agreement with workers' union, "Sindicato de Trabajadores Nro 2" during 2002 and a 6-year collective bargaining agreement with workers' union, "Sindicato de Trabajadores Nro 1" in 2001. We do not maintain any pension or retirement programs for our employees. However, the Company has recorded a liability for long term service indemnities in accordance with the collective bargaining agreements entered in to with its employees. This liability is shown at its current value, based on the amount that would be owed if the employees terminated their employment. In general, each employee is entitled to receive one month's salary for every year of service with the Company if dismissed without legal cause. Workers in Chile are subject to a national pension law that establishes a system of independent pension plans, which are administered by the pension funds administrators (Administradoras de Fondos de Pensiones). Our company has no liability for the performance of the pension plans, or for any pension payments to be made to the employees. However, we are responsible for declaring (withholding) and paying, on a monthly basis, the social security contributions corresponding to, and forming part of, the pension plan of each employee administered by the relevant pension fund administrator. ITEM 7: Major Shareholders and Related Party Transactions Control of Registrant Since July 6, 1995, we have had a total of 64,000,000 outstanding shares of common stock, which represents our total registered capital stock. The following table sets forth certain information regarding the ownership of common stock, as of December 31, 2003, with respect to each shareholder (with all directors and executive officers of our company as a group) known to own more than 5% of the outstanding shares of common stock: December 31, 2003 ---------------------------------- # Of Shares Owned % Ownership ----------------- --------------- Compania Electro Metalurgica S.A. 21,780,001 34.03 Bayona S.A. 5,912,540 9.24 Servicios y Consultorias Hendaya S.A. 5,679,359 8.87 Cia. De Inversiones La Central S.A. 4,418,933 6.90 AFP Provida S.A. Fondo de Pensiones 4,141,525 6.47 The Bank of New York (1) 3,663,966 5.72 AFP Habitat S.A. Fondo de Pensiones 3,441,977 5.38 ----------------- (1) As depositary for the ADRs The Elecmetal Group, which includes Elecmetal, Bayona S.A. and Servicios y Consultorias Hendaya S.A., was, as of December 31, 2003, the beneficial owner of approximately 52.14% of the outstanding shares of common stock of our company, and thereby has voting control of our company. 66 Compania Electro Metalurgica S.A. is a publicly-held Chilean corporation engaged in steel foundry works and is also involved in a wide range of business activities in Chile through its subsidiaries and affiliates, which together comprise the Elecmetal Group, including: (i) glass and plastic container manufacturing operations (through ownership of a controlling interest in our company); (ii) media and communications (through our 99.9% ownership of Red Televisiva Megavision S.A. and its 50% interest in Cordillera Comunicaciones Ltda.) and (iii) wine production operations (through our 54.1% ownership of Vina Santa Rita). On December 31, 2003, Mr. Ricardo Claro Valdes, the Chairman of the board of directors and a Director of our company, controlled, directly and indirectly, approximately 46.58% of the voting stock of Compania Electro Metalurgica S.A. The Elecmetal Group owns a majority of our outstanding shares of our common stock. Consequently, the Elecmetal Group has the power to elect a majority of our directors and to determine the outcome of substantially all matters to be decided by vote of the shareholders. Disposal by the Elecmetal Group of a significant portion of its shares of common stock could affect the trading price of the common stock on the Santiago Stock Exchange, and consequently, of our ADSs on the New York Stock Exchange, and control of the company. Compania Electro Metalurgica S.A. and its subsidiaries and affiliates are free to dispose of their shares of common stock at will. Interest of Management in Certain Transactions In the ordinary course of our business, we engage in a variety of transactions with affiliates of our company and the Elecmetal Group. For a detailed description of our company's related party transactions, see Note 6 of the consolidated financial statements. The principal transactions with such related parties during the last three fiscal years are as follows: Sales to Affiliates Our company, including Vina Santa Rita, Comunicacion, Informacion, Entretencion y Cultura S.A., Cristalchile Comunicaciones, Cristalchile Inversiones S.A. and Constructora Apoger S.A., sells goods and services to certain other companies within the Elecmetal Group and other related parties. Net sales to related parties were Ch$313 million in 2003 and Ch$386 million in 2002. Purchases from Affiliates Our company, including Vina Santa Rita, CIESCA, Cristalchile Comunicaciones S.A., Cristalchile Inversiones S.A. and Constructora Apoger S.A., purchases goods and services from other companies in the Elecmetal Group and other related parties. The effect on results of purchases from related parties was a Ch$24 million charge in 2003 and a Ch$34 million credit in 2002. Related Company Loans or Transactions As of December 31, 2003, there is a balance of short term receivables of Ch$ 1,167 million (Ch$403 million in 2002), that corresponds mainly to a loan granted by CIECSA to Editorial Zig Zag of Ch$ 134 million (Ch$ 237 million in 2002) including interests, with maturity on June 30, 2004, at an annual interest rate of 1%; and to publicity sold by Red Televisiva Megavision S.A. to Metropolis Intercom S.A. of Ch$63 million (Ch$54 million in 2002). The remainder corresponds to invoices receivable of Ch$319 million (Ch$113 million in 2002) and Ch$650 million to dividends receivable from Envases CMF. 67 Short term payable balances as of December 31, 2003 amount Ch$723 million (Ch$890 million in 2002) and correspond mainly to commercial transactions under 90 days of Ch$222 million (Ch$385 million in 2002) and dividends payable to majority shareholders of Ch$501 million (Ch$506 million in 2002). In 2003 there was a long term receivables balance of Ch$3 million (Ch$1 million in 2002). Article 89 of the Chilean Companies Act requires that our company's transactions with related parties be on a fair basis, 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 commence. Directors (managers) of companies that violate Article 89 are liable for losses resulting from such violation. In addition, Article 44 of the Chilean Companies Act provides that any transaction in which a director has a personal interest or is acting on behalf of a third party may be performed only when the board of directors has previously approved it knowing of such director's interest, and such transaction is subject to fairness conditions similar to those prevailing in the market. According to an amendment introduced to the Chilean Companies Act in December 2000, if the proposed transaction involves amounts considered material, the board of directors must previously declare that such transaction is consistent with fairness conditions similar to those prevailing in the market. If it is not possible to reach such a judgment, the board of directors may approve or reject the transaction or appoint two independent appraisers. The appraisers' final conclusion must be presented to the Shareholders and Directors for a period of 20 business days. In this case, the board of directors may only approve or reject the transaction, with the abstention of the interested director, once such period has elapsed. Shareholders representing 5% or more of the issued voting shares may request the board of directors to call for a shareholders' meeting to resolve the matter, with the agreement of two thirds of the issued voting shares. For purposes of this regulation, the law considers that the amount of a proposed transaction must be considered "material" when it exceeds 1% of our company's paid-in capital and reserves, provided that it also exceeds 2,000 UF, and in any event, when it exceeds UF 20,000. All resolutions of the board of directors approving such transactions must be reported to our shareholders at the next annual shareholders' meeting. Violation of Article 44 does not affect the validity of the transaction, but may result in administrative or criminal sanctions and civil liabilities entitling our company, the shareholders or third parties who suffer losses as a result of such violation, to demand damages and reimbursement to our company by the interested director of a sum equal to the benefits received by him, his principal or relatives. We believe that, to the best of our knowledge, we have complied with the requirements of Article 89 and Article 44 in all transactions with related parties. ITEM 8: Financial Information Consolidated Statements and Other Financial Information See Item 17 and 18 for the consolidated financial statements included within this document. Dividend Policy and Dividends Dividend Policy Our company's dividend policy is decided upon, from time to time, by the board of directors and is announced at the regular annual shareholders' meeting, which is generally held in April of 68 each year. However, each year, the board of directors must submit to the regular annual shareholders' meeting for shareholder approval a proposal for the declaration of the final dividend or dividends in respect of the preceding year, consistent with the then-established dividend policy. As required by the Chilean Companies Act, unless otherwise decided by unanimous vote of the issued and subscribed shares, we must distribute a cash dividend in an amount equal to at least 30% of our net income for a given year, except to the extent we have a deficit in retained earnings. Actual dividends paid have averaged 42.0% of our net income for the past five years. Dividend payments were approved at the annual ordinary shareholders' meetings, held on April 13, 1999, April 14, 2000, April 10, 2001, April 16, 2002 and April 15, 2003, amounting 40%, 40%, 50%, 40% and 40% with respect to our net income for each year, respectively. There can be no assurance that future dividends will be paid in an amount exceeding the 30% level required by law. There can also be no assurances that the Chilean Companies' Act or corporate law will remain in effect unaltered going forward. The board of directors has the authority to decide whether such dividend will be paid in the form of interim dividends or a single annual payment. In 2003, the shareholders approved at the general shareholders' meeting the payment of the proposed dividend of 40% of the net income for 2003 with the remainder to be deposited into Reserve Funds. The board of directors was authorized to issue provisional dividends against the profits of 2003 and to distribute interim dividends against the Future Dividends Fund without the need to call a new meeting of shareholders for that purpose. In 2004, the shareholders approved, at the general shareholders' meeting, 40% of the net income for 2004 as a dividend payment, with the remainder to be deposited into Reserve Funds to continue our growth. The board of directors was authorized to issue provisional dividends against the profit of 2004 and to distribute interim dividends against the Future Dividends Fund without the need to call a new meeting of shareholders for that purpose. It has been our general practice to pay two to four dividends during each fiscal year. Under this arrangement, one or more interim dividends are paid during the fiscal year, and a final dividend is declared at the annual shareholders' meeting. The final dividend is in an amount that, together with the interim dividends previously paid, is at least sufficient to satisfy the statutory requirement that at least 30% of net income for the year be paid out in dividends. Such final dividend is paid on a date fixed by the board of directors, generally in the month of April. The amount and timing for payment of dividends is subject to revision from time to time, depending upon, among other factors, our then-current level of sales, costs, cash flow, and capital requirements, as well as market conditions. Any change in dividend policy would ordinarily be effective for dividends declared in the year following adoption of the change, and a notice of any such change of policy must be filed with Chilean regulatory authorities and would be publicly available information. Notice of such a change of policy would not, however, be sent to each shareholder or ADR holder. Accordingly, there can be no assurance as to the amount or timing of declaration or payment of dividends in the future. Dividends are paid to shareholders of record on the fifth business day preceding the date set for payment of the dividend. The holders of ADRs on the applicable record dates for the ADSs will be entitled to all dividends paid after their acquisition of the ADRs. 69 Dividends The following table sets forth the dividends per share paid in terms of that year's net income for each of the years indicated. The table includes interim dividends and final dividends for the years indicated. The final dividend is declared and paid after the annual ordinary shareholders' meeting is held during March or April of the subsequent year. Information in U.S. dollars is also presented on the aggregate dividends per ADS (each ADS representing three shares of our common stock). The following information comprises actual historical amounts not restated in constant pesos: Per Share (1) Per ADR (1) (2) ---------------------- ------------------ Year ending December 31, Ch$ (3) US$ (4) US$ (4) -------------------------- --------- -------- -------- 1999 123.10 0.232 0.697 2000 132.57 0.228 0.685 2001 138.10 0.210 0.630 2002 137.35 0.192 0.577 2003 70.20 0.114 0.342 ----------------- (1) The dividend is proposed by the board of directors and voted on and declared by the shareholders at each annual shareholders meeting. Payment is made to all holders of record on a subsequent date. (2) Amounts shown do not reflect reductions for any applicable Chilean Withholding Taxes. (3) Represents dividends paid with respect to each year's net income in historical Chilean pesos. (4) Translated into U.S. dollars at the historical Observed Exchange Rates on the respective dates of payment of dividends. As a general requirement, shareholders who are not residents of Chile must register as a foreign investor under one of the foreign investment regimes contemplated by Chilean law to receive dividends, sales proceeds or other distributions with respect to their shares remitted outside of Chile through the Formal Exchange Market. Under the ADR facility, the depositary, on behalf of ADR holders, will be granted access to the Formal Exchange Market to convert cash dividend distributions from pesos to dollars and to pay such dollars to ADR holders outside of Chile. Please, see "Item 10. Additional Information--Exchange Controls and Other Limitations Affecting Stockholders", for further illustration. Dividend distributions received in respect of shares of our common stock by holders, including holders of ADRs, who are not Chilean residents, are subject to Chilean withholding tax. Please see "Item 10. Additional Information--Taxation", for further illustration. Legal Proceedings We are a party to certain legal proceedings arising in the ordinary course of business. Other than as described in this annual report, we are not aware of any litigation or arbitration proceedings which we believe will have a material adverse effect on our company. ITEM 9: The Offer and Listing Nature of Trading Market Our company's shares of common stock are listed on the Santiago Stock Exchange and the Electronic Stock Exchange of Chile of Chile. Since January 24, 1994, our company's ADSs, each one representing three shares of common stock, have been listed on the New York Stock Exchange trading under the symbol "CGW." The ADSs have been issued by The Bank of New York in its role as the depositary. In 2003, the Chilean stock market accounted for approximately 50.4% of the trading volume of the common stock, while 49.6% of the trading took place on the New York Stock Exchange. 70 The table below shows the high and low closing prices of the common stock in Chilean pesos, and the common stock trading volume on the Santiago Stock Exchange for the periods indicated. It also shows high and low trading prices expressed in historical Ch$: Ch $ Per Share(1) Share ----------------------------- Volume High Low ------------ ------------- ------------- 1999 2,969,005 2,780 1,995 2000 5,103,766 3,820 2,580 2001 4,500,611 4,700 3,300 2002 1st quarter 747,220 4,550 4,100 2nd quarter 1,045,483 4,200 3,800 3rd quarter 2,570,569 3,936 3,499 4th quarter 1,014,451 4,450 3,600 2003 1st quarter 514,640 4,650 4,450 2nd quarter 668,760 6,600 4,580 3rd quarter 825,430 7,305 5,850 4th quarter 616,345 6,860 5,400 December 2003 103,934 5,900 5,400 January 2004 207,544 5,594 5,350 February 2004 720,969 5,500 5,100 March 2004 470,887 5,701 5,450 April 2004 997,705 5,500 5,250 May 2004 781,351 5,100 4,400 ----------------- (1) Chilean pesos per share of common stock reflect nominal price on trading date. Source: Santiago Stock Exchange. The table below shows the high and low closing prices of the common stock in Chilean pesos, and the trading volume on the Electronic Stock Exchange of Chile for the periods indicated. It also shows high and low trading prices expressed in historical Ch$: Ch$ Per Share(1) Share ----------------------------- Volume High Low ------------ ------------- ------------- 1999 691,236 2,665 2,010 2000 1,175,055 3,700 2,750 2001 2,549,007 4,680 3,370 2002 1st quarter 312,687 4,530.00 4,083.89 2nd quarter 417,780 4,159.76 3,767.88 3rd quarter 75,493 3,900.00 3,499.90 4th quarter 183,170 4,300.00 3,650.00 2003 1st quarter 46,033 4,654.00 4,530.00 2nd quarter 375,553 6,766.50 5,000.00 3rd quarter 181,009 7,300.00 6,042.30 4th quarter 15,627 6,810.00 6,532.30 December 2003 - - - January 2004 122,102 5,550.00 5,300.00 February 2004 10,572 5,500.00 5,450.00 March 2004 92,757 5,700.00 5,551.00 April 2004 29,152 5,500.00 5,300.00 May 2004 276,567 4,675.76 4,400.00 71 ----------------- (1) Chilean pesos per share of common stock reflect nominal price on trading date. Source: Electronic Stock Exchange of Chile of Chile. Chilean securities markets are substantially smaller, less liquid, and more volatile than the main securities markets in the United States. The Santiago Stock Exchange had a market capitalization of approximately Ch$51.3 trillion (US$86.3 billion), as of December 31, 2003, and an average monthly trading volume of Ch$375 billion (US$632 million) during 2003. Trading activity on the Santiago Stock Exchange is on the average substantially less than it is on the principal national securities exchanges in the United States. For the year ending December 31, 2002, only approximately 10% of the securities listed on the Santiago Stock Exchange traded on an average of 90% or more of the trading days. We estimate that for the year ending December 31, 2002, our shares were traded on the Santiago Stock Exchange an average of approximately 64.7% of such trading days. The concentrated holding of our company's common stock, as well as the market's limited liquidity, may impair the ability of a holder of American Depositary Receipts, or ADRs, evidencing ADSs, to sell the underlying common stock in the Chilean stock market, in the amount, and at the price and time as such holder wishes, which could significantly increase the volatility of the ADSs' price. Prior to the Combined Offering at the New York Stock Exchange and at the Santiago Stock Exchange, there had not been a public market in the United States for ADSs or common stock. The table below shows the high and low closing prices for the ADSs on the New York Stock Exchange and the trading volume of the ADSs on the New York Stock Exchange for the periods indicated: $ Per ADS(1) ADS Trading ------------------------------ Volume High Low -------------- ------------ ----------- 1999 8,640,300 16.50 12.44 2000 4,134,800 22.25 14.50 2001 2,527,400 20.75 15.10 2002 1st quarter 295,700 20.05 18.70 2nd quarter 351,100 19.09 16.35 3rd quarter 657,500 16.35 15.13 4th quarter 255,500 18.65 14.85 2003 1st quarter 449,389 19.26 18.10 2nd quarter 37,394 28.00 19.15 3rd quarter 341,986 30.66 25.25 4th quarter 236,789 31.65 26.61 December 2003 129,000 30.00 26.61 January 2004 360,900 29.90 27.00 February 2004 21,900 28.49 26.20 March 2004 72,100 29.00 26.65 April 2004 32,800 26.67 24.00 May 2004 97,500 24.25 20.85 ----------------- (1) Trading began on January 24, 1994. It is not practical for us to determine the proportion of ADSs beneficially owned by U.S. residents. The Santiago Stock Exchange was established in 1893, and it is a private company whose equity consists of 48 shares held by 46 shareholders. The Santiago Stock Exchange comprised 261 72 companies with listed shares as of December 31, 2003. The Santiago Stock Exchange is Chile's principal exchange, and it accounted for approximately 76.4% of the equity trading volume in Chile during 2003. Approximately 22.8%, of equity trading is conducted on the Electronic Stock Exchange of Chile, an electronic trading market, which was created by banks and non-member brokerage houses, and 0.8% on the Valparaiso Stock Exchange. Equities, closed-end funds, fixed-income securities, short-term and money market securities, gold, options, futures, and U.S. dollars are traded on the Santiago Stock Exchange. There are two stock price indices for the Santiago Stock Exchange: the Indice General de Precios de Acciones, or General Stock Price Index or IGPA, and the Indice de Precios Selectivo de Acciones, or Selective Stock Price Index or IPSA. The IGPA is calculated using the prices of 165 issues and is divided into five main sectors: banks and finance, farming and forestry products, mining, industrials, and miscellaneous. The IPSA is a major company index, currently including the Santiago Stock Exchange's 40 most active stocks. Our company's stock is included in the IGPA, but not in the IPSA. In 1991, the Santiago Stock Exchange initiated a futures market with two instruments: U.S. dollar futures and IPSA futures. Securities on the Santiago Stock Exchange are traded primarily through an auction system with live bidding, a firm offers system, an electronic trading system or through the daily auction. Trading hours on the Santiago Stock Exchange are from 9:30 a.m. to 4:30 p.m. The Electronic Exchange operates continuously, from 9:00 a.m. to 6:00 p.m. every business day. The table below summarizes recent value and performance indicators for the Santiago Stock Exchange: Market Trading Capitalization (1) Volume (2) Daily (US$ billion) (US$ million) IPSA Index (3) -------------------- ------------------ --------------- As of: December 31, 1991 28.2 1,908.7 266.18 December 31, 1992 29.7 2,061.9 322.61 December 31, 1993 44.8 2,625.8 544.34 December 31, 1994 67.9 5,645.6 773.56 December 31, 1995 73.1 11,176.1 782.83 December 31, 1996 65.8 8,470.2 690.49 December 31, 1997 69.5 6,869.2 779.57 December 31, 1998 52.0 4,417.3 603.14 December 31, 1999 68.2 6,601.0 862.78 December 31, 2000 60.4 5,878.0 831.43 December 31, 2001 55.9 26,787.0 907.09 December 31, 2002 47.7 3,408.0 1,000.00 December 31, 2003 86.3 7,583.0 1,480.80 ----------------- (1) U.S. dollar equivalents for the year-end stock market capitalization and trading volume figures are translated at the Observed Exchange Rate for the last day of such period. (2) Reflects annual trading volume of stock for 1991 to 2003. (3) Index base=100 on December 31, 1990. Source: Santiago Stock Exchange. ITEM 10: Additional Information Foreign Exchange Controls Pursuant to the provisions of Chapter II of the new Compendium of Foreign Exchange Regulations of the Central Bank of Chile, or the New Compendium, that became effective on April 19, 73 2001, the foreign investments and remittances effected under the same are not subject to currency exchange controls in Chile, except that such operations must (i) be effected exclusively through the Formal Exchange Market and (ii) be reported to the Central Bank in the fashion established for said purpose. On January 23, 2002, the Central Bank agreed that, effective March 1, 2002, amendments would be introduced to the New Compendium, which generally simplified foreign exchange operations. In the case of our company, however, the ADR facility was subject to further regulations as governed by the former Compendium of Foreign Exchange Regulations in effect prior to April 19, 2001; in fact, the ADR system was the subject of an agreement, known as the Chapter XXVI agreement, between Citibank N.A. (replaced by The Bank of New York in October 2000) in its role as depositary for the common stock represented by the ADSs, our company and the Central Bank of Chile, effected on January 25, 1994, pursuant to Article 47 of the Ley Organica Constitucional regulating the Central Bank of Chile, in connection with Chapter XXVI, Title I of the Compendium of Foreign Exchange Regulations, or Chapter XXVI, in force through April 18, 2001, with regard to the issue of ADSs through a Chilean company; the Chapter XXVI agreement seeks to grant the depositary and ADR holders access to the Formal Exchange Market in Chile. At present, in accordance with the New Compendium, operations such as the influx (into Chile) of foreign currency from abroad for the purpose of investing in stock, and the payment of the dividends, interest and other distributions that are not subject to agreements under the Chapter XXVI, are solely required to comply with the aforementioned prerequisites of the New Compendium Chapter II. In spite of the fact that on April 19, 2001, the Central Bank eliminated Chapter XXVI from the New Compendium, all contracts executed under the provisions of Chapter XXVI remain in full force and effect and continue to be governed by the provisions, and continue to be subject to the restrictions, set forth in Chapter XXVI and the relevant Chapter XXVI agreement. Accordingly, pursuant to Chapter XXVI, investments carried out under the same are subject to the regulations described below and not to the current regulations summarized in the preceding paragraph. The following is a summary of some of the relevant provisions contained in our Chapter XXVI agreement, a copy of which was registered as an annex in the Registration Statement. According to Chapter XXVI and our Chapter XXVI agreement, the Central Bank of Chile has agreed to authorize the depositary, on behalf of the holders of ADRs and any other investor who is not a resident of Chile nor is domiciled in said nation, to withdraw the ADRs (such common stock is referred to in this annual report as withdrawn stock) with access the Formal Exchange Market to convert Chilean pesos into U.S. dollars (and remit those dollars outside of Chile) for the common stock represented by the ADS or the withdrawn stock, including those amounts received as (i) cash dividends, (ii) funds collected from the transfer in Chile of withdrawn stock subject to receipt from the Central Bank of a Withdrawn Share stockholder certificate (or from an institution authorized by the Central Bank) indicating that the residence and domicile of this holder are outside of Chile and a certificate from a Chilean stock exchange (or from a brokerage or securities firm incorporated in Chile) that said withdrawn stock was transferred on a Chilean stock exchange, (iii) funds collected from the transfer in Chile of the right to subscribe free-of-payment common stock, (iv) funds collected from the liquidation, merger or consolidation of our company and (v) other distributions, including, without limitation, those stemming from any capitalization as a result of the holding of common stock represented by ADS or withdrawn stock. The assignees of withdrawn stock are not authorized to access any of the preceding rights pursuant to Chapter XXVI. Investors who receive withdrawn stock in exchange for ADRs have the right to redeposit said shares in exchange for ADRs, so long as the conditions for redepositing are met. Chapter XXVI provides that access to the Formal Exchange Market, in connection with dividend payments, will be conditioned upon certification by our company to the Central Bank that a 74 dividend payment has been made, and any applicable tax has been withheld. Chapter XXVI also provides that access to the Formal Exchange Market, in connection with the sale of Withdrawn Shares, or distribution thereon, will be conditioned upon receipt by the Central Bank of certification by the depositary that such Shares have been withdrawn, in exchange for delivery of the pertinent ADRs, and receipt of a waiver of the benefit of the Chapter XXVI agreement with respect thereto, until such Withdrawn Shares are redeposited. Chapter XXVI requires an individual who brings foreign currency into Chile to convert it to Chilean pesos on the same date and invest in common stock within five banking days in order to receive the benefits of the Chapter XXVI agreement. Should said individual decide, within that period, not to acquire common stock, the individual may access the Formal Exchange Market to reacquire U.S. dollars so long as the corresponding request is filed with the Central Bank within seven banking days of the initial conversion to pesos. The shares acquired, as described above, can be deposited for ADRs and holders can receive the benefits of the Chapter XXVI agreement, subject to the receipt by the Central Bank of a certificate from the depositary indicating that said deposit has been made along with a receipt for a statement by the individual making the deposit in which the individual waives the benefits of the Chapter XXVI agreement with regard to the common stock deposited. Access to the Formal Exchange Market under any of the circumstances described above is not automatic. Pursuant to Chapter XXVI, such entry requires the approval of the Central Bank based on a request presented by means of an entity authorized to operate in the Formal Exchange Market, which may be the depositary. The Chapter XXVI agreement states that if the Central Bank fails to issue a ruling on the request within seven banking days, the petition will be deemed approved. In keeping with Chilean law, the Chapter XXVI agreement cannot be modified unilaterally by the Central Bank. In addition, legal precedent exists to indicate that the agreements signed under Chapter XXVI cannot be invalidated by future legislative changes. Nonetheless, there can be no assurances that additional Chilean restrictions on the holders of ADRs, the transfer of supporting common stock or the remittance of funds secured via such transfer may not be imposed in the future, nor is it possible to assess the duration or effect of such restrictions should they be imposed. If, for any reason, including changes to the Chapter XXVI agreement or Chilean law, the depositary is unable to convert Chilean pesos into U.S. dollars, investors would receive dividends and other distributions in Chilean pesos. From this perspective, the standing of investors under a Chapter XXVI agreement is more advantageous than that of those who invest under the regulations contained in the New Compendium, given that the latter are not protected by a Chapter XXVI agreement with the Central Bank and, therefore, the general conditions applicable to access to the Formal Exchange Market could be subject to modifications adopted by the Central Bank which could affect those investors who bring in and liquidate foreign currency positions subsequent to said modification. According to the regulations issued by the Central Bank that took effect on April 19, 2001, the entry of foreign currency into Chile for the purpose of acquiring stock in a listed corporation will not be subject to a mandatory deposit, or reserve requirement, with the Central Bank. The Central Bank is entitled, however, to establish a reserve requirement at any time in the future. The reserve requirement is also not applicable to the entry of foreign currency into Chile for the purpose of acquiring stock in a listed corporation that is a party to a Chapter XXVI agreement, so long as said acquisition of shares has been effected in keeping with the provisions of said Chapter XXVI agreement. The Central Bank is responsible, among other things, for monetary policy and foreign exchange controls in Chile. The correct registration of a foreign investment will permit the investor, under the regulations of the former Compendium, to access the Formal Exchange Market. Said registration is no longer required under the regulations of the New Compendium, as the details of the 75 transaction provided to the Central Bank would suffice. Foreign investments can be registered with the Foreign Investment Committee as per Decree Law No. 600 of 1974. The fundamental regulations of the Central Bank of Chile (Ley Organica) require a "special majority" vote of the Chilean Congress to be modified. Other Limitations Dividend Policy In accordance with Chilean law and our by-laws, we must distribute cash dividends equal to at least 30% of our annual net income calculated in accordance with Chilean GAAP, unless otherwise decided by a unanimous vote of the holders of the shares of common stock (see "Item 8. Dividend Policy and Dividends. Dividend Policy"). If there is no net income in a given year, we can elect, but are not legally obligated, to distribute dividends out of retained earnings. We may grant an option to our shareholders to receive any dividend in excess of 30% in cash in our own shares or in shares of open stock corporations held by our company. Shareholders who do not expressly elect to receive a dividend other than in cash are legally presumed to have decided to receive the dividend in cash. An U.S. holder of ADSs may, in the absence of an effective registration statement under the U.S. Securities Act of 1933, as amended, or an available exemption from the registration requirement thereunder, effectively be required to elect to receive a dividend in cash. Exchange Rates All payments and distributions with respect to the ADSs must be transacted in the Formal Exchange Market. See "Item 3. Key Information--Risk Factors". Share Capital Pursuant to Article 12 of the Securities Market Law and Circular 585 of the Superintendencia de Valores y Seguros, certain information must be reported to the Superintendencia de Valores y Seguros and Chilean Stock Exchanges with regard to transactions involving the shares of listed stock corporations (sociedades anonimas abiertas). Given that ADRs are considered to represent common stock that support ADSs, trading of ADRs is subject to these reporting requirements. As per the aforementioned Article 12, (i) individuals or corporations who directly or through other individuals or corporations hold 10% or more of the subscribed capital of a company whose shares are listed on the Superintendencia de Valores y Seguros Securities Registry or who, as a result of stock acquisitions, come to hold said percentage, and (ii) the directors, liquidators, senior executives, general manager and managers, as the case may be, of said corporations, independent of the number of shares they hold, must report to the Superintendencia de Valores y Seguros and the Chilean stock exchanges on which that corporation's stock is traded all acquisitions, direct or indirect acquisitions or transfers of shares effected within two exchange business days as of the corresponding trade. The aforementioned shareholders must also report whether the acquisition was effected with the intent of acquiring control of the corporation, or whether it was simply a financial investment. In accordance with Article 54 of the Securities Market Law, modified by Law No. No. 19,705 of December 20, 2000, any individual or entity who directly or indirectly seeks to take over control of a listed corporation that is offering its shares in a public tender, must report said intent to the general public in advance. For said purpose, a written communication shall be sent to the listed corporation targeted for control, to its controlling and controlled corporations, to the Superintendencia de Valores y Seguros and, lastly, to the exchanges on which the stock of the corporation whose control is sought is traded. Furthermore, a prominent announcement must be published in two newspapers that 76 circulate nationwide. The aforementioned communication and publication, indicating at least price and other essential conditions of the corresponding negotiation, must be effected at least ten business days prior to the date upon which the trade is intended to occur and, in any case, as soon as negotiations aimed at securing control commence. In addition, the effective takeover of control must be reported (via communication to the same persons indicated above and with announcements in the same newspapers) within two business days of the closure of the deal. Lastly, if the intent is to secure control via a public tender offer, the preceding regulations shall not apply. Rather, in such cases, the applicable regulations will be those contained in Title XXV of the Securities Market Law, introduced in conjunction with the aforementioned Article 54 of the Securities Market Law, modified by Law No. No. 19,705 of December 20, 2000. Title XXV of the Chilean Securities Market Law on tender offers and the regulations of the Superintendencia de Valores y Seguros provide that the following transactions, performed directly or indirectly, shall be carried out through a tender offer: o An offer which allows a person to take control of a publicly traded company, unless the shares are being sold by a controlling shareholder of such company at a price in cash which is not substantially higher than the market price and the shares of such company are actively traded on a stock exchange; o An offer for all the outstanding shares of a publicly traded company upon acquiring two thirds or more of its voting shares (this offer must be made at a price not lower than the price at which appraisal rights may be exercised, that is, book value if the shares of the company are not actively traded or, if the shares of the company are actively traded, the weighted average price at which the stock has been traded during the two months immediately preceding the acquisition); and o An offer for a controlling percentage of the shares of a listed operating company if such person intends to take control of the company (whether listed or not) controlling such operating company, to the extent that the operating company represents 75.0% or more of the consolidated net worth of the holding company. Article 200 of the Chilean Securities Market Law prohibits any shareholder that has taken control of a publicly traded company to acquire, for a period of 12 months from the date of the transaction that granted it control of the publicly traded company, a number of shares equal to or higher than 3.0% of the outstanding issued shares of the target without making a tender offer at a price per share not lower than the price paid at the time of taking control. Should the acquisition from the other shareholders of our company be made on the floor of a stock exchange and on a pro rata basis, the controlling shareholder may purchase a higher percentage of shares, if so permitted by the regulations of the stock exchange. Title XV of the Chilean Securities Market Law sets forth the basis to determine what constitutes a controlling power, a direct holding and a related party. The Chilean Securities Market Law defines control as the power of a person, or group of persons acting pursuant to a joint action agreement, to direct the majority of the votes in a shareholders meeting of the corporation, or to elect the majority of members of its boards of directors, or to influence the management of the corporation significantly. Significant influence is deemed to exist in respect of the person or group holding, directly or indirectly, at least 25.0% of the voting share capital, unless: o Another person or group of persons acting pursuant to joint action agreement, directly or indirectly, control a stake equal to or higher than the percentage controlled by such person; 77 o The person or group does not control, directly or indirectly, more than 40.0% of the voting share capital and the percentage controlled is lower than the sum of the shares held by other shareholders holding more than 5.0% of the share capital; and o In cases where the Superintendencia de Valores y Seguros has ruled otherwise, based on the distribution or atomization of the overall shareholding. According to the Chilean Securities Market Law, a joint action agreement is an agreement among two or more parties which, directly or indirectly, own shares in a corporation at the time and whereby they agree to participate with the same interest in the management of the corporation or taking control of the same. The law presumes that such an agreement exist between: o A principal and its agents; o Spouses and relatives up to certain level of kindred; o Entities within the same business group; and o An entity and its controller or any of its members. Likewise, the Superintendencia de Valores y Seguros may determine that a joint action agreement exists between two or more entities considering, among others, the number of companies in which they participate, the frequency with which they vote identically in the election of directors, appointment of managers and other resolutions passed at shareholders meetings. According to Article 96 of the Chilean Securities Market Law, a business group of entities is the one presenting relations on ownership, management or credit liabilities of such a nature that it may be assumed that the economic and financial action of such members is directed by, or subordinated to, the joint interest of the group, or that there are common credits risks in the credits granted to, or securities issued by, them. According to the Chilean Securities Market Law, the following entities are part of the same business group: o A company and its controller; o All the companies with a common controller and the latter; and o All the entities that the Superintendencia de Valores y Seguros declares to be part of the business group due to one or more of the following reasons: o A substantial part of the assets of the company is involved in the business group, whether as investments in securities, equity rights, loans or guaranties; o The company has a significant level of indebtedness and that the business group has a material participation as a lender or guarantor; o When the controller is a group of entities, that the company is a member of a controller of the entities mentioned in the first two bullets above and there are grounds to include it in the business group; or o When the controller is a group of entities, that the company is controlled by a member of the controlling group and there are grounds to include it in the business group. 78 The Chilean Companies Act requires Chilean companies to offer existing shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage of such company whenever such company issues new shares. U.S. holders of ADSs are not entitled to exercise the preemptive rights unless a registration statement under the Securities Act is effective with respect to such rights or an exemption from the registration requirement thereunder is available. At the time of any preemptive rights offering, we intend to evaluate the costs and potential liabilities associated with any such registration statement, as well as the indirect benefits to us of enabling the exercise by the holders of ADSs of such preemptive rights, and any other factors we consider appropriate at the time to make a decision as to whether to file such a registration statement. No assurance can be given that any registration statement would be filed. If no registration statement is filed, the depositary will attempt to sell affected ADS holders' preemptive rights in a secondary market (if one exists) and distribute the proceeds thereof. Should the depositary not be permitted or otherwise be unable to sell such preemptive rights, the rights may be allowed to lapse with no consideration to be received by the affected ADS holders. Under Chilean law, preemptive rights are exercisable or freely transferable by shareholders within a 30-day period following publication of the relevant option. During such period, and for an additional 30-day period thereafter, a Chilean company is not permitted to offer any unsubscribed shares for sale to third parties on terms that are more favorable than those offered to its shareholders. At the end of such additional 30-day period, a Chilean open stock corporation is authorized to sell unsubscribed shares to third parties on any terms if the shares are sold on a Chilean stock exchange. Unsubscribed shares that are not sold on a Chilean stock exchange can be sold to third parties only on terms no more favorable for the purchaser than those offered to shareholders. 79 Dissenting Shareholders The Chilean Companies Act establishes that, should an extraordinary meeting of shareholders adopt any of the resolutions presented below, the dissident shareholders have the right to withdraw from a Chilean company and require that we repurchase our shares, subject to compliance with certain terms and conditions described below unless said right to withdraw is suspended, in the case of bankruptcy or agreements with creditors. To exercise said rights, ADR holders must first withdraw the shares represented by their ADRs, pursuant to the terms of the Depositary agreement. Dissident shareholders are defined as those who vote against a resolution that results in the right to withdraw or, should they be absent from said meeting, those who declare their opposition to the resolution to us in writing within the following 30 days. Dissenting shareholders must complete their right to withdraw by offering their shares to us within 30 days of the adoption of the resolution. The resolutions that could trigger the right of the shareholder to withdraw are as follows: (a) The transformation of our company, specially into an entity that is not a listed corporation regulated by the Chilean Companies Act; (b) Merger of our company with or into other companies; (c) The transfer of 50% or more of corporate assets according to the terms stated in Article 67 No9 of the Chilean Companies Act; (d) The granting of real or personal guarantees for third-party obligations that exceed 50% of corporate assets; (e) The adoption of preferential rights for a given class of shares or a modification to existing rights, in which case the right to withdraw shall only be applicable for those dissident shareholders from the class of shares negatively impacted; (f) The reorganization of the nullity of our corporation due to formal errors in our incorporation or the modification of our by-laws granting this right; and (g) All other cases established by law or in our by-laws. By legal means, the dissident shareholders shall have the right to withdraw if we fail to comply with the conditions to be considered a listed stock corporation and, in addition, if the extraordinary meeting of shareholders agrees, via a two-thirds vote of eligible shareholders, that we should cease to adhere to the regulations applicable to listed stock corporations. In addition, if, as a consequence of any acquisition, an individual secures or surpasses holdings of two thirds of the shares, said individual shall have a period of 30 days as of the acquisition to effect an offer for the remaining shares under the conditions established 80 by law. Should said offer fail to be effected within the established timeframe, the aforementioned right to withdraw shall become effective for the remaining shareholders. Lastly, it should be noted that our by-laws do not include additional grounds for withdrawal. Under Article 69 BIS of the Chilean Companies Act, the right to withdraw is also granted to shareholders, other than the Administradoras de Fondos de Pensiones, or AFPs, subject to certain terms and conditions, if we are controlled by the Chilean government, directly or through any of its agencies, and if two independent rating agencies downgrade the rating of our stock from first class, because of certain actions specified in Article 69 BIS and undertaken by our company or the Chilean government that negatively affect and substantially impact the earnings of our company. Shareholders must perfect their withdrawal rights by tendering their shares to us within 30 days of the date of the publication or of the new rating by two independent rating agencies. If the withdrawal right is exercised by a shareholder invoking Article 69 BIS, the price paid to the dissenting shareholder shall be the weighted average of the sales price for the shares as reported on the stock exchanges on which our shares are quoted for the six-month period preceding the publication of the new rating by two independent rating agencies. If the Superintendencia de Valores y Seguros determines that the shares are not actively traded the price shall be the book value. Voting of Shares of common stock The depositary will mail to all holders a notice containing the information, or a summary thereof, included in any notice of a shareholders meeting received by the depositary, and a brief statement, as to the manner in which each such holder may instruct the depositary to exercise voting rights in respect of shares of our common stock, as represented by ADSs held by the holders. Holders on the record date set by the depositary are entitled to instruct the depositary in writing, subject to the terms of Chilean law, the By-Laws and the Deposit agreement, as to the exercise of voting rights attached to the deposited shares of our common stock, and upon receipt of such instructions the depositary has agreed that it will endeavor, insofar as practicable, to vote or cause to be voted the shares of our common stock underlying such holders' ADRs in accordance with such written instructions. The depositary has agreed not to, and shall instruct the Custodian and each of its nominees, if any, not to vote the shares of our common stock, or other deposited securities represented by the ADSs evidenced by an ADR other than in accordance with such written instructions from the holder. The depositary may not itself exercise any voting discretion over any shares of our common stock deposited with it under the ADR facility. If no instructions are received by the depositary from a holder with respect to any of the deposited securities represented by the ADSs evidenced by such holder's ADRs, on or before the date established by the depositary for such purpose, the depositary shall deem such holder to have instructed the depositary to give a discretionary proxy to a person designated by our company to vote the underlying shares. Disclosure Holders of ADRs are subject to certain provisions of the rules and regulations promulgated under the U.S. Securities Exchange Act of 1934, as amended, relating to the disclosure of interests in the shares of our common stock. Any holder of ADRs, who is, or becomes, directly or indirectly, a 5% owner (or such other percentage as may be prescribed by law or regulation), of the outstanding shares of our common stock, must within ten days after becoming a 5% owner (and thereafter, upon certain changes in such interests) notify us, any U.S. securities exchange on which the ADRs (or shares of our common stock) are traded and the Securities Exchange Commission, as required by such rules and regulations. In addition, holders of ADRs are subject to the reporting requirements contained in Articles 12 and 54 and Title XXV of the Securities Market Law, which may apply when a 81 holder beneficially owns 10% or more of the common stock or has the intent to take control of our company, as described under "Share Capital" above. Taxation Chilean Tax Considerations The following discussion summarizes the material consequences to ADR holders of Chilean income tax laws presently in force, including Ruling No. 324 (January 29, 1990), of the Chilean Internal Revenue Service. The discussion sets forth the material Chilean income tax consequences of an investment in the ADSs or shares of our common stock by a person who is neither domiciled in nor a resident of Chile for tax purposes (a "foreign holder"). It is not intended as tax advice to any particular investor, which can be rendered only in light of that investor's particular tax situation. Under Chilean law, provisions contained in statutes, such as tax rates applicable to foreign investors, the computation of taxable income for Chilean purposes, and the manner in which Chilean taxes are imposed and collected may be amended only by another statute. In addition, the Chilean tax authorities enact rulings and regulations of either general or specific application, and 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 Chilean tax authorities 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 Cash dividends paid by our company with respect to the ADSs, or shares of our common stock, held by a foreign holder will be subject to a 35% Chilean withholding tax, which is withheld and paid over by our company (the "Withholding Tax"). A credit against the Withholding Tax is available based on the level of corporate income tax actually paid by our company on the income to be distributed (the "First Category Tax"); however, this credit does not reduce the Withholding Tax on a one-for-one basis because it also increases the base on which the Withholding Tax is imposed. In addition, if we distribute less than all our distributable income, the credit for First-Category Tax paid by our company is proportionately reduced. Presently, the maximum First-Category Tax rate is 17.0%. The example below illustrates the effective Chilean Withholding Tax burden on a cash dividend received by a foreign holder, assuming a Withholding Tax rate of 35%, an effective First Category Tax rate of 17.0% and a distribution of 30% of the net income of our company distributable after payment of the First Category Tax: Company taxable income 100.0 First Category Tax (17.0% of Ch$100) (17.0) Net distributable income 83.0 Dividend distributed (30% of net distributable income) 24.9 Withholding Tax (35% of the sum of Ch$24.9 dividend plus Ch$5.1 First Category Tax paid) (10.5) Credit for 30% of First Category Tax 5.1 Net additional tax withheld (5.4) Net dividend received 19.5 Effective dividend withholding rate 21.69% In general, the effective dividend Withholding Tax rate, after giving effect to the credit for the First Category Tax, can be calculated using the following formula: 82

Effective dividend Withholding Tax rate = (Withholding Tax rate) - (First Category Tax rate) --------------------------------------------------- 1-(First Category Tax rate)

Under Chilean income tax law, dividends are generally assumed to have been paid out of our oldest retained profits for purposes of determining the level of First Category Tax that was paid by our company. For information as to the retained earnings of our company for tax purposes and the tax credit available on the distribution of such retained earnings, please see Note 16 of the Financial Statements. For dividends attributable to our profits during years when the First Category Tax was 10% (before 1991), the effective dividend Withholding Tax rate will be 27.8%. However, whether the First Category Tax is 10% or 17%, the effective overall combined tax rate imposed on our distributed profits will be 35%. Dividend distributions made in property would be subject to the same Chilean tax rules as cash dividends. Stock dividends are not subject to Chilean taxation. Capital Gains Gain from the sale exchange or other disposition by a foreign holder of ADSs, or ADRs evidencing ADSs, will not be subject to Chilean taxation if the disposition occurs outside Chile or it is performed under the rules of Title XXIV of the Securities Market Law, as amended by Law N(degree)19,601, dated January 18, 1999. The deposit and withdrawal of shares of common stock in exchange for ADRs will not be subject to Chilean taxes. The profit earned in a transfer or exchange of our common stock (unlike the transfer or exchange of ADSs that represent said stock) shall be subject to the First Category Tax and to the Withholding Tax (the former can be credited to the later) if (i) the foreign holder has had the common stock for less than one year as of the exchange of ADS for common stock, (ii) the foreign holder acquired or transferred the common stock in the course of his/her business or in a customary trade of shares or (iii) if the transfer occurs between parties related by equity or economically. In all other cases, the profit on the transfer of our common stock shall be subject to a flat 17.0% First Category Tax and the withholding tax shall not be applied. However, if it is impossible to determine the taxable capital gain, a 5.0% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due. The tax basis of shares of our common stock received in exchange for ADSs will be the acquisition value of the shares. The valuation procedure set forth in the Deposit agreement, which values shares of our common stock which are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, generally will determine the acquisition value for this purpose. Consequently, the conversion of ADSs into shares of our 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. The exercise of preemptive rights relating to the shares of our common stock will not be subject to Chilean taxation. Any gain on the sale of preemptive rights relating to the shares of our common stock will be subject to both the First Category Tax and the Withholding Tax (the former being creditable against the latter). The Chilean Internal Revenue Service has not enacted any rule nor issued any ruling about the applicability of the following norms to the foreign holders of ADRs. 83 An amendment to the Chilean Income Tax Law, Law N(degree)19,738 published on June 19, 2001, establishes an exemption for the payment of income tax for foreign institutional investors, such as mutual funds, pension funds and others, that obtain capital gains in the sales through a Chilean stock exchange, a tender offer or any other system authorized by the Superintendencia de Valores y Seguros, of shares of publicly traded corporations that are significantly traded in stock exchanges. A foreign institutional investor is an entity that is either: o A fund that makes public offers of its shares in a country whose public debt has been rated investment grade by an international risk classification agency qualified by the Superintendencia de Valores y Seguros; o A fund that is registered with a regulatory entity of a country whose public debt has been rated investment grade by an international risk classification agency qualified by the Superintendencia de Valores y Seguros, provided that the investments in Chile, including securities issued abroad that represent Chilean securities, held by the fund represent less than 30.0% of its share value; o A fund that holds investments in Chile that represent less than 30.0% of its share value, if the fund proves that no more that 10.0% of its share value is directly owned by Chilean residents; o A pension fund that is exclusively formed by individuals that receive their pensions on account of capital accumulated in the fund; o A fund regulated by Law N(degree) 18,657, or the Foreign Capital Investment Funds Law, in which case all holders of its shares must reside abroad or be qualified as local institutional investors; or o Another kind of institutional foreign investor that complies with the characteristics defined by a regulation with the prior report of the Superintendencia de Valores y Seguros and the Chilean Internal Revenue Service (Servicio de Impuestos Internos). In order to be entitled to the exemption, foreign institutional investors, during the time in which they operate in Chile, must: o Be organized abroad and not be domiciled in Chile; o Not participate, directly or indirectly, in the control of the issuers of the securities in which it invests and not hold, directly or indirectly, 10.0% or more of such companies' capital or profits; o Execute an agreement in writing with a Chilean bank or securities broker in which the intermediary is responsible for the execution of purchase and sale orders and for the 84 verification, at the time of the respective remittance, that such remittances relate to capital gains that are exempt from income tax in Chile or, if they are subject to income tax, that the applicable withholdings have been made; and o Register in a special registry with the Chilean Internal Revenue Service. Pursuant to an enacted amendment to the Chilean Income Tax Law published on November 7, 2001 (Law N(degree) 19,768), the sale and disposition of shares of Chilean public corporations which are significantly traded on stock exchanges is exempted from Chilean taxes on capital gains if the sale or disposition was made: o On a local stock exchange or any other exchange authorized by the Superintendencia de Valores y Seguros or in a tender offer process pursuant to Title XXV of the Securities Market Law, so long as the shares (a) were purchased on a public stock exchange or in a tender offer process pursuant to Title XXV of the Securities Market Law, (b) are newly issued shares issued in a capital increase of the corporation or (c) were the results of the exchange of convertible bonds (in which case the option price is considered to be the price of the shares). In this case, gains exempted from Chilean taxes shall be calculated using the criteria set forth in the Chilean Income Tax; or o Within 90 days after the shares would have ceased to be significantly traded on a stock exchange. In such case, the gains exempted from Chilean taxes on capital gains will be up to the average price per share of the last 90 days. Any gains above the average price will be subject to the First Category Tax. 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 gains subject to taxation in Chile may be generated. On October 1, 1999, the Chilean Internal Revenue Service issued Ruling N(degree) 3708, whereby it allowed Chilean issuers of ADSs to amend the deposit agreements to which they are parties in order to include a clause stating that, in the case that the exchanged shares are sold by the ADSs' holders in a Chilean Stock Exchange, either in the same day in which the exchange is recorded in the shareholders' registry of the issuer or within the two prior business days 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 we include this clause 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. Other Chilean Taxes There are no Chilean inheritance, gift, or succession taxes applicable to the ownership, transfer, or disposition of ADSs by a foreign holder, but such taxes generally will apply to the transfer upon death, or by gift of shares of our common stock by a foreign holder. There are no Chilean stamp, issue, registration taxes, similar taxes, or duties payable by holders of ADSs or shares of our common stock. UNITED STATES TAX CONSIDERATIONS The following discussion summarizes certain United States federal income tax consequences of an investment in ADSs or shares of our common stock by U.S. holders (as defined below) as of the date hereof. This discussion is intended only as a descriptive summary, and does not purport to be a complete analysis or listing of all possible tax considerations. The discussion deals only with ADSs and shares of our common stock held as capital assets, and does not address any special 85 United States tax consequences that may be applicable to U.S. holders who are subject to special situations such as those of dealers in securities or currencies, financial institutions, regulated investment companies, real estate investment trusts, tax-exempt entities, insurance companies, traders in securities that elect to use the mark-to-market method of accounting for their securities, persons holding ADSs or shares of our common stock as part of a hedging, integrated, conversion or constructive sale transaction or a straddle, persons owning 10% or more of our voting stock, persons liable for alternative minimum tax, investors in pass-through entities or persons whose "functional currency" is not the United States dollar. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (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 United States federal income tax consequences different from those discussed below. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the Deposit Agreement, and all other related agreements, will be performed in accordance with their terms. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF SHARES OF COMMON STOCK OR ADSS SHOULD CONSULT THEIR OWN TAX ADVISORS ABOUT THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSS OR SHARES OF COMMON STOCK. As used in the annual report, the term "U.S. holder" means a holder of ADSs or shares of common stock who is: (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation for United States 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 United States federal income taxation regardless of its source; or (iv) a trust that: (x) is subject to the supervision of a court within the United States and the control of one or more United States persons as described in section 7701(a)(30) of the Code; or (y) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. If a partnership holds ADSs or shares of our 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 our common stock, should consult their tax advisors. ADSs In general, for United States federal income tax purposes, U.S. holders of ADSs will be treated as the owners of the underlying shares of common stock that are represented by such ADSs. Accordingly, deposits or withdrawals of shares of common stock by U.S. holders for ADSs will not be subject to United States federal income tax. 86 Cash Dividends and Other Distributions Cash dividends (including the amount of any Chilean taxes withheld) paid to U.S. holders with respect to ADSs or shares of common stock will generally be treated as dividend income to such holders, to the extent paid out of current or accumulated earnings and profits, as determined under United States federal income tax principles. Such income shall be included in the gross income of a U.S. holder as ordinary income on the day received by the U.S. holder, in the case of shares of common stock, or by the depositary, in the case of ADSs. The dividends will not be eligible for the dividends-received deduction allowed to corporations. With respect to U.S. non-corporate investors, certain dividends received before January 1, 2009 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. United States 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 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. The amount of any dividend paid in Chilean pesos will equal the United States dollar value of the Chilean pesos received calculated by reference to the exchange rate in effect on the date the dividend is received by the U.S. holder, in the case of shares of common stock, or by the depositary, in the case of ADSs, regardless of whether the Chilean pesos are converted into United States dollars. If the Chilean pesos received as a dividend are not converted into United States dollars on the date of receipt, a U.S. holder will have a basis in the Chilean pesos equal to their United States 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 United States source ordinary income or loss. Subject to certain conditions and limitations, Chilean withholding taxes (after taking into account the credit for the First Category Tax) may be treated as foreign taxes eligible for credit against a U.S. holder's United States federal income tax liability. The overall limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes or "baskets" of income. For purposes of calculating the foreign tax credit, dividends paid with respect to ADSs or shares of our common stock will be treated as income from sources outside the United States and will generally constitute "passive income" or, in the case of certain U.S. holders, "financial services income." Special rules apply to certain individuals whose foreign source income during the taxable year consists entirely of "qualified passive income" and whose creditable foreign taxes paid or accrued during the taxable year do not exceed $300 ($600 in the case of a joint return). Further, in certain circumstances, a U.S. holder that has held shares of our common stock or ADSs for less than a specified minimum period during which it is not protected from risk of loss, or 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 shares of our common stock or ADSs. 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, including the 87 possible adverse impact on creditability to the extent a U.S. holder is entitled to a refund of any Chilean taxes withheld or a reduced rate of withholding. To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the shares of common stock or ADSs (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the investor on a subsequent disposition of the shares of common stock or ADSs), 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 would generally not give rise to foreign source income and a U.S. holder would generally 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 United States tax due on other foreign source income in the appropriate category for foreign tax credit purposes. Distributions to U.S. holders of ADSs, 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 our company, will generally not be subject to United States federal income tax. Passive Foreign Investment Companies We do not believe that we are a passive foreign investment company (a "PFIC") for United States federal income tax purposes, and expect to continue our operations in such a manner that we will not become a PFIC. If, however, we are or become a PFIC, U.S. holders could be subject to additional United States 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. Non-corporate U.S. holders will not be eligible for reduced rates of taxation on any dividends received from us prior to January 1, 2009, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. Capital Gains Upon the sale or other disposition of ADSs or shares of common stock (or preemptive rights with respect to such shares), U.S. holders will recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the amount realized for the ADSs or shares of common stock (or preemptive rights), and the U.S. holder's basis in the ADSs or shares of common stock (or preemptive rights). Such gain or loss will generally be a capital gain or loss. 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. U.S. holders will not recognize gain or loss on the exercise of preemptive rights. Any gain or loss recognized by a U.S. holder generally will be treated as United States 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 the credit, subject to applicable limitations, 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 ownership, transfer or disposition of 88 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 United States federal estate tax imposed on the estate of a U.S. holder. Prospective purchasers 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 United States tax purposes. Information Reporting and Backup Withholding In general, information reporting requirements will apply to dividends paid in respect of ADSs or shares of common stock or the proceeds received on the sale, exchange or redemption of ADSs or shares of common stock within the United States (and in certain cases, outside the United States) by U.S. holders other than certain exempt recipients (such as corporations). A backup withholding tax may apply to such amounts if 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 United States federal income tax returns. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the U.S. holder's United States federal income tax liability provided the required information is furnished to the Internal Revenue Service. Incorporation of Certain Documents by Reference We will provide free of charge to each person to whom this report is delivered, upon receipt of the written, or oral, request of any such person, a copy of any or all the documents incorporated in this annual report by reference (other than exhibits, unless such exhibits are specifically incorporated by reference in such documents). Written requests for such copies should be directed to Cristalerias de Chile S.A., Hendaya 60, of. 201, Las Condes, Santiago, Chile, Attention: Investor Relations. Telephone requests can be directed to 562-787-8855. Fax requests to 562-787-8800 ITEM 11: Quantitative and Qualitative Disclosures about Market Risk Quantitative and Qualitative Disclosures about Market Risk (2003) The following analysis of our risk management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in these forward-looking statements. See Introduction "Disclosure Regarding Forward-Looking Statements". The Company faces market risk in two major areas: (i) variations in interest rates, and (ii) foreign exchange rate fluctuations. The most significant interest rate risk is our exposure to changes in the LIBOR and TAB[5] rates that could affect consolidated bank liabilities, which totaled approximately Ch$37,383 million as of December 31, 2003 (Ch$49,138 million as of December 31, 2002). The most significant foreign exchange rate risk is in the variation of the Chilean peso against the U.S. dollar. We had operating liabilities of approximately Ch$40,826 million and operating assets of approximately Ch$17,612 million denominated in U.S. dollars as of December 31, 2003 ___________________ [5] TAB = Active Banking Rate. Rate calculated by the Association of Banks and Financial Institutions on the basis of maximum interest payable on deposits plus reserve requirement and inflation. 89 (Ch$52,704 million and Ch$10,897 million, respectively, as of December 31, 2002). In addition, we had non-operating assets denominated in U.S. dollars of approximately Ch$78,121 million and US$86.1 million in financial investments denominated in U.S. dollars as of December 31, 2003 (Ch$74,230 million and US$106.2 million respectively in 2002). In addition, we face risk from purchases of raw materials that are denominated in US dollars, such as soda ash and energy (natural gas, electric power and fuel oil) in the case of the glass container business and labels, bottles and corks in the case of the wine business. We mitigate foreign exchange rate fluctuation risk in our U.S. denominated bank liabilities through U.S. sales exports, a net investment hedge in Argentina, and the use of foreign currency forward contracts. A portion of this risk is mitigated by sales in U.S. dollars that are offset by costs that are largely measured in Chilean pesos. During 2003 approximately 36% of the Company's consolidated sales were indexed to the variation of the dollar/peso exchange rate (36.7% in 2002). While the Company generally enters into derivative instruments to mitigate its risk to foreign currency, from time to time it enters into foreign currency forward contracts. Those foreign currency forward exchange contracts that form part of the Company's hedging program are designated as such, and are effective as hedges. The amounts payable and the amounts receivable related to foreign exchange hedging contracts are recognized on a net basis under Other Current Liabilities as of December 31, 2003 and 2002. Amounts payable or receivable under these contracts offset gains and losses on the assets, liabilities and transactions being hedged and are presented on a net basis at the end of the period and are classified according to a contract's expiration date. Although the actual foreign currency exchange risk to which we are exposed depends upon the fluctuation of foreign exchange rates in which monetary assets and liabilities are maintained as compared to the Chilean peso, for accounting purposes our results from operations are affected by variations in the exchange rate between the U.S. dollar and the Chilean peso due to the application of BT 64. Under this Chilean accounting standard, the effects of re-measuring our non-Chilean investments into U.S. dollars are recorded in income, while the accumulated effects of Chilean peso to U.S. dollar exchange rate fluctuations are recorded in equity, net of any price-level restatement due to the effects of Chilean inflation on such foreign investment amounts. As of December 31, 2003 we have dollar purchase forward exchange contracts in the amount of US$44.6 million, that are mainly compensated by dollar sale future exchange contracts of US$41.6 million; to manage exposure related to certain foreign currency commitments, certain foreign currency denominated balance sheet positions, and certain anticipated foreign currency denominated expenditures. In 2002 we entered into foreign currency forward exchange contracts in the amount of US$130.6 million. Risk of Variations in Floating Interest Rates We are exposed to market risk from changes in interest rates on our short and long-term debt. As of December 31, 2003, consolidated bank liabilities totaled approximately Ch$37,383 million, of which Ch$32,095 million correspond to loans in foreign currency at variable interest rates related to the 6-month LIBOR plus 0.8% annually, Ch$4,492 million correspond to loans in adjustable pesos in UFs exposed to changes in 90 and 180 days TAB and Ch$796 million in loans in pesos at a fixed annual rate of 4.94%. As of December 31, 2002, consolidated bank liabilities totaled approximately Ch$49,138 million, of which Ch$41,855 million correspond to loans in foreign currency at variable interest rates related to the 6-month LIBOR, Ch$6,208 million correspond to loans in adjustable pesos in UFs exposed to changes in the 6-month TAB and Ch$1,073 million in loans in pesos at a fixed annual rate of 4.94%. 90 Of our obligations with the public, totaling Ch$90,955 million as of December 2003, Ch$71,072 correspond to bonds issued by Cristalerias de Chile and Ch$20,358 million to bonds issued by Vina Santa Rita; both at fixed interest rates. Furthermore, as of December 31, 2003, we held a total of approximately Ch$72,096 million in short and long-term financial investments such as time deposits, bonds, fixed rate mutual funds and resale agreements. The interest rates for these investments vary at each renewal. We are not a party to any agreement involving derivative financial instruments to reduce exposure to adverse fluctuations in interest rates. The table below provides information about our short and long-term debt and investments, by fixed and variable interest rates as of December 31, 2003:

As of December 31, 2003 (Ch$ in millions) --------------------------------------------------------------------- Short-term Long-Term ---------------------------------- -------------------------------- Floating rate Fixed rate Floating rate Fixed rate -------------------- ----------- ----------------- ----------- LIBOR TAB LIBOR TAB --------- -------- -------- ------- Bank liabilities 2,135 1,688 265 29,960 2,804 531 Bonds 1,754 89,676 -------- -------- ---------- ------- ------ ----------- Total debt 2,135 1,688 2,019 29,960 2,804 90,207 Time deposits 4,266 Marketable securities 59,615 Other current assets 12,755 -------- -------- ---------- ------- ------ ----------- Total investments --- --- 76,636 --- --- --- -------- -------- ---------- ------- ------ ----------- Net Debt (Investments) 2,135 1,688 (74,617) 29,960 2,804 90,207 ======== ====== ----------------- (1) Dollar denominated assets and liabilities have been converted to pesos based on the Observed Exchange Rate, as of December 31, 2003, which was Ch$593.80 = US$1.00.

The table below provides information about our short and long-term debt and investments, by fixed and variable interest rates as of December 31, 2002:

As of December 31, 2002 (Ch$ in millions) --------------------------------------------------------------------- Short-term Long-Term ---------------------------------- -------------------------------- Floating rate Fixed rate Floating rate Fixed rate -------------------- ----------- ----------------- ----------- LIBOR TAB LIBOR TAB --------- -------- -------- ------- Bank liabilities 3,046 1,153 216 38,809 5,055 856 Bonds 1,967 89,631 -------- -------- ---------- ------- ------ ----------- Total debt 3,046 1,153 2,183 38,809 5,055 90,487 Time deposits 13,112 Marketable securities 68,138 Other current assets 15,561 -------- -------- ---------- ------- ------ ----------- Total investments --- --- 96,811 --- --- --- -------- -------- ---------- ------- ------ ----------- Net Debt (Investments) 3,046 1,153 ( 94,628) 38,809 5,055 90,487 ----------------- (1) Dollar denominated assets and liabilities have been converted to pesos based on the Observed Exchange Rate, as of December 31, 2002, which was Ch$718.61 = US$1.00.

91 The following table summarizes the debt obligations held by our company, as of December 31, 2003, which are sensitive to changes in interest rates. The table presents principal payment obligations that exist by maturity date and the related weighted average interest rate. U.S. dollar-denominated liabilities have been converted to pesos based on the Observed Exchange Rate, as of December 31, 2003, which was Ch$593.80=US$1.00.

As of December 31, 2003 Expected maturity date --------------------------------------------------------------------------------------------- Total Debt Fair (incl. 200 Value 2004 2005 2006 2007 2008 Thereafter maturities) (1) ------- ------- ------- -------- ---- --------------------- -------- (Ch$ Equivalent in millions) Bank Liabilities Short and long-term Bank Liabilities: Fixed Rate Ch$ denominated (3) 265.6 266.8 264.4 --- --- --- 796.8 796.8 Average interest rate (%)(2) 4.94% 4.94% 4.94% --- --- --- US$ denominated --- --- --- --- --- --- --- --- Average interest rate (%)(2) --- --- --- --- --- --- Variable Rate Ch$ denominated (3) 1,688.1 1,033.2 906.3 864.0 --- --- 4,491.6 4,491.6 Average interest rate (%)(4)(2) 5.11% 5.26% 5.26% 5.26% US$ denominated 2,134.8 234.0 14,871.5 14,854.2 --- --- 32,094.5 32,094.5 Average interest rate (%)(2) 1.90% 1.99% 1.99% 1.99% ----------------- 1. These figures were calculated based on the discount value of future cash flows expected to be received or paid, considering current discount rates that reflect the different risks involved. 2. Average interest rate means, for variable rate debt, the average prevailing interest rate on December 31, 2003, on Cristalerias' variable rate debt, and for fixed rate debt, the average prevailing interest rate on December 31, 2003, on Cristalerias' fixed rate debt. 3. These figures were calculated based on the Observed Exchange Rate, as of December 31, 2003, which was Ch$593.8=US$ 1.00. 4. Calculated using the 360 days TAB (Chilean Active Bank Rate), which was 3.36% in 12/31/2003.

The following table summarizes the debt obligations held by our company, as of December 31, 2002, which are sensitive to changes in interest rates. The table presents principal payment obligations that exist by maturity date and the related weighted average interest rate. U.S. dollar-denominated liabilities have been converted to pesos based on the Observed Exchange Rate, as of December 31, 2002, which was Ch$718.61=US$1.00. 92

As of December 31, 2002 Expected maturity date --------------------------------------------------------------------------------------------- Total Debt Fair (incl. 200 Value 2004 2005 2006 2007 2008 Thereafter maturities) (1) ------- ------- ------- -------- ---- --------------------- -------- (Ch$ Equivalent in millions) Bank Liabilities Short and long-term Bank Liabilities: Fixed Rate Ch$ denominated (3) 10.6 --- --- --- --- --- 10.6 10.6 Average interest rate (%) (2) 3.2% --- --- --- --- --- US$ denominated --- --- --- --- --- --- --- --- Average interest rate (%) (2) --- --- --- --- --- --- Variable Rate Ch$ denominated (3) 1,422.0 2,523.5 1,566.7 905.9 863.6 --- 7,281.6 7,281.6 Average interest rate (%)(4)(2) 3.87% 2.56% 3.16% 2.22% 2.21% --- US$ denominated 2,983.9 2,272.1 297.5 18,146.7 18,144.9 --- 41,845.2 41,845.2 Average interest rate (%) (2) 2.42% 2.49% 4.24% 2.68% 2.68% --- ----------------- 1. These figures were calculated based on the discount value of future cash flows expected to be received or paid, considering current discount rates that reflect the different risks involved. 2. Average interest rate means, for variable rate debt, the average prevailing interest rate on December 31, 2002, on Cristalerias' variable rate debt, and for fixed rate debt, the average prevailing interest rate on December 31, 2002, on Cristalerias' fixed rate debt. 3. These figures were calculated based on the Observed Exchange Rate, as of December 31, 2002, which was Ch$718.61=US$ 1.00. 4. Calculated using the 360 days TAB (Chilean Active Bank Rate), which was 0.32% on 02/01/03.

The following table summarizes the public debt obligations held by our company, as of December 31, 2003. The table presents principal payment obligations that exist by maturity date and the related interest rate.

As of December 31, 2003 Expected maturity date --------------------------------------------------------------------------------------------- Total Debt (incl. 200 Fair 2004 2005 2006 2007 2008 Thereafter maturities) Value ------- ------- ------- -------- -------- --------------------- -------- (Ch$ Equivalent in millions) Short-term: Fixed Rate ChUF$ denominated --- --- --- --- --- --- --- --- Interest rate (%) --- --- --- --- --- --- --- --- Long-Term: ChUF$ denominated 1,754.3 3,384.0 --- --- 33,840.0 52,452.0 91,430.3 92,894 Interest rate (%) 5.36% 6.25% --- --- 4.75% 5.95% --- --- -----------------

The following table summarizes the public debt obligations held by our company, as of December 31, 2002. The table presents principal payment obligations that exist by maturity date and the related interest rate. 93

As of December 31, 2002 Expected maturity date --------------------------------------------------------------------------------------------- Total Debt Fair (incl. 200 Value 2004 2005 2006 2007 2008 Thereafter maturities) (1) ------- ------- ------- -------- -------- --------------------- -------- (Ch$ Equivalent in millions) Bonds Short-term: Fixed Rate --- --- --- --- --- --- --- --- ChUF$ denominated --- --- --- --- --- --- --- --- Interest rate (%) --- --- --- --- --- --- --- --- Long-Term: ChUF$ denominated 1,966.3 --- 3,382.3 --- --- 86,249.0 91,598.6 91,961.7 Interest rate (%) 5.51% --- 6.25% --- --- 5.48% --- ---

Risk of Variations in Foreign Currency Exchange Rates Our consolidated results are exposed to variations in exchange rates, particularly to fluctuations in the peso-U.S. dollar exchange rate. As of December 31, 2003, we held U.S. dollar-denominated operating assets totaling approximately Ch$17,612 million and U.S. dollar-denominated liabilities of approximately Ch$40,826 million. As a result, we had a net exposure of Ch$23,214 million. As of December 31, 2002, we held U.S. dollar-denominated operating assets totaling approximately Ch$10,897 million and U.S. dollar-denominated liabilities of approximately Ch$52,704 million. As a result, we had a net exposure of Ch$41,807 million. The table below provides information about our U.S. dollar-denominated operating assets and liabilities: December 31, 2002 December 31, 2003 (Ch$ in millions) (Ch$ in millions) ---------------- ----------------- On-Balance Sheet Financial Instruments (1) Assets Cash 333.1 465.4 Miscellaneous Receivables 4,491.9 4,920.4 Other assets 6,072.3 12,226.5 Total assets 10,897.3 17,612.3 Liabilities Obligations to Banks 40,383.2 31,900.9 Accounts payable 3,158.5 1,439.2 Documents payable 2,367.4 1,762.3 Accrued expenses 5,424.8 4,931.6 Miscellaneous Creditors 1,370.3 792.1 Total liabilities 52,704.2 40,826.1 ----------------- [(1) ADD FN TEXT HERE] As of December 31, 2003, we held approximately Ch$2,665 million in U.S. dollar-denominated time deposits, Ch$37,066 million in marketable securities, as well as foreign currency forward contracts to purchase U.S. dollars totaling US$ 44.6 million and foreign currency forward contracts to sell U.S. dollars totaling US$41.6 million. 94 As of December 31, 2002, we held approximately Ch$3,301 million in U.S. dollar-denominated time deposits, Ch$64,253 million in marketable securities, as well as foreign currency forward contracts to purchase U.S. dollars totaling US$ 130.6 million. The table below provides information about our U.S. dollar-denominated time deposits and forward exchange agreements that are sensitive to foreign currency exchange rates as of December 31, 2003:

As of December 31, 2003 Expected maturity date ------------------------------------------------------------------------------------ Fair 2004 2005 2006 2007 2008 Thereafter Total Value ---------- --------- --------- ------- -------- ------------ --------- -------- On-Balance Sheet Financial Instruments (Ch$ in millions) US$ Time Deposits 2,665 --- --- --- --- --- 2,665 2,665 Marketable Securities 37,066 --- --- --- --- --- 37,066 37,066 Long-Term Bonds --- 8,036 --- --- --- --- 8,036 8,450 Reverse Repurchase agreements 3,586 --- --- --- --- --- 3,586 3,586 Anticipated Transactions and Expected transaction date Related Derivatives (Ch$ in millions) Forward Exchange agreements (Receive US$/Pay UF): (1) Contract Amount (2) --- --- --- --- --- --- --- --- Average Contractual Exchange Rate (UF/US$) Forward Exchange agreements (Receives Ch$/Pays US$) Contract Amount (3) (2,398) --- --- --- --- --- (2,398) (2,366) Average Contractual Exchange Rate 662.83 (Ch$/US$) (1) The UF-U.S. dollar exchange rate differs from the peso-U.S. dollar exchange rate because the UF automatically adjusts with Chilean inflation and is tied in part to the peso-U.S. dollar exchange rate. (2) These figures were calculated based on the Observed Exchange Rate as of December 31, 2003, which was Ch$593.80=US$1.00. (3) This average exchange rate includes Dollar purchase forward exchange contracts of US$44.6 million and Dollar sale future exchange contracts of US$41.6 millin, which take into account an average exchange rate of Ch$686.91/US$1 and Ch$638.74/US$1 respectively.

The table below provides information about our U.S. dollar-denominated time deposits and forward exchange agreements that are sensitive to foreign currency exchange rates, as of December 31, 2002:

As of December 31, 2002 Expected maturity date ----------------------------------------------------------------------------------- Fair 2003 2004 2005 2006 2007 Thereafter Total Value ---------- --------- -------- ------- ------ ------------- ------- --------- On-Balance Sheet Financial Instruments (Ch$ in millions) US$ Time Deposits 3,301 --- --- --- --- --- 3,301 3,301 Marketable Securities 64,253 --- --- --- --- --- 64,253 64,378 Long-Term Bonds --- --- 9,938 --- --- --- 9,938 10,494 Reverse Repurchase agreements 5,692 --- --- --- --- --- 5,692 5,692 95 Anticipated Transactions and Expected transaction date Related Derivatives (Ch$ in millions) Forward Exchange agreements (Receive US$/Pay UF): (1) Contract Amount (2) (628) --- --- --- --- --- (628) 1,076 Average Contractual Exchange Rate 0.04295 (UF/US$) Forward Exchange agreements (Receives Euros/Pays US$) Contract Amount (3) --- --- --- --- --- --- --- --- Average Contractual Exchange Rate (US$/Euro) (1) The UF-U.S. dollar exchange rate differs from the peso-U.S. dollar exchange rate because the UF automatically adjusts with Chilean inflation and is tied in part to the peso-U.S. dollar exchange rate. (2) These figures were calculated based on the Observed Exchange Rate as of December 31, 2002, which was Ch$718.61=US$1.00.

In addition, during 2003, approximately 36% of our consolidated sales were denominated in U.S. dollars (36.7% in 2002). These sales stemmed primarily from the exports of wine from Vina Santa Rita and from sales by Cristalerias in Chile for contracts denominated in U.S. dollars. Furthermore, during 2003, 30% of our consolidated costs, were denominated in U.S. dollars (27.4% in 2002). In the case of the glass container business approximately 34% of sales and 27% of costs were denominated in US Dollars (34% and 28% respectively in 2002); the latter mainly related to costs of raw materials such as soda ash and energy. In the case of Santa Rita approximately 54.5% of consolidated sales and 34.0% of consolidated costs are denominated in US Dollars; the latter mainly corresponding to dry costs such as corks, labels and bottles. As of December 31, 2003, we held investments in Argentina of Ch$16,150 million as represented by a 40% ownership interest in Rayen Cura S.A.I.C., which has been remeasured into U.S. dollars as required under BT 64 (Ch$20,763 million in 2002). Other Risks i. Competition The glass containers industry in Chile is subject to substitutes such as plastics, tetra packs and aluminum and steel cans. Additionally, the Company faces competition from a local producer and from imports of glass containers. An increase in the level of competition could affect the Company's sales and/or its margins, and therefore impact negatively its results. At the same time it is worth mentioning that the Company has an important market share in each of the glass container segments in which it participates as well as the advantages that glass has compared with potential substitutes. In addition, the Company owns 50% of a plastic containers producer, Envases CMF S.A., and owns 40% of Rayen Cura S.A.I.C., a glass producer located in the province of Mendoza, Republic of Argentina. In the case of the wine business there is a high level of competition in the local market that allows fluctuations in the Company's profitability. In relation to foreign markets, the level of globalization and the large amount of participants in the wine industry make these markets highly competitive. 96 ii. Concentration of sales to the wine sector During 2003 59.7% of individual sales of the glass business in Chile were glass containers for the wine sector. Of this total, 81% was attributable to wine exports. In this way, potential problems in the commercialization or production of Chilean wine could negatively affect the Company's results. In addition, it is noteworthy that 44.1% of the Company's consolidated sales correspond to sales of Vina Santa Rita. Agricultural risk Production of fine wines depends importantly of quantity and quality of harvested grapes. Being an agricultural activity, grapes harvest is influenced by factors such as weather and plagues. Likewise, a higher than expected harvest represents a reduction of direct costs, and, at the same time, could have negative effects in the sale price of the final product. Vina Santa Rita has demanding quality standards on its agricultural assets administration, which include, among others: plague resistant plantations, deep wells that ensure a higher water availability and frost and hail control systems in the majority of its vineyards, in order to reduce exposure to the aforementioned factors. Additionally, Vina Santa Rita has invested in plantations in order to increase self supply for its fine wines production. ITEM 12: Description of Securities other than Equity Securities Not Applicable PART II ITEM 13: Defaults, Dividend Arrearages and Delinquencies Not Applicable ITEM 14: Material Modifications to the Rights of Security Holders and Use of Proceeds Not Applicable ITEM 15: Controls and Procedures Within the 90 days prior to the date of this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. 97 Furthermore, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 16: Reserved ITEM 16A. Audit Committee Financial Expert In accordance with Chilean laws and regulations, our Board of Directors, at its meeting on April 19, 2003, elected the following three members of what is called the "Committee of Directors," which is the Audit Committee: o Mr. Juan Agustin Figueroa Yavar, President o Mr. Joaquin Barros Fontaine o Mr. Patricio Claro Grez The Board is in the process of evaluating whether any current member of the Audit Committee qualifies as an "audit committee financial expert," as the term is defined in Item 16A of Form 20-F. If the evaluation, once complete, shows that no current member of the Audit Committee is qualified as such an expert, the Board of Directors intends to propose an appropriately qualified audit committee financial expert as a candidate to the Audit Committee. ITEM 16B. Conduct Ruling We have adopted a conduct ruling that applies to our chief executive officer and all senior financial officers of our company, including the chief financial officer, corporate comptroller and accounting officer. Our conduct ruling is filed as Exhibit 11.1. If we make any substantive amendment to the conduct ruling or grant any waivers, including any implicit waiver, from a provision of the conduct ruling, we will disclose the nature of such amendment or wavier on our website, www.cristalchile.com. ITEM 16C.Principal Accountant Fees and Services The following table sets forth the fees billed to us by our independent auditors, Ernst & Young Limitada, during the fiscal years ended December 31, 2002 and 2003: Year ended December 31, ------------------------------- 2002 2003 --------- --------- (Ch$ in constant millions) Audit fees (1) 85 85 Audit-related fees (2) -- -- Tax fees (3) -- -- Other fees (4) -- -- Total fees 85 85 ----------------- (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. 98 (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 and Legal Fees relate to services performed by the tax division for tax compliance, planning, and advice. (4) All Other Fees relate to products and services provided by the principal accountant that are not otherwise described in this table. Audit fees in the above table are the aggregate fees billed and contracted to be billed by Ernst & Young Limitada in connection with the audit of our 2003 annual financial statements, statutory and regulatory filings and engagements, including the review of our interim financial statements as of and for the period ended June 30, 2003. We did not incur any audit-related fees, tax fees or other fees with Ernst & Young Limitada. Audit-related fees would include assurance and related services that are related to the performance of the audit or review of our financial statements. Tax fees would include tax compliance, tax advice, and tax planning. 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 the audit committee. Any service proposals submitted by external auditors need to be discussed and approved by the 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. ITEM 16D. Exemptions from the Listing Standards for Audit Committees Not applicable. ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers During 2003, no issuer or affiliated party repurchases were made pursuant to publicly announced plans or programs or not pursuant to such plans. 99 PART III ITEM 17: Financial Statements Our financial statements have been prepared in accordance with Item 18 hereof. ITEM 18: Financial Statements The following consolidated financial statements of our company and its subsidiaries are included at the end of this annual report:

Independent Auditors' Report....................................................................F-2 Consolidated balance sheets at December 31, 2002 and 2003.......................................F-4 Consolidated statements of income for the years ended December 31, 2001, 2002 and 2003..........F-6 Consolidated statements of cash flows at December 31, 2001, 2002 and 2003.......................F-8 Notes to the Consolidated Financial Statements................................................ F-10 The following consolidated financial statements of Cordillera Comunicaciones Ltda. and its subsidiaries are included at the end of this annual report: Independent Auditors' Report....................................................................G-3 Consolidated balance sheets at December 31, 2002 and 2003.......................................G-5 Consolidated statements of income for the years ended December 31, 2001, 2002 and 2003..........G-7 Consolidated statements of cash flows at December 31, 2001, 2002 and 2003.......................G-8 Notes to the Consolidated Financial Statements.................................................G-10

100 ITEM 19: Exhibits The exhibits filed with or incorporated by reference in this annual report are listed in the index of exhibits below. Exhibit Number Description 12.1 Certification of Mr. Cirilo Elton Gonzalez pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 12.2 Certification of Mr. Rodrigo Palacios Fitz-Henry, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 13.1 Certification of Mr. Cirilo Elton Gonzalez pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (filed herewith). 13.2 Certification of Mr. Rodrigo Palacios Fitz-Henry pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (filed herewith). 8.1 List of Cristalerias Subsidiaries (filed herewith). 11.1 Conduct Ruling of the company (filed herewith). 101 ---------------------------------------------------- CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES ------------------ CONSOLIDATED FINANCIAL STATEMENTS as of December 31, 2002 and 2003 and for each of the three years in the period ended December 31, 2003 together with the Reports of Independent Auditors CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES ------------ Index to Consolidated Financial Statements Pages INDEPENDENT AUDITORS' REPORT: Audit Report of Ernst & Young - 2002 and 2003 F-2 Audit Report of Langton Clarke - 2001 F-3 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of December 31, 2002 and 2003 F-4 - F-5 Consolidated Statements of Income for each of the three years in the period ended December 31, 2003 F-6 Consolidated Statements of Changes in Shareholders' Equity for each of the three years in the period ended December 31, 2003 F-7 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2003 F-8 - F-9 Notes to the Consolidated Financial Statements F-10 ------------ Ch$ - Chilean pesos ThCh$ - Thousands of Chilean pesos US$ - United States dollars ThUS$ - Thousands of United States dollars UF - Unidad de Fomento "UF" is a daily, indexed, peso-denominated accounting unit. The UF rate is set daily in advance based on the change in the Chilean Consumer Price Index of the previous month. ------------ F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Cristalerias de Chile S.A.: We have audited the accompanying consolidated balance sheets of Cristalerias de Chile S.A. and Subsidiaries (the "Company") as of December 31, 2002 and 2003, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. 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. The consolidated financial statements of the Company for the year ended December 31, 2001 were audited by Langton Clarke, a member of Andersen Worldwide, who issued an unqualified opinion in their report dated February 28, 2002, except for Notes 2(a), 2(b), 35 and 39 for which the date was May 29, 2002. Andersen Worldwide has ceased operating as a member of the Securities and Exchange Commission Practice Section of the American Institute of Certified Public Accountants. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cristalerias de Chile S.A. and Subsidiaries as of December 31, 2002 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 37 to the consolidated financial statements). /s/ Ernst & Young ERNST & YOUNG LTDA. Santiago, Chile February 26, 2004 F-2 This is a copy of a previously issued Arthur Andersen - Langton Clarke report. Arthur Andersen - Langton Clarke has not reissued the report, nor has Arthur Andersen - Langton Clarke consented to the inclusion of the report. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Cristalerias de Chile S.A.: We have audited the accompanying consolidated balance sheets of Cristalerias de Chile S.A. (the "Company") and subsidiaries as of December 31, 2000 and 2001 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001, all expressed in thousands of constant Chilean pesos. 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 the United States of America. 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. Accounting practices used by the Company in preparing the accompanying consolidated financial statements conform with accounting principles generally accepted in Chile, but do not conform with accounting principles generally accepted in the United States of America. A description of these differences and a reconciliation of consolidated net income and shareholders' equity under accounting principles generally accepted in Chile to the corresponding amounts that would be reported in accordance with accounting principles generally accepted in the United States, except for the omissions, as allowed pursuant to Item 18 of SEC Form 20-F, of adjustments necessary to eliminate the effect of price-level changes and the translation of non-Chilean operations described in Notes 2(b) and 2(t), is set forth in Note 39 to these consolidated financial statements. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cristalerias de Chile S.A. and subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in Chile. As explained in Note 3 to these consolidated financial statements, on January 1, 2000 the Company prospectively recorded the tax effects of temporary differences adopted using the liability method in accordance with Technical Bulletins No. 60 and 68 issued by the Chilean Association of Accountants and Circular No. 1,466 issued by the Chilean Superintendency of Securities and Insurance. LANGTON CLARKE Santiago, Chile February 28, 2002, (except for Notes 2(a), 2(b), 35 and 39 for which the date is May 29, 2002) F-3 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 and thousands of U.S. dollars)

As of December 31, --------------------------------------------- ASSETS 2002 2003 2003 ThCh$ ThCh$ ThUS$ (Note 2(o)) ----------- ----------- ----------- CURRENT ASSETS: Cash 2,450,019 3,513,737 5,917 Time deposits (Note 4) 13,112,270 4,265,706 7,184 Marketable securities (Note 4) 68,137,825 59,614,973 100,396 Current receivables, net of allowance for doubtful accounts of ThCh$704,809 and ThCh$701,509 respectively (Note 5) 43,530,243 45,000,647 75,784 Accounts receivable from related companies (Note 6) 403,409 1,166,627 1,965 Inventories (Note 7) 32,129,652 31,888,316 53,702 Recoverable taxes, net (Note 8) 795,607 3,934,227 6,626 Prepaid expenses 1,718,272 1,636,025 2,755 Deferred income taxes (Note 8) 1,192,020 1,060,466 1,786 Other current assets (Note 9) 15,561,568 12,755,237 21,481 ----------- ----------- -------- Total current assets 179,030,885 164,835,961 277,596 ----------- ----------- -------- PROPERTY, PLANT AND EQUIPMENT (Note 11): Land 13,058,482 13,083,665 22,034 Buildings and construction 55,742,387 61,582,136 103,709 Machinery and equipment 132,480,170 144,254,005 242,934 Other property, plant and equipment 11,252,568 11,475,204 19,325 Technical revaluation of property, plant and equipment 7,713,765 6,606,881 11,126 Less: Accumulated depreciation (91,550,235) (100,861,120) (169,857) ----------- ------------ --------- Net property, plant and equipment 128,697,137 136,140,771 229,271 ----------- ----------- --------- OTHER ASSETS: Investments in related companies (Note 12) 110,749,484 103,059,369 173,559 Investments in others companies (Note 13) 825,600 825,600 1,390 Long-term receivables 196,909 210,268 354 Accounts receivables from related companies (Note 6) 1,442 2,894 5 Intangibles, net (Note 15) 10,771,986 10,593,695 17,841 Goodwill, net (Note 14) 9,822,246 8,978,309 15,120 Other assets (Note 16) 16,907,513 13,298,636 22,396 ----------- ----------- --------- Total other assets 149,275,180 136,968,771 230,665 ----------- ----------- --------- Total assets 457,003,202 437,945,503 737,532 =========== =========== ========= The accompanying notes are an integral part of these consolidated financial statements.

F-4 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 and thousands of U.S. dollars)

As of December 31, LIABILITIES AND SHAREHOLDERS' EQUITY ---------------------------------------------- 2002 2003 2003 ThCh$ ThCh$ ThUS$ (Note 2(o)) ----------- ----------- ----------- CURRENT LIABILITIES: Short-term bank liabilities (Note 17) 10,590 165,648 279 Current portion of long-term bank liabilities (Note 17) 4,405,941 3,922,847 6,606 Current portion of bonds payable (Note 19) 1,966,286 1,754,288 2,954 Dividends payable 729,869 503,684 848 Trade accounts payable 13,399,179 11,233,939 18,919 Miscellaneous creditors 2,440,235 1,657,009 2,791 Accounts payable to related companies (Note 6) 890,409 722,925 1,217 Accrued expenses (Note 20) 10,872,844 8,440,614 14,215 Withholdings 2,714,583 3,294,333 5,548 Unearned income 1,634,702 3,035,936 5,113 Other current liabilities (Note 18) 628,635 2,397,846 4,038 ----------- ----------- ------- Total current liabilities 39,693,273 37,129,069 62,528 ----------- ----------- ------- LONG-TERM LIABILITIES: Long-term bank liabilities (Note 17) 44,720,914 33,294,496 56,070 Bonds payable (Note 19) 89,631,274 89,676,000 151,021 Accounts payable 14,210 - - Miscellaneous creditors 2,505,839 272,283 459 Accrued expenses (Note 20) 5,627,116 7,539,441 12,697 Deferred income taxes (Note 8) 4,046,876 4,030,879 6,788 ----------- ----------- ------- Total long-term liabilities 146,546,229 134,813,099 227,035 ----------- ----------- ------- COMMITMENTS AND CONTINGENCIES (Note 29): MINORITY INTEREST (Note 21): 37,120,269 37,681,750 63,459 SHAREHOLDERS' EQUITY (Note 22): Authorized, subscribed and paid-in capital represented by 64,000,000 shares with no par value 65,396,749 65,396,749 110,133 Share premium 27,874,377 27,874,377 46,942 Other reserves 9,810,228 6,421,900 10,815 Retained earnings 112,724,808 122,202,039 205,797 Net income 17,837,269 6,426,520 10,823 ----------- ----------- ------- Total shareholders' equity 233,643,431 228,321,585 384,510 ----------- ----------- ------- Total liabilities and shareholders' equity 457,003,202 437,945,503 737,532 =========== =========== ======= The accompanying notes are an integral part of these consolidated financial statements.

F-5 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 and thousands of U.S. dollars)

Years ended December 31, --------------------------------------------------------------- 2001 2002 2003 2003 ThCh$ ThCh$ ThCh$ ThUS$ (Note 2(o)) ------------ ------------ ------------ ------------ OPERATING RESULTS: Net sales 147,648,547 162,667,833 169,941,105 286,192 Cost of sales (90,986,823) (95,725,678) (105,685,566) (177,982) ------------ ------------ ------------ --------- Gross margin 56,661,724 66,942,155 64,255,539 108,210 Selling and administrative expenses (22,764,040) (24,915,744) (26,613,799) (44,819) ------------ ------------ ------------ -------- Operating income 33,897,684 42,026,411 37,641,740 63,391 ------------ ------------ ------------ -------- NON-OPERATING RESULTS: Net interest expense (Note 23) (4,256,736) (4,329,668) (4,235,958) (7,134) Equity participation in net income (loss) of related companies (Note 12) (7,692,604) (8,991,404) (4,538,754) (7,644) Other non-operating income (Note 23) 6,980,179 1,276,956 928,916 1,564 Other non-operating expense (Note 23) (2,857,052) (4,114,556) (2,313,971) (3,897) Price-level restatement, net (Note 24) (2,361,148) (1,970,860) (802,562) (1,352) Foreign currency translation, net (Note 25) 1,401,312 4,997,842 (17,064,668) (28,738) ------------ ------------ ------------ ------- Non-operating income (loss) (8,786,049) (13,131,690) (28,026,997) (47,201) ------------ ------------ ------------ ------- Income before income taxes and minority interest 25,111,635 28,894,721 9,614,743 16,190 Income taxes (Note 8) (5,183,099) (6,461,791) (1,347,581) (2,268) Extraordinary income (Note 26) 1,857,013 - - - ------------ ------------ ------------ ------- Income before minority interest 21,785,549 22,432,930 8,267,162 13,922 Minority interest (Note 21) (3,298,782) (4,595,661) (1,840,642) (3,099) ------------ ------------ ------------ ------- Net income 18,486,767 17,837,269 6,426,520 10,823 ============ ============ ============ ======= The accompanying notes are an integral part of these consolidated financial statements.

F-6 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Translation of financial statements originally issued in Spanish - See Note 2) (Expressed in thousands of historical Chilean pesos, except as stated)

Previous Share Share Other Retained Year's Net Net Income Capital Premium Reserves Earnings Income For the Year Total ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ----------- ---------- ---------- ----------- ----------- ------------- ------------ Balance as of January 1, 2001 60,973,186 25,988,901 6,058,558 87,131,175 17,042,239 - 197,194,059 Profit distribution 2001 - - 107,536 16,934,703 (17,042,239) - - Dividends - - - (8,996,480) - (8,996,480) Price-level restatement of equity accounts 1,890,169 805,655 172,570 3,070,988 - - 5,939,382 Currency translation adjustment - - 1,604,256 - - - 1,604,256 Subsidiary start-up stage deficit - - (123,129) - - - (123,129) Net income for the year - - - - - 17,770,611 17,770,611 ---------- ---------- ---------- ----------- ---------- ---------- ----------- Balance as of December 31, 2001 62,863,355 26,794,556 7,819,791 98,140,386 - 17,770,611 213,388,699 ========== ========== ========== =========== ========== ========== =========== Balance as of December 31, 2001 restated to constant Chilean Pesos as of December 31, 2003 65,396,749 27,874,377 8,134,929 102,095,444 - 18,486,767 221,988,266 ========== ========== ========== =========== ========== ========== =========== Balance as of January 1, 2002 62,863,355 26,794,556 7,819,791 98,140,386 17,770,611 - 213,388,699 Profit distribution 2002 - - 123,129 17,647,482 (17,770,611) - - Dividends - - - (7,494,400) - - (7,494,400) Price-level restatement of equity accounts 1,885,901 803,837 238,285 3,315,252 - - 6,243,275 Currency translation adjustment - - 1,531,894 - - - 1,531,894 Net income for the year - - - - - 17,660,662 17,660,662 ---------- ---------- ---------- ----------- ---------- ---------- ----------- Balance as of December 31, 2002 64,749,256 27,598,393 9,713,099 111,608,720 - 17,660,662 231,330,130 ========== ========== ========== =========== ========== ========== =========== Balance as of December 31, 2002 restated to constant Chilean Pesos as of December 31, 2003 65,396,749 27,874,377 9,810,228 112,724,808 - 17,837,269 233,643,431 ========== ========== ========== =========== ========== ========== =========== Balance as of January 1, 2003 64,749,256 27,598,393 9,713,099 111,608,720 17,660,662 - 231,330,130 Profit distribution 2003 - - 17,660,662 (17,660,662) - - Dividends - - - (8,406,400) - - (8,406,400) Price-level restatement of equity accounts 647,493 275,984 97,131 1,339,057 - - 2,359,665 Currency translation adjustment - - (3,388,330) - - - (3,388,330) Net income for the year - - - - - 6,426,520 6,426,520 ---------- ---------- ---------- ----------- ---------- ---------- ----------- Balance as of December 31, 2003 65,396,749 27,874,377 6,421,900 122,202,039 - 6,426,520 228,321,585 ========== ========== ========== =========== ========== ========== =========== As of December 31, 2001, 2002 and 2003 there were 64,000,000 shares authorized, issued and outstanding. The accompanying notes are an integral part of these consolidated financial statements.

F-7 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 and thousands of U.S. dollars)

Years ended December 31, --------------------------------------------------------- 2001 2002 2003 2003 ThCh$ ThCh$ ThCh$ ThUS$ (Note 2(o)) ---------- ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME 18,486,767 17,837,269 6,426,520 10,823 Net (gain) loss on sale of property and equipment (44,944) 50,438 122,185 206 Net (gain) loss on sale of other assets (2,070,142) - - - ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation 12,256,348 13,710,672 14,727,039 24,801 Amortization of intangibles 164,506 180,998 296,917 500 Amortization of bonds 243,585 206,036 326,029 549 Amortization of prepaids 851,293 394,263 438,315 738 Write-offs and provisions 4,038,228 8,518,965 1,972,742 3,322 Equity in net loss of related companies 7,692,604 8,991,404 4,538,754 7,644 Amortization of goodwill 855,611 653,119 577,203 972 Price-level restatement, net 2,361,148 1,970,860 802,562 1,352 Foreign exchange gain, net (1,401,312) (4,997,842) 17,064,668 28,738 Other, net (845,431) 3,708,085 (8,192,875) (13,797) CHANGES IN OPERATING ASSETS: (Increase) decrease in current receivable (6,108,279) (4,645,631) 581,545 979 (Increase) decrease in inventories 865,030 (3,647,598) (574,569) (968) Increase in other assets (3,780,216) (1,914,417) (903,829) (1,522) CHANGES IN OPERATING LIABILITIES: Increase (decrease) in trade accounts payable 1,675,405 1,316,413 (3,954,092) (6,659) Increase (decrease) in bank liabilities (1,106,081) 2,434,166 (370,023) (623) Increase (decrease) in income tax 1,579,465 582,027 (2,353,081) (3,963) Increase (decrease) in accounts payable to related 2,118,652 (200,725) 882,098 1,486 companies Increase (decrease) in withholdings (257,894) 125,485 1,186,630 1,999 Loss in minority interest 3,298,782 4,595,661 1,840,642 3,099 ---------- ---------- ---------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 40,873,125 49,869,648 35,435,380 59,676 ========== ========== ========== ======= The accompanying notes are an integral part of these consolidated financial statements.

F-8 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 and thousands of U.S. dollars)

Years ended December 31, ----------------------------------------------------------- 2001 2002 2003 2003 ThCh$ ThCh$ ThCh$ ThUS$ (Note 2(o)) ------------ ------------ ------------ ----------- CASH FLOW FROM FINANCING ACTIVITIES: Borrowings from banks and others 8,802,865 3,173,791 220,986 372 Bonds payable 19,045,096 69,077,493 - - Borrowings from related companies 1,986,639 78,545 124,518 210 Dividends paid (9,834,314) (9,246,022) (9,942,762) (16,744) Payment of loans (12,180,660) (45,549,482) (4,377,152) (7,371) Payment for bond issuance costs - (3,870,561) - - Repayment of bonds (1,100,268) (1,060,815) (212,214) (357) Payment of loans from related companies (2,320,860) (325,781) (150,068) (253) Other sources of financing 982,810 - - - Other finance payments (163,477) (458,765) (1,452,340) (2,446) ---------- ---------- ----------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 5,217,831 11,818,403 (15,789,032) (26,589) ---------- ---------- ----------- -------- CASH FLOW FROM INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 1,525,951 239,409 369,137 622 Proceeds from sales of permanent investment 957,932 1,395 - - Proceeds from sales of other investments 55,981,752 11,467,486 2,395,881 4,035 Proceeds from loans from related companies 1,384,696 90,831 2,032,082 3,422 Proceeds from forwards contracts 10,617,050 5,038,015 2,770,343 4,665 Additions to property, plant and equipment (34,049,120) (15,654,305) (25,643,601) (43,186) Disbursements for forward contracts - - (9,977,356) (16,803) Permanent investments (4,091,354) (4,112,747) (3,920,618) (6,603) Investment in financial instruments (67,597,460) (1,609,107) (2,465,810) (4,153) Related company loans (157,778) (31,002) (46,737) (79) Other investing activities 112,347 (477,609) (340,376) (573) ---------- ---------- ----------- -------- NET CASH USED IN INVESTING ACTIVITIES (35,315,986) (5,047,634) (34,827,055) (58,653) ---------- ---------- ----------- -------- TOTAL NET CASH FLOW OF THE PERIOD 10,774,970 56,640,417 (15,180,707) (25,566) EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS EQUIVALENTS (1,302,575) (1,708,086) (3,439,516) (5,792) ---------- ---------- ----------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 9,472,395 54,932,331 (18,620,223) (31,358) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 29,825,469 39,297,864 94,230,195 158,690 ---------- ---------- ----------- -------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 39,297,864 94,230,195 75,609,972 127,332 ========== ========== =========== ======== The accompanying notes are an integral part of these consolidated financial statements.

F-9 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) 1. BUSINESS DESCRIPTION The primary activity of Cristalerias de Chile S.A. ("Cristalerias") and its subsidiaries (collectively, the "Company") is the production of glass bottles and plastic containers for the beverage industry. The Company also has majority holdings in companies within the communications and wine production industries. Virtually all the sales made by Cristalerias de Chile S.A. are within the domestic market, with the exception of wine bottle sales which have a significant export volume. In addition, Santa Rita also has a significant volume of export sales and is one of the largest exporters of wine in Chile. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis for preparation of financial statements: The consolidated financial statements of the Company have been prepared on the basis of accounting principles generally accepted in Chile and specific guidelines issued by the Chilean Superintendency of Securities and Insurance (the "SVS"), which are collectively referred to as "Chilean GAAP". Certain accounting practices applied by the Company that conform with generally accepted accounting principles in Chile do not conform with generally accepted accounting principles in the United States of America ("U.S. GAAP"). Certain prior year amounts have been reclassified to conform to the current year method of presentation. The preparation of financial statements in conformity with Chilean GAAP, along with the reconciliation to U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In certain cases generally accepted accounting principles require that assets or liabilities be recorded or disclosed at their fair values. The fair value is the amount at which an asset could be bought or sold or the amount at which a liability could be incurred or settled in a current transaction between willing parties, other than in a forced or liquidation sale. Where available, quoted market prices in active markets have been used as the basis for the measurement; however, where quoted market prices in active markets are not available, the Company has estimated such values based on the best information available, including using modeling and other valuation techniques. The accompanying financial statements reflect the consolidated results of operations of Cristalerias and its subsidiaries. All significant inter-company accounts have been eliminated in consolidation. The company consolidates the financial statements of the companies in which it controls a majority of voting shares. Investments in companies in the development stage are accounted for using the equity method, except that any participation in income or losses is included directly in shareholders' equity instead of being reflected in the Company's consolidated statement of income. F-10 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (a) Basis for preparation of financial statements, continued: As of December 31, 2001, 2002 and 2003, Cristalerias consolidated the following companies:

Name % Participation 2001 2002 2003 ----- ----- ----- Cristalchile Comunicaciones S.A. 99.99 99.99 99.99 Constructora Apoger S.A. "Apoger" (1) 80.00 80.00 80.00 CIECSA S.A. and subsidiaries "CIECSA" (2) 98.21 98.21 98.45 Vina Santa Rita "Santa Rita" (3) 54.10 54.10 54.10 Cristalchile Inversiones S.A. 99.99 99.99 99.99 (1) Apoger consolidates its subsidiary, Monte Azul Ltda. of which it owns 99.0%. (2) Consolidated CIECSA S.A. includes the balances of its subsidiary, Megavision S.A. of which previously owned 78.01%. Beginning August 27, 2002, CIECSA's participation in Megavision S.A. increased to 99.99%. Beginning the third quarter of 2001, CIECSA's subsidiary, Ediciones Chiloe S.A. has not been consolidated, because ownership has decreased from 75% to 50%, and the Company no longer has control. (3) Santa Rita and subsidiaries includes the balances of its subsidiaries, Vina Dona Paula S.A. and Vina Carmen S.A., of which it owns 99.0% and 100%, respectively. Sur Andino S.A., which is 100% owned and consolidated, was formed on March 1, 2001.

(b) Price-Level Restatement: The financial statements have been price-level restated in order to reflect the effect of the changes in the purchasing power of the Chilean currency during each year. All non-monetary assets and liabilities and income statement accounts have been restated to reflect the changes in the Chilean consumer price index from the date they were acquired or incurred to year-end. The purchasing power gain or loss included in net income within the account "price-level restatement" reflects the net effect of Chilean inflation on the monetary assets and liabilities held by the Company. The restatements were calculated using the official consumer price index ("CPI") of the National Institute of Statistics and based on the "prior month rule", in which the inflation adjustments are based on the consumer price index at the close of the month preceding the close of the respective year or transaction. 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 purposes in Chile. F-11 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (b) Price-Level Restatement, continued: The values of the Chilean consumer price index used for financial accounting price-level restatement purposes are as follows: Change over previous Index November 30 ------ ----------- November 30, 2001 110.10 3.1% November 30, 2002 113.36 3.0% November 30, 2003 114.44 1.0% By way of comparison, the year-end values of the Chilean consumer price index are as follows: Change over previous Index December 31 ------ ----------- December 31, 2001 109.76 2.6% December 31, 2002 112.86 2.8% December 31, 2003 114.07 1.1% The above-mentioned price-level restatements do not purport to represent 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 monetary assets and liabilities exposed to the effects of inflation. Assets and liabilities that are denominated in index-linked units of account are stated at the year-end values of the respective units of account. The principal index-linked unit used in Chile is the Unidad de Fomento (UF), which changes daily to reflect the changes in Chile's consumer price index. Many of the Company's investments and liabilities are denominated in UF. As the Company's indexed liabilities exceed its indexed assets, an increase in the index results in a net loss on indexation. Values for the UF are as follows (historical pesos per UF): Ch$ --------- December 31, 2001 16,262.66 December 31, 2002 16,744.12 December 31, 2003 16,920.00 F-12 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (b) Price-Level Restatement, continued: Comparative financial statements: All amounts in the financial statements and notes are expressed in constant Chilean pesos of December 31, 2003 purchasing power, unless otherwise stated. For comparative purposes, the December 31, 2001 and 2002 financial statements, and the amounts disclosed in the related footnotes have been restated by 4.0%(1) and 1.0%, respectively, in order to present such information in terms of Chilean pesos as of December 31, 2003. This updating does not change the prior year's statements or information in any way except to update the amounts to constant Chilean pesos of similar purchasing power. (1) Originally reported 2001 figures multiplied by 3.0% then multiplied by 1.0% (c) Assets and liabilities denominated in foreign currency: Balances in foreign currencies have been translated into Chilean Pesos at the Observed Exchange Rate as reported by the Central Bank of Chile as follows:

As of December 31, ------------------------------------------- Symbol 2001 2002 2003 ------ -------- -------- Ch$ Ch$ Ch$ U.S. Dollar US$ 654.79 718.61 593.80 Pound Sterling GBP 948.01 1,152.91 1,056.21 German Mark (1) DEM 296.36 - - Italian Lira (1) ITL 0.30 - - Swiss Franc CHF 390.62 517.69 477.64 French Franc (1) FRF 88.36 - - Danish Corona (1) DKK 77.82 - - Euro EUR 578.18 752.55 744.95 Argentine peso (2) ARG 385.17 216.45 204.05 (1) Beginning on January 1, 2002, these currencies have been replaced by the Euro. (2) In recent years prior to December 31, 2001, the Argentine peso was pegged to the U.S. dollar at a rate of 1 Argentine peso to 1 U.S. dollar. In early December 2001, restrictions were put in place that prohibited cash withdrawals above a certain amount and foreign money transfers, with certain limited exceptions. While the legal exchange rate remained at 1 peso to 1 U.S. dollar, financial institutions were allowed to conduct only limited activity due to these controls, and currency exchange activity was effectively halted except for personal transactions in small amounts. In January 2002, the Argentine government announced its intent to create a dual currency system with an "official" fixed exchange rate of 1.4 pesos to 1 U.S. dollar for import and export transactions and a "free" floating exchange rate for other transactions. On January 11, 2002, the exchange rate market holiday ended and closing new "free" floating exchange rates ranged from 1.6 to 1.7 pesos to 1 U.S. dollar notwithstanding the official foreign exchange rate as of December 31, 2001, 2002 and 2003, in accordance with SVS Circular No. 81. The conversion of Argentine subsidiary financial statements reflect the conversion rate of 1.7, 3.32 and 2.91 pesos to 1 U.S. dollar, respectively.

F-13 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (c) Assets and liabilities denominated in foreign currency, continued: Transactions in foreign currencies are recorded at the exchange rate prevailing when the transactions occur. Foreign currency balances are translated at the exchange rate prevailing at the month end. The resulting translation gains and losses related to these balances are included in foreign exchange gains and losses in the income statement for the period to which they relate. (d) Time deposits, marketable securities and investments under agreements to resell: Time deposits and marketable securities are shown at cost plus price-level restatement (indexation) and accrued interest, which approximates the market value of these items. Investments in mutual funds are presented at their redemption value at the end of each accounting period. Investment in other companies are recorded at the lower of price-level restated cost or market value. Financial instruments acquired subject to reverse repurchase agreements are classified as Other Current Assets (see Note 9). These financial instruments are notes issued by the Chilean Central Bank, primarily denominated in UF and are stated at cost plus interest and indexation accrued at year-end. Investments held by the Company in bonds of Celulosa Arauco are included in Other Assets and recorded at par value, without adjusting them to the market value because the Company intends to hold these bonds until their maturity (see Note 16). (e) Inventories: Inventories are valued at price-level restated cost, or at replacement cost, if lower. Finished goods are shown at restated direct costs, which include raw materials, energy and direct labor costs. Raw materials are valued at historical cost, which does not exceed net realizable value. Inventory costs are transferred to cost of sales on the basis of weighted-average cost. Rights to show television programs and programs produced by Megavision are valued at cost less amortization. The inventory of programs is amortized on an accelerated basis over the number of contracted showings in order to match the higher income earned from the initial showings. The stated values of inventories do not exceed their estimated net replacement cost. F-14 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (f) Property, plant and equipment: Property, plant and equipment are presented at price-level restated cost; as further restated for permitted technical revaluations carried out during 1979 and 1986. Depreciation has been calculated on a straight-line basis, taking into account the estimated useful lives of the assets, which are as follows: Years ----- Buildings and construction 15 - 50 Machinery and equipment 5 - 20 Other 3 - 10 The Company accounts for repairs and maintenance expenditures that do not improve the operating capacity of its fixed assets as expenses. Expenditures such as betterments or significant improvements that enhance the operating capacity of its fixed assets are capitalized. When disposed of, the difference between the sales proceeds and the net book value of the fixed assets is treated as a gain or a loss. (g) Investments in related companies: Investments in companies in which the Company's participation exceeds 10% but is 50% or less are accounted for using the equity method unless the Company does not have significant control. In addition, if a company (such as Cristalerias) is part of a group under common control which owns more than 10% of the outstanding voting shares of a related company, each company in the controlled group which has an ownership interest in the related company accounts for its investment using the equity method. The Company's proportional share in net income and losses of related companies is recognized in non-operating income and expense in the Consolidated Statements of Income, after eliminating any unrealized profits from transactions between related companies. (h) Staff severance indemnities: The Company has recorded a liability for long-term service indemnities in accordance with the collective bargaining agreements entered into with its employees. This liability is shown at its current value, based on the amount that would be owed if the employees terminated their employment. In general, each employee is entitled to receive one month's salary for every year of service with the Company. F-15 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (i) Deferred income taxes and tax income: Prior to 2000, deferred income taxes were recorded based only on those non-recurring timing differences between the recognition of income and expense items for financial statement and tax purposes. Under Chilean law, the Parent Company and its subsidiaries are required to file separate tax declarations. Beginning January 1, 2000, the Company records deferred income taxes in accordance with Technical Bulletin No. 60 and related amendments, recognizing the deferred tax effects of all temporary differences between the financial and tax values of assets and liabilities, using the liability method. The effect of the temporary differences existing at December 31, 1999 were recorded in complementary asset and liability accounts, and will be recognized in the statement of operations in the period in which they reverse. (j) Allowance for doubtful accounts: The Company and its subsidiaries have established an allowance for doubtful accounts, which for presentation purposes is deducted from accounts receivables and notes receivables. The criteria used in determining the allowance is based on the aging of the balances due. (k) Intangibles: Intangible assets comprise the value paid by Megavision in 1990 for the right to use the Channel 9 television frequency and its regional channels network and certain trademarks held by Santa Rita. The television broadcast rights have a long productive life, and according to commercial transactions it has maintained its economic value. The television broadcast rights are being amortized over a 40 year period on a decelerated basis, that is, the depreciation charge will increase as a proportion of the remaining balance. The decelerated basis has been chosen in order to match the amortization expense with the expected increases in advertising revenue. Trademarks are carried at historical cost plus price-level restatement. Beginning January 1, 1998, Santa Rita began to amortize these trademarks on a straight-line basis over a 40-year period. (l) Goodwill and negative goodwill: Goodwill has resulted from comparing the price paid for the investment made with the proportional carrying values of the investment's net assets acquired. The amortization of these values is over a period of 20 years. As of December 31, 2002 and 2003, there are no negative goodwill amounts recorded. F-16 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (m) Foreign currency forward exchange contracts: While the Company generally enters into derivative instruments to mitigate its risk to foreign currency, from time to time it enters into foreign currency forward contracts that are speculative in nature. Those foreign currency forward exchange contracts that form part of the Companies hedging program are designated as such, and are effective as hedges. The amounts payable and the amounts receivable related to foreign exchange hedging contracts are recognized on a net basis under Other Current Liabilities as of December 31, 2002 and 2003. Amounts payable or receivable under these contracts offset gains and losses on the assets, liabilities and transactions being hedged and are presented on a net basis at the end of the period and are classified according to the contract's expiration date. (n) Revenue Recognition: Revenue is recognized (a) upon shipment of goods, at which time title transfers to the customer, or (b) upon broadcasting for advertising services. (o) Convenience translation to U.S. dollars: The Company maintains its accounting records and prepares its financial statements in Chilean pesos. The United States dollar amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader at the December 31, 2003 closing exchange rate of Ch$593.80 per US$1. This translation should not be construed as representing that the Chilean peso amounts actually represent or have been, or could be, converted into United States dollars at that exchange rate or at any other rate of exchange. (p) Statement of cash flows: The Company considers all time deposits and instruments under repurchase agreements with a remaining maturity of less than 90 days as of year-end to be cash equivalents. (q) Repurchase and Resale agreement operations: The financial instruments acquired with resale agreement are presented at their acquisition value plus the interests and indexation adjustments accrued at the closing of the fiscal year and they are classified as Other Current Assets. F-17 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: (r) Bonds: Bonds payable are recorded at the weighted-average yield rate of 5.60%. The difference between the face value and the proceeds received, equal to the premium or discount, is deferred and amortized on a straight-line basis over the term of the bonds, which is not materially different than the effective-interest method. (s) Computer Software: The Company and Santa Rita acquired computer packages from third parties, which are recorded as Fixed Assets and amortized over 36 months by Cristalerias and over 48 months by the subsidiary Santa Rita, respectively. (t) Foreign investments: In accordance with Technical Bulletin No. 64 ("BT 64") of the Chilean Association of Accountants, and Official Circular No. 5294 of the SVS, permanent foreign investments established in countries defined by BT 64 as being unstable, whose activities do not constitute an extension of the Company's operations are controlled and measured in U.S. dollars. Differences between the Chilean peso and the U.S. dollar exchange rate variation and fluctuations in CPI are accounted for as a charge or credit to the equity account called "Cumulative Translation Adjustment." Under BT 64, foreign exchange differences on US dollar-denominated liabilities that have been designated as a hedge of such investments are also included in the same equity account to the extent the hedge is effective. This rule corresponds to the Company's equity method investment in Rayen Cura and Santa Rita's consolidated subsidiary Dona Paula S.A. (u) Research and development costs: The Company charges research and development costs to expense, when they are incurred. F-18 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 3. CHANGES IN ACCOUNTING PRINCIPLES There were no changes in accounting principles during the years ended December 31, 2002 and 2003 that would affect the comparability with previously issued financial statements. 4. TIME DEPOSITS AND MARKETABLE SECURITIES The composition of time deposits is as follows:

Institution Currency 2002 2003 ---------- --------- ThCh$ ThCh$ Banco Santander-Santiago US$ - 2,665,003 ScotiaBank US$ 307,139 - Banco J.P. Morgan Chase Bank US$ 1,198,453 - Banco Deutsche Bank Chile S.A. US$ 1,795,528 - Banco de Chile Ch$ - 1,235,194 BankBoston Ch$ - 365,509 Banco Santander-Santiago Ch$ 9,811,150 - ---------- --------- Total 13,112,270 4,265,706 ========== =========

Marketable securities consist of the following:

2002 2003 ---------- ---------- ThCh$ ThCh$ Treasury bonds and money market securities 64,099,289 55,308,119 Equity securities 3,837,333 4,154,550 Other 201,203 152,304 ---------- ---------- Total 68,137,825 59,614,973 ========== ==========

F-19 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 5. CURRENT RECEIVABLES Current receivables are summarized as follows:

2002 2003 ---------- ---------- ThCh$ ThCh$ Trade accounts receivable 38,644,697 40,109,328 Miscellaneous accounts receivable 711,493 1,903,513 Notes receivable 4,878,862 3,689,315 ---------- ---------- Sub-total 44,235,052 45,702,156 Less: Allowance for doubtful accounts (704,809) (701,509) ---------- ---------- Total 43,530,243 45,000,647 ========== ==========

The movements in the allowance for doubtful accounts as at December 31, 2001, 2002 and 2003 are as follows:

2001 2002 2003 -------- -------- -------- ThCh$ ThCh$ ThCh$ Allowance beginning (561,743) (550,308) (704,809) Charges to costs and expenses (169,773) (223,769) (32,427) Charges to other accounts 160,926 53,236 2,890 Amounts written off 20,282 16,032 32,837 -------- -------- -------- Total (550,308) (704,809) (701,509) ======== ======== ========

F-20 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 6. RELATED PARTY TRANSACTIONS The following table details amounts receivable from and payable to related parties as of December 31, 2002 and 2003:

Balance Receivable Balance Payable --------------------- --------------------- 2002 2003 2002 2003 ------- --------- ------- ------- ThCh$ ThCh$ ThCh$ ThCh$ Short-term: Metropolis - Intercom S.A. (indirect affiliate company) 54,082 81,113 - 8,307 Inversiones Bayona S.A. (shareholder) - - 125,405 88,688 Servicios y Consultorias Hendaya S.A. (shareholder) 4,702 5,597 121,928 85,795 Elecmetal S.A. (majority shareholder) 859 672 461,954 326,700 Editorial Zig-Zag S.A.(affiliate) 236,590 133,970 - - Cordillera Comunicaciones Ltda. (affiliate) - - - - Claro y Compania (common board members) 240 202 40,283 3,945 Distribuicion via Directa (common control) - - - - Envases CMF S.A. (affiliate) 139 659,218 88,036 189,381 Marketing Meter Ltda. (affiliate) - - 9,964 9,865 Cia. Sudamericana de Vapores S.A. (common control) 17,474 - 6,789 8,789 Quemchi S.A. (common control) - 1,009 - - Navarino S.A. (common control) - 1,009 - - Vina Los Vascos S.A. (indirect affiliate) 86,275 124,713 7,385 - Rayen Cura S.A.I.C. (affiliate) 2,929 156,992 26,164 - Ediciones Financieras S.A. (affiliate) 119 2,132 2,501 1,455 ------- --------- ------- ------- Total Short-term 403,409 1,166,627 890,409 722,925 ======= ========= ======= ======= Long-term: Ediciones Chiloe S.A. (affiliate) 1,442 2,894 - - ------- --------- ------- ------- Total Long-term 1,442 2,894 - - ======= ========= ======= =======

All related party transactions use estimated market rates. F-21 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 6. RELATED PARTY TRANSACTIONS, continued: Transactions with related parties that affect net income are as follows:

Amount of transaction (Charge) Credit to income -------------------------------- --------------------------------- 2001 2002 2003 2001 2002 2003 --------- --------- --------- ---------- ---------- --------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ CRISTALCHILE S.A. Servicios y Consultorias Hendaya S.A. (shareholder) Services received 1,285,681 1,330,538 1,370,806 (1,285,681) (1,330,538) (1,370,806) Dividends paid 783,255 723,329 780,060 - - - Services Provided 20,213 19,606 20,872 20,213 19,606 20,872 Sales 7,842 4,184 3,354 39 131 905 Cia. Electro Metalurgica S.A. (shareholder) Dividends paid 3,003,736 2,773,923 2,991,483 - - - Payments on company's behalf 21 - 280 - - - Purchase of industrial materials 6,287 3,711 3,585 - - - Advertising sold 2,359 1,502 1,603 535 222 824 Claro y Compania (common board member) Legal Counsel 170,363 235,340 231,441 (170,363) (235,340) (231,441) Sales 1,290 896 852 360 297 237 Navarino S.A. (common parent) Services Provided 9,966 9,914 10,130 9,966 9,914 10,130 Quemchi S.A. (common parent) Services Provided 9,966 9,914 10,760 9,966 9,914 10,760 Loans Granted 52,015 - - - - - Repayment of Loans 52,015 - - - - - Interest on Loans Granted 159 - - 159 - - Cia Sudamericana de Vapores S.A. (common parent) Shipping Services 420,106 12,388 266,586 (420,106) (12,388) (266,586) Advertising contracts 55,482 26,934 - 55,482 26,934 - Services received 46,203 41,045 45,856 (46,203) (41,045) (45,856) Sales 51,246 46,786 32,085 11,343 9,822 10,528 Rayen Cura S.A. (equity-method investment) Direct Sales 39,944 185 697,022 10,642 - 186,317 Paid in Capital 3,370,346 - - - - - Repayment of Loans 419 - - - - - Cordillera Comunicaciones Ltda. (equity-method investment) Broadcasting rights - 216,084 - - - - Vinedos Cullipeumo Ltda. (directors in common) Purchase of Industrial Materials 40,055 82,273 40,468 - - - CAP S.A. (directors in common) Advertising sold 2,601 - - 2,601 - -

F-22 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 6. RELATED PARTY TRANSACTIONS, continued:

Amount of transaction (Charge) Credit to income -------------------------------- --------------------------------- 2001 2002 2003 2001 2002 2003 --------- --------- --------- ---------- ---------- --------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ CIECSA S.A. Envases CMF S.A. (equity-method investment) Purchase of Industrial Materials 18,071 515,410 628,148 - 50,018 - Sales 180 196 432 36 65 120 Paid in Capital 522,274 - - - - - Repayment of Loans 1,295,482 - - - - - Interest on Loans Granted 60,912 - - 60,912 - - Reimbursement of Expenses 12,611 - - (12,611) - - Other - 4,299 57,184 - - - Televisa S.A. de CV (former owner of affiliate) Sales 36,326 - - 36,326 - - Purchase of Materials 1,874,076 - - (1,874,076) - - Metropolis Intercom S.A. (equity-method investment) Advertising sold 187,794 322,762 19,258 (187,794) (322,762) (19,258) Subscription sold - - - - - - Advertising purchased 65,535 15,461 204,396 (65,535) (15,461) (204,396) Sales - 9,876 30,881 - 3,272 11,096 Other - 144 159 - - (159) Forus S.A. (directors in common) Advertising sold - 81,378 - - (2,056) - Ediciones Financieras S.A. (subsidiary) Payments on company's behalf 10,372 - - - - - Advertising sold 56,932 27,124 22,476 - (18,419) (14,476) Advertising purchased 61,677 - - (61,677) - - Other sold 4,877 9,515 7,220 800 1,834 2,007 Services received 9,057 6,928 1,702 (9,057) (6,928) (1,702) Carmen Luz Sanchez (directors in common) Purchase of Industrial Materials - 60,085 38,358 - - - Costanera S.A.C.I. (directors in common) Program production 80,917 - - (80,917) - - Inversiones Bayona S.A. (majority shareholder) Dividends 815,413 1,416,497 1,377,874 - - - Vina Los Vascos S.A. (equity-method investment) Direct Sales 490,381 520,556 446,123 111,047 140,441 119,267 Purchase of Industrial Materials 44,818 40,089 35,032 - - - Inmobiliaria Don Aberto S.A. (equity-method investment) Interest on Loans Granted 980 - - 980 - - Loans Repaid 43,888 - - - - - Dividends 46,825 - - - - -

F-23 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 7. INVENTORIES Inventories have been valued in accordance with the policy described in Note 2(e). The principal components are as follows:

2002 2003 ---------- ---------- ThCh$ ThCh$ Finished products 8,413,106 8,107,685 Raw materials and fuel 17,377,449 18,798,989 Operating supplies and spare parts 2,631,039 2,420,880 Goods-in-transit 199,063 497,244 Foreign and local programming not transmitted 3,508,995 2,063,518 ---------- ---------- Total 32,129,652 31,888,316 ========== ==========

8. INCOME AND DEFERRED TAXES The Company and its subsidiaries have recorded a current tax provision of 15% in 2001, 16% in 2002 and 16.5% in 2003 of taxable income for income tax and for withheld employee taxes. The income tax liability is determined based on current Chilean tax laws and is presented as a net asset or liability. Net recoverable taxes assets as of December 31, 2002 and 2003 are calculated, as follows:

2002 2003 ---------- ---------- ThCh$ ThCh$ Provision for current income taxes (4,265,885) (1,271,856) Withheld employee taxes (9,444) (14,646) ---------- ---------- Total current taxes (4,275,329) (1,286,502) Credits: Credit Art. 33 79,295 48,293 Monthly income tax installments 4,388,053 4,647,506 Training expeditures 123,675 111,801 Grants 48,448 46,311 ---------- ---------- Total Credits 4,639,471 4,853,911 Income tax refund 364,142 3,567,409 Other credits 431,465 366,818 ---------- ---------- Recoverable taxes, net 795,607 3,934,227 ========== ==========

F-24 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 8. INCOME AND DEFERRED TAXES, continued: As legislated in 2001, the income tax rate increased from 15% in 2001 to 16% in 2002 to 16.5% in 2003, and will increase to 17% in 2004 and for periods thereafter. Deferred tax assets and liabilities as of December 31, 2003, are recorded using the applicable tax rate depending on the year of reversal. The net deferred tax liabilities recognized by the Company as of December 31, 2002 and 2003 amounted to ThCh$2,854,856 and ThCh$2,970,413, respectively, and is classified as short and long-term as follows:

2002 2003 ---------------------------- --------------------------- Short Term Long Term Short Term Long Term ---------- ---------- ---------- ---------- ThCh$ ThCh$ ThCh$ ThCh$ Deferred income tax assets: Allowance for doubtful accounts 114,245 - 118,540 - Unearned revenues 277,899 - 516,109 - Vacation provision 172,514 - 202,898 - Severance payments 1,886 35,823 1,415 27,208 Packaging provision 117,346 - 107,601 - Furnace repairs provision 324,861 296,101 - 563,187 Inventories obsolence provision 13,489 - 24,255 - Spareparts obsolence provision 95,046 - 97,280 - Bond discount amortization 59,212 - 86,317 - Intangibles amortization 231,721 - - - Deferred customs duties 14,250 - - - Depreciation - 13,658 - 17,352 Unrealized earnings related companies 121,084 53,463 174,233 7,922 Other provisions 92,745 104,623 49,791 108,980 Direct labor costs 20,438 - 11,337 - Required bank reserve 8,737 - - - Accumulated tax losses - 4,723,875 - 4,506,337 Complementary account, net of amortization (191,149) (4,085,799) (5,796) (3,269,380) --------- ---------- --------- ---------- Total deferred income tax assets 1,474,324 1,141,744 1,383,980 1,961,606 --------- ---------- --------- ---------- Deferred income tax liabilities: Depreciation - 8,057,421 - 8,561,734 Other events 12,756 1,029 - - Deferred customs duties - 153,739 - 77,512 Advanced expenses 44,123 - 47,272 - Bond discount 52,183 806,022 53,620 765,732 Capitalized moldings - 251,222 - 256,166 Required bank reserve - - - 38,486 Deferred expenses 173,242 - 222,622 - Complementary accounts, net of amortization - (4,080,813) - (3,707,145) --------- ---------- --------- ---------- Total deferred income tax liabilities 282,304 5,188,620 323,514 5,992,485 ========= ========== ========= ========== Net deferred tax asset (liability) 1,192,020 (4,046,876) 1,060,466 (4,030,879) ========= ========== ========= ==========

F-25 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 8. INCOME AND DEFERRED TAXES, continued: Income tax expense as of December 31, 2001, 2002 and 2003 is as follows:

2001 2002 2003 ----------- ----------- ----------- ThCh$ ThCh$ ThCh$ Parent Company 1st category tax (4,036,042) (4,275,329) (1,286,502) Deferred tax expense (461,879) (2,204,700) (572,894) Tax benefit for tax losses 6,404 (39,382) (279,876) Deferred tax amortization of complementary accounts (640,594) 57,620 626,161 Other (50,988) - 165,530 ---------- ---------- ---------- Income tax expense (5,183,099) (6,461,791) (1,347,581) ========== ========== ==========

9. OTHER CURRENT ASSETS Other current assets are valued as described in Note 2 (q) and are principally comprised of investments in government securities subject to reverse repurchase agreements.

2002 2003 ---------- ---------- ThCh$ ThCh$ Reverse repurchase agreements (see Note 10) 15,167,670 12,370,106 Other 393,898 385,131 ---------- ---------- Total 15,561,568 12,755,237 ========== ==========

F-26 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 10. REVERSE REPURCHASE AGREEMENTS:

Carrying value as of ----------------------------- Purchase Maturity Purchase December 31, Issuer Date Date Date 2002 ------ ---------- ---------- ---------- ------------ BCI CB 12/30/2002 01/02/2003 831,230 831,257 BCI CB 12/30/2002 01/06/2003 336,330 336,347 BBV BHIF 11/28/2002 01/06/2003 810,608 812,039 BBV BHIF 12/04/2002 01/06/2003 654,054 655,065 BBV BHIF 12/09/2002 03/10/2003 627,066 627,890 BBV BHIF 12/02/2002 01/06/2003 725,796 727,041 Scotiabank 12/31/2002 01/08/2003 303,000 303,441 Scotiabank 12/13/2002 01/10/2003 101,000 101,161 Scotiabank 12/13/2002 01/29/2003 101,000 101,161 Scotiabank 10/25/2002 03/21/2003 371,680 364,303 Scotiabank 11/07/2002 04/25/2003 289,668 291,116 Scotiabank 11/14/2002 05/23/2003 286,249 290,996 Scotiabank 11/25/2002 06/20/2003 214,524 218,153 Scotiabank 12/30/2002 01/24/2003 108,870 108,879 BCI CB 12/06/2002 01/03/2003 3,041,606 3,048,703 Scotiabank 11/20/2002 01/10/2003 364,369 364,693 Scotiabank 12/20/2002 01/10/2003 3,031,980 3,035,426 Inversiones Boston CB 12/27/2002 01/03/2003 353,500 353,627 Inversiones Boston CB 12/30/2002 01/03/2003 303,000 303,028 BBV BHIF 12/27/2002 01/06/2003 515,955 522,686 BBV BHIF 12/27/2002 01/09/2003 143,321 145,191 BBV BHIF 12/23/2002 01/23/2003 704,051 726,111 Banco de Chile 12/26/2002 01/03/2003 199,580 203,274 Inversiones Boston CB 12/27/2002 01/03/2003 393,900 394,041 Inversiones Boston CB 12/30/2002 01/03/2003 60,600 60,606 Inversiones Boston CB 12/30/2002 01/03/2003 156,550 156,564 Inversiones Boston CB 12/27/2002 01/03/2003 84,840 84,871 ---------- ---------- Total 15,114,327 15,167,670 ========== ==========

F-27 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 10. REVERSE REPURCHASE AGREEMENTS: continued:

Carrying value as of ----------------------------- Purchase Maturity Purchase December 31, Issuer Date Date Date 2003 ------ ---------- ---------- ---------- ------------ BCI CB 12/24/2003 01/05/2004 1,600,000 1,600,709 Banchile CB 12/29/2003 01/06/2004 1,560,000 1,560,239 Banchile CB 12/30/2003 01/05/2004 2,107,000 2,107,176 Banco de Chile 12/29/2003 01/09/2004 300,000 300,052 Banco de Chile 12/30/2003 01/09/2004 740,000 740,057 Banco de Chile 12/30/2003 01/05/2004 314,120 314,120 Banco de Chile 12/29/2003 01/09/2004 86,000 86,015 Banco de Chile 12/29/2003 01/09/2004 500,000 500,087 Banco de Chile 12/29/2003 01/28/2004 2,139,905 2,142,692 Banco Santander Santiago 12/30/2003 03/21/2004 1,139,923 1,129,298 Banco Santander Santiago 10/08/2003 01/16/2004 320,000 322,538 Banco Santander Santiago 10/16/2003 01/06/2004 320,000 322,300 Banco Santander Santiago 11/06/2003 02/05/2004 310,000 311,505 Banco Santander Santiago 11/12/2003 02/20/2004 310,000 311,292 Banco Santander Santiago 11/15/2003 01/27/2004 310,000 310,994 Banco Santander Santiago 11/25/2003 01/16/2004 310,000 311,032 ---------- ---------- Total 12,366,948 12,370,106 ========== ==========

F-28 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 11. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment have been valued in accordance with Note 2(f). The items comprising property, plant and equipment of the Company at each year end, are primarily land, industrial buildings, infrastructure, machinery and equipment distributed among the Padre Hurtado Plant, the San Sebastian plant and Megavision's Vicuna Mackenna facilities and Santa Rita's vineyards, building, infrastructure and equipment distributed among Alto Jahuel and Peralillo. a) Technical revaluation and adjustment of book value: Property, plant and equipment include increases arising from the technical revaluation of certain assets carried out during 1979 and 1986, in accordance with instructions from the SVS. The gross amount of technical revaluation included in the carrying amount of assets is detailed below by class of asset:

2002 2003 --------- --------- ThCh$ ThCh$ Land 318,839 318,839 Buildings and construction 6,287,935 6,288,042 Machinery and equipment 1,106,991 - --------- --------- Total increase in value due to technical revaluation of property, plant and equipment 7,713,765 6,606,881 ========= =========

During 2003, the technical revaluation for machinery and equipment was written-off as these amounts were fully amortized. F-29 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 11. PROPERTY, PLANT AND EQUIPMENT, continued: b) Depreciation The depreciation charge to income each year and the balance of accumulated depreciation at each year-end are summarized as follows:

2001 2002 2003 ---------- ---------- ---------- ThCh$ ThCh$ ThCh$ Depreciation of: Property, plant and equipment 11,989,359 13,502,089 14,518,455 Technical revaluation 266,989 208,583 208,584 ---------- ---------- ---------- Depreciation expense 12,256,348 13,710,672 14,727,039 ========== ========== ==========

c) Accumulated depreciation at each year-end is distributed as follows:

2002 2003 ----------- ------------ ThCh$ ThCh$ Property, plant and equipment (85,591,188) (95,800,480) Technical revaluation (5,959,047) (5,060,640) ----------- ------------ Accumulated depreciation (91,550,235) (100,861,120) =========== ============

12. INVESTMENTS IN RELATED COMPANIES The investments in related companies at each year-end are as follows:

2002 2003 ----- ----------- ----- ----------- % ThCh$ % ThCh$ Vina Los Vascos S.A. 43.00 5,107,907 43.00 5,797,019 Envases CMF S.A. 50.00 16,155,277 50.00 16,212,135 Ediciones Chiloe S.A. 50.00 597,972 50.00 560,628 Cordillera Comunicaciones Ltda. (1) 0.25 366,084 0.25 332,298 Cordillera Comunicaciones Holding Ltda. 50.00 72,850,574 50.00 66,127,314 Editorial Zig-Zag 49.89 387,776 49.89 411,983 Inmobiliaria Don Alberto 38.17 13 38.17 (45) Rayen Cura S.A.C.I. 40.00 15,283,881 40.00 11,935,164 Metropolis Intercom S.A. (1) - - 2.21 1,682,873 ----------- ----------- Total 110,749,484 103,059,369 =========== =========== (1) These investments are accounted under the equity method, since the Company has significant influence and significant indirect ownership of these companies.

F-30 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 12. INVESTMENTS IN RELATED COMPANIES, continued: Income resulting from these investments for each year is as follows:

Participation in net income (loss) ------------------------------------------------ 2001 2002 2003 ---------- ---------- ---------- ThCh$ ThCh$ ThCh$ Vina Los Vascos S.A. 492,608 481,271 689,110 Envases CMF S.A. 955,790 1,287,806 706,798 Inmobiliaria y Constructora Richelieu S.A. (471) - Ediciones Chiloe S.A. (38,088) (45,122) (77,664) Cordillera Comunicaciones Ltda. (36,587) (46,195) (33,785) Cordillera Comunicaciones Holding Limitada 7,280,811) (8,565,515) (6,723,259) Editorial Zig-Zag S.A. 67,889 42,864 24,300 Inmobiliaria Don Alberto S.A. (11,761) (1,107) (59) Rayen Cura S.A.C.I. (1,841,173) (2,145,406) 921,623 Metropolis Intercom S.A. - - (45,818) ---------- ---------- ---------- Total (7,692,604) (8,991,404) (4,538,754) ========== ========== ==========

The Company has valued its investments in related companies as described in Note 2(g). The following is a description of the Company's significant investments. Metropolis Intercom S.A. On April 30, 2003, the shareholders of Metropolis Intercom S.A. approved an increase to capital by authorizing the issuance of 3,923,834 shares, raising ThCh$ 4,931,000. The share issuance was equally participated by the Company's subsidiary, Cristalchile Comuniciones, and Liberty Comunicaciones de Chile Una Ltda., both joint-venture partners in Metropolis Intercom's parent company Cordillera Comunicaciones Holding Limitada. Cristalerias paid ThCh$ 2,462,794 for the shares, leading to an investment of ThCh$ 1,733,963 and unrecognized loss of ThCh$ 728,831 included in Goodwill (see Note 14). F-31 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 12. INVESTMENTS IN RELATED COMPANIES, continued: Rayen Cura S.A.I.C. The Company transferred the investment it had in Rayen Cura S.A.I.C., a company established in the city of Mendoza, Argentina, to its subsidiary CristalChile Inversiones S.A. for ThCh$18,340,577 (historic pesos), equivalent to US$25,582,473 (historic dollars) on December 28, 2001, which included a loan from shareholders issued in July 2001 of US$4,800,000. This transaction had no effect on results as it was a transaction between entities under common control and all amounts were recorded at book values. During 2002, the partners contributed US$9,900,000 in equal proportions to Rayen Cura, maintaining the Company's 40% share. On January 31, April 25 and September 30, 2003 Rayen Cura S.A.I.C., carried out repayment of part of a capital increase paid on April 29, 2002. Total amounts reimbursed amounted to US$ 2,600,000 (approximately ThCh$ 1,543,880). In accordance with Chilean GAAP, CristalChile Inversiones S.A. remeasures the Rayen Cura S.A.C.I. financial statements from Argentine peso into U.S. dollars. The accounting charge to results as a consequence of remeasuring into U.S. dollars was ThCh$2,140,616 at December 31, 2003 and ThCh$3,090,768; ThCh$2,315,764 at December 31, 2002 and 2001, respectively. In accordance with Technical Bulletin No. 64, the Company presents the following information with respect to this foreign investment (See Note 2(t)):

2001 2002 2003 ---------- ---------- ----------- ThCh$ ThCh$ ThCh$ Participation of Cristalchile in Rayen Cura S.A.I.C. 13,660,363 15,283,881 11,935,164 Goodwill on investment, net of accumulated amortization 5,480,923 5,478,884 4,214,863 ---------- ---------- ----------- Total investment value 19,141,286 20,762,765 16,150,027 ========== ========== ========== Participation in net income (loss) for the year (1,841,173) (2,145,406) 921,623 ========== ========== ========== Participation in net income available for dividends - - - ========================================

The investment in RayenCura S.A.I.C. is measured in U.S. dollars in accordance with Technical Bulletin No 64. F-32 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 12. INVESTMENTS IN RELATED COMPANIES, continued: Ediciones Chiloe S.A. CIECSA sold 443,731 shares of Ediciones Chiloe S.A. to Recoletos Chile Ltda. on September 27, 2001, thereby reducing its share in the company to 50%. The sale generated a gain of ThCh$570,630 as well as the recognition of ThCh$50,879 from previously unrecognized earnings. During the Shareholders' meeting held on September 27, 2001, the shareholders agreed to increase the company's capital by ThCh$711,886 through the issuance of 1,500,795 shares, which were equally purchased by CIECSA S.A. and Recoletos Chile Ltda., so each party maintained the same ownership percentage. In the issuance, 1,297,013 shares, equivalent to ThCh$606,847 were paid by contributing 1,046 shares of Ediciones Financieras S.A. valued at ThCh$438,539 and forgiveness of loans of ThCh$168,308. On February 4, 2002, the shareholders of Ediciones Chiloe agreed to purchase, 86,352 shares that had already been subscribed. The subsidiary Ciecsa paid ThCh$20,058 (ThCh$ 19,859 historic pesos), equivalent to 43,176 shares, thus maintaining 50% participation in Ediciones Chiloe. Payment is pending for 135,030 shares that mature in September 2004. Envases CMF S.A. During the Shareholders' meeting of Crowpla Reicolite S.A. that was held on June 29, 2001, shareholders agreed to increase the company's capital to ThCh$27,276,994 divided into 56,000 shares, through the issuance of 29,000 shares equivalent to ThCh$16,278,926. Andina Inversiones Societarias S.A. purchased 28,000 shares worth ThCh$15,760,283, and Cristalerias purchased 1,000 shares worth ThCh$518,644. As a result of this transaction, Cristalerias decreased its ownership in the company to 50% and the investment is no longer consolidated as neither company has control of the joint-venture. Cristalerias recognized a gain from the excess of its share in the joint venture's equity and the book value of its investment of ThCh$2,132,248, which is included in Gain on Sale of Investments in Other Non-Operating Income (see Note 25). The company changed its name to Envases CMF S.A. during November 2001. 13. INVESTMENTS IN OTHER COMPANIES The investment in other companies, are detailed as follows:

Number of Share Accounting value Corporation shares percentage 2002 2003 ----------- --------- ---------- ------- ------- % ThCh$ ThCh$ Internet Holding S.A. 57,104 7.42 222,082 222,082 Bazuca Com. INC 266,500 7.89 603,518 603,518 ------- ------- Total 825,600 825,600 ======= =======

F-33 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 14. GOODWILL, NET Goodwill, net of accumulated amortization of ThCh$4,254,256 and ThCh$4,830,056 as of December 31, 2002 and 2003, respectively, is as follows:

2002 2003 --------- --------- ThCh$ ThCh$ Editorial Zig-Zag S.A. 108,754 102,402 Ciecsa S.A. 1,454,822 1,333,587 Vina Santa Rita 609,214 559,038 Red Televisiva Megavision S.A. 935,535 882,273 Vina Los Vascos S.A. 1,235,037 1,168,585 Rayen Cura S.A.I.C. 5,478,884 4,214,863 Metropolis Intercom S.A. - 717,561 --------- --------- Goodwill, net 9,822,246 8,978,309 ========= =========

On August 27, 2002, CIECSA increased its ownership share in Red Televisiva Megavision S.A. from 78.01% to 99.99%. This acquisition was accounted for under the purchase method, generating additional goodwill of ThCh$867,823 for the amount of the purchase price over the carrying value of net assets purchased. 15. INTANGIBLES, NET Intangibles at each year-end are as follows:

2002 2003 ---------- ---------- ThCh$ ThCh$ Channel 9 and regional network frequency concessions 10,180,259 10,180,259 Trademarks 1,595,011 1,622,172 ---------- ---------- 11,775,270 11,802,431 Accumulated frequency amortization (819,387) (968,366) Accumulated trademarks amortization (183,897) (240,370) ---------- ---------- Intangibles, net 10,771,986 10,593,695 ========== ==========

F-34 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 16. OTHER ASSETS Other assets at each period-end are as follows:

2002 2003 --------------------------------- ThCh$ ThCh$ Inventories of domestic and foreign programming to be broadcast in over one year 1,842,966 604,428 Celulosa Arauco bonds (1) 9,938,100 8,036,005 Bond discount 3,461,960 3,117,738 Bond issuance costs 1,224,806 1,050,258 Other 439,681 490,207 --------------------------------- Total Other assets 16,907,513 13,298,636 =================================

(1) During 2001, the Company purchased Celulosa Arauco bonds with a face value of US$13,420,000 at an effective rate of 2.40% with a maturity date of September 15, 2005. The bonds are presented at amortized cost. The bonds are intended to be held-to-maturity, and therefore have not been marked to market at year-end. 17. BANK LIABILITIES a) Short-term bank liabilities as of December 31, 2002 and 2003 are as follows:

2002 2003 ------------------------------- Bank Currency ThCh$ ThCh$ Banco Santander-Santiago Ch$ - 30,281 Fondo Provincial de Mendoza US$ 10,590 15,906 Banco de Chile US$ - 119,461 ------------------------------- Total 10,590 165,648 ===============================

The weighted-average annual interest rate on short-term borrowings was 3.20% as of December 31, 2002 and 2.04% as of December 31, 2003. F-35 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 17. BANK LIABILITIES, continued: b) Long-term bank liabilities outstanding at each year-end are as follows:

Balances as of December 31, 2002 Balances as of December 31, 2003 -------------------------------- -------------------------------- Current Long-term Current Long-term Bank or Financial Institution Type of Portion Portion Total Portion Portion Total Currency ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ------------------------------------------------------------------------------------------- J.P Morgan Chase (syndicate) US$ 199,543 36,289,805 36,489,348 126,213 29,690,000 29,816,213 Banco Santander-Santiago UF 275,555 - 275,555 486,776 - 486,776 ScotiaBank UF 412,643 1,623,370 2,036,013 419,746 1,218,135 1,637,881 Banco Santander-Santiago UF - 1,830,959 1,830,959 - 1,373,904 1,373,904 Banco Edwards UF 294,442 1,220,263 1,514,705 610,653 - 610,653 Banco Argentaria US$ 267,957 401,935 669,892 218,358 109,178 327,536 Banco Regional de Cuyo US$ - 52,444 52,444 - 51,562 51,562 Citibank, N.A. US$ 1,989,317 2,117,052 4,106,369 1,624,551 109,070 1,733,621 Dresdner US$ 527,174 - 527,174 - - - Banco del Estado Ch$ 268,191 804,577 1,072,768 265,573 531,147 796,720 BCI UF 171,119 380,509 551,628 170,977 211,500 382,477 --------------------------------------------------------------------------------- 4,405,941 44,720,914 49,126,855 3,922,847 33,294,496 37,217,343 =================================================================================

2002 2003 Weighted - average interest rate 2.83% 2.40% Percentage of debt in foreign currency 68.00% 90.00% Percentage of debt in local currency 32.00% 10.00%

During September 2002, the Company prepaid US$50,000,000 of the J.P. Morgan Chase syndicated loan and renegotiated the remaining US$50,000,000 to extend the due date and the lower interest rate to LIBOR + 0.8%. Scheduled maturities of the long-term bank obligations as of December 31, 2003 are as follows:

Year Ending December 31, ThCh$ ------------------------ -------------------- 2005 1,533,988 2006 16,042,276 2007 15,718,232 2008 - Thereafter - -------------------- Total 33,294,496 ====================

The Company's syndicated loan with J.P Morgan Chase Bank has certain restrictive covenants, the most significant of which are summarized below: a) The Company cannot have a total debt to capitalization ratio of more than 0.45 to 1.0. b) The unconsolidated net debt to EBITDA ratio, as defined in the covenant cannot exceed 2.5 to 1.0. c) Interest coverage ratio cannot be less than 4.0, during 2004 thereafter and, d) Net worth cannot be less than UF10,000,000. F-36 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- As of December 31, 2003, the Company is in compliance with these covenants. F-37 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 18. OTHER CURRENT LIABILITIES As of December 31, 2003 there are balances in Other Current Liabilities of ThCh$2,397,846 (ThCh$628,635 in 2002) corresponding to forward contracts in foreign currency entered into by Cristalerias and the subsidiaries, Vina Santa Rita and CIECSA S.A. (See Note 28 for further description of financial derivatives). 19. BONDS PAYABLE The Company has made the following public bond issuances: Series C and D bonds Santa Rita On December 15, 2000, Santa Rita issued Series C bonds of UF 200,000 with an annual interest rate of 6.25% payable semiannually with principal due in the fifth year, and Series D bonds of UF 1,000,000 with an annual interest rate of 6.25% payable semiannually with principal due in 32 semiannual installments beginning in December 2005. Series C and D bonds Cristalerias de Chile During August 2002, Cristalerias de Chile placed long-term bonds in the local market for UF 4,100,000. Of the total, UF 2,000,000 were issued with a final maturity of 6 years at an annual interest rate of 4.75% and UF 2,100,000 were issued with a maturity of 21 years at an annual interest rate of 5.8%. The bonds payable at each period-end consist of the following:

2002 2003 ------------------------------------ ThCh$ ThCh$ Principal 89,842,669 89,676,000 Accrued interest 1,754,891 1,754,288 ------------------------------------ 91,597,560 91,430,288 Current portion (1,966,286) (1,754,288) ------------------------------------ Long-term portion 89,631,274 89,676,000 ====================================

F-38 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 19. BONDS PAYABLE, continued: Scheduled maturities of the long-term portion of the principal of these bonds as of December 31, 2003 are as follows:

Maturing during the year Ending December 31, ThCh$ ------------------ 2005 11,844,000 2006 8,460,000 2007 8,460,000 2008 8,460,000 Thereafter 52,452,000 ------------------ Total 89,676,000 ==================

The above-mentioned bond issues contain certain restrictive covenants; the most significant of which are summarized below: a) Financial Indicators: o Individual Balance (unconsolidated balance sheet of parent company) - debt leverage not exceeding 1.2 times. o Consolidated Balance - debt leverage not exceeding 1.4 times. b) Insurance for the Company and Subsidiaries' assets. c) Transactions related to Articles No.44 and 89, which are transactions with related parties, from Act 18,046 must be carried out according to the conditions thereby established. d) Other minor restrictions related to bonds issuance contract. As of December 31, 2003, the Company is in compliance with these covenants. F-39 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 20. ACCRUED EXPENSES The composition of short and long-term accrued expenses at each year-end is as follows:

2002 2003 ------------------------------------- ThCh$ ThCh$ Short-term accrued expenses: Board of Directors' share in profits (i) 899,487 334,256 Staff severance indemnities (iii) 169,904 182,124 Furnace repairs and reconstruction (ii) 2,030,386 - Obligations for pallets 711,184 639,214 Accrued vacation 1,070,119 1,174,601 Royalty for authoring rights 252,948 59,000 Publicity agency commissions 3,121,753 4,201,817 Sales commissions 364,952 242,003 Suppliers 781,868 315,402 Insurance 444,857 404,026 Machine repairs 541,335 533,844 Other 484,051 354,327 ------------------------------------- Total short-term accrued expenses 10,872,844 8,440,614 ===================================== Long-term accrued expenses: Staff severance indemnities (iii) 3,854,058 4,129,428 Furnace repairs and reconstruction (ii) 1,773,058 3,410,013 ------------------------------------- Total long-term accrued expenses 5,627,116 7,539,441 =====================================

(i) As of December 31 of each year, a provision is made for the Board of Directors' share of net income. (ii) Furnace repairs and reconstruction: This provision is made over the estimated useful life of each smelter furnace refractor so that significant repairs or reconstruction will not have a distorting effect on the results of the year in which the repairs are performed. As of December 31, 2003, the short-term portion of the provision represents the estimated cost of repairs to be made to the furnaces in 2003. The Company has a total provision for this purpose of ThCh$3,803,444 and ThCh$3,410,013, at December 31, 2002 and 2003, respectively. (iii)Staff severance indemnities provision: The provision for staff severance indemnity payments is shown at its current value, as stated in Note 2(h). The movement in this account was as follows:

2002 2003 ------------------------------------ ThCh$ ThCh$ Balance at beginning of year 3,825,912 4,023,962 Provisions established during the year 299,777 464,541 Payments (101,727) (176,951) ------------------------------------ Balance at year end 4,023,962 4,311,552 ====================================

F-40 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 21. MINORITY INTEREST The consolidated subsidiaries generating minority interest at each year-end are as follows:

Equity Participation in net (income) loss Participation 2002 2003 2001 2002 2003 2001 2002 2003 -------------------------------------------------------------------------------------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ % % % CIECSA S.A. Consolidated 271,434 313,351 149,292 (299,999) (42,665) 1.79 1.73 1.55 Constructora Apoger S.A. 10,154 939 841 (80) 293 20.00 20.00 20.00 Cristalchile Comunicaciones S.A. 1,446 1,262 145 170 126 0.01 0.01 0.002 S.A. Vina Santa Rita 36,837,235 37,366,198 (3,449,060) (4,295,752) (1,798,396) 45.90 45.90 45.90 ---------------------------------------------------------------------- Total 37,120,269 37,681,750 (3,298,782) (4,595,661) (1,840,642) ======================================================================

On August 26, 2003, CIECSA S.A. issued 36,400,000 shares which were purchased by Cristalerias de Chile in the amount of ThCh$ 910,000, increasing their ownership to 98.45%. F-41 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 22. CHANGES IN SHAREHOLDERS' EQUITY (a) Other reserves: As of December 31, 2001, 2002 and 2003, other reserves consist of the following:

2001 2002 2003 -------------------------------------------------- ThCh$ ThCh$ ThCh$ Reserve for future capital increases 4,007,637 4,198,685 4,413,578 Reserve for technical revaluation of Property, plant and equipment 1,962,974 1,771,923 1,557,032 Currency translation adjustment 2,292,409 3,839,620 451,290 Subsidiary start-up stage deficit (128,091) - - -------------------------------------------------- Total other reserves 8,134,929 9,810,228 6,421,900 ==================================================

(b) Dividends: In accordance with law 18.046, the Company must declare a minimum dividend of 30% of net income for the year. The Company paid dividends to shareholders during 2001, 2002 and 2003 related to the results of operations during 2000, 2001, 2002, detailed below in historic pesos:

Year Related to Dividend per Share Type of Dividend Date of Payment --------------- ------------------- ---------------- --------------- (historic pesos) 2000 21.00 Interim 07/2000 2000 21.00 Interim 10/2000 2000 22.00 Interim 01/2001 2000 41.57 Final 04/2001 2000 27.00 Revised Final 05/2001 2001 21.00 Interim 07/2001 2001 21.00 Interim 10/2001 2001 30.00 Interim 01/2002 2001 66.10 Final 04/2002 2002 15.00 Interim 07/2002 2002 15.00 Interim 10/2002 2002 21.00 Interim 01/2003 2003 25.20 Final 04/2003 2003 15.00 Interim 10/2003 2003 21.00 Interim 01/2004

F-42 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 23. NON-OPERATING INCOME AND EXPENSE

2001 2002 2003 ------------------------------------------------------- Net interest expense during each ThCh$ ThCh$ ThCh$ year were as follows: Interest income 2,953,840 2,578,216 2,592,973 Interest and other financial expense (7,210,576) (6,907,884) (6,828,931) ------------------------------------------------------- Net interest expense (4,256,736) (4,329,668) (4,235,958) ======================================================= Non-operating income during each year were as follows: Other non-operating income: Net sales of materials and other 21,003 5,072 49,377 Amortization of unrealized profit 62,374 41,933 40,319 Gain on sale of investments 6,009,896 - - Office rental 293,551 281,193 205,950 Indemnities 97,975 416,532 69,669 Taxation franchise 208,006 167,469 208,832 Other 287,374 364,757 354,769 ------------------------------------------------------- Total other non-operating income 6,980,179 1,276,956 928,916 =======================================================

F-43 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 23. NON-OPERATING INCOME AND EXPENSE, continued: Non-operating expense during each year were as follows:

2001 2002 2003 ---------------------------------------------------- ThCh$ ThCh$ ThCh$ Amortization of goodwill (855,611) (653,119) (577,203) Amortization of intangibles (164,506) (180,998) (296,917) Write-offs of accounts receivable (316,928) (1,023,310) (65,247) Board of Directors' participation in profits (101,723) (185,708) (77,195) Professional expenses (752,087) (780,630) (763,206) Indemnities (145,459) (15,471) (55,264) Insurance (12,204) (30,275) (50,856) Other (508,534) (1,245,045) (428,083) ---------------------------------------------------- Total non-operating expense (2,857,052) (4,114,556) (2,313,971) ====================================================

24. PRICE-LEVEL RESTATEMENT The price-level restatement is determined under Chilean GAAP by restating the following non-monetary assets and liabilities:

2001 2002 2003 ------------------------------------------------------ ThCh$ ThCh$ ThCh$ Shareholders' equity (6,178,740) (6,305,707) (2,359,665) Liabilities (3,611,727) (3,762,538) (1,600,215) Property, plant and equipment, net 3,829,952 3,770,742 1,196,325 Current assets 1,248,946 1,811,694 269,147 Other assets 3,052,167 4,367,692 1,893,389 Minority interest (64,064) (969,774) (367,423) ------------------------------------------------------ Adjustment to balance sheet accounts (1,723,466) (1,087,891) (968,442) Adjustment to income statement accounts (637,682) (882,969) 165,880 ------------------------------------------------------ Net price-level restatement effect (2,361,148) (1,970,860) (802,562) ======================================================

F-44 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 25. FOREIGN CURRENCY TRANSLATION There is a net charge to results in the 2003 fisical year of ThCh$17,064,668 and a net credit to results of ThCh$ 1,401,313 and ThCh$ 4,997,842, in 2001 and 2002, respectively, due to exchange differences.

2001 2002 2003 ------------------------------------------------------- ThCh$ ThCh$ ThCh$ Cash and Marketable Securities (676,071) 1,705,160 (11,140,298) Accounts Receivable 219,813 1,293,270 (740,666) Time Deposits 3,330,101 5,693,422 (103,771) Inventory 376,843 503,818 (626,401) Forward contracts - 612,906 (9,657,149) Other Assets 38,065 2,317,362 (3,168,056) ------------------------------------------------------- Sub-total foreign exchange gains 3,288,751 12,125,938 (25,436,341) Short-term Bank Loans (912,559) (2,947) 3,460 Accounts Payable (121,433) (339,418) 395,870 Notes Payable (1,505,322) (420,480) 341,397 Short-term Misc. Creditors (36,484) (53,712) 166,960 Short-term Provisions (367,960) (91,964) 5,124 Long-term Bank Loans 1,639,800 (4,511,829) 6,240,500 Long-term Provisions (381,888) (461,107) 625,155 Other Long-term Liabilities (179,415) (1,143,775) 141,438 Other Liabilities (22,177) (102,864) 451,769 ------------------------------------------------------- Sub-total foreign exchange (losses) (1,887,438) (7,128,096) 8,371,673 ------------------------------------------------------- Foreign Currency Translation, net 1,401,312 4,997,842 (17,064,668) =======================================================

26. EXTRAORDINARY ITEMS For the year ended December 31, 2002 and 2003, there were no extraordinary items. For the year ended December 31, 2001, the provision for repairs on Furnace C of ThCh$1,857,013 was reversed net of taxes as an extraordinary item because the furnace was completely rebuilt, instead of being repaired. 27. BOND ISSUANCE COSTS The Company and its subsidiary, Vina Santa Rita, issued bonds in March 2001 and August 2002, respectively, and incurred issurance costs (including bond discount) of ThCh$4,530,487 as of December 31, 2003 (ThCh$5,051,970 in 2002). These costs are classified as Other Current Assets and Other Assets and are being amortized over the life of the bonds. The charge for the amortization of these expenses is recorded in Net Interest Expense and amounted to ThCh$36,998, ThCh$163,893 and ThCh$521,483 for the fiscal years ended December 31, 2001, 2002 and 2003, respectively. F-45 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 28. FINANCIAL DERIVATIVE CONTRACTS: The Company and its subsidiaries, Vina Santa Rita and CIECSA S.A., have entered into forward foreign currency purchase contracts with notional amounts of US$44,600,000 and foreign forward currency sales contracts with notional amounts of US$ 41,600,000 in 2003 which is equivalent to ThCh$ 52,514,361 at each contract date. As of December 31, 2002 and 2003, the net liabilities balance is presented in Other Current Liabilities of ThCh$628,635 and ThCh$2,397,847, respectively. Additional information regarding hedging and speculative (non-hedging) instruments is presented in the following table where the forward contracts are listed by period of maturity date:

----------------------------------------------------------------------------------------------------- As of December 31, 2003 ------------------------------------------- Notional Amount Maturity Hedged Spot Value Net Asset/ (1) Transaction (Liability) ThCh$ ThCh$ ThCh$ ----------------------------------------------------------------------------------------------------- Non-hedging instruments: 22,827,689 3rd Quarter 2004 N/A N/A (3,500,809) 22,197,232 3rd Quarter 2004 N/A N/A 1,751,782 2,769,040 3rd Quarter 2004 N/A N/A (399,035) 621,570 3rd Quarter 2004 N/A N/A 29,659 633,250 3rd Quarter 2004 N/A N/A 36,661 1,289,040 1st Quarter 2004 N/A N/A 98,653 Hedging instruments: 742,140 1st Quarter 2004 U.S. dollar debt 593,800 (157,434) 742,140 1st Quarter 2004 U.S. dollar debt 593,800 (157,565) 692,260 4th Quarter 2004 U.S. dollar debt 593,800 (99,758) -------------------- ------------- 52,514,361 (2,397,847) ==================== =============

(1) US$ equivalent at contract date F-46 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 28. FINANCIAL DERIVATIVE CONTRACTS, continued; As of the year ended December 31, 2002 the Company entered into forward currency purchase contracts with a notional amount of US$130,600,000 which is equivalent to ThCh$ 93,962,463 at each contract date. Additional information regarding hedging and speculative (non-hedging) instruments is presented in the following table where the forward contracts are listed by period of maturity date:

----------------------------------------------------------------------------------------------------- As of December 31, 2002 ---------------------------------------- Notional Amount Maturity Hedged Spot Value Net Asset/ (1) Transaction (Liability) ThCh$ ThCh$ ThCh$ ----------------------------------------------------------------------------------------------------- Non-hedging instruments: 24,988,593 1st Quarter 2004 N/A N/A 268,980 4,788,356 2nd Quarter 2004 N/A N/A 292,216 36,674,738 3rd Quarter 2004 N/A N/A (1,110,729) 12,872,250 4th Quarter 2004 N/A N/A (533,715) 1,342,088 1st Quarter 2004 N/A N/A 100,750 672,599 1st Quarter 2004 N/A N/A 49,904 682,053 1st Quarter 2004 N/A N/A 15,088 650,268 2nd Quarter 2004 N/A N/A 63,847 728,503 4th Quarter 2004 N/A N/A (3,767) 728,503 4th Quarter 2004 N/A N/A (4,177) 1,471,489 4th Quarter 2004 N/A N/A (21,108) 1,471,489 4th Quarter 2004 N/A N/A (20,888) 1,457,006 4th Quarter 2004 N/A N/A (7,436) 356,803 4th Quarter 2004 N/A N/A 5,593 356,803 4th Quarter 2004 N/A N/A 5,593 Hedged instruments: 1,345,199 1st Quarter 2004 U.S. dollar debt 1,451,592 96,903 1,344,310 1st Quarter 2004 U.S. dollar debt 1,451,592 76,955 682,053 1st Quarter 2004 U.S. dollar debt 725,796 14,968 674,680 1st Quarter 2004 U.S. dollar debt 725,796 40,672 674,680 1st Quarter 2004 U.S. dollar debt 725,796 41,716 ---------------- -------------------- 93,962,463 (628,635) ================ ====================

(1) US$ equivalent at contract date F-47 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 29. COMMITMENTS AND CONTINGENCIES Cristalerias de Chile S.A. and its subsidiaries have the following commitments as of December 31, 2003: (a) Liens held by third parties: Cristalerias has ThCh$233,457 and ThCh$3,707,569 in assets pledged as of December 31, 2003 related to third party creditors. A schedule of the release dates of the liens is as follows:

As of December 31, 2003 ------------------------------------------------------------ Balance payable of related debt ---------------------------- -------------------- ------------------------------------------------------------ Lien holder Subsidiary 2004 2005-2006 After 2006 Total ---------------------------- -------------------- ----------- ------------ ------------- ----------- ThCh$ ThCh$ ThCh$ ThCh$ Banco Santander Santiago Red Televisiva Megavision S.A. 486,776 915,936 457,968 1,860,680 Scotiabank Red Televisiva Megavision S.A. 419,746 812,090 406,045 1,637,881 BCI Red Televisiva Megavision S.A. 170,977 211,500 - 382,477 Edif. Metropolis AGF Cristalerias de Chile - - 7,932 7,932 Other Cristalerias de Chile - - 225,525 225,525 ----------- ------------ ------------- ----------- Total 1,077,499 1,939,526 1,097,470 4,114,495 =========== ============ ============= ===========

(b) Indirect guarantees of equity-method subsidiary obligations (i):

As of December 31, 2003 ------------------------------------------------------------ Balance payable of related debt ------------------------------------------------------------ Equity-method Guarantee Investment 2004 2005-2006 After 2006 Total ---------------------------- -------------------- ----------- -------------- ------------ ----------- ThCh$ ThCh$ ThCh$ ThCh$ Societe de Participations Financieres et Industrielles, France Rayen Cura S.A.I.C. 684,058 1,368,116 - 2,052,174 ----------- -------------- ------------ ----------- Total 684,058 1,368,116 - 2,052,174 =========== ============== ============ ===========

(i) The guarantee in this table was provided by the Company and the majority owner of Rayen Cura to a third party creditor that had entered into an obligation with Rayen Cura, an equity-method investment of the Company. If Rayen Cura is unable to meet the requirements of the related obligation, the Company will be required to make future payments on behalf of Rayen Cura up to the remaining amount payable in proportion to the Company's 40% ownership percentage. No liability has been recorded by the Company for the guarantee because the estimated fair value of the guarantee is not significant, since it is expected that the equity-method investment will meet the required debt payments. F-48 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 29. COMMITMENTS AND CONTINGENCIES, continued: Legal Proceedings: Cristalerias is party to various lawsuits arising in the ordinary course of its business amounting to a total at-risk amount of ThCh$126,000. Management considers it unlikely that any losses associated with pending lawsuits will significantly affect the Company's results of operations, financial position or cash flows, although no assurance can be given to such effect. The Company has not established a provision for these lawsuits except for a total of ThCh$10,000 committed for pending civil and labor lawsuits related to the subsidiary, Megavision as of December 31, 2003. Grape Contracts: The Company's subsidiary, Santa Rita, enters into purchase contracts with local growers in order to ensure the company has sufficient amounts of fine quality grapes to be used in the company's wine production. Approximately 36.4% of the Company's grapes are obtained from these contracts, while another approximately 30.5% are obtained from the Company's own vineyards and an additional approximately 33.1% is purchased at market. The Company only incurs obligations when the grapes are delivered to the Company and as such are not recorded as liabilities. Technical Agreement: Cristalerias pays monthly fees of ThCh$170,000 for a technical assistance agreement which expires in September 2004. Advertising contracts: Megavision has commitments of ThCh$8,317,202 in advertising contracts for future broadcast as of December 31, 2003. 30. GUARANTEES FROM THIRD PARTIES: The Company has received the following guarantees from third parties as of December 31, 2002 and 2003:

2002 2003 ----------------------------------- ThCh$ ThCh$ Rental of BankBoston Real Estate Property 6,222 - Rental of Bank Security Real Estate Property - 5,144 Rental of property Telecomunicaciones Cono Sur Ltda 2,199 - Rental of office 202 AGF Building 6,188 6,191 Rental of office Metropolis Building 3,200 3,201 Promissory notes from Suppliers 1,691 1,674 Container installation (Tersanoix S.A.) 281,431 - Purchase of grapes and wine 1,048,057 1,037,576 Purchase of posts and grapevine plants (Intelmaq) 45,638 35,051 Underground materials storehouse Buin Salfa Montajes 33,456 366,164 ----------------------------------- Total 1,428,082 1,455,001 ===================================

F-49 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 31. FOREIGN CURRENCIES As of December 31, 2002 and 2003, foreign currency denominated assets and liabilities in the disclosed currencies are as follows:

2002 2003 ----------------------------------- Foreign currency ThCh$ ThCh$ Assets: Cash Other currencies - 89,583 Cash U.S. dollars 333,092 465,420 Cash Euro dollars 14,760 81,791 Cash Argentina peso 52,891 45,698 Time deposits U.S. dollars 3,301,120 2,665,004 Marketable securities U.S. dollars 64,253,376 37,066,215 Marketable securities Euro dollars - 18,394,208 Accounts receivable U.S. dollars 4,377,905 4,302,946 Accounts receivable Euro dollars 2,894,220 3,043,044 Accounts receivable Other currencies 1,452,291 2,636,983 Accounts receivable Argentina peso - 43,245 Notes receivable U.S. dollars 106,579 - Notes receivable Argentina peso 120,568 10,941 Miscellaneous accounts receivable U.S. dollars 5,303 460,465 Miscellaneous accounts receivable Euro dollars 10,217 - Miscellaneous accounts receivable Argentina peso 4,781 18,472 Notes and accounts receivable from related companies U.S. dollars 2,054 156,992 Taxes receivable Other currencies - 41,439 Prepaid expenses U.S. dollars 591,938 472,978 Prepaid expenses Argentina peso - 19,864 Other current assets U.S. dollars 6,072,324 3,586,110 Other assets U.S. dollars 11,781,066 8,640,432 Other assets Argentina peso - 460,166 Other assets Other currencies 278,707 -

F-50 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 31. FOREIGN CURRENCIES, continued:

2002 2003 ----------------------------------- Foreign currency ThCh$ ThCh$ Current liabilities: Short-term bank liabilities U.S. dollars - 149,742 Short-term bank liabilities Argentina peso 10,590 15,906 Current portion of long-term bank liabilities U.S. dollars 2,784,447 1,842,909 Current portion of long-term liabilities U.S. dollars 370,029 305,803 Trade accounts payable U.S. dollars 3,158,460 1,439,172 Trade accounts payable Euro dollars 47,778 15,535 Trade accounts payable Other currencies 6,362 4,518 Trade accounts payable Argentina peso 140,229 80,946 Notes payable U.S. dollars 2,367,430 1,762,250 Notes payable Euro dollars 43,728 2,666 Miscellaneous creditors U.S. dollars 120,588 670,855 Accrued expenses U.S. dollars - 12,369 Accrued expenses Argentina peso - 8,542 Accrued expenses Other currencies 22,427 - Provisions Euro dollars 518,564 1,269,243 Provisions U.S. dollars 3,651,783 1,521,583 Provisions Argentina peso 79,480 5,110 Provisions Other currencies 604,871 722,936 Other current liabilities U.S. dollars 628,635 2,397,847 Long-term liabilities: Long-term bank liabilities U.S. dollars 36,289,805 29,908,248 Long-term bank liabilities Argentina peso 3,376,008 51,562 Other long-term liabilities U.S. dollars - 115,227 Miscellaneous creditors U.S. dollars 1,249,708 121,249 Long-term provisions U.S. dollars 1,773,057 3,410,013

F-51 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 32. SANCTIONS: During 2001, 2002 and 2003, no sanctions by the Chilean Superintendency of Securities and Insurance and other regulatory agencies have been applied to the Company. 33. SUBSEQUENT EVENTS: On January 9, 2003, CristalChile Comunicaciones S.A., 50% owner of Metropolis Intercom S.A., reached an agreement of understanding with Liberty Media International, indirect owner of the remaining 50% of Metropolis and majority shareholder of VTR S.A. in order to merge Metropolis and VTR. The agreement is subject to numerous conditions, among them, drafting of a final agreement, approval by the board of directors or related parties of Liberty Media including UnitedGlobalCom, Inc., approval by the Chilean Anti-Monopoly Commission, and approval by the board of directors of CristalChile Comunicaciones S.A. As of and for the year ending December 31, 2003, the Company has not recorded any adjustment in the financial statements related to the proposed merger. On January 13, 2004, the Company paid a dividend of Ch$15 per share on the 64,000,000 outstanding shares. The Board of Directors approved this dividend in November 2003. Management is not aware of any other subsequent events that have occurred after the date of these financial statements that may significantly affect these financial statements. 34. ENVIRONMENT: The Company is committed to the preservation of the environment. During 2003, the Company invested ThCh$205,409 to purchase equipment to be used in the treatment of nitrous oxide in the new Furnace B. During 2002, the Company invested ThCh$ 206,201 to repair an electrostatic precipitator, which is used to filter gases discharged from the glass smelting process, in order to continue complying with emission standards for particulate matter issued by the Chilean Government. Additionally the subsidiary, Vina Santa Rita S.A. invested ThCh$33,002 and ThCh$39,369 to comply with the laws and regulations on industrial processing and installations during 2002 and 2003, respectively. 35. SHAREHOLDER INFORMATION: During the years ended December 31, 2001, 2002 and 2003, there were no share transactions made by the directors, majority shareholders, and parties related to the directors. F-52 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 35. SHAREHOLDER INFORMATION, continued: During the years ended December 31, 2001, 2002 and 2003, distribution of shareholder were as follows:

% of Participation Number of Shareholders Type of Shareholder 2001 2002 2003 2001 2002 2003 --------------------------------------------------------------------------------------------------------------- 10% or more 34.03 34.03 34.03 1 1 1 Less than 10% and equal to or greater than UF200 65.81 65.82 65.83 261 261 258 Less than 10% and less than UF200 0.16 0.15 0.14 831 815 768 ----------------------------------------------------------------------- Totals 100.00 100.00 100.00 1,093 1,077 1,027 ======================================================================= Controlling shareholders 52.14 52.14 52.14 3 3 3 =======================================================================

Cristalerias is a member of the Elecmetal Group and is a subsidiary of Compania Electrometalurgica S.A., Bayona S.A., and Servicios y Consultorias Hendaya S.A. 36. BOARD OF DIRECTORS' REMUNERATION: Required disclosures of amounts paid to the Board of Directors of the Company during each year are as follows:

2001 2002 2003 ------------------------------------------------------ ThCh$ ThCh$ ThCh$ Share of previous year's net income 854,336 880,655 902,577 Fees for attendance at meetings 9,181 8,079 8,331 Payment of special services 3,855 3,558 2,763 ------------------------------------------------------ Total 867,372 892,292 913,671 ======================================================

As of December 31, 2003, the Company and its subsidiary Vina Santa Rita S.A., have accrued an estimated ThCh$334,256 (ThCh$899,487 in 2002 and ThCh$889,687 in 2001) for 2003 Directors' remuneration that will be paid during 2004. F-53 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: Generally accepted accounting principles in Chile (Chilean GAAP) vary in certain important respects from the generally accepted accounting principles in the United States of America (U.S. GAAP). Such differences involve certain methods for measuring the amounts shown in the financial statements, as well as additional disclosures required by U.S. GAAP. I. Differences in Measurement Methods: 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: (a) Inflation accounting: The cumulative inflation rate in Chile as measured by the Consumer Price Index for the three-year period ended December 31, 2003 was 7.25%. 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 2(b), 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, by restating all non-monetary accounts in the financial statements. The model prescribes that the historical cost of such accounts be restated for general price-level changes between the date of origin of each item and the year-end, but requires that latest cost values be used for the restatement of inventories. The inclusion of price-level adjustments in the accompanying 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%. As allowed pursuant to Form 20-F the reconciliation included herein of consolidated net income, comprehensive income and shareholders' equity, as determined with U.S. GAAP, does not include adjustments to eliminate the effect of inflation accounting under Chilean GAAP. (b) Revaluation of property, plant and equipment: As mentioned in Note 2(f), certain property, plant and equipment are reported in the financial statements at amounts determined in accordance with a technical appraisal. Revaluation of property, plant and equipment is an accounting principle not generally accepted in the United States. The effects of the reversal of this revaluation, as well as of the related accumulated depreciation and depreciation expense for the year is shown below, under paragraph I(q). F-54 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: (b) Revaluation of property, plant and equipment, continued: In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" during 2000 and 2001, which was superceded by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" beginning in 2002, the Company evaluates the carrying amount of property, plant and equipment and other long-lived assets, in relation to the operating performance and future undiscounted cash flows of the underlying business. These standards require that an impairment loss be recognized in the event that facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable, when compared to the estimated future undiscounted cash flows. Impairment, if determined, is recorded based on an estimate of future discounted cash flows, as compared to current carrying amounts. For the years ended December 31, 2001, 2002, and 2003 no additional amounts were recorded for impairment under U.S. GAAP. (c) Allocation of certain overhead costs to inventories: As indicated in Note 2(e), finished and in-process products are reported in the financial statements at restated direct costs plus price-level restatement, which include the related raw material, energy and direct labor costs. Accordingly, certain indirect manufacturing expenses are excluded from inventory, which is contrary to U.S. GAAP. The effects of including certain indirect manufacturing expenses are included under paragraph I(q) below. (d) Income taxes: Under Chilean GAAP, until December 31, 2000, deferred income taxes were recorded based on non-recurring timing differences between the recognition of income and expense items for financial statement and tax purposes. Accordingly, there was an orientation toward the income statement focusing on differences in the timing of recognition of revenues and expenses in pre-tax accounting income and taxable income. Chilean GAAP also permitted not providing for deferred income taxes where a deferred tax asset or liability is not expected to be realized. Starting January 1, 2001, the Company recorded income taxes in accordance with Technical Bulletin No. 60 of the Chilean Association of Accountants, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision, a contra asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2001. Such contra asset or liability must be amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax asset or liability relates. Under U.S. GAAP, companies must account for deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires an asset and liability approach for financial accounting and reporting of income taxes, under the following basic principles: F-55 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (d) Income taxes, continued: (i) A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carryforwards. (ii) The measurement of deferred liabilities and assets is based on the provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated. (iii) The measurement of deferred tax assets are reduced by a valuation allowance, if based on the weight of available evidence, it is more likely than not that some of the deferred tax assets will not be realized. Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset and liability that at some future date will reverse, thereby resulting in taxable income or expense. Temporary differences ordinarily become taxable or deductible when the related assets are recovered or the related liability is settled. A deferred tax liability or asset represents the amount of taxes payable or refundable in future years as a result of temporary differences at the end of the current year. The principal difference in the accounting for deferred income taxes between Chilean and U.S. GAAP relates to the reversal of the complementary assets and liabilities recorded as a transitional provision for unrecorded deferred taxes as of January 1, 2001 and their corresponding amortization into income. The effect of these differences on the net income and shareholders' equity of the Company is included in paragraph I (q) below. e) Accounting for investments in related companies: The adjustment to related companies includes the effect on the income and equity on the consolidated accounts of Cristalerias of the adjustments to U.S. GAAP that affect the accounts of the Company's equity investees. The principal U.S. GAAP adjustments affecting the Company's equity investees are as follows: (i) The recording of deferred taxes in accordance with SFAS No. 109 (ii) The recording of goodwill in accordance with SFAS No. 142 (iii) The recording of financial derivatives in accordance with SFAS No. 133 (iv) The depreciation of external networks in accordance with U.S. GAAP (v) The recording of indirect costs in accordance with U.S. GAAP (vi) The deferred income tax effect of the above adjustments These adjustments principally relate to deferred taxes, production costs, and goodwill amortization. The effects of this adjustment are included under paragraph I(q) below. F-56 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (f) Minimum dividend required by Chilean law: As required by the Chilean Companies Act, unless otherwise decided by the unanimous vote of holders of the issued and subscribed shares, the Company must distribute a cash dividend in an amount equal to at least 30% of the Company's net income for each year as determined in accordance with Chilean GAAP, unless and except to the extent the Company has unabsorbed prior year losses. Since the payment of the 30% dividend out of each year's income is a legal requirement in Chile, a provision has been made in the accompanying U.S. GAAP reconciliation in I(q) below to recognize the corresponding decrease in net equity at the end of each year in which the net income is earned. (g) Furnace repair provision: Under Chilean GAAP, provisions may be accrued for estimated future repairs that will be required to be made to significant property, plant and equipment. Accordingly, Cristalerias has accrued provisions for estimated future repairs to the Company's furnaces. Under U.S. GAAP the Company expenses such repairs in the year incurred or capitalizes these costs if they are considered to be a betterment that would significantly improve the useful life of the asset. The effects of this adjustment are included under paragraph I(q) below. (h) Depreciation of molds as property, plant, and equipment: Under U.S. GAAP, molds used in the production process are treated as property, plant and equipment and are depreciated over their expected useful lives. The Company, in accordance with Chilean GAAP, has historically expensed some of these items as incurred. As of January 1, 1997, the Company began to capitalize purchased molds and depreciate them over a period of 24 months. For U.S. GAAP purposes, the molds are depreciated using the unit-of-production method with the estimated useful life per mold ranging from 12,000,000 units produced to 20,000,000 units produced, depending upon the type and specifications of the individual molds. The effects of this adjustment are included under paragraph I(q) below. F-57 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (i) Investments in marketable securities: Under Chilean GAAP, investments in debt and equity securities are accounted for at the lower of cost or market value. Under U.S. GAAP, investments in debt and equity securities are accounted for according to the purpose for which these investments are held. U.S. GAAP defines three distinct purposes for holding investments: o Investments held-for-trading purposes o Investments available-for-sale o Investments held-to-maturity The Company considers that all of its investments are held-for-trading except for the Santa Emiliana shares which are available-for-sale and the Celulosa Arauco bonds purchased during 2001, which are considered held-to-maturity. There are no differences between Chilean GAAP and U.S. GAAP for held-for-trading and held-to-maturity investments. For available-for-sale investments, the accounting treatment in accordance with U.S. GAAP is to value these instruments at fair value and record the change in fair value as a separate component of shareholders' equity, net of deferred taxes. The effects on shareholders' equity of adopting this treatment are included under paragraph I(q) below. (j) Intangible assets: Under Chilean GAAP, the cost of the frequency purchased by the subsidiary Megavision S.A. is being amortized on a decelerated basis as described in Note 2(k). Under U.S. GAAP, such intangible assets are amortized on a straight-line basis since they relate to a finite concession period. During 1998, the Company began amortizing trademarks under Chilean GAAP on a straight-line basis over a period of 40 years, in accordance with Technical Bulletin No. 55 of the Chilean Association of Accountants. Previously under Chilean GAAP, companies were not required to amortize those costs relating to trademarks. In accordance with U.S. GAAP, companies are required to amortize trademarks on a systematic and rational basis over the expected period for which an economic benefit will be derived from the trademark as long as the right does not have an indefinite life. For U.S. GAAP purposes, the Company has historically, and continues to, amortize deferred costs related to trademarks on a straight-line basis over a period of 25 years. The effects of the adjustments are included under paragraph I(q) below. F-58 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (k) Unrealized profit and negative goodwill: (i) In 1995 the Company recorded the contribution of Cable TV companies to Cordillera Comunicaciones S.A., a related Company, at an amount that exceeded the book value of these investments. Under Chilean GAAP the excess amount was recorded as income in 1995. Under U.S. GAAP, the profit from this transaction is unrealized because of the Company's influence in the related company. (ii) Additionally, under U.S. GAAP, the excess of the fair value of the assets received over the purchase price is allocated to reduce the values assigned to the non-current assets. This reduces the U.S. GAAP depreciation base in property, plant and equipment by the excess purchase price. As a consequence, the U.S. GAAP adjustment includes income from the decreased depreciation of the fixed assets using straight-line depreciation over an original useful life of 13 years. The effects of recording the unrealized profit and reduced depreciation expense is included under Paragraph I(q) below. (l) Goodwill: (i) Under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying value, and the excess of the purchased price over the carrying value are recorded as goodwill. Circular No. 1358, dated December 3, 1997 issued by the SVS, extended the maximum amortization period of goodwill to 20 years from the previous 10 years. Under U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess of the purchased price over the estimated fair value of the net identifiable assets and liabilities acquired are recorded as goodwill, unless the transaction is between entities under common control, in which case the related party transaction would be recorded using book values and no goodwill would be recorded. Under U.S. GAAP, the Company amortized goodwill on a straight-line basis over the estimated useful lives of the assets, ranging from 20 to 40 years for goodwill acquired prior to July 1, 2001 and all other goodwill prior to January 1, 2002. The effects of adjustment to U.S. GAAP, to reverse the related amortization expense on goodwill not accepted in U.S. GAAP and different amortization periods is included in the net income and shareholders' equity reconciliation to U.S. GAAP under paragraph I(q) below. (ii) Under Chilean GAAP, the Company has evaluated the carrying amount of goodwill for impairment. The evolution of impairment was based on the fair value of the investment which the Company determined using a discounted cash flow approach, stock valuations and recent comparable transactions in the market. In order to estimate fair value, the Company made assumptions about future events that are highly uncertain at the time of estimation. The results of this analysis showed that the Company's goodwill was not impaired. F-59 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (l) Goodwill, continued: In accordance with U.S. GAAP, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets", (SFAS No. 142) as of January 1, 2002. SFAS 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill, including that acquired before initial application of the standard, and indefinite-lived intangible assets are not amortized, but must be tested for impairment at least annually. Previously, the Company evaluated the carrying amount of goodwill, in relation to the operating performance and future undiscounted cash flows of the underlying business. The impairment tests, which were performed during 2002 and 2003, resulted in no impairment of the Company's goodwill. The following effects are included in the net income and shareholders' equity reconciliation to U.S. GAAP under paragraph I(q) below: (a) Adjustment to record differences in goodwill amortization between Chile GAAP and U.S. GAAP as of December 31, 2001, and (b) The reversal of goodwill amortization recorded under Chilean GAAP relating to reporting units that were not found to be impaired under U.S. GAAP for the years ended December 31, 2002 and 2003, and (c) Gain on sale from differing carrying values under U.S. GAAP and Chile GAAP in the sale of the related party Ediciones Chiloe during 2001. Amortization of goodwill under U.S. GAAP of ThCh$390,239, ThCh$0 and ThCh$0 for the years ended December 31, 2001, 2002 and 2003, respectively, is included in operating income for U.S. GAAP purposes. (iii) The following details what the Company's net income under U.S. GAAP would have been for the year ended December 31, 2001, excluding goodwill amortization expense:

(Unaudited) Year ended December 31, 2001 ---------------------- ThCh$ Net income under U.S. GAAP 15,202,365 Add back: Goodwill amortization 2,051,694 ---------------------- Adjusted net income 17,254,059 ======================

(m) Results of subsidiaries in the development stage: Under Chilean GAAP, costs incurred during the development stage of a controlled company are not charged to the income statement during the year in which they were incurred, being charged instead directly to an equity account (Subsidiary start-up deficit). U.S. GAAP requires that all such costs be included to the consolidated income statement in the year incurred. The effects are included under paragraph I(q) below. F-60 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (n) Translation of financial statements of investments outside of Chile: In accordance with the Chilean foreign currency translation standard, "BT 64", the financial statements of foreign subsidiaries that operate in countries exposed to significant risks, and are not considered to be an extension of the Company's operations, are remeasured into U.S. dollars. The Company has remeasured its foreign subsidiaries into U.S. dollars under this requirement as follows: - Monetary assets and liabilities are translated at year-end rates of exchange between the U.S. dollar and the local currency. - All non-monetary assets and liabilities and shareholder's equity are translated at historical rates of exchange between the U.S. dollar using the closing exchange rate and the local currency. - Income and expense accounts are translated at monthly average rates of exchange between the U.S. dollar and local currency. - The effects of any exchange rate fluctuations are included in the results of operations for the period. Under BT 64, the investment in the foreign subsidiary is price-level restated in the accounting records of the parent company, the effects of which are reflected in income, while the effects of the foreign exchange gain or loss between the Chilean peso and the U.S. dollar using the closing exchange rate are reflected in equity in the account "Cumulative Translation Adjustment"; as the foreign investment itself is measured in U.S. dollars. The foreign currency translation 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 as permitted by Form 20-F. F-61 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (o) Derivative instruments: The Company is exposed to foreign currency risk arising from long-term debt denominated in U.S. dollars. This risk is partially mitigated by the Company's export revenues which are in U.S. dollars. The Company uses short duration forward foreign currency contracts, where possible, to transfer risk from exposure in U.S. dollars to an exposure in UF. Under Chilean GAAP, the Company defers forward contract gains and recognizes losses when accounting criteria under Chile GAAP permits hedging. The hedging criteria and documentation requirements under Chilean GAAP are less onerous than U.S. GAAP. The Company recorded a net liability of ThCh$628,634 and ThCh$2,397,846, as of December 31, 2002 and 2003, respectively. Fair values under Chilean GAAP have been estimated using the closing spot exchange rate at the period end. Beginning January, 1, 2001, under U.S. GAAP, the accounting for derivative instruments is described in (SFAS No. 133), "Accounting for Derivative Instruments and Hedging Activities and other complementary rules and amendments". SFAS No. 133, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 required that changes in the derivative instrument's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative instrument's gains and losses to offset related results on the hedged item in the income statement, to the extent effective, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133, in part, allows special hedge accounting for "fair value" and "cash flow" hedges. SFAS No. 133 provides that the gain or loss on a derivative instrument designated and qualifying as a "fair value" hedging instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk be recognized currently in earnings in the same accounting period. While the Company enters into derivatives for the purpose of mitigating its global financial and commodity risks, from time to time it enters into foreign currency forward contracts that are speculative in nature. These operations do not meet the documentation requirements to qualify for hedge accounting under U.S. GAAP. Therefore changes in the respective fair values of all derivatives are reported in earnings when they occur. F-62 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (o) Derivative instruments, continued: The cumulative effect resulting from the adoption of SFAS No. 133 on January 1, 2001 was a net gain of ThCh$64,469 which is presented net of tax of ThCh$12,068, and minority interest under the caption "Cumulative effect of change in accounting principles. The adjustment is due to the difference between recording forward contracts at spot exchange rates under Chilean GAAP and marking the forward contracts to market using forward rates in according with US GAAP. The effect of the adjustment between the current market values and the fair value for the years ended December 31, 2002 and 2003 is included in paragraph I(q) below. (p) Elimination of gain on Joint-venture: During July 2001, the Company deconsolidated its subsidiary Crowpla Reicolite S.A. as part of a joint venture transaction with Andina Inversiones Societarias S.A., in which the Company retained a 50% interest in Crowpla Reicolite S.A. Under Chilean GAAP a gain of ThCh$2,070,143 was recognized based on the difference between the net assets contributed as part of the joint-venture and the Company's share in the joint-venture's equity. This occurred as two transactions, first Cristalerias sold capital in Crowpla Reicolite S.A. which Andina Inversiones Societarias S.A. purchased, and secondly, Andina Inversiones transferred assets into Crowpla Reicolite (now called "Envases CMF S.A.") to complete the joint venture. Under U.S. GAAP, these series of transactions are viewed as one transaction and contributions to joint ventures are recorded at book value of net assets contributed with a gain being recorded only to the extent that cash is received, unless it is reinvested in the business. The gain recorded under Chilean GAAP is reversed under U.S. GAAP as a deferred credit and is amortized over the weighted-average estimated useful lives of the joint-venture's assets which, as of the date that the joint-venture was formed, was 12 years. The effect of the adjustment is included under paragraph I(q) below. F-63 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (q) Effects of conforming to U.S. GAAP: The adjustments to reported net income required to conform with U.S. GAAP are as follows (all amounts are expressed in thousands of constant Chilean pesos as of December 31, 2003):

2001 2002 2003 ------------------------------------------------- ThCh$ ThCh$ ThCh$ Net income as reported under Chilean GAAP 18,486,761 17,837,269 6,426,520 Revaluation of property, plant and equipment (paragraph I(b)) 343,359 208,256 208,478 Allocation of certain overhead costs to inventories (paragraph I(c)) (274,850) (460,075) 173,922 Income taxes (paragraph I(d)) 284,288 (336,627) (635,706) Accounting for investments in related companies (paragraph I(e)) (1,812,961) 195,475 20,944 Furnace repair provision (paragraph I(g)) (2,432,046) (694,679) (393,430) Depreciation of molds as property, plant and equipment (paragraph I(h)) 518,232 232,105 297,418 Intangibles assets (paragraph I(j)) (183,294) 104,018 (137,357) Unrealized profit and negative goodwill (paragraph I(k)) 23,184 23,108 23,108 Goodwill (paragraph I(l(i))) 1,674,639 - - Goodwill amortization (paragraph I(l(ii))) (314,354) 653,119 542,800 Results of subsidiaries in the development stage (paragraph I(m)) (128,092) - - Derivative instruments (paragraph I(o)) 1,116,276 366,163 (1,673,964) Elimination of gain on Joint-venture (paragraph I(p)) (2,070,143) 172,512 172,512 Effect of minority interests on U.S. GAAP adjustments (151,571) (208,322) 10,473 Deferred tax effect of the above adjustments 58,468 (213,010) 235,350 ------------------------------------------------- Net income in accordance with U.S. GAAP before cumulative effect of change in accounting principles 15,137,895 17,879,310 5,271,068 ------------------------------------------------- Cumulative effect of change in accounting principle, net of taxes of ThCh$12,068 and minority interest 64,469 - - ------------------------------------------------ Net income in accordance with U.S. GAAP 15,202,364 17,879,310 5,271,068 ------------------------------------------------- Other comprehensive income: Unrealized holding gain on marketable securities, net of applicable taxes (paragraphs I(i)) (1,035,250) 73,312 (99,397) Foreign exchange translation adjustment 1,668,908 1,569,793 (3,523,815) ------------------------------------------------- Comprehensive income in accordance with U.S. GAAP 15,836,022 19,522,415 1,647,856 =================================================

F-64 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (q) Effects of conforming to U.S. GAAP, continued: The adjustments required to conform net shareholders' equity amounts to U.S. GAAP are as follows (all amounts are expressed in thousands of constant Chilean pesos as of December 31, 2003):

2002 2003 ----------------------------------- ThCh$ ThCh$ Net shareholders' equity as reported under Chilean GAAP 233,643,431 228,321,585 Revaluation of property, plant and equipment (paragraph I(b)) (7,713,765) (6,606,881) Revaluation of property, plant and equipment, accumulated depreciation (paragraph 5,959,046 5,060,640 I(b)) Allocation of certain overhead costs to inventories (paragraph I(c)) 3,562,998 3,736,920 Income taxes (paragraph I(d)) 203,737 (431,969) Accounting for investments in related companies (paragraph I(e)) 3,541,745 3,562,689 Minimum dividend required by Chilean law (paragraph I(f)) (2,014,206) (969,876) Furnace repair provision (paragraph I(g)) 3,803,443 3,410,013 Depreciation of molds as property, plant and equipment (paragraph I(h)) 2,073,539 2,370,957 Investments in marketable securities (paragraph I(i)) 2,011,276 1,891,521 Intangible assets (paragraph I(j)) (1,714,743) (1,852,100) Unrealized profit and negative goodwill (paragraph I(k(i))) (298,034) (298,034) Amortization of unrealized profit and negative goodwill (paragraph I(k(ii))) 115,614 138,722 Goodwill (paragraph I(l)) (3,368,500) (3,379,109) Goodwill amortization (paragraph I(l)) 3,142,538 3,560,462 Derivative instruments (paragraph I(o)) 1,704,981 31,017 Elimination of gain on joint-venture - gross (paragraph I(p)) (2,070,144) (2,070,144) Elimination of gain on joint-venture - accumulated amortization (paragraph I(p)) 172,511 345,024 Effect of minority interests on U.S. GAAP adjustments (399,366) (388,893) Deferred tax effect of the above adjustments (3,366,050) (3,110,344) ----------------------------------- Net shareholders' equity in accordance with U.S. GAAP 238,990,051 233,322,200 ===================================

F-65 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (q) Effects of conforming to U.S. GAAP, continued: The following summarizes the changes in shareholders' equity under U.S. GAAP during the years ended December 31, 2001, 2002 and 2003:

2001 2002 2003 ------------------------------------------------------ ThCh$ ThCh$ ThCh$ Balance as of January 1 221,889,516 228,510,560 238,990,051 Dividends paid (9,539,740) (7,729,314) (8,360,037) Change in minimum dividends accrued 324,761 (1,313,610) 1,044,330 Net income in accordance with U.S. GAAP 15,202,365 17,879,310 5,271,068 Foreign exchange translation adjustment 1,668,908 1,569,793 (3,523,815) Unrealized holding gain (loss) on marketable securities, net of applicable taxes (1,035,250) 73,312 (99,397) ------------------------------------------------------ Balance as of December 31 228,510,560 238,990,051 233,322,200 ======================================================

(r) Other Comprehensive Income: In accordance with US GAAP, Cristalerias reports a measure of all changes in shareholders' equity that result from transactions and other economic events of the period other than transactions with owners ("comprehensive income"). Comprehensive income is the total of net income and other non-owner equity transactions that result in changes in net shareholders' equity. The following represents the components of other comprehensive income, together with the related tax effects by component for the years ended December 31, 2001, 2002 and 2003 (in thousands of constant Chilean pesos as of December 31, 2003). F-66 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (r) Other Comprehensive Income, continued:

Before-Tax Amount Tax (Expense) or Net of Tax Benefit Amount --------------------------------------------------------- ThCh$ ThCh$ ThCh$ For the year ended December 31, 2001 Unrealized holding gains on marketable securities arising during period: (1,195,311) 160,061 (1,035,250) Foreign exchange translation adjustment 1,668,908 - 1,668,908 ----------------------------------------------------- Other comprehensive income 473,597 160,061 633,658 ===================================================== For the year ended December 31, 2002 Unrealized holding gains on marketable securities arising during period: 87,798 (14,486) 73,312 Foreign exchange translation adjustment 1,569,793 - 1,569,793 ------------------ ---------------------------------- Other comprehensive income 1,657,591 (14,486) 1,643,105 ===================================================== For the year ended December 31, 2003 Unrealized holding loss on marketable securities arising during period: (119,755) 20,358 (99,397) Foreign exchange translation adjustment (3,523,815) - (3,523,815) ----------------------------------------------------- Other comprehensive income (3,643,570) 20,358 (3,623,212) =====================================================

The following represents accumulated other comprehensive income balances as of December 31, 2002 and 2003 (in thousands of constant Chilean pesos as of December 31, 2003).

As of December 31, 2002 -------------------------------------------------------------- Unrealized Gains Cumulative Foreign Accumulated Other on Securities Exchange Translation Comprehensive Income Adjustment Beginning balance 1,615,720 2,294,542 3,910,262 Current-period change 73,312 1,569,793 1,643,105 -------------------------------------------------------------- Ending balance 1,689,032 3,864,335 5,553,367 ==============================================================

As of December 31, 2003 -------------------------------------------------------------- Unrealized Gains Cumulative Foreign Accumulated Other on Securities Exchange Translation Comprehensive Income Adjustment Beginning balance 1,689,032 3,864,335 5,553,367 Current-period change (99,397) (3,523,815) (3,623,212) -------------------------------------------------------------- Ending balance 1,589,635 340,520 1,930,155 ==============================================================

F-67 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: II. Additional Disclosure Requirements: (a) Earnings per share: The following earnings per share information is not generally required for presentation in the financial statements under Chilean GAAP but is required under U.S. GAAP:

2001 2002 2003 -------------------------------------- Ch$ Ch$ Ch$ Chilean GAAP basic earnings per share (Ch$) (1) 288.86 278.71 100.41 ====================================== U.S. GAAP basic earnings per share (Ch$1) (1): U.S. GAAP earnings per share before cumulative effect of 237.54 279.38 82.36 ====================================== change in accounting principle Cumulative effect of change in accounting principle 1.01 - - -------------------------------------- U.S. GAAP net earnings per share 238.55 279.38 82.36 ====================================== Weighted average number of common shares outstanding (in thousands) 64,000 64,000 64,000 ======================================

(1) There are no requirements to provide earnings per share disclosures under Chilean GAAP. The earnings per share data shown above are determined by dividing net income available to common shareholders in accordance with U.S. GAAP and Chilean GAAP respectively by the weighted-average number of shares outstanding. The Company has a simple capital structure and has not issued any convertible debt securities. Consequently, there are no diluting effects on the earnings per share of the Company. (b) Income taxes: The provision for income taxes was as follows:

Chilean GAAP: 2001 2002 2003 ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Current tax expense 4,036,042 4,275,329 1,286,502 Deferred tax expense (benefit) and others as calculated under Chilean GAAP: 1,147,057 2,186,462 61,079 ----------------------------------------------------- Charge for the year under Chilean GAAP 5,183,099 6,461,791 1,347,581 U.S. GAAP Adjustments Deferred tax effect of applying FAS No. 109 (284,288) 336,627 635,706 Deferred tax effect of adjustments to U.S. GAAP (58,468) 213,010 (235,350) Deferred tax effect of cumulative effect of change in accounting principle 12,068 - - ----------------------------------------------------- Charge for the year under U.S. GAAP 4,852,411 7,011,428 1,747,937 =====================================================

F-68 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (b) Income taxes, continued: Deferred tax assets (liabilities) as of each year-end are summarized as follows:

2002 2003 ------------------------------------------- -------------------------------------------- SFAS No. 109 SFAS No. 109 Total SFAS No. 109 SFAS No. 109 Total applied to applied to US Deferred applied to applied to US Deferred hilean GAAP GAAP Taxes under Chilean GAAP GAAP Taxes under C Balances Adjustments SFAS No. 109 Balances Adjustments SFAS No. 109 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Deferred income tax assets: Tax loss carryforwards (1) 4,723,875 - 4,723,875 4,506,337 - 4,506,337 Furnace repair provision 620,962 (620,962) - 563,187 (563,187) - Provision for doubtful accounts 114,245 - 114,245 118,540 - 118,540 Inventory and packaging provision 225,881 - 225,881 229,139 - 229,139 Accrued vacation expense 172,514 - 172,514 202,898 - 202,898 Unearned revenues and unrealized income 452,446 - 452,446 698,264 - 698,264 Staff severance indemnities 37,709 - 37,709 28,623 - 28,623 Bond discount amortization 59,212 - 59,212 86,317 - 86,317 Other provisions 197,368 - 197,368 158,771 - 158,771 Direct labor costs 20,438 - 20,438 11,337 - 11,337 Other 268,366 41,378 309,744 17,349 10,568 27,917 ------------------------------------------- -------------------------------------------- Total deferred income tax assets 6,893,016 (579,584) 6,313,432 6,620,762 (552,619) 6,068,143 ------------------------------------------- -------------------------------------------- Deferred income tax liabilities: Depreciation (8,057,421) - (8,057,421) (8,561,734) - (8,561,734) Bond discount (858,205) - (858,205) (819,352) - (819,352) Inventories - (587,895) (587,895) - (635,277) (635,277) Molds (251,222) (352,502) (603,724) (256,166) (403,063) (659,229) Forwards contracts - (281,321) (281,321) - (5,273) (5,273) Intangibles - (1,232,887) (1,232,887) - (1,192,554) (1,192,554) Deferred customs duties (153,739) - (153,739) (77,512) - (77,512) Deferred costs (173,242) - (173,242) (222,622) - (222,622) Marketable securities - (331,861) (331,861) - (321,559) (321,559) Other (57,908) - (57,908) (85,758) - (85,758) ------------------------------------------- -------------------------------------------- Total deferred income tax liabilities (9,551,737) (2,786,466) (12,338,203) (10,023,144) (2,557,725) (12,580,869) ------------------------------------------- -------------------------------------------- Net deferred tax assets (liabilities) resulting from SFAS No. 109 (2,658,721) (3,366,050) (6,024,771) (3,402,382) (3,110,344) (6,512,726) =========================================== ============================================

(1) In accordance with the current enacted tax law in Chile, such tax losses may be carried forward indefinitely. F-69 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (b) Income taxes, continued: The classification of the deferred income tax assets and liabilities above is detailed as follows:

2002 2002 ------------------------------------- ThCh$ ThCh$ Short-term (918,810) 168,342 Long-term (5,105,961) (6,681,068) ------------------------------------- Net deferred tax liabilities (6,024,771) (6,512,726) =====================================

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 in accordance with U.S. GAAP as a result of the following differences:

2001 2002 2003 ------------------------------------------------------- ThCh$ ThCh$ ThCh$ Tax provision at statutory Chilean tax rates 3,215,200 3,979,917 1,351,613 Increase (decrease) in taxes resulting from: Amortization of goodwill and other intangibles (257,594) - - Price-level restatement not accepted for tax purposes (159,932) (23,671) (22,310) Equity in net income of related companies 1,448,344 1,785,957 296,778 Tax credits and other permanent differences 606,393 1,269,225 121,856 ------------------------------------------------------- Effective tax provision 4,852,411 7,011,428 1,747,937 =======================================================

The Chilean statutory first category (corporate) income tax rate was 15% prior to 2001, however tax rates increased to 16% in 2002, with subsequent increases to 16.5% in 2003, and is scheduled to increase to 17% in 2004 and thereafter, in accordance with the currently enacted tax legislation. In accordance with Chilean law, Cristalerias de Chile S.A. and each of its subsidiaries compute and pay tax on an individual legal entity basis. The Company had net operating tax-loss carry forwards related to its subsidiaries of approximately ThCh$26,507,865 as of December 31, 2003 that can be carried forward indefinitely. (c) Cash flows: The Company's subsidiary Simetral was not consolidated under Chilean GAAP until 2002, because this company was in the development stage prior to 2002. Under U.S. GAAP this subsidiary would have been consolidated, regardless of when their operations began. Additionally, under U.S. GAAP, only instruments with an original maturity of less than 90 days are considered to be cash and cash equivalents. F-70 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (c) Cash flows, continued: Cash flow amounts reconciled in accordance with U.S. GAAP, as presented below include restatement to constant Chilean pesos as of December 31, 2003 as part of the comprehensive basis used by the Company in preparing its price-level adjusted financial statements. Foreign registrants that prepare comprehensive price-level adjusted financial statements are permitted to not reconcile the effects of price level changes to U.S. GAAP. Consequently, the effects of the price level adjustments have not been reconciled. Consolidation of the Company's development stage operations would result in the following differences under U.S. GAAP:

2001 2002 2003 2003 ----------------------------------------------------------- ThCh$ ThCh$ ThCh$ ThUS$ Cash provided by operating activities reported under Chilean GAAP 40,873,125 49,869,648 35,435,380 59,676 Effect of consolidation of subsidiary in Simetral (180,207) - - - ---------------------------------------------------------- Cash provided by operating activities under US GAAP 40,692,918 49,869,648 35,435,380 59,676 ---------------------------------------------------------- Cash provided by financing activities reported under Chilean GAAP 5,217,831 11,818,403 (15,789,032) (26,589) Effect of consolidation of subsidiary in Simetral 158,129 - - - Proceeds from loans from related companies 1,384,696 90,831 153,564 259 ---------------------------------------------------------- Cash provided by financing activities under US GAAP 6,760,656 11,909,234 (15,635,468) (26,330) ----------------------------------------------------------- Cash used in investing activities reported under Chilean GAAP (35,315,986) (5,047,634) (34,827,055) (58,649) Proceeds from loans from related companies (1,384,696) (90,831) (153,564) (259) Reclassification of repurchase agreement - (364,303) (635,570) (1,070) ----------------------------------------------------------- Cash used in investing activities under US GAAP (36,700,682) (5,502,768) (35,616,189) (59,978) ----------------------------------------------------------- Effect of inflation on cash and cash equivalents under Chilean GAAP (1,302,575) (1,708,086) (3,439,516) (5,792) ---------------------------------------------------------- Effect of inflation on cash and cash equivalents under Chilean GAAP (1,302,575) (1,708,086) (3,439,516) (5,792) ----------------------------------------------------------- Net change in cash and cash equivalents under Chilean GAAP 9,472,395 54,932,331 (18,620,223) (31,358) Effect of consolidation of subsidiary in Simetral (22,079) - - - Reclassification of repurchase agreement - (364,303) (635,570) (1,070) ----------------------------------------------------------- Net change in cash and cash equivalents under US GAAP 9,450,316 54,568,028 (19,255,793) (32,428) ----------------------------------------------------------- Cash and cash equivalents at beginning of year under Chilean GAAP 29,825,469 39,297,864 94,230,195 158,690 Effect of consolidation of subsidiary in Simetral 148,733 - - - ---------------------------------------------------------- Cash and cash equivalents at beginning of year under US GAAP 29,974,202 39,297,864 94,230,195 158,690 ---------------------------------------------------------- Cash and cash equivalents at end of year under Chilean GAAP 39,297,864 94,230,195 75,609,972 127,332 Effect of consolidation of subsidiary in Simetral 126,654 - - - Reconciliation of repurchase agreement - (364,303) (635,570) ( 1,070) ---------------------------------------------------------- Cash and cash equivalents at end of year under US GAAP 39,424,518 93,865,892 74,974,402 126,262 ===========================================================

F-71 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (d) For purposes of the statements of cash flows under U.S. GAAP, the company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents as follows:

2001 2002 2003 ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Cash deposits that are cash equivalents 3,055,994 2,450,019 3,513,737 Time deposits that are cash equivalents 14,347,867 13,112,270 4,265,706 Money market securities 10,095,194 64,300,492 55,460,423 Repurchase agreements 11,925,463 14,003,111 11,734,536 ------------------------------------------------------ Total cash and cash equivalents 39,424,518 93,865,892 74,974,402 =====================================================

Supplementary Cash flow information:

2001 2002 2003 ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Interest paid 6,564,524 3,411,897 7,510,044 Taxes paid 4,028,079 3,590,684 5,161,304

F-72 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (e) Investments in related companies: The following tables show combined summary financial information of the related companies accounted for using the equity method. All amounts are in thousands of constant Chilean pesos of December 31, 2003 purchasing power. The condensed information shown here has been combined from each company's individual financial statements prepared in accordance with Chilean GAAP. For the overall effect on the financial statements of Cristalerias de Chile S.A. of the application of U.S. GAAP to the financial statements of these companies, see paragraph I(q) above.

2001 2002 2003 ------------------------------------------------------ ThCh$ ThCh$ ThCh$ Current assets 59,544,152 70,305,255 71,395,646 Non-current assets 459,508,673 423,360,327 531,374,536 ------------------------------------------------------ Total assets 519,052,825 493,665,582 602,770,182 ====================================================== Current liabilities 48,707,437 42,340,632 77,442,945 Non-current liabilities 52,985,555 74,069,920 102,402,872 ------------------------------------------------------ Total liabilities 101,692,992 116,410,552 179,845,817 ====================================================== Net sales 104,105,558 107,476,905 154,247,114 ====================================================== Gross profit 25,328,360 22,523,603 29,959,333 ====================================================== Net loss (30,839,340) (36,024,119) (31,293,484) ====================================================== Company's share of loss (Note 12) (7,692,604) (8,991,404) (4,538,754) ======================================================

(f) Segment information: The Company operates principally in three business segments, substantially all of which are located in Chile, which comprise the (i) the production and sale of glass and plastic containers, (ii) the wine segment, (iii) the media and communications business and (iv) other, which includes real estate operations. Total revenues by segment are comprised of sales to unaffiliated customers, as reported in Cristalchile's consolidated income statement and inter-segment sales, which are accounted for at invoice prices. Operating expenses are allocated between Cristalchile's operating segments on a proportionate basis. The methods of revenue recognition by segment are (i) (a) glass containers: when a sales commitment has been made through the issuance of a sales invoice and the product has been delivered and (b) plastic containers: upon delivery, (ii) wine: upon delivery, (iii) media and communications: upon broadcast of the program or advertisement, and (iv) other, which includes real estate: upon period of rental. F-73 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (f) Segment information, continued: The Company's segment data, based on Chilean GAAP balances, are as follows:

Glass Wines Communications Other Total ------------------------------------------------------------------------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ As for and for the year ended December 31, 2001 Revenues from external customers 68,434,649 67,698,318 16,771,906 (5,256,326) 147,648,547 Revenues from transactions with other operating segments of the same enterprise 6,436,967 - - (6,436,967) - Interest income 1,672,632 1,205,582 74,206 1,421 2,953,840 Interest expense (4,091,543) (2,589,099) (529,935) - (7,210,576) Depreciation (7,946,049) (3,229,292) (1,081,007) - (12,256,348) Amortization (1,550,452) (280,501) (258,318) (25,725) (2,114,995) Income tax expense (3,475,055) (1,750,592) 40,931 1,617 (5,183,099) Earnings (loss) from equity-method (897,145) 492,608 (7,287,597) (470) (7,692,604) Net Income 20,250,210 7,510,832 (7,044,440) (2,229,835) 18,486,767 Total Assets 160,336,575 119,188,544 110,243,517 19,203,084 408,971,720 Capital Expenditures 25,846,336 7,900,239 302,544 - 34,049,120 As for and for the year ended December 31, 2002 Revenues from external customers 71,767,516 72,438,586 25,063,613 (6,601,882) 162,667,833 Revenues from transactions with other operating segments of the same enterprise 6,260,478 - 341,404 (6,601,882) - Interest income 1,889,088 610,585 77,730 813 2,578,216 Interest expense (4,665,150) (1,833,501) (409,233) - (6,907,884) Depreciation (9,105,507) (3,725,337) (879,829) - (13,710,672) Amortization (607,792) (295,945) (530,678) - (1,434,416) Income tax expense (4,074,990) (2,414,252) 28,160 (708) (6,461,791) Earnings (loss) from equity-method (858,708) 481,271 (8,610,816) (3,151) (8,991,404) Net Income 16,417,253 9,355,774 (5,433,779) (2,501,980) 17,837,269 Total Assets 206,229,614 123,299,581 106,650,023 20,823,984 457,003,202 Capital Expenditures 10,403,089 4,728,002 523,214 - 15,654,305 As for and for the year ended December 31, 2003 Revenues from external customers 74,549,216 74,939,862 26,544,548 (6,092,521) 169,941,105 Revenues from transactions with other operating segments of the same enterprise 5,773,771 - 318,750 (6,092,521) - Interest income 2,256,765 247,432 88,528 248 2,592,973 Interest expense (4,840,988) (1,702,955) (284,988) - (6,828,931) Depreciation (9,903,163) (4,011,470) (812,406) - (14,727,039) Amortization (956,810) (196,368) (208,593) (276,693) (1,638,464) Income tax expense (1,463,667) (657,693) 229,565 544,212 (1,347,581) Earnings (loss) from equity-method 1,628,362 689,110 (6,810,408) (45,818) (4,538,754) Net Income 5,556,118 3,915,158 (4,232,402) 1,187,646 6,426,520 Total Assets 198,876,855 122,381,264 99,834,108 16,853,276 437,945,503 Capital Expenditures 19,763,094 4,829,510 1,050,997 - 25,643,601

F-74 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (g) Geographic information: Although all of the Company's operations are located in Chile, export revenues, primarily from customers in the United Kingdom, the United States and Canada, totaled ThCh$29,384,627, ThCh$31,695,353 and ThCh$39,841,325 for the years ended December 31, 2001, 2002 and 2003, respectively. (h) Supplementary information on marketable securities: Supplementary information on available for sale marketable securities is as follows:

As of December 31, 2002 ----------------------------------------------------- Carrying value Unrealized Market value Holding Gains ThCh$ ThCh$ ThCh$ Bonds 55,053,309 - 55,053,309 Equity securities and mutual funds 13,084,516 2,011,276 15,095,792 ----------------------------------------------------- Total 68,137,825 2,011,276 70,149,101 =====================================================

Within one year After one year After five years The contracted maturities of these securities are as But within five but within 10 follows: years years ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Government securities 55,053,309 - - Equity securities and mutual funds 15,095,792 - - ----------------------------------------------------- Total 70,149,101 - - =====================================================

As of December 31, 2003 ----------------------------------------------------- Carrying value Unrealized Market value Holding Gains ThCh$ ThCh$ ThCh$ Bonds 47,852,283 - 47,852,283 Equity securities and mutual funds 11,762,690 1,891,521 13,654,211 ----------------------------------------------------- Total 59,614,973 1,891,521 61,506,494 =====================================================

Within one year After one year After five years The contracted maturities of these securities are as But within five but within 10 follows: years years ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Bonds 47,852,283 - - Equity securities and mutual funds 13,654,211 - - ---------------------------------------------------- Total 61,506,494 - - =====================================================

Equity stock investments and mutual fund investments do not have a fixed maturity date, but are anticipated to be sold within one year. F-75 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (h) Supplementary information on marketable securities, continued: Supplementary information on held-to-maturity marketable securities is as follows:

As of December 31, 2002 ----------------------------------------------------- Carrying value Unrealized Market value Holding Gains ThCh$ ThCh$ ThCh$ Bonds 10,139,303 354,848 10,494,151 ----------------------------------------------------- Total 10,139,303 354,848 10,494,151 =====================================================

Within one year After one year After five years The contracted maturities of these securities are as But within five but within 10 follows: years years ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Bonds - 10,494,151 - ----------------------------------------------------- Total - 10,494,151 - =====================================================

As of December 31, 2003 ----------------------------------------------------- Carrying value Unrealized Market value Holding Loss ThCh$ ThCh$ ThCh$ Bonds 8,188,309 413,865 8,602,174 ----------------------------------------------------- Total 8,188,309 413,865 8,602,174 =====================================================

Within one year After one year After five years The contracted maturities of these securities are as But within five but within 10 follows: years years ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Bonds - 8,602,174 - ----------------------------------------------------- Total - 8,602,174 - =====================================================

(i) Other disclosures: The Company has accounted for its liability for severance indemnities as disclosed in Notes 2(h) and 21. Except for severance indemnities, the Company does not provide any post-employment or post-retirement benefits to its employees and accordingly, there is no need to record any additional obligations in accordance with either SFAS No. 106 "Employers' Accounting for Post-retirement Benefits other than Pensions" or SFAS No. 112 "Employers' Accounting for Post-employment Benefits" or SFAS No. 132 "Employers' Disclosure About Pensions and Other Postretirement Benefits". The Company had advertising expenses of ThCh$3,173,637, ThCh$2,753,152 and ThCh$4,126,224 for the years ended December 31, 2001, 2002 and 2003. There were no significant lease obligations or rental expenses for the years ended December 31, 2001, 2002 and 2003. F-76 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (i) Other disclosures, continued: Reliance on Significant Customers: The Company sells glass to three unrelated companies that have from time to time accounted for more than 10% of the Company's glass segment sales over the last three years. Sales to these companies accounted for 35.9% (15.0%, 11.4% and 9.5%), 37.83% (16.7%, 11.6% and 9.5%) and 40.46% (18.7%, 12.1% and 9.7%) of the Company's total net sales for the years ended December 31, 2001, 2002 and 2003 of the company's glass segment sales, respectively. (j) Concentrations of Credit Risk The Company holds bank balances and places deposits in a number of different financial institutions and in this way attempts to reduce counterparty risk. The Company does not believe that it is exposed to any material credit risk from any single financial institution. No customer has outstanding receivables of more than 10%. The concentration of the Company's accounts receivable balances are as follows:

Percentage of accounts receivable Sector 2003 ---- Glass Container Liquor 4.16% Beer 5.22% Soft Drink 6.23% Wine 29.86% Other Glass Container 1.41% 46.88% ------------- TV Advertisement 12.99% Wine 40.13% ------------- Total 100.00% =============

The Company's debtors are all dependent on the Chilean economy, and significant proportions of these debtors operate in the beverage industry. As a result, the Company could be vulnerable to a downturn in economic activity in Chile. However, the Company so far does not have any experience of credit losses due to non-payment by major customers. Additionally, the credit risk that the Company has faced from creditors has been reduced as a result of the Company's position in the market for the production of glass bottles. In the event of failure by the Company's counterparties, the Company would be exposed to a loss equivalent to the amount shown in the balance sheet. F-77 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (k) Disclosure regarding the fair value of financial instruments: In accordance with SFAS No. 107, "Disclosures about Fair Value of Financial Instruments" and SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" under US GAAP, information is provided about the fair value of certain financial instruments for which it is practicable to estimate that value. For the purposes of SFAS No. 107, the estimated fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. There are certain limitations inherent in the fair value data, since while the data represents Management's best estimates and certain assumptions; the data is subjective, involving significant estimates and assumptions regarding current economic and market conditions. The methods and assumptions used to estimate the fair values are as follows: o For cash, short-term deposits and investments, and current receivables and payables the carrying amounts approximate the fair value due to the short-term maturity of these instruments. o For interest earning assets and interest bearing liabilities that are contracted at variable interest rates, book value is considered to be equivalent to fair value. o Estimates of fair values of financial instruments for which no quoted prices or secondary market exists have been made using valuation techniques such as forward pricing models, present value of estimated future cash flows, and modeling techniques. These estimates of fair values include assumptions made by the Company about market variables that may change in the future. Changes in assumptions could have a significant impact on the estimate of fair values disclosed. As a result, such fair value amounts are subject to significant uncertainty and are highly dependent on the quality of the assumptions used. o For interest earning assets and interest bearing liabilities, contracted at fixed interest rates with an original maturity of more than one year, the fair values have been calculated by discounting contractual cash flows at the current market origination rates for financial instruments with similar terms. F-78 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (k) Disclosure regarding the fair value of financial instruments, continued:

2002 2003 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Assets ThCh$ ThCh$ ThCh$ ThCh$ Cash 2,450,019 2,450,019 3,513,737 3,513,737 Time deposits 13,112,270 13,112,270 4,265,706 4,265,706 Marketable securities 70,149,101 70,149,101 61,506,494 61,506,494 Other instruments 15,561,567 15,561,567 12,755,237 12,755,237 Current accounts receivable 43,933,653 43,933,653 46,167,274 46,167,274 Long-term receivables 198,351 198,351 210,268 210,268 Long-term other instruments 16,907,513 17,262,361 13,298,636 13,712,501 Forward contracts 2,469,835 2,469,835 1,700,502 1,700,502 Liabilities Accounts payable 13,413,389 13,413,389 11,233,939 11,233,939 Long-term bank liabilities 49,126,856 49,126,856 37,217,343 37,217,343 Bonds payable 91,597,561 91,597,561 91,430,288 92,894,025 Miscellaneous creditors 4,946,074 4,946,074 1,929,292 1,929,292 Forward contracts 1,393,590 1,393,590 4,067,331 4,067,331

The carrying amounts above are presented in accordance with U.S. GAAP. (l) Restrictions on payment of dividends: As of December 31, 2003, the Company had undistributed earnings of ThCh$3,724,559 in companies accounted for by the equity method, included as a part of consolidated retained earnings. Dividends received from such entities were ThCh$454,504, ThCh$237,759 and ThCh$215,661 for the years ended December 31, 2001, 2002 and 2003, respectively. F-79 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (m) Recent accounting pronouncements: In June 2001 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143). This standard requires that under U.S. GAAP obligations associated with the retirement of tangible long-lived assets be recorded as liabilities when those obligations are incurred, with the amount of the liability initially measured at fair value. Upon initially recognizing a liability for an asset retirement obligation, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset. Over time, this liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The effective date of application of SFAS No. 143 is January 1, 2003. The implementation of SFAS No. 143 had no material impact on the results of operations or financial position of the Company. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities-an interpretation of ARB 51," to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. Many variable interest entities, including special purpose entities have commonly been referred to as special-purpose entities or off-balance sheet structures, but the guidance applies to a larger population of entities. In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. The Company must apply Interpretation No. 46 to variable interest entities created after January 31, 2003. The Company did not create any variable interest entities after January 31, 2003 and is in the process of assessing the impact of the Interpretation in relation to business relationships created before January 31, 2003. The effective date of Interpretation No. 46 is January 1, 2004 for variable interest entities created before January 31, 2003. The Company does not expect the implementation of the Interpretation to have a material impact on the Company's results of operation or financial position. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). The Interpretation significantly changed practice in the accounting for, and disclosure of, guarantees. In general, the Interpretation applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or an equity security of the guaranteed party. Guarantees meeting the characteristics described in the Interpretation, are required to be initially recorded at fair value, which is different from the general current practice of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement No. 5, "Accounting for Contingencies". The Interpretation also requires a guarantor to make significant new disclosures for virtually all guarantees even when the likelihood of the guarantor's having to make payments under the guarantee is remote. The Interpretation's disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The Interpretation's initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The implementation of FIN 45 had no material impact on the results of operations or financial position of the Company. F-80 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (n) Goodwill As discussed in paragraph (l), section (ii), the Company adopted SFAS 142, which requires companies to stop amortizing goodwill and certain intangible assets with an indefinite useful life. Instead, SFAS 142 requires that goodwill and intangible assets deemed to have an indefinite useful life be reviewed for impairment upon adoption of SFAS 142, effective January 1, 2002 and annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. The Company's reporting units are at the operating subsidiary level. This methodology differs from the Company's previous policy, as provided under accounting standards existing at that time of using undiscounted cash flows on an enterprise-wide basis to determine if goodwill was recoverable. During 2002 and 2003, the Company did not recognize an impairment charge to reduce the carrying value of goodwill. In calculating the fair value of reporting units, the Company used a discounted cash flow approach, stock valuations and recent comparable transactions in the market. Prior to performing the review for impairment, SFAS 142 required that all goodwill deemed to be related to the entity as a whole be assigned to all of the Company's reporting units, including the reporting units of the acquirer. A summary of the changes in the Company's goodwill under U.S. GAAP during the year ended December 31, 2002 and 2003, by reporting unit is as follows:

Goodwill ----------------------------------------------------------------------------------------------------------------------- Cumulative Effect of Cumulative January 1, Accounting Translation December 31, Company 2002 Acquisitions Change Impairment Adjustment 2002 ----------------------------------------------------------------------------------------------------------------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Rayen Cura S.A.(1) 5,825,649 - - - 340,917 6,166,566 S.A. Vina Santa Rita 1,028,248 - - - - 1,028,248 Vina Los Vascos S.A. 598,703 - - - - 598,703 Zig-Zag S.A. 122,131 - - - - 122,131 Red Televisiva Megavision S.A. 200,656 412,467 - - - 613,123 ---------------------------------------------------------------------------------------------------------------------- Total 7,775,387 412,467 - - 340,917 8,528,771 ======================================================================================================================

F-81 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (n) Goodwill, continued

Goodwill ------------------------ ------------- -------------- -------------- ------------- -------------- ------------ Cumulative Effect of Cumulative January 1, Accounting Translation December Company 2003 Acquisitions Change Impairment Adjustment 31, 2003 ------------------------ ------------- -------------- -------------- ------------- -------------- ------------ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Rayen Cura S.A.(1) 6,166,566 - - - (1,154,182) 5,012,384 S.A. Vina Santa Rita 1,028,248 - - - - 1,028,248 Vina Los Vascos S.A. 598,703 - - - - 598,703 Zig-Zag S.A. 122,131 - - - - 122,131 Red Televisiva 613,123 - - - - 613,123 Megavision S.A. ------------------------ ------------- -------------- -------------- ------------- -------------- ------------ Total 8,528,771 - - - (1,154,182) 7,374,589 ======================== ============= ============== ============== ============= ============== ============

(1) In thousands of constant Chilean pesos as of December 31, 2003, using exchange rate of Ch$ 593.80 per US$ . Metropolis Intercom S.A.'s unrealized gain has not been included in this rollforward as these amounts do not represent goodwill. The Company's intangible assets were ThCh$11,775,270 and ThCh$11,802,431 and related accumulated amortization were ThCh$3,950,914 and ThCh$4,256,746 as of December 31, 2002 and 2003, respectively, in accordance with U.S. GAAP. All of the Company's intangible assets are subject to amortization, since they relate to finite contracts or concessions, however there is a difference in the amortization methodology between Chilean and U.S. GAAP, Chilean GAAP permits recording depreciation on a decelerated basis and while under U.S. GAAP intangibles are amortized on a straight-line basis over their expected useful life. Intangible amortization is expected to be approximately ThCh$305,832 over each of the next five years, not taking inflation or future purchases into account. F-82 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (o) Summarized information in accordance with U.S. GAAP In addition to differences in measurement methods between Chile GAAP and U.S. GAAP, certain reclassifications are required to be made in order to prepare information in accordance with U.S. GAAP. These reclassifications would be made to the line items of the Chilean GAAP income statement to show the same presentation as would be required under a U.S. GAAP format. Amounts that are included in non-operating income and expenses would be included as operating income under U.S. GAAP. These reclassifications exclude consolidation of development stage companies during 2001, the effect of which is immaterial. The condensed consolidated statements of income under U.S. GAAP, classified in accordance with U.S. GAAP are presented as follows:

2001 2002 2003 --------------------------------------------------------- ThCh$ ThCh$ ThCh$ Sales 147,648,547 162,667,833 169,941,105 Cost of sales (93,175,486) (96,648,327) (105,607,656) --------------------------------------------------------- Gross margin 54,473,061 66,019,506 64,333,449 Selling and administrative expenses (15,627,514) (26,232,938) (24,195,912) --------------------------------------------------------- Operating income 38,845,547 39,786,568 40,137,537 Non-operating income (loss) (15,352,417) (10,091,846) (31,288,361) --------------------------------------------------------- Net income before income taxes and minority interest 23,493,130 29,694,722 8,849,176 Income taxes (4,840,411) (7,011,428) (1,747,939) --------------------------------------------------------- Income before minority interest 18,652,719 22,683,294 7,101,237 Minority interest (3,450,353) (4,803,983) (1,830,169) --------------------------------------------------------- Net income 15,202,366 17,879,311 5,271,068 =========================================================

F-83 CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued (Translation of financial statements originally issued in Spanish - See Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003, except as indicated) ----------------------- 37. DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, continued: (o) Summarized information in accordance with US GAAP, continued: Certain reclassifications would be made to the line items of the Chilean GAAP balance sheet to show the same presentation as would be required under a U.S. GAAP format. Amounts payable or receivable under forward contacts would only be stated net if there was a right of offset, bond discount presented as Other Assets in Chilean GAAP would be reclassified as long-term liabilities against bonds payable. The summarized consolidated balance sheets under U.S. GAAP, classified in accordance with U.S. GAAP are presented as follows:

2001 2002 2003 --------------------------------------------------------- ThCh$ ThCh$ ThCh$ Total current assets 121,435,516 177,964,582 165,774,275 Property, plant and equipment 219,255,103 222,320,911 239,372,848 Accumulated depreciation of property, plant and equipment (76,829,482) (85,591,189) (95,718,243) --------------------------------------------------------- Property, plant and equipment, net 143,654,605 142,425,621 136,729,722 Goodwill 9,139,480 9,931,488 8,726,420 Accumulated amortization of goodwill (1,364,093) (1,402,717) (1,351,831) --------------------------------------------------------- Goodwill, net 7,775,387 8,528,771 7,374,589 Other assets 143,570,778 141,664,042 129,519,455 ---------------------------------------------------------- Total assets 415,207,302 464,887,117 446,322,924 ========================================================= Current liabilities 53,994,752 45,730,556 43,534,389 Long-term liabilities 96,290,184 142,646,8761 31,395,692 Minority interest 36,411,806 37,519,635 38,070,643 Shareholder's equity 228,510,560 238,990,050 233,322,200 ---------------------------------------------------------- Total liabilities and shareholder's equity 415,207,302 464,887,117 446,322,924 =========================================================

38. CONSOLIDATED FINANCIAL STATEMENTS OF CORDILLERA COMUNICACIONES HOLDING LIMITADA AND SUBSIDIARIES In accordance with Chilean GAAP, as of December 31, 2003, the Company included its equity method investment in Cordillera Comunicaciones Holding Limitada and subsidiaries ("Cordillera") (See Note 10) in the balance sheet account "Investments in related companies" and its participation in earnings for the years ended December 31, 2001, 2002 and 2003 in the income statement account "Equity participation in net income (loss) of related companies". For purposes of complying with the requirements of Form 20-F, the Company is required to present separately, the Chilean GAAP audited financial statements with a reconciliation to U.S. GAAP of Cordillera as of December 31, 2002 and 2003 and for the three years in the period ended December 31, 2003, as Cordillera met the definition of a significant subsidiary under Rule 1-02 (w) of Regulation S-X as of December 31, 2003. F-84 Cordillera Comunicaciones Holding Limitada and Subsidiaries ------------ Consolidated Financial Statements as of December 31, 2002 and 2003 and for the years ended December 31, 2001, 2002 and 2003 together with the Report of Independent Auditors Cordillera Comunicaciones Holding Limitada and Subsidiaries ------------ Index to Consolidated Financial Statements Pages Report of Independent Auditors: Audit Report of Ernst & Young - 2002 and 2003 3 Audit Report of Langton Clarke - 2001 4 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2002 and 2003 5 Consolidated Statements of Income for the three years ended December 31, 2001, 2002 and 2003 7 Consolidated Statements of Cash Flows for the three years ended December 31, 2001, 2002 and 2003 8 Notes to the Consolidated Financial Statements 10 Ch$ - Chilean pesos ThCh$ - Thousands of Chilean pesos US$ - United States Dollars ThUS$ - Thousands of United States Dollars UF - Unidad de Fomento "UF" is a daily-indexed peso-denominated accounting unit. The UF rate is set daily in advance based on the change in the Chilean Consumer Price Index of the previous month. REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Cordillera Comunicaciones Holding Limitada: We have audited the accompanying consolidated balance sheets of Cordillera Comunicaciones Holding Limitada and subsidiaries (the "Company") as of December 31, 2002 and 2003, and the related consolidated statements of income and cash flows for the two years then ended. 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. The consolidated financial statements of the Company as of December 31, 2001 and for the year then ended were audited by Langton Clarke, a member of Andersen Worldwide, who issued an unqualified opinion in their report dated February 28, 2002, except for Notes 2(a), 2(c) and 27 for which the date was May 29, 2002. Andersen Worldwide has ceased operating as a member of the Securities and Exchange Commission Practice Section of the American Institute of Certified Public Accountants. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial position of Cordillera Comunicaciones Holding Limitada and subsidiaries at December 31, 2002 and 2003, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 28 to the consolidated financial statements). ERNST & YOUNG LTDA. [OBJECT OMITTED] Santiago, Chile February 27, 2004 G-3 This is a copy of a previously issued Arthur Andersen - Langton Clarke report. Arthur Andersen - Langton Clarke has not reissued the report, nor has Arthur Andersen - Langton Clarke consented to the inclusion of the report. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Cordillera Comunicaciones Holding Limitada: We have audited the accompanying consolidated balance sheets of Cordillera Comunicaciones Holding Limitada (the "Company") and subsidiaries as of December 31, 2000 and 2001 and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 2001, all expressed in thousands of constant Chilean pesos. 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 the United States of America. 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. Accounting practices used by the Company in preparing the accompanying consolidated financial statements conform with accounting principles generally accepted in Chile, but do not conform with accounting principles generally accepted in the United States of America. A description of these differences and a reconciliation of consolidated net income and shareholders' equity under accounting principles generally accepted in Chile to the corresponding amounts that would be reported in accordance with United States generally accepted accounting principles, except for the omissions, as allowed pursuant to Item 17 of SEC Form 20-F, of adjustments necessary to eliminate the effect of price-level changes described in Note 2(c), is set forth in Note 27 to these consolidated financial statements. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cordillera Comunicaciones Holding Limitada and subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in Chile. As explained in Note 3 to these consolidated financial statements, starting January 1, 2000, the Company modified the method in which income taxes are recorded, recognizing deferred taxes in accordance with generally accepted accounting principles in Chile and the Superintendency of Securities and Insurance. During 2001 the Company modified its criteria for depreciating its external network from a straight-line method to a progressive method on the basis of estimated growth of average subscribers. During 2001, the Company also modified the amortization method of Cable TV residence installations in order to assure consistent useful lives among installations originally installed by the Company and those acquired. LANGTON CLARKE Santiago, Chile February 28, 2002, (except for Notes 2(a), 2(c) and 27 for which the date is May 29, 2002) Cordillera Comunicaciones Holding Limitada and Subsidiaries Consolidated Balance Sheets for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated)

As of December 31, ----------------------------------------------- 2002 2003 2003 ASSETS ThCh$ ThCh$ ThUS$ Note 2(e) CURRENT ASSETS Cash 404,286 205,388 346 Time deposits (Note 5) 4,936,648 805,179 1,356 Marketable securities (Note 6) 812,430 - - Trade receivables, net of allowance for doubtful accounts of ThCh$5,053,701 and ThCh$6,144,894, respectively (Note 7) 3,739,641 2,517,565 4,241 Notes receivable 173,283 90,392 152 Miscellaneous receivables (Note 8) 1,606,489 2,608,708 4,393 Notes and accounts receivable from related companies (Note 11) 333,637 226,838 382 Income taxes recoverable, net (Note 24) 84,792 74,765 125 Prepaid expenses (Note 9) 858,029 964,731 1,624 Deferred income taxes (Note 24) 623,696 1,184,628 1,995 Other current assets, net (Note 10) 7,823,123 5,962,072 10,041 ---------------------------------------- Total current assets 21,396,054 14,640,266 24,655 ---------------------------------------- PROPERTY, PLANT AND EQUIPMENT (Note 12) Land 487,823 487,823 822 Buildings and other infrastructure 110,427,653 115,577,177 194,640 Machinery and equipment 9,939,220 11,750,324 19,788 Furniture and equipment 3,762,055 4,026,282 6,776 Other property, plant and equipment 14,197,851 14,724,167 24,797 Less: accumulated depreciation (24,872,679) (33,840,639) (56,986) ----------------------------------------- Property, plant and equipment, net 113,941,923 112,725,134 189,837 ----------------------------------------- OTHER ASSETS Investment in other companies (Note 14) 259,854 227,817 384 Goodwill, net (Note 15) 65,016,645 60,829,024 102,440 Intangibles, net 1,043,521 1,669,947 2,812 Deferred income taxes (Note 24) 3,578,867 5,019,018 8,452 Other assets (Note 13) 12,030,032 11,302,855 19,035 ----------------------------------------- Total other assets 81,928,919 79,048,661 133,123 ----------------------------------------- TOTAL ASSETS 217,266,896 206,414,061 347,615 =========================================

The accompanying notes are an integral part of these consolidated financial statements. G-5 Cordillera Comunicaciones Holding Limitada and Subsidiaries Consolidated Balance Sheets for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated)

As of December 31, ----------------------------------------------- 2002 2003 2003 LIABILITIES AND SHAREHOLDERS' EQUITY ThCh$ ThCh$ ThUS$ Note 2(e) CURRENT LIABILITIES Banks and financial institutions, short-term (Note 16) 16,770 - - Banks and financial institutions, current portion (Note 16) 42,587 7,445,646 12,539 Accounts payable (Note 17) 12,508,111 9,032,587 15,211 Notes payable (Note 18) 207,635 11,837 20 Miscellaneous payables (Note 19) 311,309 1,016,554 1,712 Notes and accounts payable to related companies (Note 11) 1,409,380 734,659 1,237 Accrued liabilities and withholdings (Note 20) 1,488,049 1,265,504 2,131 Unearned revenues 828,510 719,021 1,211 Other current liabilities (Note 10) - 4,188,044 7,054 ------------------------------------------- Total current liabilities 16,812,351 24,413,852 41,115 ------------------------------------------- LONG-TERM LIABILITIES Banks and financial institutions, non-current portion (Note 16) 36,867,508 29,508,724 49,695 Long-term notes payables (Note 21) 16,719,923 14,401,629 24,253 Other long-term liabilities (Note 22) 433,919 1,804,798 3,039 ------------------------------------------- Total long-term liabilities 54,021,350 45,715,151 76,987 ------------------------------------------- Minority interest 732,047 4,030,429 6,789 Commitments and contingencies (Note 26) SHAREHOLDERS' EQUITY (Note 23) Paid-in capital 200,844,300 200,844,300 338,236 Price-level restatement 1,807,600 1,807,600 3,044 Accumulated deficit (39,819,722) (56,950,752) (95,912) Net loss (17,131,030) (13,446,519) (22,644) ------------------------------------------- Total Shareholders' equity 145,701,148 132,254,629 222,724 ------------------------------------------- Total Liabilities and Shareholders' equity 217,266,896 206,414,061 347,615 ===========================================

The accompanying notes are an integral part of these consolidated financial statements. G-6 Cordillera Comunicaciones Holding Limitada and Subsidiaries Consolidated Statements of Income for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated)

For the years ended December 31, ---------------------------------------------------------------------- 2001 2002 2003 2003 ThCh$ ThCh$ ThCh$ ThUS$ OPERATING INCOME Note 2(e) Operating revenue 47,748,180 46,742,630 44,975,680 75,742 Operating costs (38,532,872) (42,530,949) (38,082,828) (64,134) ------------------------------------------------------------- Operating margin 9,215,308 4,211,681 6,892,852 11,608 ------------------------------------------------------------- Administrative and selling expenses (18,199,446) (15,568,891) (13,931,701) (23,462) ------------------------------------------------------------- Operating loss (8,984,138) (11,357,210) (7,038,849) (11,854) ------------------------------------------------------------- NON-OPERATING INCOME Financial revenue 147,414 363,812 212,802 358 Other non-operating income 221 57,154 298,755 503 Financial expenses (1,695,581) (2,372,141) (2,642,668) (4,450) Other non-operating expenses (1,497,206) (1,529,670) (1,101,700) (1,855) Goodwill amortization (Note 15) (4,123,225) (4,105,116) (4,184,519) (7,047) Price-level restatement, net (Note 4) (633,626) (664,246) (1,190,856) (2,005) ------------------------------------------------------------- Non-operating loss (7,802,003) (8,250,207) (8,608,186) (14,496) ------------------------------------------------------------- ------------------------------------------------------------- Loss before taxes and minority interest (16,786,141) (19,607,417) (15,647,035) (26,350) ------------------------------------------------------------- Income taxes (Note 24) 2,148,223 2,389,871 2,038,031 3,432 Minority interest 76,297 86,516 162,485 274 ------------------------------------------------------------- Net loss (14,561,621) (17,131,030) (13,446,519) (22,644) ============================================================-

The accompanying notes are an integral part of these consolidated financial statements. G-7 Cordillera Comunicaciones Holding Limitada and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated)

For the years ended December 31, ------------------------------------------------------------- 2001 2002 2003 2003 CASH FLOWS FROM OPERATING ACTIVITIES ThCh$ ThCh$ ThCh$ ThUS$ Note 2(e) Net loss (14,561,621) (17,131,030) (13,446,519) (22,645) Charges (credits) to income that do not represent cash flows Depreciation 7,258,539 8,551,082 9,509,897 16,015 Amortization of software and other 328,834 313,515 437,134 736 Residential cable TV installations amortization 1,941,656 2,764,525 3,525,929 5,938 (Gain) Loss in sale of fixed assets (6,850) - 31,521 53 Deferred taxes (1,634,765) (2,558,686) (2,042,691) (3,440) Write-offs 1,053,605 659,174 283,407 477 Allowance for doubtful accounts 3,670,211 3,037,732 1,197,856 2,017 Vacation provision 285,191 164,957 153,895 259 Valuation and obsolescence provision - 127,441 141,042 238 Goodwill amortization 4,123,225 4,105,116 4,184,519 7,047 Price-level restatement, net 633,626 664,246 1,190,856 2,005 Accrued interest 371,211 893,471 835,292 1,407 Investment price level restatement 64,613 312,898 (193,581) (326) Unrealized (gain) loss on forward contracts 240,561 838,394 292,989 493 Other 1,733,455 (103,925) (3,914) (7) Decrease (increase) in Assets Trade receivables, net (4,496,466) (3,634,684) (10,370) (17) Miscellaneous receivables 1,843,963 (690,461) (1,001,945) (1,687) Inventory 1,065,316 - - - Accounts receivable from related parties (216,520) 113,352 48,310 81 Income taxes recoverable, net 3,273,505 822,289 10,242 17 Prepaid expenses (1,415,189) 1,484,999 (106,702) (180) Other current assets, net (1,655,167) 399,761 - - (Decrease) increase in Liabilities Accounts and notes payable (603,394) (3,830,144) (3,671,650) (6,183) Miscellaneous payables (2,826,774) (9,676) 695,361 1,171 Accrued liabilities and withholdings (1,647,093) 264,121 (54,134) (91) Notes and accounts payable to related parties (1,543,568) 796,764 (667,389) (1,124) Unearned revenues (239,003) 463,421 (109,489) (184) Other current liabilities (1,280) - 305,829 515 Minority interest (3,123) (86,516) (162,485) (274) --------------------------------------------------- Total cash flows provided from (used in) operating activities (2,963,302) (1,267,864) 1,373,210 2,311 ===================================================

The accompanying notes are an integral part of these consolidated financial statements. G-8 Cordillera Comunicaciones Holding Limitada and Subsidiaries Consolidated Statements of Cash Flows for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated)

For the years ended December 31, --------------------------------------------------------------- 2001 2002 2003 2003 CASH FLOWS FROM FINANCING ACTIVITIES ThCh$ ThCh$ ThCh$ ThUS$ Note 2(e) Loan proceeds 18,479,386 17,918,023 - - Issuance of subsidiary shares - - 4,924,603 8,294 ------------------------------------------------------- Total cash flows from financing activities 18,479,386 17,918,023 4,924,603 8,294 ------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Sale of property, plant and equipment 63,905 - 201,267 339 Purchase of property, plant and equipment (12,554,796) (3,597,399) (8,215,178) (13,835) Purchase of software and licenses (867,838) (372,083) (442,214) (745) Additions to residential Cable TV installations (3,862,933) (4,423,291) (3,430,911) (5,778) ------------------------------------------------------- Total cash flows used in investing activities (17,221,662) (8,392,773) (11,887,036) (20,019) ------------------------------------------------------- Total net cash flow for the year (1,705,578) 8,257,386 (5,589,223) (9,414) - Effect of inflation on cash and cash equivalents (78,202) (434,743) (125,618) (210) ------------------------------------------------------- Increase (decrease) of cash and cash equivalents during the year (1,783,780) 7,822,643 (5,714,841) (9,624) Cash and cash equivalents at the beginning of the year 6,648,617 4,864,837 12,687,480 21,366 ------------------------------------------------------- Cash and cash equivalents at the end of the year 4,864,837 12,687,480 6,972,639 11,742 =======================================================

The accompanying notes are an integral part of these consolidated financial statements. G-9 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 1. The Company: Cordillera Comunicaciones Holding Limitada (the "Company") was incorporated on December 31, 1994. On that date, the founders of the Company contributed 100% of the shares of cable television systems serving the communities of Santiago, Temuco, Vina del Mar, Valdivia, Puerto Montt, Puerto Varas and Los Angeles, Chile. This contribution resulted in dissolution of the underlying companies, with the Company assuming all of the assets and liabilities of the predecessor companies. Included in the assets of the predecessor companies are cash, property, plant and equipment and certain organizational costs contributed by the founders to the various companies prior to their dissolution. The acquisitions were recorded under the purchase method of accounting. Note 2. Significant Accounting Policies: (a) General: The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Chile and the regulations established by the SVS (collectively "Chilean GAAP"). Certain accounting practices applied by the Company that conform with generally accepted accounting principles in Chile do not conform with generally accepted accounting principles in the United States ("U.S. GAAP"). A reconciliation of Chilean GAAP to U.S. GAAP is provided in Note 28. Certain amounts in the prior year's financial statements have been reclassified to conform to the current year's presentation. The preparation of financial statements in conformity with Chilean GAAP, along with the reconciliation to U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In certain cases generally accepted accounting principles require that assets or liabilities be recorded or disclosed at their fair values. The fair value is the amount at which an asset could be bought or sold or the amount at which a liability could be incurred or settled in a current transaction between willing parties, other than in a forced or liquidation sale. Where available, quoted market prices in active markets have been used as the basis for the measurement; however, where quoted market prices in active markets are not available, the Company has estimated such values based on the best information available, including using modeling and other valuation techniques. The accompanying financial statements reflect the consolidated operations of Cordillera Comunicaciones Holding Limitada and subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The Company consolidates the financial statements of companies in which it controls over 50% of the voting shares. G-10 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 2. Significant Accounting Policies, continued: (a) General, continued: The Company consolidates the following subsidiares:

2001 2002 2003 % % % Pacific Television Limitada 99.5 99.5 99.5 Metropolis Intercom S.A. 99.5 99.5 95.1 Cordillera Comunicaciones Limitada 99.5 99.5 99.5

(b) Periods covered These financial statements reflect the Company's financial results of its balance sheet, its operating results and its cash flows for the years ended December 31, 2001, 2002 and 2003. (c) Price-level restatement: The Company's financial statements have been restated to reflect the effects of variations in the purchasing power of Chilean pesos during the year. For this purpose non-monetary assets and liabilities, equity and income statement accounts have been restated in terms of year-end constant pesos based on the change in the Chilean consumer price index during the years ended December 31, 2001, 2002 and 2003 at 3.1%, 3.0% and 1.0%. (d) Assets and liabilities denominated in foreign currency: Balances in foreign currencies have been translated into Chilean Pesos at the Observed Exchange Rate as reported by the Central Bank of Chile as follows:

As of December 31 ------------------------------------------------------ 2001 2002 2003 ------------------------------------------------------ Ch$ Ch$ Ch$ U.S. Dollar 654.79 718.61 593.80 Unidad de Fomento 16,262.66 16,744.12 16,920.00

Transactions in foreign currencies are recorded at the exchange rate prevailing when the transactions occur. Foreign currency balances are translated at the exchange rate prevailing at the month end. The resulting translation gains and losses related to these balances are included in price-level restatement in the income statement for the period to which they relate. G-11 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 2. Significant Accounting Policies, continued: (e) Convenience translation to U.S. Dollars: The Company maintains its accounting records and prepares its financial statements in Chilean pesos. The United States dollar amounts disclosed in the accompanying financial statements are presented solely for the convenience of the reader and have been translated at the closing exchange rate of Ch$593.80 per US$1 as of December 31, 2003. This translation should not be construed as representing that the Chilean peso amounts actually represent or have been, or could be, converted into United States dollars at that exchange rate or at any other rate of exchange. (f) Time deposits: This account corresponds to fixed term deposits in Chilean pesos and U.S. dollars, which are recorded at cost, plus inflation-indexation and accrued interest at year end. (g) Marketable securities: This account corresponds to investments in mutual funds, which are presented at their redemption value at the end of each accounting period. (h) Trade receivables: Trade receivables include sales of advertising and rendering of monthly cable television service. This balance is stated net of an allowance for uncollectible receivables. The allowance was determined by considering 100% of the receivables from subscribers who are connected to the Company's network and are over three months past due, and specifically identified debtors who have been disconnected from the Company's network or are in the process of being disconnected. (i) Prepaid expenses: Program costs, movies, series and documentaries, are capitalized and charged to expense when broadcasted or are amortized over the term of the contract, whichever is greater. (j) Property, plant and equipment: Property, plant and equipment are stated at their acquisition value and are price-level restated. Depreciation is computed using the straight-line method over the estimated remaining useful lives of the assets, which are as follows: Years ----- Buildings and other infrastructure 20 - 38 Machinery and equipment 7 - 10 Furniture and equipment 5 - 10 Other 5 - 7 G-12 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 2. Significant Accounting Policies, continued: (j) Property, plant and equipment, continued: The Company depreciates its fibre optic external network using a progressive method based on the projected number of subscribers per product line. (k) Leased assets: The Company has entered into financing lease agreements for property, plant and equipment, which include options to purchase at the end of the term of the agreement. These assets are not legally owned by the Company and cannot be freely disposed of until the purchase option is exercised. These assets are shown at the present value of the contract, determined by discounting the value of the installments and the purchase option at the interest rate established in the respective agreement. (l) Software: The cost of the computer applications purchased from external vendors needed for managing the Company's business is amortized using the straight-line method over an estimated useful life of four years. For the years ended December 31, 2001, 2002 and 2003 amortization charged to income amounted to ThCh$ 328,834, ThCh$ 313,515 and ThCh$ 437,134, respectively. (m) Investment in other companies: Investments in other companies are recorded at the lower of cost adjusted by price-level restatement or market value. (n) Goodwill: Goodwill is calculated as the excess of the purchase price of cable television operations acquired over their net book value and is amortized on a straight-line basis over 20 years. (o) Other assets Other assets primarily consist of deferred costs of Cable TV residence installations or drops, which are amortized over their remaining estimated useful life which is estimated as 5 years. For the years ended December 31, 2001, 2002 and 2003 the amount amortized was ThCh$ 1,941,656, ThCh$ 2,764,525 and ThCh$ 3,525,929, respectively. (p) Accrued vacation expense In accordance with Technical Bulletin No. 47 issued by the Chilean Association of Accountants, employee vacation expenses are recorded on the accrual basis. G-13 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 2. Significant Accounting Policies, continued: (q) Revenue recognition and unearned revenues Revenues from cable subscriptions are recognized during the month that the services are to be performed and revenues from advertising are recognized when the advertising is broadcast. Unearned revenues relate to advance billing on advertising contracts, which have not yet been broadcast. As of December 31, 2002 and 2003, deferred revenues were ThCh$ 828,510 and ThCh$ 719,021, respectively. (r) Current and deferred income taxes Deferred income taxes are recorded based on timing differences between accounting and taxable income. As a transitional provision, a contra asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such contra asset or liability amounts must be amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax asset or liability relates calculated using the tax rates to be in effect at the time of reversal. (s) Financial derivatives The Company maintains forward contracts in order to hedge the future payments related to liabilities denominated in U.S. dollars. The Company also enters into forward contracts to hedge cash flows in U.S. dollars of anticipated transactions, primarily programming contracts. Gains and losses are recorded at the closing spot exchange rate on the forward contracts, and the gains or losses related to anticipated transactions are deferred and recorded net in other current assets or liabilities, until the sale date of the contracts. Additionally, the initial discount or premium is deferred over the life of the contract and is netted with the gain or loss recorded for the contract. (t) Cash and cash equivalents: Cash and cash equivalents are comprised of cash, time deposits, repurchase agreements and marketable securities with a remaining maturity of 90 days or less as of each year-end. The detail of cash and cash equivalents as of December 31, 2002 and 2003 is as follows:

2002 2003 ThCh$ ThCh$ Cash 404,286 205,388 Time deposits 4,936,648 805,179 Marketable securities 812,430 - Repurchase agreements 6,534,116 5,962,072 ------------------------------------ Total 12,687,480 6,972,639 ====================================

G-14 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 3. Changes in Accounting Principles There have been no changes in accounting principles during the years ended December 31, 2002 and 2003 that would affect the comparability with previously issued financial statements. Note 4. Price - Level Restatement, net: The detail of price-level restatement credited (charged) to income for the year ended December 31 is as follows:

2001 2002 2003 ThCh$ ThCh$ ThCh$ Price-level restatement of: Shareholders' equity (5,360,662) (4,766,517) (1,449,834) Non-monetary liabilities (332,339) (1,020,140) (395,698) Non-monetary assets 6,286,029 6,039,402 1,933,767 Currency exchange difference: Monetary liabilities (2,551,288) (2,507,006) 4,166,177 Monetary assets 1,364,206 1,555,876 (5,430,993) Price-level restatement of income amounts (39,572) 34,139 (14,275) -------------------------------------------- Price-level restatement, net (633,626) (664,246) (1,190,856) ============================================

Note 5. Time Deposits: Time deposits as of December 31, 2002 and 2003 are as follows:

2002 2003 Financial Institution Currency ThCh$ ThCh$ Santander Ch$ - 805,179 Chase Manhattan Bank US$ 4,936,648 - ------------------------------------ Total 4,936,648 805,179 ====================================

Note 6. Marketable Securities: Details of marketable securities as of December 31, 2002 and 2003 are as follows:

Type of Financial Institution investment 2002 2003 ThCh$ ThCh$ F.M. Security Check Mutual fund 812,430 - ---------------------------- Total 812,430 - ============================

G-15 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 7. Trade Receivables, net: Trade receivables, net as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Cable Services 5,899,301 6,937,808 Invoiced advertising receivable 2,894,041 1,724,651 Allowance for doubtful accounts-cable services monthly services (4,936,714) (6,015,082) Allowance for doubtful accounts on advertisement (116,987) (129,812) --------------------------- Total allowance for doubtful accounts (5,053,701) (6,144,894) --------------------------- Total 3,739,641 2,517,565 ===========================

The movements in the allowance for doubtful accounts as of December 31, 2001, 2002 and 2003 are as follows:

2001 2002 2003 ThCh$ ThCh$ ThCh$ Allowance beginning (2,618,627) (2,390,793) (5,053,701) Additions to allowance (charged against income) (2,369,459) (5,004,311) (1,681,193) Amounts written off 2,597,293 2,341,403 590,000 -------------------------------------------- Total (2,390,793) (5,053,701) (6,144,894) ============================================

Note 8. Miscellaneous Receivables: Miscellaneous receivables as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Materials receivable 210,330 287,395 Suppliers advances 46,785 402,453 Employee advances 14,474 4,666 Receivables from Compania de Telecomunicaciones de Chile S.A. 383,108 1,044,850 Receivables from advertising rights 907,462 201,620 Receivables from Comunicaciones Intercom S.A. 34,164 - Network receivables - 499,603 Other receivables 10,166 168,121 ------------------------ Total 1,606,489 2,608,708 ========================

G-16 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 9. Prepaid Expenses: Prepaid expenses as of December 31, 2002 and 2003 are follows:

2002 2003 ThCh$ ThCh$ Programming rights 17,633 24,267 Advertising rights 126,629 176,428 Prepaid transmission poles usage rights 1,425 369,046 Prepaid rent 205,363 207,534 Prepaid insurance 175,686 - Other 331,293 187,456 ------------------------ Total 858,029 964,731 ========================

G-17 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 10. Other Current Assets and Liabilities: Other current assets as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Repurchase agreements 6,534,116 5,962,072 Forward contracts 1,289,007 - --------------------------- Total 7,823,123 5,962,072 ===========================

Other current liabilities as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Forward contracts - 4,188,044 --------------------------- Total - 4,188,044 ===========================

The detail of repurchase agreements held by the Company as of December 31, 2002 and 2003 are as follows:

2002 2003 Financial Institution Currency ThCh$ ThCh$ Credito e Inversiones Ch$ 859,550 1,038,769 Santander Ch$ 1,215,782 908,453 Santander Ch$ 2,032,016 2,004,666 Santander Ch$ - 1,096,954 Estado Ch$ 1,213,435 - Estado Ch$ 1,213,333 - Corpbanca - 913,230 --------- --------- Total 6,534,116 5,962,072 ========= =========

G-18 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 10. Other Current Assets and Liabilities, continued: The Company has entered into forward foreign currency contracts with notional amounts of US$ 48,000,000 and US$ 37,350,000 as of December 31, 2002 and 2003, respectively. Forward contracts for the year ended December 31, 2002 is detailed as follows:

Notional Amount Financial Institution ThUS$ Maturity Date 2002 ThCh$ Security 5,000 2/6/2003 172,881 Bankboston 5,000 3/5/2003 158,071 Santiago 4,000 1/6/2003 140,481 Bhif 1,000 4/8/2003 34,530 Bhif 6,000 5/6/2003 210,927 Bankboston 4,000 4/8/2003 134,316 Santander 1,000 1/7/2003 30,524 Santander 1,500 1/15/2003 - Santander 500 1/15/2003 - Santander 2,500 2/12/2003 - Santander 500 1/15/2003 - Santander 2,500 3/6/2003 89,746 BCI 2,000 4/10/2003 112,435 Santander 1,500 5/15/2003 91,497 BCI 2,500 4/8/2003 113,599 BCI 750 7/11/2003 - BCI 250 7/11/2003 - Santander 1,000 9/8/2003 - Santander 1,000 8/6/2003 - BCI 500 10/10/2003 - Santander 500 10/10/2003 - BCI 500 11/7/2003 - Security 200 11/7/2003 - Security 400 11/12/2003 - Corpbanca 200 11/7/2003 - Corpbanca 200 11/7/2003 - BCI 500 12/7/2003 - Security 500 12/15/2003 - Security 500 12/17/2003 - Corpbanca 1,500 6/18/2003 - ------- ------------ Total 48,000 1,289,007 ======= ============

G-19 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 10. Other Current Assets and Liabilities, continued: Forward contracts for the year ended December 31, 2003 is detailed as follows:

Notional Amount 2003 Financial Institution ThUS$ Maturity Date ThCh$ BCI 250 01/06/2004 (32,862) Security 1,000 01/02/2004 (136,536) Security 500 01/02/2004 (67,025) Security 500 01/02/2004 (66,677) Security 1,000 01/05/2004 (128,903) Security 250 01/05/2004 (33,015) Security 250 01/06/2004 (33,108) Security 250 01/06/2004 (32,440) Corpbanca 500 01/06/2004 (64,786) Corpbanca 250 01/06/2004 (33,082) Corpbanca 250 01/06/2004 (32,800) BCI 500 01/30/2004 (76,241) Security 500 02/04/2004 (81,850) Security 500 02/04/2004 (80,044) Security 500 02/04/2004 (81,412) Security 500 02/04/2004 (81,367) Security 500 02/04/2004 (81,231) Security 500 02/04/2004 (81,457) Security 500 02/04/2004 (81,141) Security 1,000 01/30/2004 (164,759) Security 500 02/27/2004 (84,603) Corpbanca 500 02/04/2004 (80,908) Corpbanca 500 02/04/2004 (80,275) Corpbanca 500 02/04/2004 (82,015) BCI 500 03/02/2004 (85,074) BCI 500 03/02/2004 (85,531) BCI 500 03/02/2004 (85,157) BCI 250 03/02/2004 (42,724) Security 500 03/02/2004 (84,605) Security 500 03/30/2004 - Security 500 02/27/2004 (76,400) Security 500 03/30/2004 - BCI 550 04/05/2004 (74,776) BCI 500 04/05/2004 (67,868) BCI 500 04/05/2004 (67,831) BCI 250 02/27/2004 (34,496) BCI 250 02/27/2004 (34,229) BCI 500 02/27/2004 (68,991) BCI 1,000 03/30/2004 (136,894) BCI 1,000 03/30/2004 (136,146) BCI 500 03/30/2004 (67,961) ---------- Subtotal (2,947,220) ==========

G-20 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 10. Other Current Assets and Liabilities, continued: Forward contracts for the year ended December 31, 2003 is detailed as follows, continued:

Notional Amount 2003 Financial Institution ThUS$ Maturity Date ThCh$ Subtotal (2,947,220) ---------- BCI 500 03/30/2004 (68,372) Security 600 04/01/2004 (83,975) Security 2,500 04/06/2004 (342,772) Security 750 04/30/2004 - Security 750 04/30/2004 - Corpbanca 450 04/05/2004 (61,164) Security 3,000 05/03/2004 (345,446) Security 1,000 05/03/2004 (117,525) Security 500 05/03/2004 (58,763) Security 500 05/31/2004 (58,656) Security 1,000 05/31/2004 (115,213) Corpbanca 750 05/31/2004 - Estado 750 05/31/2004 - Estado 750 06/30/2004 - Estado 300 06/30/2004 - Estado 200 06/30/2004 - Estado 250 06/30/2004 - Estado 500 07/30/2004 - Estado 500 06/30/2004 - Estado 500 08/31/2004 - Estado 500 08/31/2004 - Estado 500 01/30/2004 1,455 Estado 1,500 02/27/2004 4,024 Estado 1,000 01/30/2004 5,583 --------- Total 40,350 (4,188,044) =========

Deferred gains or (losses) on forward contracts that hedge cash flows in U.S. dollars for anticipated transactions amounted to ThCh$ 206,708, (ThCh$ 147,363) and ThCh$ 926,592 for the years ended December 31, 2001, 2002 and 2003 respectively. G-21 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 11. Balances and Transactions with Related Companies: a) Balances with related companies as at December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Short term accounts receivable: Red Televisiva Megavision S.A. 50,890 1,214 Ediciones Financieras S.A. 1,772 - Crown Media 87,996 25,350 Vina Santa Rita 5,283 14,436 Bresnan Communications de Chile S.A. 187,696 185,838 ------------------------- Total Short-term accounts receivable 333,637 226,838 ========================= Short term accounts payable: Bresnan Communications Company Limited partnership 206,360 168,831 Vina Santa Rita 50,924 24,052 Red Televisiva Megavision S.A. 136,765 63,189 Pramer 106,637 29,690 Discovery 727,615 347,375 DMX 4,896 8,533 Crown Media 141,530 68,287 Ediciones Financieras S.A. 21,642 - USA Network - 24,702 Hendaya S.A. 13,011 - ------------------------- Total 1,409,380 734,659 =========================

G-22 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 11. Balances and Transactions with Related Companies, continued: b) Transaction with related companies during the years ended December 31, 2001, 2002 and 2003 are as follows:

2001 2002 2003 ThCh$ ThCh$ ThCh$ ----------------------------------------------------------------------------- Effect on Effect on Effect on Loss Loss Loss Transaction (Charge)/ (Charge)/ (Charge)/ Company description Amount credit Amount credit Amount credit ----------------------------------------------------------------------------------------------------------------------------------- S.A. Vina Santa Rita Advertising 140,006 127,456 15,461 15,461 19,258 19,258 Red Televista Megavision S.A. Advertising 7,084 - 322,762 322,762 204,555 (201,545) Red Televista Megavision S.A Payment on behalf of third - - - - 984 - party Ediciones Financieras Invoicing of services - - - - 63,295 63,295 Ediciones Financieras Advertising 107,267 57,026 41,316 48,491 81,248 (81,248) Pramer Programming 314,388 (314,388) 243,335 (243,335) 82,427 82,427 Discovery Programming - - 1,663,489 1,663,489 1,454,032 (1,454,032) DMX Service - - 10,879 10,879 43,302 43,302 Crown Media Service 312,527 (312,527) 209,772 (310,772) 206,068 206,068 Turner Programming 1,821,641 (1,821,641) - - - - HBO Programming 5,947,942 (5,947,942) - - - -

G-23 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 12. Property, Plant and Equipment: Property, Plant and Equipment as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Land 487,823 487,823 Buildings and other infrastructure Buildings 126,177 126,177 External networks 109,010,675 112,210,760 Head end installations 1,290,801 1,572,197 Equipment hub - 1,668,043 ---------------- ------------------ Total 110,427,653 115,577,177 Machinery and equipment 9,939,220 11,750,324 ---------------- ------------------ Furniture and equipment 3,762,055 4,026,282 ---------------- ------------------ Other property, plant and equipment Vehicles 866,636 634,439 Tools and instruments 121,836 152,576 Fixed assets in transit 4,320 58,378 Leased office installations 745,443 1,195,172 Cable TV materials 2,553,060 4,151,714 Works in progress 955,710 1,428,980 Decoding equipment 8,617,691 6,769,753 Leased assets 333,155 333,155 ---------------- ------------------ Total 14,197,851 14,724,167 Total assets 138,814,602 146,565,773 Accumulated depreciation (24,872,679) (33,840,639) ---------------- ------------------ Total property, plant and equipment, net 113,941,923 112,725,134 ================ ==================

Depreciation: Depreciation expense for the years ended December 31, 2001, 2002 and 2003 amounted to ThCh$ 7,258,539, ThCh$ 8,551,082 and ThCh$ 9,509,897, respectively. G-24 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 13. Other Assets: Other assets as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Long-term broadcast rights 1,485 - Rental guarantees 83,990 115,286 Residential cable TV installations 16,462,261 19,893,172 Accumulated amortization of residential cable TV installations (6,064,699) (9,590,628) Projects in development 589,800 - Rent of hubs, external net 370,523 412,467 Administrative projects-in-progress 68,157 33,987 Other assets 518,515 438,571 ---------------- --------------- Total 12,030,032 11,302,855 ================ ===============

Note 14. Investment in Other Companies: Investments in other companies as of December 31, 2002 and 2003 are as follows:

Participation 2002 2003 ThCh$ ThCh$ Bazuca.Com Chile S.A. 1.615% 187,268 153,211 Internet Holding S.A. 1.519% 276,640 276,644 Valuation allowance (204,054) (202,038) ----------------- ----------------- Total 259,854 227,817 ================= =================

Note 15. Goodwill, net:

2002 2003 ThCh$ ThCh$ Metropolis Intercom S.A. 96,850,167 96,850,167 Other 5,052,078 5,052,078 Accumulated amortization (36,885,600) (41,073,221) ------------------ ------------------ Goodwill, net 65,016,645 60,829,024 ================== ==================

Goodwill amortization for the years ended December 31, 2001, 2002 and 2003 amounted to ThCh$ 4,123,225, ThCh$ 4,105,116 and ThCh$ 4,184,519, respectively. G-25 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 16. Banks and Financial Institutions Liabilities: Short-term and long-term obligations with banks and financial institutions as of December 31, 2002 and 2003 are as follows:

U.S. Dollars UF TOTAL 2002 2003 2002 2003 2002 2003 ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ --------------------------------------------------------------------------------- Short-term Credito e Inversiones 16,770 - - - 16,770 - --------------------------------------------------------------------------------- Total 16,770 - - - 16,770 - ================================================================================= Principal Owed 16,770 - - - 16,770 - Current portion of long-term Santander-Santiago - - 15,311 3,002,586 15,311 3,002,586 Credito e Inversiones - - 7,924 1,434,700 7,924 1,434,700 Estado de Chile - - 7,539 1,503,966 7,539 1,503,966 Corpbanca - - 11,813 1,504,394 11,813 1,504,394 --------------------------------------------------------------------------------- Total - - 42,587 7,445,646 42,587 7,445,646 =================================================================================

The weighted-average annual interest rate on short-term borrowing was 5.67% as of December 31, 2003.

---------------------------------------------------------------------- Total ---------------------------------------------------------------------- Bank or Financial Currency 2002 2003 Institution Long-term ThCh$ ThCh$ ---------------------------------------------------------------------- Banco Santander UF 14,879,017 11,909,153 Banco Credito e inversiones UF 7,101,244 5,683,830 Banco Corpbanca UF 7,443,633 5,957,877 Banco Estado UF 7,443,614 5,957,864 -------------- ----------- Total 36,867,508 29,508,724 ============== ===========

The weighted-average annual interest rate on long-term borrowing was 5.66% as of December 31, 2003. On July 8, 2001, the Company entered into a syndicated loan agreement led by Banco Santander of up to UF 2,823,800 with variable interest rates based on the current 180 day Chilean Active Banking Rate (TAB) plus 1.4%, interest due semi-annually, with principal payment beginning June 15, 2004 and maturing in December 15, 2008. G-26 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 16. Banks and Financial Institutions Liabilities, continued: Scheduled maturities of long-term bank obligations as of December 31, 2003 are as follows: Year ThCh$ 2004 7,445,646 2005 7,377,181 2006 7,377,181 2007 7,377,181 2008 7,377,181 --------------------- Total 36,954,370 ===================== The Company' s syndicated loan lead by Banco Santander has certain restrictive covenants, the most significant of which are summarized below: a) The Company cannot have a total debt to capitalization ratio of more than 1.0 b) Interest coverage ratio cannot be less than 2.5, and c) Total indebtedness cannot be more than UF 3,000,000 As of December 31, 2003, the Company is in compliance with these covenants or has received the appropriate bank waivers. Note 17. Accounts Payable: The detail of Accounts payable as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Suppliers 5,829,880 5,367,417 Programming 5,163,508 2,736,230 Fees 733,824 5,284 Other accounts payable 780,899 923,656 ------------------- ------------------- Total 12,508,111 9,032,587 =================== ===================

Note 18. Notes Payable: Notes payable as of December 31, 2002 and 2003 are as follows:

Creditor 2002 2003 ThCh$ ThCh$ Compania de Seguros Las Americas S.A. 197,089 - Other 10,546 11,837 -------------------- ------------------- Total 207,635 11,837 ==================== ===================

G-27 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 19. Miscellaneous Payables: Miscellaneous payables of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Compania de Telecomunicaciones de Chile S.A. 216,019 213,880 Comunicaciones Intercom S.A. 84,279 83,445 Others 11,011 719,229 ----------------------------------------- 311,309 1,016,554 =========================================

Note 20. Accrued Liabilities and Withholdings: The balance of Accrued liabilities and withholdings as of December 31, 2002 and 2003 are as follows:

2002 2003 ThCh$ ThCh$ Vacations 429,235 409,146 Personnel benefits 66,065 66,066 Withholdings 877,746 669,879 Invoices 101,974 90,840 Others 13,029 29,573 -------------------- ------------------- Total 1,488,049 1,265,504 ==================== ===================

Note 21. Long-Term Notes Payable: On July 30, 2000, in connection with a purchase transaction involving Compania de Telecomunicaciones de Chile S.A. (CTC), the Company entered into a loan agreement with CTC for a total of US$20,000,000 payable over 5 years with an annual interest rate of 6%. The balance of the long-term notes payable as of December 31, 2002 and 2003 are as follows:

Principal Principal Accrued interest (6%) 2002 2003 ThUS$ ThCh$ ThCh$ ThCh$ ThCh$ 20,000 11,876,000 2,525,629 16,716,923 14,401,629 ----------- --------- ---------- ---------- Total 11,876,000 2,525,629 16,719,923 14,401,629 =========== ========= ========== ==========

G-28 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 22. Other Long-term Liabilities:

2002 2003 ThCh$ ThCh$ Deferred gain on sale of subsidiary's shares, net (i) - 1,437,708 Other 433,919 367,090 ------------------ ----------------- Total 433,919 1,804,798 ================== =================

(i) During the year ended December 31, 2003, the Company's subsidiary Metropolis Intercom S.A. issued an additional 3,923,834 shares raising ThCh$ 4,924,603 in cash. The Company did not subscribe to any of the shares. As the cash received was greater than the related increase in minority interest, the Company recorded a deferred gain of ThCh$ 1,455,918 which will be amortized to income over future periods. As of December 31, 2003 ThCh$ 18,210 in amortization income was recognized. Note 23. Shareholders' Equity: The changes in shareholders equity for the years ended December 31, 2001, 2002 and 2003 are as follows:

Paid-in Price-level Accumulated Net loss Total Capital restatement Deficit for the year ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Balance as of January 1, 2001 187,258,805 1,685,330 (15,916,134) (7,633,459) 165,394,542 Reclassification of prior year net loss - - (7,633,459) 7,633,459 - Price-level restatement 5,805,023 52,245 (730,037) - 5,127,231 Net loss for the year - - - (13,997,522) (13,997,522) ----------------------------------------------------------------------------------- Balance as of December 31, 2001 193,063,828 1,737,575 (24,279,630) (13,997,522) 156,524,251 ----------------------------------------------------------------------------------- Price-level restatement ----------------------------------------------------------------------------------- for comparison purposes 200,844,300 1,807,600 (25,258,098) (14,561,622) 162,832,180 ----------------------------------------------------------------------------------- Balance as of January 1, 2002 193,063,828 1,737,575 (24,279,630) (13,997,522) 156,524,251 Reclassification of prior year net loss - - (13,997,522) 13,997,522 - Price-level restatement 5,791,915 52,126 (1,148,315) - 4,695,726 Net loss for the year - - - (16,961,416) (16,961,416) ----------------------------------------------------------------------------------- Balance as of December 31, 2002 198,855,743 1,789,701 (39,425,467) (16,961,416) 144,258,561 ----------------------------------------------------------------------------------- Price-level restatement 200,844,300 1,807,600 (39,819,722) (17,131,030) 145,701,148 ----------------------------------------------------------------------------------- for comparison purposes Balance as of January 1, 2003 198,855,743 1,789,701 (39,425,467) (16,961,416) 144,258,561 Reclassification of prior year net loss - - (16,961,416) 16,961,416 - Price-level restatement 1,988,557 17,899 (563,869) - 1,442,587 Net loss for the year - - - (13,446,519) (13,446,519) ----------------------------------------------------------------------------------- Balance as of December 31, 2003 200,844,300 1,807,600 (56,950,752) (13,446,519) 132,254,629 ===================================================================================

G-29 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 24. Income Taxes and Deferred Taxes: a) Income taxes recoverable As of December 31, 2002 and 2003, the Company had the following income taxes recoverable:

2002 2003 ThCh$ ThCh$ Current income taxes and Article 21 (5,392) (4,660) Monthly income tax installments 11,396 11,283 Credit for training expenses 76,812 66,166 Credit value-added tax 1,976 1,976 --------------------------------------- Total 84,792 74,765 =======================================

b) Income taxes Income tax benefits for the years ended December 31, 2001, 2002, and 2003 are as follows:

2001 2002 2003 ThCh$ ThCh$ ThCh$ Credit for absorbed earnings 355,290 (163,423) - Amortization of complementary accounts 390,017 - - Deferred income taxes 1,406,070 2,558,686 2,042,691 First category tax provision (3,154) (5,392) (4,660) ------------------------------------------------------- Total 2,148,223 2,389,871 2,038,031 =======================================================

The summary of net deferred taxes for the years ended December 31, 2002 and 2003 are as follows:

2002 2003 Short-term deferred taxes ThCh$ ThCh$ Short-term assets 623,696 1,342,149 Short-term liabilities - (157,521) ------------------------------------------ Net short-term deferred taxes 623,696 1,184,628 ========================================== Long-term deferred taxes 2002 2003 ThCh$ ThCh$ Long-term assets 5,580,601 8,145,767 Long-term liabilities (2,001,734) (3,126,749) ------------------------------------------ Net long-term deferred taxes 3,578,867 5,019,018 ==========================================

G-30 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 24. Income Taxes and Deferred Income Taxes, continued: c) Deferred income taxes As of December 31, 2002 and 2003 the Company has recorded deferred taxes for temporary differences as follows:

As of December 31, 2002 As of December 31, 2003 ---------------------------------------------------------------------------------------------------- Assets Liabilities Assets Liabilities ---------------------------------------------------------------------------------------------------- Short-term Long-term Short-term Long-term Short-term Long-term Short-term Long-term -------------------------- ------------------------- ---------------------- --------------------- Allowance for doubtful accounts 353,442 - - - 1,078,606 - - - Goods and services provision 38,406 - - - 16,259 - - - Assets provision - - - - - 301,306 - - Unearned revenues 136,709 - - - 177,729 - - - Vacation provision 70,824 - - - 69,555 - - - Accumulated depreciation - - - - - 3,540 - - Forward contracts 24,315 - - - - - (157,521) - Tax loss carryforwards (1) - 12,286,151 - - - 14,395,139 - - Trademarks - 1,629 - - - - - Leasing - 51,276 - - - 56,607 - (64,282) Accumulated depreciation - 4,474 - (4,529,906) - - - (5,285,746) Leasing operations - - - (55,138) - 2,365 - - Software - - - (173,425) - - - (282,107) Leased installations - - - (61,275) - - - (125,687) Complementary account - (6,762,929) - 2,818,010 - (6,613,190) - 2,631,073 ------------ ------------ ------- ---------- ------------- ---------- --------- ----------- Total 623,696 5,580,601 - (2,001,734) 1,342,149 8,145,767 (157,521) (3,126,749) ============ ============ ======= ========== ============= ========== ========= ===========

(1) In accordance with the current enacted tax law in Chile, accumulated tax losses can be carried-forward indefinitely. G-31 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 25. Board of Directors Compensation: During the years ended December 31, 2001, 2002 and 2003 the Board of Directors did not receive compensation for their services. Note 26. Contingencies and Commitments: The Company is party to various lawsuits arising in the ordinary course of its business. Management considers it unlikely that any losses associated with the pending lawsuits will significantly affect the Company or its subsidiaries' results of operations, financial position and cash flows, although no assurance can be given to such effect. Accordingly, the Company has established a provision for these lawsuits, which Management considers to be adequate. On June 8, 2001, the Company's subsidiary, Metropolis Intercom S.A. obtained a syndicated loan with Banco Santiago, Banco del Estado de Chile, Banco Credito Inversiones and CorpBanca, for UF 2,823,800. Metropolis Intercom S.A. guaranteed the loan with the HFC (Hybrid Coaxial fiber-optic Network) and the equipment related to the network. On December 9, 2003, the Chilean Subsecretary of Telecomunications ("Subtel") notified the Company's subsidiary, Metropolis Intercom S.A. ("Metropolis"), that the regulatory agency considered MI's VOIP services was in violation of Article No. 8 of the General Telecomunications Law. Subtel alleged that Metropolis was exploiting a public utility (telephone service) without the express consent of the appropriate regulatory agency and ordered that Metropolis cease commercial operations related to that service until the issue would be resolved. As the matter is not yet resolved by the relevant authority, the minister of telecommunications, Metropolis has requested a suspension of the order. This suspension was subsequently granted for a period of 60 days. Furthermore, on December 19, 2003, Metropolis filed it's defense to the allegations maded by Subtel, and is currently awaiting the next step of this legal matter. Recently, Metropolis has requested and considers it likely that Subtel will grant an additional extension to allow Metropolis to present results from tests that will be performed supporting Metropolis' position. The eventual decision of the Minister of Transportation and Telecommunications is appealable before the Court of Appeals, and in the event that the Court of Appeals does not overule a negative resolution by the Ministry, Metropolis will be required to cease or modify the VOIP services as determined. As of and for the year ended December 31, 2003, the Company has not recorded an accrual related to these regulatory inquiries as the outcome is uncertain and unable to be estimated. G-32 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 27. Subsequent Events On January 9, 2004, CristalChile Comunicaciones S.A., 50% owner of Metropolis Intercom S.A., reached an agreement of understanding with Liberty Media International, indirect owner of the remaining 50% of Metropolis and majority shareholder of VTR S.A. in order to merge Metropolis and VTR. The agreement is subject to numerous conditions, among them, drafting of a final agreement, approval by the board of directors of related parties of Liberty Media including UnitedGlobalCom, Inc., approval by the Chilean Anti-Monopoly Commission, and approval by the board of directors of CristalChile Comunicaciones S.A. As of and for the year ending December 31, 2003, the Company has not recorded any adjustment in the financial statements related to the proposed merger. Management is not aware of any other subsequent events between December 31, 2003 and the issuance of these financial statements that would materially impact the financial statements. G-33 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles: Accounting principles generally accepted in Chile vary in certain important aspects from those generally accepted in the United States. Such differences involve certain methods for measuring the amounts included in the financial statements as well as additional disclosures required by U.S. GAAP. The principal differences between Chilean GAAP and U.S. GAAP are described below together with explanations, where appropriate, of the method used in the determination of the adjustments that affect net income and total shareholders' equity. References below to "SFAS" are to United States Statements of Financial Accounting Standards. The preparation of financial statements in conformity with Chilean GAAP, along with the reconciliation to U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. I. Differences in measurement methods 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: (a) Inflation accounting: The cumulative inflation rate in Chile as measured by the Consumer Price Index for the three years ended December 31, 2003 was 7.3%. 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 2(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, by restating all non-monetary accounts in the financial statements. The model prescribes that the historical cost of such accounts be restated for general price-level changes between the date of origin of each item and the year-end, but requires that latest cost values be used for the restatement of inventories. Under U.S. GAAP, financial statement amounts must be reported in historical currency. The inclusion of price-level adjustments in the accompanying 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%. The reconciliation included herein of consolidated net income and Shareholders' equity, as determined with U.S. GAAP, does not include adjustments to eliminate the effect of inflation accounting under Chilean GAAP. G-34 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (b) Deferred income taxes: Starting January 1, 2000, the Company recorded income taxes in accordance with Technical Bulletin No. 60 (BT No. 60) of the Chilean Association of Accountants, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision, a contra asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such contra asset or liability must be amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax asset or liability relates. Under U.S. GAAP, companies must account for deferred taxes in accordance with Statement Financial Accounting Standards (SFAS) No.109 "Accounting for Income Taxes", which requires an asset and liability approach for financial accounting and reporting of income taxes, under the following basic principles: (i) A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carryforwards. (ii) The measurement of deferred tax liabilities and assets is based on the provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated. (iii) The measurement of deferred tax assets are reduced by a valuation allowance, if based on the weight of available evidence, it is more-likely-than-not that some portion of the deferred tax assets will not be realized. Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset and liability that at some future date will reverse, thereby resulting in taxable income or expense. Temporary differences ordinarily become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the amount of taxes payable or refundable in future years as a result of temporary differences at the end of the current year. As of December 31, 2002 and 2003, a valuation allowance was recorded under U.S. GAAP to provide against tax loss carryforwards to the extent it is estimated more-likely-than-not that such net deferred tax assets will not be realized. The effect of these differences and the effects of deferred taxes over the adjustments to U.S. GAAP on the net loss and shareholders' equity of the Company is included in paragraph (i) below. G-35 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (c) Goodwill: Under Chilean GAAP, assets acquired and liabilities assumed are recorded at their carrying value in the records of the acquired company, and the excess of the purchase price over the carrying value is recorded as goodwill, and is amortized over a maximum period of 20 years. Under U.S. GAAP, assets acquired and liabilities assumed are recorded at their estimated fair values, and the excess of the purchase price over the estimated fair value of the net identifiable assets and liabilities acquired is recorded as goodwill, unless the transaction is between entities under common control, in which case the related party transaction would be recorded using book values and no goodwill would be recorded. Prior to July 1, 2001 under U.S. GAAP, the Company amortized goodwill on a straight-line basis over the estimated useful lives of the assets, ranging from 20 to 40 years. Under Chilean GAAP, the Company has evaluated the carrying amount of goodwill for impairment. The evaluation of impairment was based on the fair value of the investment which the Company determined using a discounted cash flow approach, stock valuations and recent comparable transactions in the market. In order to estimate fair value, the Company made assumptions about future events that are highly uncertain at the time of estimation. The results of this analysis showed that the Company's goodwill was not impaired. In accordance with U.S. GAAP, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets", ("SFAS 142") as of January 1, 2002. SFAS 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill, including that acquired before initial application of the standard, and indefinite-lived intangible assets are not amortized, but must be tested for impairment at least annually. Previously, the Company evaluated the carrying amount of goodwill, in relation to the operating performance and future undiscounted cash flows of the underlying business and the transitional impairment test required by the standard, which was performed during the first half of 2002, which resulted in no impairment of the Company's recorded goodwill. The following effects are included in the net loss and shareholders' equity reconciliation to U.S. GAAP under paragraph (i) below: (a) Adjustment to record differences in goodwill amortization between Chile GAAP and U.S. GAAP as of December 31, 2001, and (b) The reversal of goodwill amortization recorded under Chilean GAAP for the years ended December 31, 2002 and 2003. G-36 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (c) Goodwill, continued: Impairment is recorded based on an estimate of future discounted cash flows, as compared to current carrying amounts. For the years ended December 31, 2001, 2002, and 2003 no additional amounts were recorded for impairment under U.S. GAAP. Goodwill under U.S. GAAP as of December 31 2001, 2002 and 2003 is summarized as follows:

For the years ended December 31, 2001 2002 2003 ---- ---- ---- ThCh$ ThCh$ ThCh$ Goodwill 101,902,245 101,902,245 101,902,245 Accumulated amortization (25,202,663) (25,202,663) (25,202,663) --------------------- ------------------- -------------------- Goodwill, net 76,699,582 76,699,582 76,699,582 ===================== =================== ====================

The effect of these differences on the net loss and shareholders' equity of the Company is included in paragraph (i) below. (d) Derivative instruments: For the years ended December 31, 2001, 2002 and 2003, the Company continued to have foreign currency forward exchange contracts for the purpose of transferring risk from exposure in U.S. dollars to an exposure in Chilean peso. Under Chilean GAAP, the Company deferred forward contract gains and losses when the contracts are hedges for future program payments and other cash out flows to be made in U.S. dollars. The hedging criteria and documentation requirements under Chilean GAAP are less onerous than U.S. GAAP. The Company recorded a net asset of ThCh$1,289,006 as of December 31, 2002 and a net liability of ThCh$4,188,044 as of December 31, 2003. Fair values under Chilean GAAP have been estimated using the closing spot exchange rate at year end. G-37 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (d) Derivative instruments, continued: Beginning January 1, 2001, under U.S. GAAP, the accounting for derivative instruments is described in SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and other complementary rules and amendments. SFAS No. 133, as amended, establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative instrument's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative instrument's gains or losses to offset against related results on the hedged item in the income statement, to the extent effective, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting SFAS No. 133, in part, allows special hedge accounting for "fair value" and "cash flow" hedges. SFAS No. 133 provides that the gain or loss on a derivative instrument designated and qualifying as a "fair value" hedging instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk be recognized currently in earnings in the same accounting period. While the Company enters into derivatives for the purpose of mitigating its global financial and commodity risks, these operations do not meet the documentation requirements to qualify for hedge accounting under U.S. GAAP. Therefore changes in the respective fair values of all derivatives are reported in earnings when they occur. The cumulative effect resulting from the adoption of SFAS No. 133 on January 1, 2001 was a net gain of ThCh$ 619,942. The adjustment is due to the difference between recording forward contracts at spot exchange rates under Chilean GAAP and marking the forward contracts to market using forward rates in according with U.S. GAAP. The effect of the adjustment between the current market values and the fair value for the years ended December 31, 2001, 2002 and 2003 is included in paragraph (i) below (e) Depreciation: Under Chilean GAAP, the Company changed the method of depreciation of the external network from the straight-line method of depreciation to a progressive method based on the projected number of subscribers per product line. Under U.S. GAAP, the method of depreciation used has continued to be the straight-line method. The effect of accounting for this difference in accordance with U.S. GAAP is included in the reconciliation of net loss and shareholders' equity in paragraph (i) below. G-38 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (f) Investments in marketable securities Under Chilean GAAP, investments in debt and equity securities are accounted for at the lower of cost or market value. Under U.S. GAAP investments in debt and equity securities are accounted for according to the purpose for which these investments are held. U.S. GAAP defines three distinct purposes for holding investments: o Investments held for trading purposes o Investments available-for-sale o Investments held to maturity The Company considers that all of its investments are available-for-sale. The effect of recording the marketable securities at fair value is not material and is not included in the effects on shareholders' equity under paragraph (i) below. (g) Issuance of shares in subsidiary During the year ended December 31, 2003 Metropolis Intercom S.A. issued an additional 3,923,834 shares representing 4.4% of Metropolis Intercom S.A. to related parties. The Company did not subscribe to any of these shares. Under Chilean GAAP, as the cash received was greater than the related increase in minority interest the Company recorded a deferred gain of ThCh$ 1,455,918, which will be amortized into income in future periods. Under U.S. GAAP, the transfer would be recorded at the lower of carrying value or fair value, since the cash received was less than the carrying value of Metropolis Intercom S.A. under U.S. GAAP. Consequently under U.S. GAAP, the difference between the cash proceeds and the carrying value has been recorded as a distribution to shareholders. The effect of eliminating the income statement impact of this transaction from net loss as determined under Chilean GAAP and recording this transaction under U.S. GAAP is included in paragraph (i) below. (h) Effect of minority interests on U.S. GAAP adjustments The effects of recording minority interests on U.S. GAAP adjustments are included in the reconciliation to U.S. GAAP in paragraph (i) below. G-39 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (i) Effect of conforming net loss and shareholders' equity to U.S. GAAP: The adjustments required to conform reported net loss to U.S. GAAP are as follows:

For the year ended December 31, ---------------------------------------------------- 2001 2002 2003 ThCh$ ThCh$ ThCh$ Net loss in accordance with Chilean GAAP (14,561,621) (17,131,030) (13,446,519) Deferred taxes (paragraph b) (2,102,458) (1,974,411) (1,016,653) Amortization of goodwill (paragraph c) (245,558) 4,165,650 4,184,519 Derivative instruments (paragraph d) 33,760 149,481 (1,127,039) Depreciation (paragraph e) (1,496,092) (1,224,154) (1,494,484) Issuance of subsidiaries shares (paragraph g) - - (18,210) Effect of minority interests on U.S. GAAP adjustments (paragraph h) - - 301,502 ---------------------------------------------------- Net loss and comprehensive loss in accordance with U.S. GAAP before cumulative effect of change in accounting principles (18,371,969) (16,014,464) (12,616,884) Effect of change in accounting principles, net of tax benefit of ThCh$ 4,467 (25,566) - - ---------------------------------------------------- Net loss and comprehensive loss in accordance with U.S. GAAP (18,397,535) (16,014,464) (12,616,884) ====================================================

The adjustments required to conform reported shareholders' equity to U.S. GAAP are as follows:

As of December 31, ---------------------------------------- 2002 2003 ThCh$ ThCh$ Shareholders' equity, in accordance with Chilean GAAP 145,701,148 132,254,629 Deferred income taxes (paragraph b) (2,129,871) (3,146,524) Effect in amortization of goodwill (paragraph c) 11,659,249 15,843,768 Derivative instruments (paragraph d) 153,162 (973,877) Depreciation (paragraph e) (2,720,245) (4,214,729) Issuance of subsidiary shares (paragraph g) - (948,612) Effect of minority interests on U.S. GAAP adjustments (paragraph h) - 301,502 ---------------------------------------- Shareholders' equity, in accordance with U.S. GAAP 152,663,443 139,116,157 ========================================

G-40 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (i) Effect of conforming net loss and shareholders' equity to U.S. GAAP, continued: The following summarizes the changes in shareholders' equity under U.S. GAAP during the years ended December 31, 2001, 2002 and 2003:

For the year ended December 31, ------------------------------------------------------------ 2001 2002 2003 ThCh$ ThCh$ ThCh$ Balance as of January 1 187,075,442 168,677,907 152,663,443 Issuance of subsidiary shares (paragraph g) - - (930,402) Net loss and comprehensive loss in accordance with U.S. GAAP (18,397,535) (16,014,464) (12,616,884) ------------------------------------------------------------ Balance as of December 31 168,677,907 152,663,443 139,116,157 ============================================================

G-41 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: II. Additional disclosure requirements The following additional disclosures are required under U.S. GAAP: (a) Income taxes: Deferred tax assets (liabilities) are summarized as follows at December 31 under U.S. GAAP:

2002 2003 ---- ---- ThCh$ ThCh$ Deferred Tax Assets Allowance for doubtful debts 353,442 1,078,606 Goods and services provision 38,406 16,259 Assets provision - 301,306 Unearned revenues 136,709 177,729 Vacation provision 70,824 69,555 Forward contract 24,315 165,559 Tax loss carryforwards 12,286,151 14,395,138 Trademarks 1,629 - Leasing 51,276 2,365 Accumulated depreciation 466,916 720,044 -------------------- ------------------- Total deferred tax assets 13,429,668 16,926,561 Deferred Tax Liabilities Forward contracts (26,038) (157,521) Leasing operations (55,138) (7,675) Accumulated depreciation (6,068,674) (7,089,567) Software (173,425) (282,107) Rented installations (61,275) (125,687) -------------------- ------------------- Total deferred tax liabilities (6,384,550) (7,662,557) Net deferred tax asset (liability) before valuation allowance 7,045,118 9,264,004 -------------------- ------------------- Valuation allowance (4,973,958) (6,206,882) -------------------- ------------------- Net deferred tax asset (liability) 2,071,160 3,057,122 ==================== ===================

G-42 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (a) Income taxes, continued: The classification of the net deferred tax asset before valuation allowance detailed above is as follows:

2002 2003 ---- ---- ThCh$ ThCh$ Short-term 597,658 1,350,187 Long-term 6,447,460 7,913,817 ------------------ -------------------- Net deferred tax liabilities 7,045,118 9,264,004 ================== ====================

The deferred income tax benefit in accordance with U.S. GAAP is as follows:

2001 2002 2003 ---- ---- ---- ThCh$ ThCh$ ThCh$ Deferred income tax benefit, Chile GAAP - Note 24 2,148,223 2,389,871 2,038,031 Additional deferred tax adjustment, U.S. GAAP, net (2,102,458) (1,974,411) (1,016,653) ---------------- ----------------- ---------------- Deferred income tax benefit under U.S. GAAP 45,765 415,460 1,021,378 ================ ================= ================

In accordance with Chilean Law No. 19,753, which was issued on September 28, 2001, the corporate income tax rate increased from 15% to 16% for the year 2002, 16% to 16.5% for the year 2003, and will increase to 17% for the year 2004 and thereafter. The effect of the tax rate increase for the year ended December 31, 2001 was an increase to income tax expense of ThCh$ 266,032. (b) Foreign currency forward contract capacity: The Company's Board of Directors approves policies on risk-management of forward currency risk through the use of U.F. to U.S. dollar forward contracts. The Company petitions several Chilean and foreign banks to approve forward contract limits on a yearly basis, which in the aggregate, total US$ 73 million and US$ 50 million at December 31, 2002 and 2003, respectively. There was US$ 24.8 million and US$ 9.7 million available as of December 31, 2002 and 2003, respectively. G-43 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (c) Lease agreements: The Company leases computer equipment and office space by way of capital lease payable in installments through 2016, with a bargain purchase option at the end of the lease. Minimum lease payments under capital leases are as follows:

Capital Lease ThCh$ ------------------ 2004 53,444 2005 49,824 2006 31,725 2007 29,081 2008 31,725 Thereafter 224,736 ------------------- Total future minimum lease payments 420,535 Interest (97,174) ------------------- Present value of net minimum lease payments 323,361 ===================

(d) Foreign exchange gains and losses: For U.S. GAAP presentation purposes, the net foreign exchange gains or losses on transactions in foreign currencies and UF amounted to a loss of ThCh$ 1,226,654, ThCh$ 916,991 and ThCh$ 1,341,397 in 2001, 2002 and 2003, respectively. (e) Advertising costs: Advertising costs are expensed as incurred and amounted to ThCh$ 2,583,698, ThCh$ 2,045,599 and ThCh$ 2,413,556 for the years ended December 31, 2001, 2002 and 2003, respectively. G-44 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (f) Proforma goodwill amortization: As described in paragraph I (c) above the Company adopted SFAS 142 as of January 1, 2002. SFAS 142 applies to all goodwill and identified intangible assets acquired in a business combination. The following details net income in accordance with U.S. GAAP for the Company for the year ended December 31, 2001 excluding goodwill amortization expense recognized during those years:

(Unaudited) For the year ended December 31, 2001 ThCh$ ------------------ Reported net loss (18,397,535) Add back: Goodwill amortization 4,123,225 ------------------ Adjusted net loss (14,274,310) ==================

(g) Reclassification differences between Chilean GAAP and U.S. GAAP: The following reclassifications are required to conform the presentation of Chilean GAAP income statement information to that required under U.S. GAAP for the years ended December 31, 2001, 2002 and 2003. The reclassification amounts are determined in accordance with Chilean GAAP.

Year ended December 31, 2001 ------------------------------------------------------- Chilean U.S. GAAP GAAP Reclassification presentation ThCh$ ThCh$ ThCh$ ------------------------------------------------------- Operating loss (8,984,138) (5,472,796) (14,456,934) Non-operating expenses (7,802,003) 5,472,796 (2,329,207) ------------------------------------------------------- Year ended December 31, 2002 ------------------------------------------------------- U.S. GAAP Chilean GAAP Reclassification presentation ThCh$ ThCh$ ThCh$ ------------------------------------------------------- Operating loss (11,357,210) (5,158,030) (16,515,240) Non-operating expenses (8,250,207) 5,158,030 (3,092,177) ------------------------------------------------------- Year ended December 31, 2003 ------------------------------------------------------- U.S. GAAP Chilean GAAP Reclassification presentation ThCh$ ThCh$ ThCh$ ------------------------------------------------------- Operating loss (7,038,849) (4,774,662) (11,813,511) Non-operating expenses (8,608,186) 4,774,662 (3,833,524) -------------------------------------------------------

G-45 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (g) Reclassification differences between Chilean GAAP and U.S. GAAP, continued: The following reclassifications are required to conform the presentation of Chilean GAAP balance sheet information to that required under U.S. GAAP for the years ended December 31, 2002 and 2003. The reclassification amounts are determined in accordance with Chilean GAAP.

Year ended December 31, 2002 ------------------------------------------------------- U.S. GAAP Chilean GAAP Reclassification presentation ThCh$ ThCh$ ThCh$ ------------------------------------------------------- Total current assets 21,395,053 147,365 21,542,418 Total other assets 81,928,919 - 81,928,919 Total current liabilities 16,812,351 147,365 16,959,716 Total long-term liabilities 54,021,350 - 54,021,350 ------------------------------------------------------- Year ended December 31, 2003 ------------------------------------------------------- U.S. GAAP Chilean GAAP Reclassification presentation ThCh$ ThCh$ ThCh$ ------------------------------------------------------- Total current assets 14,640,266 926,592 15,566,858 Total other assets 77,632,300 77,632,300 Total current liabilities 24,413,852 926,592 25,340,444 Total long-term liabilities 44,276,688 44,276,688 -------------------------------------------------------

(h) Estimated fair value of financial instruments and derivative financial instruments: The accompanying tables provide disclosure of the estimated fair value of financial instruments owned by the Company. Various limitations are inherent in the presentation, including the following: - The data excludes non-financial assets and liabilities, such as property, plant and equipment, and goodwill. - While the data represents management's best estimates, the data is subjective and involves significant estimates regarding current economic and market conditions and risk characteristics. G-46 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (h) Estimated fair value of financial instruments and derivative financial instruments, continued; The methodologies and assumptions used depend on the terms and risk characteristics of the various instruments and include the following: - Cash and cash equivalents approximate fair value because of the short-term maturity of these instruments. - For current liabilities that are contracted at variable interest rates, the book value is considered to be equivalent to their fair value. - For interest-bearing liabilities with an original contractual maturity of greater than one year, the fair values are calculated by discounting contractual cash flows at current market origination rates with similar terms. The following is a detail of the Company's financial instruments' Chilean GAAP carrying amount and estimated fair value:

December 31, 2002 2003 ----------------------------------- ------------------------------------ Chilean GAAP Chilean GAAP Carrying Amount Estimated Fair Carrying Amount Estimated Fair Value Value ------------------ ---------------- ------------------ ----------------- ThCh$ ThCh$ Assets: Cash and cash equivalents 12,687,480 12,687,480 6,972,416 6,972,416 Short-term accounts receivable 3,739,641 3,739,641 2,517,565 2,517,565 Notes receivable 173,283 173,283 90,392 90,392 Forward contracts 1,289,006 1,442,168 - - Liabilities: Short-term bank debt (59,357) (59,357) - - Current bank debt - - (7,445,646) (7,445,646) Forward contracts - - (4,188,044) (5,161,921) Notes payable (207,635) (207,635) (11,837) (11,837) Long-term bank debt (36,867,508) (36,867,508) (29,508,724) (29,508,724) Long-term notes payable (16,719,923) (16,719,923) (14,401,629) (14,401,629)

G-47 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (i) Cash and cash equivalents Under Chilean GAAP cash and cash equivalents are considered to be all highly liquid investments with a remaining maturity of less than 90 days as of the closing date of the financial statements, whereas, U.S. GAAP considers cash and cash equivalents to be all highly liquid investments with an original maturity date of less than 90 days. The difference between the balance under U.S. GAAP and Chilean GAAP of cash and cash equivalents is not material for the periods presented. Supplementary Cash flow information:

2001 2002 2003 ----------------------------------------------------- ThCh$ ThCh$ ThCh$ Assets acquired under capital leases 335,155 - - Interest paid during the year (521,092) (1,464,029) (1,807,376)

G-48 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (j) Recently issued accounting pronouncements: (i) Accounting for Asset Retirement Obligations In June 2001 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143). This standard requires that under U.S. GAAP obligations associated with the retirement of tangible long-lived assets be recorded as liabilities when those obligations are incurred, with the amount of the liability initially measured at fair value. Upon initially recognizing a liability for an asset retirement obligation, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset. Over time, this liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The implementation of SFAS No. 143 had no material impact on the results of operations or financial position of the Company. (ii) Accounting for Costs Associated with Exit or Disposal Activities In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, not when it is "planned". The implementation of SFAS No. 146 had no material impact on the results of operations or financial position of the Company. G-49 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (j) Recently issued accounting pronouncements, continued: (iii) Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). The Interpretation significantly changed practice in the accounting for, and disclosure of, guarantees. In general, the Interpretation applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or an equity security of the guaranteed party. Guarantees meeting the characteristics described in the Interpretation, are required to be initially recorded at fair value, which is different from the general current practice of recording a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement No. 5, "Accounting for Contingencies". The Interpretation also requires a guarantor to make significant new disclosures for virtually all guarantees even when the likelihood of the guarantor's having to make payments under the guarantee is remote. The Interpretation's disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The Interpretation's initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The implementation of FIN 45 had no material impact on the results of operations or financial position of the Company. (iv) Revenue arrangements with multiple deliverables On January 23, 2003, the Emerging Issues Taskforce issued EITF 00-21 " Revenue Arrangements with Multiple Deliverables". This Issue addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. Specifically, this Issue addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. The Issue requires, that revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables in the arrangement meet certain criteria, arrangement consideration should be allocated among the separate units of accounting based on their relative fair values, and applicable revenue recognition criteria should be considered separately for separate units of accounting. The guidance in this Issue is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. Alternatively, entities may elect to report the change in accounting as a cumulative-effect adjustment. Implementation of EITF 00-21 is required on January 1, 2004 for Cordillera Comunicaciones Holding Limitada. The Company is currently evaluating the effects of its implementation. G-50 Cordillera Comunicaciones Holding Limitada and Subsidiaries Notes to the Consolidated Financial Statements for the years ended December 31 (Translation of financial statements originally issued in Spanish - see Note 2) (Restated for general price-level changes and expressed in thousands of constant Chilean pesos as of December 31, 2003 except as stated) Note 28. Differences Between Chilean and United States Generally Accepted Accounting Principles, continued: (j) Recently issued accounting pronouncements, continued (v) Amendment of Statement 133 on Derivative Instruments and Hedging Activities In May 2003 the FASB issued Statement No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities". This Statement is effective for contracts entered into or modified after June 30, 2003, except for hedging relationships designated after June 30, 2003. In addition, all provisions of this Statement should be applied prospectively with exceptions. The provisions of this Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a) of that Statement, which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The implementation of SFAS No. 149 had no material impact on the results of operations or financial position of the Company. (vi) Consolidation of Variable Interest Entities In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities-an interpretation of ARB 51," to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. Many variable interest entities have commonly been referred to as special-purpose entities or off-balance sheet structures, but the guidance applies to a larger population of entities. In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. The Company must apply Interpretation No. 46 to variable interest entities created after January 31, 2003. The Company did not create any variable interest entities after January 31, 2003 and is in the process of assessing the impact of the Interpretation in relation to business relationships created before January 31, 2003. The Company does not expect the implementation of the Interpretation to have a material impact on the Company's results of operation or financial position. G-51 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 to be signed on its behalf by the undersigned, thereunto duly authorized, in Santiago, Chile on June 25, 2004. CRISTALERIAS DE CHILE S.A. (GLASSWORKS OF CHILE INC.) /s/ Cirilo Elton Gonzalez ------------------------- Chief Executive Officer 102 Exhibit 12.1 CERTIFICATION I, Cirilo Elton Gonzalez, certify that: 1. I have reviewed this annual report on Form 20-F of Cristalerias de Chile 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 registrant 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) for the company 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 registrant, 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) 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 (c) 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 registrant'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. 103 Date: June 30, 2004 /s/ Cirilo Elton Gonzalez Cirilo Elton Gonzalez Chief Executive Officer Cristalerias de Chile S.A. 104 Exhibit 12.2 CERTIFICATION I, Rodrigo Palacios Fitz-Henry, certify that: 1. I have reviewed this annual report on Form 20-F of Cristalerias de Chile 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 registrant 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) for the company 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 registrant, 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) 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 (c) 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 registrant'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. 105 Date: June 30, 2004 /s/ Rodrigo Palacios Fitz-Henry Rodrigo Palacios Fitz-Henry Chief Financial Officer Cristalerias de Chile S.A. 106 Exhibit 13.1 CERTIFICATION 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 Cristalerias de Chile S.A (the "Company") on Form 20-F for the fiscal year ended December 31, 2003, as filed with the U.S. Securities and Exchange Commission on the date hereof (the "Report"), I, Cirilo Elton Gonzalez, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 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/ CIRILO ELTON GONZALEZ Cirilo Elton Gonzalez Chief Executive Officer Cristalerias de Chile S.A. Dated: June 30, 2004 107 Exhibit 13.2 CERTIFICATION 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 Cristalerias de Chile S.A. (the "Company") on Form 20-F for the fiscal year ended December 31, 2003, as filed with the U.S. Securities and Exchange Commission on the date hereof (the "Report"), I, Rodrigo Palacios Fitz-Henry, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 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/ RODRIGO PALACIOS FITZ-HENRY Rodrigo Palacios Fitz-Henry Chief Financial Officer Cristalerias de Chile S.A. Dated: June 30, 2004 108 Exhibit 8.1 List of Cristalerias Subsidiaries As of December 31, 2003 Company Name Jurisdiction ------------ ------------ Vina Santa Rita Chile Envases CMF S.A. Chile Constructora Apoger S.A. Chile Inmobiliaria Don Alberto S.A. Chile Cristalchile Comunicaciones S.A. Chile Cordillera Comunicaciones Holding Ltda. Chile Cordillera Comunicaciones Ltda. Chile Metropolis-Intercom S.A. Chile Comunicacion, Informacion, Entretencion y Cultura S.A. Chile Red Televisiva Megavision S.A. Chile Zig-Zag S.A. Chile Simetral S.A. Chile Ediciones Chiloe S.A. Chile Ediciones Financieras S.A. Chile Cristalchile Inversiones S.A. Chile Rayen Cura S.A.I.C. Argentina 109 Exhibit 11.1 Cristalerias Conduct Ruling for the CEO, CFO, Corporate Controller and Accounting Officer Cristalerias's Conduct Ruling applies to our CEO, CFO, Corporate Controller and Accounting Officer. 1. The CEO and each financial officer mentioned above must act with honesty and integrity, avoiding actual or apparent conflicts of interest between personal and professional relationships. 2. The CEO and each financial officer mentioned above is responsible for full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission and in other public communications made by the Company. 3. The CEO and each financial officer mentioned above must comply with applicable governmental laws, rules and regulations. 4. The CEO and each financial officer mentioned above shall promptly report to the Audit Committee any information he or she may have concerning any violation of this Conduct Ruling. 5. The CEO and each financial officer mentioned above will be held accountable for adherence to the Conduct Ruling. Accordingly, the Board of Directors may determine, or designate appropriate persons to determine, appropriate disciplinary actions to be taken in the event of violations of this Conduct Ruling by the Company's Chief Executive or Senior Financial Officers and a procedure for granting any waivers of this Conduct Ruling. 110