Edgar Filing: GLASSWORKS OF CHILE

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2002
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)

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The Republic of Chile
(Jurisdiction of incorporation or organization)

Hendaya 60, Oficina 201
Las Condes
Santiago, Chile
(Address of principal executive offices)

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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

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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........................ 62
ITEM 7: Major Shareholders And Related Party Transactions................. 66
ITEM 8: Financial Information............................................. 69
ITEM 9: The Offer And Listing............................................. 72
ITEM 10: Additional Information........................................... 75
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

PART III

ITEM 17: Financial Statements............................................. 98
ITEM 18: Financial Statements............................................. 98
ITEM 19: Exhibits......................................................... 98
INDEX TO EXHIBITS......................................................... 98
SIGNATURE ............................................................... 100
CERTIFICATION ........................................................... 101

INTRODUCTION

Cristalerias de Chile S.A. is a public corporation (sociedad
anonima) organized under the laws of the Republic of Chile. 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. Our principal executive offices are located at Hendaya 60,
Oficina 201, Las Condes, Santiago, Chile, and our telephone number is
011-562-787-8855.

Inquiries and requests for additional information should be directed
to Cristalerias de Chile S.A., Attention: Rodrigo Palacios Fitz-Henry, Chief
Financial Officer, Cristalerias de Chile. Telephone requests may be directed
to 011-562-787-8855.

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 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, and

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.

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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.

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, 2002. 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$718.61 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, 2002.

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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, 2002. 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 39 of
the Notes for the Financial Statements, which provides descriptions of the
principal differences between Chilean GAAP and U.S. GAAP.

The table below describes Chilean GAAP and U.S. GAAP income
statement data, for the years ending on December 31, 1998, 1999, 2000, 2001
and 2002:

AT AND FOR YEAR ENDED DECEMBER 31,
Millions of constant pesos and millions of US$ (1)(2)
-----------------------------------------------------------------------
1998 1999 2000 2001 2002 (8) 2002 (1)(8)
---------- ---------- ---------- ---------- ---------- ----------

Income Statement Data:
Chilean GAAP: ....................... Ch$ Ch$ Ch$ Ch$ Ch$ US$
Net Sales ....................... 127,923 132,427 149,311 146,187 161,057 224.1
Operating income .................... 24,390 24,116 31,778 33,563 41,610 57.9
Non-operating income (loss) ..... (577) 2,185 (7,163) (8,699) (13,002) (18.1)
Equity in net income of related
companies ..................... 334 1,037 (2,883) (7,617) (8,902) (12.4)
Interest income (expense), net .. 591 547 (2,186) (4,215) (4,286) (6.0)
Other non-operating income
(expense), net ................ (786) (835) (961) 4,082 (2,810) (3.9)
Price-level restatement, net .... (717) 1,436 (1,133) (951) 2,997 4.2
Income tax and minority interest (4,805) (4,321) (6,517) (8,398) (10,948) (15.2)
Net income ...................... 19,007 21,980 18,098 18,304 17,661 24.6
Net income per share (3) (in Ch$) 296.99 343.42 282.77 286.00 275.95 0.38
Net income per ADS (3)(4) ....... 890.98 1,030.24 848.31 858.00 827.84 1.15
Dividends per share (3)(5) ...... 126.62 136.87 140.78 142.2 4 137.35 0.19
Dividends per ADS (3)(4)(5) ..... 379.86 410.61 422.34 426.72 412.05 0.57
U.S. GAAP: .......................... Ch$ Ch$ Ch$ Ch$ Ch$ US$
Net Sales ....................... 127,924 132,427 149,311 146,187 161,057 224.12
Operating income ................ 24,955 24,467 32,365 38,461 39,392 54.82
Non-operating income (loss) ..... (405) 3,316 (6,226) (15,200) (9,991) (13.90)
Equity in net income (loss) of
related companies ............. 194 1,632 (3,079) (9,411) (8,709) (12.12)
Interest income (expense), net .. 591 392 (2,060) (3,045) (3,924) (5.46)
Other non-operating income
(expense), net ................ (474) (297) (46) (1,793) (355) (0.49)
Price-level restatement ......... (716) (1,119) (2,190) (2,338) (1,951) (2.71)
Exchange differences ................ -- 2,708 1,057 1,387 4,948 6.89
Income tax and minority interest (4,990) (4,471) (6,831) (8,209) (11,698) (16.28)
Net income ...................... 19,560 23,312 19,308 15,052 17,703 24.64
Net income per share (3) (4) .... 305.63 364.25 301.69 235.17 276.61 US$0.38
Net income per ADS (3) (4) ...... 916.89 1,092.75 905.07 705.51 829.83 US$1.15

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The table below describes Chilean GAAP and U.S. GAAP balance sheet
data, as of December 31, 1998, 1999, 2000, 2001 and 2002:

AT AND FOR YEAR ENDED DECEMBER 31,
Millions of constant pesos and millions of US$ (1)(2)(8)
-------------------------------------------------------------------
1998 1999 2000 2001 2002 2002 (1)
--------- --------- --------- --------- --------- -----------

Balance Sheet Data:
Chilean GAAP: ........................ Ch$ Ch$ Ch$ Ch$ Ch$ US$
Total assets ..................... 281,353 304,876 374,790 404,922 452,478 629.7
Long-Term debt (6) ............... 14,703 16,814 73,004 85,865 133,022 185.1
Shareholders' equity ............. 185,721 199,231 209,406 219,790 231,330 321.9
U.S. GAAP:
Total assets ..................... 290,828 311,511 384,288 411,096 460,284 640.52
Long-term debt (6) ............... 14,703 16,814 73,004 85,864 133,022 185.11
Shareholders' equity ............. 190,977 206,931 219,692 226,248 236,624 329.28
Operating Data (7):
Chilean GAAP:
Gross margin ..................... 35.3% 34.5% 37.4% 38.4% 41.2% --
Operating margin ................. 19.1% 18.2% 21.3% 23.0% 25.8% --
Net margin ....................... 14.9% 16.6% 12.1% 12.5% 11.0% --
Financial Ratios:
Chilean GAAP:
Total liabilities/Total assets ... 0.34x 0.35x 0.44x 0.46x 0.49x --
Current assets/Current liabilities 2.99x 2.69x 2.46x 2.38x 4.51x --

_________________
(1) Financial information for the years ended December 31, 1998, 1999, 2000
and 2001 is restated in terms of constant pesos, as of December 31, 2002.
Chilean peso amounts have been translated into U.S. dollars at the rate
of Ch$718.61 to US$1.00, the Observed Exchange Rate on December 31, 2002.
(2) Except per share, per ADS and Other Data amounts.
(3) For the years 1998, 1999, 2000, 2001 and 2002, 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, 2002. (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 and 2002 do not include the
consolidation of Envases CMF S.A. (formerly Crowpla-Reicolite S.A.)
because the ownership percentage in that company is 50% and Cristalerias
does not have control.

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Exchange Rates

Chile's Ley Organica Constitucional del Banco Central de Chile
No.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 Market. Banks and other institutions may
affect 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, 2002, the Reference
Exchange Rate was Ch$549.08 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:

1997 411.85 439.81 420.64 439.18
1998 439.58 475.41 462.20 472.41
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
December 2002 692.94 718.61 701.95 718.61

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Observed Exchange Rate (3)
----------------------------------------------------------------------------------------
Year Low (1) High (1) Average (2) Year End
---- ------- -------- ----------- --------
January 2003 709.22 738.87 722.48 N/A
February 2003 733.10 755.26 745.21 N/A
March 2003 725.79 758.21 743.28 N/A
April 2003 705.32 731.56 718.25 N/A
May 2003 694.22 713.73 703.58 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
Source: The Central Bank.

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.

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.

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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, 2002, 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 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 2002.
Sales to our leading 10 customers accounted for approximately 67% of our net
sales in 2002. Our three largest customers,[1] Vina Concha y Toro, Vina San
Pedro and Sociedad Anonima Vina Santa Rita S.A., accounted for an aggregate of
approximately 36% of the our sales of glass containers in 2002.

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.

________________
[1] All these customers are located in Chile. There are no major customers
outside Chile as measured by net sales.

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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 S.A, 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 2002, approximately 79.1% of net sales of
wine bottles (which represented 61.8% of overall 2002 net sales) were
attributable to exports by the Chilean wine industry. Sociedad Anonima Vina
Santa Rita S.A's sales are also dependent on Chilean wine exports, as
approximately 52.4% of its net sales in 2002 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-Langdon Clarke as our independent
public 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, 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 LLP ceased its audit practice before the United States
Securities and Exchange Commission. 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 Securities and
Exchange Commission. As a foreign Securities and Exchange Commission
registrant, we are required to file with the Securities and Exchange
Commission annual financial statements audited by an independent public
accountant registered to practice before the Securities and Exchange
Commission. We engaged Ernst & Young Servicios Profesionales de Auditoria y
Asesoria Limitada, independent accountants and a member firm of Ernst & Young
International, to serve as our independent auditor for 2002. Arthur Andersen
LLP had audited our financial statements for the years ended December 31, 2000
and 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 Securities and Exchange
Commission. Our annual report on Form 20-F for the year ended December 31,
2002 includes the financial statements audited by Arthur Andersen LLP for our
2000 and 2001 fiscal years. If the Securities and Exchange Commission ceases
to accept financial statements audited by Arthur Andersen LLP, we could
experience additional costs or delays in making filings with the Securities
and Exchange Commission. In addition, our securities holders may have no
effective remedy against Arthur Andersen LLP - Langdon Clarke in connection
with a material misstatement or omission in our 2000 and 2001 financial
statements, particularly in the event that Arthur Andersen LLP ceases to exist
or becomes insolvent as a result of the proceedings against it.

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
indirect benefits to the company of thereby enabling the exercise by the
holders of ADSs of the

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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 the 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, the 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".

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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, 2002, only approximately 11% of securities listed in the
Santiago Stock Exchange traded 90% or more of the total trading days. We
estimate that for 2002, our shares were traded on the Santiago Stock Exchange
on an average of approximately 64.7% 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, 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, investing in general 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 Investment
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 39 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 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 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 share in Chile in June 1994. 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. Our principal
subsidiaries are:

Company Name Jurisdiction

Sociedad Anonima Vina Santa Rita Chile
Envases CMF S.A. Chile
Constructora Apoger S.A. Chile
Inmobiliaria Don Alberto Chile
Cristalchile Comunicaciones S.A. Chile
Cordillera Comunicaciones Holding Ltda. Chile
Cordillera Comunicaciones Ltda. Chile
Metropolic-Intercom S.A. Chile
Comunicacion, Informacion, Entretencion y Cultura S.A. Chile
Red Relevisiva 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

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 cable television
companies currently operating in Chile.

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

-14-

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. In
1975, as part of a national program of privatization, Elecmetal, a private
steel foundry business, acquired a 46% interest our company from Corporacion
de Fomento de la Produccion 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 Inc., 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 Sociedad Anonima Vina Santa Rita S.A,
one of the largest Chilean producer exporters of bottled wine. In 1992,
Sociedad Anonima Vina Santa Rita S.A established Vina Carmen S.A., which
produces fine wines and in which Sociedad Anonima Vina Santa Rita S.A 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 Inc. 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, 2002, we hold a 98.2% interest
in Comunicacion, Informacion, Entretencion y Cultura S.A. As of December 31,
2002, Comunicacion, Informacion, Entretencion y Cultura S.A. held the
following interests in media and communications companies:

* a 49.9% interest in Zig-Zag S.A., a publishing company;

* 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 El
Diario Financiero, a Chilean financial newspaper; and most significantly;

* 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 shares of 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.

-15-

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, 2002, 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, Sociedad Anonima Vina Santa Rita S.A issued US$20 million
of its common stock, which we partially subscribed. During the second half of
1996, Sociedad Anonima Vina Santa Rita S.A 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 Sociedad Anonima Vina Santa Rita S.A 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, Sociedad Anonima Vina Santa Rita S.A. 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, 2002, Cristalchile
and Liberty Media Corporation each owned 50% of Cordillera Comunicaciones
Ltda.

During 2001, Sociedad Anonima Vina Santa Rita S.A 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,
2002, Cristalerias owned 54.1% of Sociedad Anonima Vina Santa Rita S.A's
outstanding shares and the Elecmetal Group, as a whole, held a 77.6% interest
in Sociedad Anonima Vina Santa Rita S.A.

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 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

-16-

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. of 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:

* 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

* 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:

* 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;

* to promote the wider use of glass containers in Chile; and

* 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:

* 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;

* 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

* to strengthen the market position of Sociedad Anonima Vina Santa
Rita S.A 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 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

-17-

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.

-18-

I. Packaging Operations

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 the Chilean customer (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): 1998 1999 2000 2001 2002
----------------------- ---------- ---------- ---------- ---------- ----------

Product Sector:
Wine 62.9% 61.7% 60.1% 59.2% 61.8%
Beer 11.3% 11.0% 10.7% 14.1% 14.9%
Non-alcoholic beverages 10.9% 12.2% 16.3% 14.9% 13.0%
Liquor 9.0% 10.4% 9.4% 8.3% 7.5%
Food 4.9% 3.7% 2.7% 2.7% 2.2%
Pharmaceuticals 1.0% 1.0% 0.8% 0.8% 0.6%
----- ----- ----- ----- -----
TOTAL 100% 100% 100% 100% 100%

_________________
(1) Each respective year ends December 31.

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 Vina Sociedad Anonima Vina Santa Rita S.A

o Vina San Pedro S.A., and

o Vina Santa Carolina S.A.

These companies account for approximately 61% of total wine sales in
Chile. 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 168% between 1997 and 2002, representing
50.4% of the our unit sales in 2002.

-19-

In 2002, the number of cases of wine in glass bottles exported by
Chilean winemakers rose by 5.6% (21.4 million in 2001 to 22.6 million in
2002). Net sales increased by 2.3% (US$511 million in 2001 and US$522 million
in 2002). The four leading vineyards and their subsidiaries experienced an
aggregate increase in exported sales volume of 7.5%, while the remaining wine
producers' export volume increased by 3.6%. For 2002, primary destinations of
Chilean bottled wine exports included the United States (27.1%), the United
Kingdom (24.0%), Japan (4.7%), Denmark (4.1%), Holland (4.1%), Sweden (4.0%),
Finland (3.9%), Germany (3.7%), Canada (2.9%), Ireland (2.7%), Belgium (2.5%)
and Brazil (2.2%).

The following table shows the growth of Chilean non-bulk wine
exports:

YEAR (1): 1998 1999 2000 2001 2002
-------------------------- ---------- ---------- ----------- ---------- ----------

Export Cases
Glass bottles (2) 18,265 18,043 20,596 21,416 22,622
Other containers (3) 392 852 1,000 1,631 1,878
------ ------ ------ ------ ------
TOTAL 18,657 18,895 21,596 23,047 24,500

_________________
(1) Each respective year ends December 31.
(2) In thousands of cases containing 9 liters each.
(3) In thousands of cases containing nine one-liter tetra pack containers.
Source: Chilean Export Association.

We believe that approximately 79.1% of our sales of wine bottles in
2002 were attributable to wine exports. Nevertheless during 2002, we continued
to introduce glass containers specially developed for the domestic market for
family, table and fine wines, where the 1.5 liter screw-top bottle stands out.

The following table shows the number of units we sold and net sales
related to the wine sector for the periods indicated:

YEAR (1): 1998 1999 2000 2001 2002
---------------------- --------- --------- --------- --------- ---------

Units (2) 225,247 241,107 273,744 289,855 308,635
Net Sales (3) Ch$30,469 Ch$32,899 Ch$36,978 Ch$40,110 Ch$43,904

_________________
(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 pesos.

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 85.8%, 7.2% and
7.0% of the non-alcoholic beverage market in 2002, respectively (85.5%, 7.4%
and 7.1% in 2001).

We estimate glass containers represented approximately 14.86% of the
Chilean non-alcoholic beverage container market, as measured by liters of
beverages sold during 2002 (15.09% during 2001).

In 2002, the demand for soft drinks grew by approximately 2.3% over
2001. Approximately 14% of the Chilean market for soft drinks, measured in
liters, was bottled in glass containers (14% in 2001). The remainder was
bottled in PET bottles and one-way aluminum cans.

-20-

In 2002, the demand for mineral water remained flat with respect to
2001. Approximately 18.7% of the Chilean market for mineral water, measured in
liters, was bottled in glass containers (20.0% in 2001). The remainder was
bottled in PET and one-way PVC containers.

In 2002, the demand for fruit-based juices remained flat with
respect to 2001. Approximately 21.5% of the Chilean market for fruit-based
juices, measured in liters, was bottled in glass containers (21.0% in 2001).

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) 1998 1999 2000 2001 2002
----------------------- ---------- ---------- ----------- ----------- ------------

Units (2) 62,374 74,444 128,945 115,910 119,169
Returnable 18,472 15,892 18,426 18,208 15,972
Non-Returnable 43,902 58,552 110,519 97,702 103,197
Net sales (3) Ch$ 5,277 Ch$ 6,531 Ch$ 10,038 Ch$ 10,074 Ch$ 9,210

___________________
(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 of constant pesos.

Beer

During 2002, there was no change in terms of per capita consumption
of beer in Chile. Nevertheless, unit sales of non-returnable bottles posted a
strong growth of 24.8%, due to an increase in the share of non-returnable
containers in total containers used for beer. On the other hand, returnable
bottles sales decreased by 13.0% in 2002 with respect to 2001 in unit terms as
a result of the launching of new formats effected during the previous year.

As a whole, demand for glass containers in the sector rose during
2002. Our net sales to the beer sector grew by approximately 10.5% during
2002. As a result, net sales to the beer sector increased from 14.1% of our
net sales in 2001 to 14.9% in 2002.

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): 1998 1999 2000 2001 2002
----------------------- -------- -------- -------- --------- ----------

Units (2) 58,579 54,882 69,859 88,728 104,108
Returnable 14,157 19,458 13,402 17,532 15,247
Non-Returnable 44,422 35,424 56,457 71,196 88,861
Net sales (3) Ch$5,491 Ch$5,835 Ch$6,588 Ch$9,583 Ch$10,591

___________________
(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 pesos

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 fell by 5.8% during 2002 because
pisco producers increased prices, which resulted in lower consumer demand for
pisco.

-21-

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): 1998 1999 2000 2001 2002
--------------------- -------- --------- ---------- ---------- ----------

Units (2) 43,213 53,827 54,183 50,483 48,285
Net Sales (3) Ch$4,382 Ch$5,569 Ch$5,798 Ch$5,631 Ch$5,306

___________________
(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 pesos.

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): 1998 1999 2000 2001 2002
------------------- ---------- ---------- ---------- ----------- ----------

Units (2) 39,127 30,400 23,848 26,051 22,693
Net sales (3) Ch$2,358 Ch$1,959 Ch$1,640 Ch$1,840 Ch$1,591

In general, the use of glass containers for packaging food is
significantly less in Chile than in more developed economies. In 2002, net
sales for the packaged food container sector decreased by 13.5% over 2001,
while unit sales decreased about 12.9%. This decrease was due to adjustments
experienced by this market and due to a lower demand of containers for food
exports.

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 0.6% of our net sales
of glass containers in 2002. In 2002, net sales for this segment decreased by
12.5%.

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): 1998 1999 2000 2001 2002
-------------------- --------- --------- --------- --------- ---------

Units (2) 12,376 14,449 13,115 13,049 8,918
Net Sales (3) Ch$481 Ch$529 Ch$480 Ch$520 Ch$454

_________________
(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 pesos.

Plastic Containers

As of December 31, 2002, we had a 50.0% interest in Envases
CMF S.A., a company engaged in the production of plastic containers, caps and
crates. Envases CMF manufactures a variety of

-22-

plastic containers for such industries as non-alcoholic beverages, edible
oils, wine, cleaning products, chemicals, lubricants, and agricultural
business. During 2002, new formats were developed for wine, soft drinks,
mineral water and juice.

In 2002, Envases CMF completed concentrating operations at a single
plant, increasing the facility's size from 15 thousand to 23 thousand square
meters. This reorganization was completed in July 2002 and improved Envases
CMF's operating efficiency, and productivity. Profitability also improved as a
consequence of a better sales mix.

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. Envases CMF was certified under ISO
9001 in 2001.

The following table sets forth the volumes sold by Envases CMF and
the related net sales revenues for the periods indicated:

YEAR (1): 1998 1999 2000 2001 2002
----------------------- ---------- ------------ ------------ ------------ ------------

Metric Tons (2) 7,382 9,064 9,553 19,272 24,147
Net Sales (3)(4) Ch$9,638 Ch$10,699 Ch$13,004 Ch$27,729 Ch$35,329
Net Profit Ch$58 Ch$501 Ch$625 Ch$1,893 Ch$2,550

________________
(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. Year 2002 considers operations for both companies during the whole
period.
(4) Net sales and net profit are set forth in millions of constant pesos.

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 Coca-Cola system bottlers in Chile. Envases CMF's
principal customers are the Coca-Cola bottlers, who in 2002, accounted for
approximately 71% of net sales.

During 2002, Envases CMF's sales measured in tons decreased compared
with aggregated sales of Crowpla Reicolite S.A. and Multipack sales for 2001
(24,147 tons in 2002 vs. 25,389 tons in 2001). This decrease is due to the
strategy followed for preform exports to Latin America, where the region's
credit risk did not allow the company to maintain volumes reached in year
2001. The sales decline was compensated with the development of some formats
like the 2.0 lts. and 5 lts. PET bottles for family wines, which were readily
accepted by the country's main wineries and returnable formats for soft drinks
due to the introduction in Chile of a 2.5lt wide-neck returnable bottle for
Coca-Cola. Volume sales of returnable PET bottles grew by 17.7% over 2001.
Sales of non-returnable bottles for the soft drink market decreased by 6.2%,
while non-returnable preforms grew by 8.0%. The latter is explained by the
fact that one of the main clients from the Coca-Cola system switched from
buying bottles to preforms. PET bottles sales for the juice market decreased
by 19.2%, while PET bottle sales for cooking oils decreased by 6.4%.

During 2002, total sales in the plastic container business totaled
Ch$35,329 million. Despite achieving lower sales in tons, we had better
results due to a better sales mix, with higher-margin products, and due to
higher operating efficiency resulting from concentrating all production in a
single plant.

-23-

Customers

In 2002, 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 2002.
Sales to our leading ten customers accounted for approximately 67% of our net
sales in 2002. The three largest customers, Vina Concha y Toro, Vina San Pedro
and Sociedad Anonima Vina Santa Rita S.A., accounted for approximately 36% of
the our net sales of glass containers for 2002. Sales of wine bottles to
Sociedad Anonima Vina Santa Rita S.A, an affiliate controlled by us, accounted
for 8.9% of our net sales in 2002.

Generally, we do not enter into long-term supply contracts with our
main clients, but does 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.

ISO 9001:2000

In order to strengthen the ongoing improvement process and to comply
with higher demands of quality and customer service, in July 2002, we were
certified under norm ISO 9001:2000 for "Design, production and
commercialization of glass packaging and commercialization of special
packaging". The reputed international institution Bureau Veritas Quality
International (BVQI) conducted the audit for our Quality Management System.
This certification is accredited by ANSI*RAB in the United States of America
and by UKAS in the European Community.

Capital Expenditure Program

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. For 2000, 2001 and 2002, we invested
US$21.3 million, US$33 million and US$14.3 million respectively. We estimate
that we will invest an additional US$25.8 million during 2003, since furnace B
is to be rebuilt and a new production line for this furnace is to be added.
Over the next five years, we expect to invest approximately US$5 million to
US$7 million per year in the glass container business in general plant
improvements.

In 2002, we invested US$14.3 million in fixed assets in the glass
container business. This figure included US$6.5 million associated with the
partial refurbishing of furnace A and its packaging-forming machines, which
now has an annual production capacity of 50,000 tons.

In 2002, Sociedad Anonima Vina Santa Rita S.A invested US$5.7
million mainly in agricultural and oenologic areas. In the agricultural area,
Sociedad Anonima Vina Santa Rita S.A maintained its fine varieties plantings
and the development of an extensive technified irrigation system in its
planted areas. 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 S.A. These investments were aimed at
increasing and renovating the fine winemaking facilities and increase fine

-24-

wine storage capacity. In 2002, Sociedad Anonima Vina Santa Rita S.A began
operating a new distribution center and a new productive and storage facility,
both under long-term lease contracts. The distribution center is located in
San Bernardo (Metropolitan Region) and has more than 800 square meters. The
winemaking and storage facility is located in Quinta de Tilcoco, has a 4.8
million liter capacity and is destined for the production of premium wines.

In 2002, Envases CMF invested approximately US$2.4 million in new
injection-molding equipment and blow-up machinery.

SOFOFA Award 2002: Outstanding Industry

In October 2002, we were granted the "2002 Outstanding Industry
Award" by the Sociedad de Fomento Fabril (SOFOFA), a Chilean Chamber of
Commerce, in recognition of our contribution to the country's industrial and
export developments. Our significant investments in and our incorporation of
state-of-the-art technology, innovative environmental solutions, compliance
with most demanding quality standards, as well as our continued support of
professional development and personnel welfare were highlighted.

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 estimated total
capacity of 50,000 to 60,000 metric tons per year. Other significant current
competitors are 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
2003 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.

The plastics industry is highly competitive. There is one competitor
in the production of PET bottles for non-alcoholic beverages. This bottler
uses in-house production facilities to satisfy its own needs and may at times,
sell excess capacity to third parties. In addition, there is a variety of
smaller privately-owned companies that manufacture PET containers. Our
principal competitors in the production of plastic containers for detergents,
lubricants, foods and other products are a variety of privately-owned
companies, whose presence makes the market for plastic container products
highly competitive.

-25-

New Products--Research and Development

We seek to provide our 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.

Raw Materials

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. 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 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 preceding ten years, we have not experienced any
significant difficulties in obtaining adequate supplies of necessary raw
materials at satisfactory prices.

The use of recycled glass in the manufacturing process offers
environmental and cost advantages over the use of other raw materials. In
2002, approximately 35% 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.

The main raw materials used in the manufacture of plastic containers
are plastic resins (PET and HDPE) imported from a variety of suppliers who are
selected on the basis of competitive terms.

In the case of Sociedad Anonima Vina Santa Rita S.A, 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.A'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. Sociedad Anonima Vina Santa Rita S.A's objective is to grow nearly
50% of the grape supply for its premium wines by year 2007. Currently,
Sociedad Anonima Vina Santa Rita S.A enters into purchase contracts with local
growers to ensure the company has sufficient amounts of fine quality grapes to
be used in the Sociedad Anonima Vina Santa Rita S.A's wine production. In
2002, approximately 40% of Sociedad Anonima Vina Santa Rita S.A's grapes were
obtained from these contracts, while another 40% were obtained from Sociedad
Anonima Vina Santa Rita S.A's own vineyards and an additional 20% was
purchased at market. These purchase contracts obligate Sociedad Anonima Vina
Santa Rita S.A to purchase the grapes harvested only to the extent that meet
specific quality standards.

As of December 31, 2002, Sociedad Anonima Vina Santa Rita S.A owned
1,811 planted hectares, and leased an additional 326 planted hectares under
long-term contracts -- totaling 2,137 planted hectares. Of this total, 1,906
hectares are located in Chile (1,001 hectares in the Maipo valley, 400
hectares in the Rapel valley, 193 hectares in the Curico valley and 312
hectares in the Casablanca valley)

-26-

and 231 planted hectares are located in Argentina (176 hectares un Ugarteche
and 55 hectares in Tupungato). In addition, Sociedad Anonima Vina Santa Rita
S.A and its subsidiaries own 866 hectares of land, of which 376 hectares are
located in Chile and 490 hectares are located in Argentina.

Prices of raw materials such as grapes are volatile since they
depend on climate 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.

Patents and Licenses

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, 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 Inc.
The agreement may be terminated by Owens Illinois if we default in our
obligations or certain events occur constituting a change in control of our
company. This advisory relationship is representative of our and 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 the 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, social security laws, public health
laws, consumer protection laws, environmental laws, securities 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, the controlling
shareholders of a publicly traded corporation can 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 a period
starting 90 days before the proposed transaction and ending 30 days before such

-27-

proposed transaction, 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.

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. We also 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 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.

-28-

II. Sociedad Anonima Vina Santa Rita S.A Winery

General

In 2002, Sociedad Anonima Vina Santa Rita S.A was the leader 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). We have a 54.1%
interest in Sociedad Anonima Vina Santa Rita S.A as of December 31, 2002.

From 1992 to 1996, Sociedad Anonima Vina Santa Rita S.A's sales
increased marginally, largely as a result of increasing sales to the export
markets. From 1998 to 2002, Sociedad Anonima Vina Santa Rita S.A's total net
sales have increased at an average annual rate of approximately 7.4%, largely
as a result of the significant growth in exports of bottled wines.

The following table sets forth certain financial information
regarding Sociedad Anonima Vina Santa Rita S.A for the periods indicated:

YEAR (1): 1998 1999 2000 2001 2002
---------------------------- ---------- ----------- ----------- ----------- ------------

Net Sales (2) 53,841 56,436 63,844 67,028 71,721
Cost of Sales (35,492) (37,457) (40,720) (41,383) (44,557)
Gross Margin 18,349 18,979 23,124 25,645 27,165
SG&A Expenses (10,146) (10,929) (13,323) (14,129) (15,535)
Operating Income 8,204 8,049 9,800 11,516 11,630
Non-operating Income (loss) (1,657) (2,550) (2,263) (2,345) 25
Net Income 5,715 5,130 6,388 7,437 9,263
Total Assets 80,432 93,250 97,013 118,008 122,079
____________________
(1) Each respective year ends December 31.
(2) Figures are set forth in of constant pesos.

History

In 1980, the Claro Group and Owens-Illinois Inc., the world's
leading glass bottle producer, acquired the Sociedad Anonima Vina Santa Rita
S.A property, including its brands, the Alto Jahuel plant and 50 hectares of
vineyard adjacent to the plant.

The Claro Group invested heavily in Sociedad Anonima Vina Santa Rita
S.A in a number of areas. In production, significant investments were made in
technology, and pioneering winemaking techniques were introduced. In
1985-1986, Sociedad Anonima Vina Santa Rita S.A wines began making significant
inroads into worldwide markets. In 1987, Sociedad Anonima Vina Santa Rita S.A
acquired Vina Carmen S.A., a winery with a good reputation in the domestic
market. In 1988, the Claro Group purchased Owens Illinois' share of Vina
Sociedad Anonima Vina Santa Rita S.A and took over full control of Sociedad
Anonima Vina Santa Rita S.A. Subsequently, in 1991, Sociedad Anonima Vina
Santa Rita S.A 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, Sociedad Anonima Vina Santa Rita
S.A experienced significant expansion due to growth in its exports and the
excellent reputation that its products developed.

-29-

In July 1996, Sociedad Anonima Vina Santa Rita S.A purchased a
39.35% interest in Vina Los Vascos S.A. for approximately US$5.8 million. Vina
Los Vascos S.A. was a leader 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 Sociedad Anonima Vina
Santa Rita S.A'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 Sociedad Anonima Vina Santa Rita
S.A's common stock for Ch$4,793 million.

In September 1997, Sociedad Anonima Vina Santa Rita S.A 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 plantations, of which 80
hectares are being developed and planted and more than 90 hectares have
produced their first harvest.

In September 1999, Sociedad Anonima Vina Santa Rita S.A 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). In addition, Vina Los Vascos S.A. received a
capital investment in 1999, from by its partners (of Ch$479 million or
US$900,000).

In 2000, Sociedad Anonima Vina Santa Rita S.A increased its market
capitalization 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 is
due within 3 years of April 12, 2000.

In 2001 the board of directors of Sociedad Anonima Vina Santa Rita
S.A decided to transfer the commercial administration and its 99.9995%
ownership stake in Vina Dona Paula S.A. to Vina Carmen S.A. That same year,
Sociedad Anonima Vina Santa Rita S.A acquired the Terra Andina brand, which
has been administered through Sur Andino S.A., a subsidiary of Vina Carmen
S.A.

Sociedad Anonima Vina Santa Rita S.A 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. 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 8.6 million liters. In Palmilla, in the province of Colchagua,
Sociedad Anonima Vina Santa Rita S.A owns a modern cellar with vinification
and aging facilities for 9.9 million liters of fine red wines exclusively.
Finally, in Ugarteche, Republic of Argentina, Vina Dona Paula S.A. has a plant
with machinery and vinification systems with a capacity of 760,000 liters.
Complementarily, Sociedad Anonima Vina Santa Rita S.A has 3 winemaking and
storage plants leased with a total capacity of 18.8 million liters located at
Isla de Maipo, Quinta de Tilcoco and Cumpeo.

As of December 31, 2002, we held a 54.1% interest in Sociedad
Anonima Vina Santa Rita S.A and the Elecmetal Group, as a whole, held a 77.6%
interest in the winery.

-30-

Business Strategy

Sociedad Anonima Vina Santa Rita S.A's overall strategy is to
continue to differentiate its products from those of its competitors. Sociedad
Anonima Vina Santa Rita S.A distinguishes itself by producing and selling wine
of the highest quality in each market segment. Each element of Sociedad
Anonima Vina Santa Rita S.A's business strategy is designed to enhance its
ability to produce high quality wines of exceptional value. To implement this
strategy, Sociedad Anonima Vina Santa Rita S.A plans to do the following:

* maintain its emphasis on the production of "premium" wine through
continued investments in improved equipment and technology and
through the engagement of expert winemakers;

* control grape supply for the development of its fine wines;

* promote sales of Chilean wines in the international market through
efforts coordinated with other leading exporters of Chilean wine;
and

* maintain its dominant domestic market position of its "120" brand
and increase overall market share through market segmentation with
the introduction of new brands and products.

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 grapes (or wines) 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 the international markets offered a growth opportunity for many
Chilean wineries, resulting in a significant dedication of Chilean production
facilities to production of finer quality wines for export. In 2002, net sales
of wine exports by Chilean winemakers grew 2.4% over 2001, generating export
revenues of US$602 million.

-31-

The following table sets forth the volume of Chilean wine exports
and related net sales revenues for the periods indicated:

YEAR (1): 1998 1999 2000 2001 2002
------------------------ ---------- ---------- ---------- ---------- -----------

Liters exported (2) 230,953 234,156 264,750 308,941 348,590
Net Sales (3) US$503 US$526 US$573 US$588 US$602
_________________
(1) Each respective year ends December 31.
(2) Set forth in thousands.
(3) Set 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 Sociedad Anonima Vina
Santa Rita S.A has been a key participant in that growth. In 2002, 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 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.

Business

Since 1988, Sociedad Anonima Vina Santa Rita S.A 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, Sociedad Anonima Vina Santa Rita S.A initiated a
capital expansion and improvement program aimed at increasing both the quality
and quantity of its wines. Sociedad Anonima Vina Santa Rita S.A has invested
approximately Ch$55,501 million (US$77.2 million) in real terms since 1993,
primarily in the acquisition of new land, winemaking machinery, winery
operations and investments in Argentina. In 2002, US$5.7 million were invested
to increase Sociedad Anonima Vina Santa Rita S.A<180>s vinification capacity
(through the acquisition of sophisticated 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 Sociedad Anonima Vina Santa Rita S.A's strategic
plan and have led to significant increases in productivity.

In the last five years, Sociedad Anonima Vina Santa Rita S.A's
physical sales in liters in the domestic market have increased at an average
annual rate of 10.5%. 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 28.4% in the last 5 years. There has also been a strong marketing
strategy and the launching of new products. In 2002, case sales in the
domestic market rose by 12.8% from 2001, compared with an 11.2% increase in
sales of the market overall. Increases in case sales were achieved through the
success of the introduction of new products, such as:

o new varieties of the "Floresta" brand of fine wines;

o the "120" family brand in its new 2 liter plastic format;

o the "Late Harvest" of the "Sociedad Anonima Vina Santa
Rita S.A" brand;

o the "Bodega Uno" brand of family wines in its 2 liter
plastic format;

-32-

o the "Carmen Reserva Cabernet Sauvignon";

o the "Carmen Insigne Carmenere" brands for fine wines sold
in restaurants and specialized stores; and

o the imported "Dona Paula" in its Malbec and Chardonnay
varieties for the same destination in the category of
premium wines.

The "120" brand was complemented with its Cabernet Sauvignon Blanc
variety, and the "Triple C" brand was launched for mixed high-quality
varieties. It is noteworthy that 52% of Sociedad Anonima Vina Santa Rita S.A's
total revenues for year 2002 came from wines introduced during the last five
years. These efforts have been complemented by aggressive marketing campaigns,
in addition to the winery's recently launched web site.

In the export market, Sociedad Anonima Vina Santa Rita S.A's results
were favorable despite the recessions in the world's leading economies. Sales
measured in cases increased an average of 6.6% per year in the last five
years, while net export sales have grown 12.9% in real terms during that
period. This has been achieved by exports to more than 60 countries and higher
price levels. Export volumes for 2002 rose by 6.8% over 2001, compared with a
5.6% average increase for bottled wine exports from Chile as a whole. Our
increased sales are primarily due to a 7.3% increase in exports during 2002 to
Europe.

The following table sets forth Sociedad Anonima Vina Santa Rita
S.A's sales volume, both overall and in the domestic and export sales
individually for the periods indicated:

YEAR (1): 1998 1999 2000 2001 2002
----------------------- ----------- ----------- ----------- ----------- -----------

Domestic market
Cases (2) 4,662 4,822 5,531 6,154 6,942
Net Sales (3) Ch$30,296 Ch$31,414 Ch$33,843 Ch$32,837 Ch$32,309
Export market:
Cases (2) 1,345 1,397 1,593 1,626 1,738
Net Sales Ch$21,425 Ch$24,028 Ch$28,719 Ch$32,777 Ch$37,593
Total
Cases 6,007 6,219 7,124 7,780 8,680
Net Sales (4) Ch$51,721 Ch$55,442 Ch$62,562 Ch$65,614 Ch$69,902
__________________
(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.

Sociedad Anonima Vina Santa Rita S.A offers a broad selection of
wines in the premium and popular wine segments of the table wine market. For
the export market, Sociedad Anonima Vina Santa Rita S.A produces and markets
wines under the following brand names: Casa Real, Medalla Real, Reserva, "120"
(used for premium and popular wines), 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, Bodega Uno, Frizz,
Hermanos Carrera, Tolten, Floresta and the Carmen product line.

Each of these brands is factored into Sociedad Anonima Vina Santa
Rita S.A's overall domestic and international marketing strategy. In the
domestic market, Sociedad Anonima Vina Santa Rita S.A'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,
Sociedad Anonima Vina Santa

-33-

Rita S.A has joined other Chilean producers in an advertising effort to
promote the price-quality value of Chilean wines. In addition, Sociedad
Anonima Vina Santa Rita S.A has concentrated its efforts on affluent countries
that recognize and value quality wines, including the United States, Great
Britain, Canada, Denmark and Germany, among others. This strategy has enabled
Sociedad Anonima Vina Santa Rita S.A to raise prices higher than the rest of
the industry, with prices of US$30.6 per case, 32% higher than the Chilean
industry average of US$23.1 per case during 2002.

The export market includes exports of Sociedad Anonima Vina Santa
Rita S.A, Vina Carmen S.A. and Sur Andino. The Carmen brand was purchased in
1987 and has been a 99.9% subsidiary of Sociedad Anonima Vina Santa Rita S.A
since 1992. Vina Carmen S.A.'s production is almost exclusively targeted to
the export market. Vina Carmen S.A. 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 S.A. increased
an approximate 5.2% in 2002.

The marketing of Sociedad Anonima Vina Santa Rita S.A wines varies
according to the market segments. In the domestic market, all marketing is
coordinated with its own sales force of more than 72 salespeople, working in
the main office in Santiago and in eight locations throughout Chile. In the
international market, a network of exclusive distributors located in each of
the markets where the wine is exported coordinate all international sales.

During 2002, Sociedad Anonima Vina Santa Rita S.A employed 1,292
people.

Vineyards and Winemaking

Sociedad Anonima Vina Santa Rita S.A'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). In 2002, there were no cases of phylloxera
in Chilean vineyards.

An essential component in the quality of the wine is strict
supervision of the grapes and vineyards. Sociedad Anonima Vina Santa Rita
S.A'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 Sociedad Anonima Vina Santa Rita S.A'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. Sociedad Anonima Vina Santa Rita S.A's objective is to
grow nearly 50% of the grape supply for its premium wines by 2007. As of
December 31, 2002, nearly 38% of the grape supply for Sociedad Anonima Vina
Santa Rita S.A's premium wines came from its own vineyards.

As of December 31, 2002, Sociedad Anonima Vina Santa Rita S.A and
its subsidiaries owned 1,811 hectares, and in addition it has 326 hectares
under long-term contracts, totaling 2,137 planted hectares. Out of this total,
906 hectares are located in Chile (1,001 hectares in the Maipo valley, 400
hectares in the Rapel valley, 193 hectares in the Curico valley and 321
hectares in the Casablanca valley); and 231 in Argentina (176 hectares in
Ugarteche and 55 hectares in Tupungato). In addition, Sociedad Anonima Vina
Santa Rita S.A owns 866 hectares of land, of which 376 are located in Chile
and 490 in the province of Mendoza, Republic of Argentina. Sociedad Anonima
Vina Santa Rita S.A believes that diminished dependence on grapes purchased
from third parties will significantly reduce its costs and enhance the
profitability of operations.

-34-

The following table sets forth the planted vineyards owned by
Sociedad Anonima Vina Santa Rita S.A and subsidiaries for the periods
indicated:

2001(2) 2002(2)
------------------------------ -------------------------------
Location (1) Acres Hectares Acres Hectares
------------------------------- ----------- -------------- ------------- -------------

Maipo Valley 2,439 987 2,472 1,001
Rapel Valley 909 368 988 400
Casablanca Valley 771 312 771 312
Curico Valley 393 159 477 193
Ugarteche (Argentina) 435 176 435 176
Tupungato (Argentina) 136 55 136 55
------ ------ ------ ------
TOTAL 5,083 2,057 5,279 2,137
_________________
(1) Sociedad Anonima Vina Santa Rita S.A 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.

III. Media and Communications

General

In accordance with the 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 98.2%
interest in Comunicacion, Informacion, Entretencion y Cultura S.A., 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 El Diario Financiero, a Chilean financial
newspaper; (ii) a 49.9% interest in 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 30.4% market share as measured by number of
subscribers.

The following chart illustrates our interests in the Chilean
communications and media sectors on December 31, 2002:

-------------
| ELECMETAL |
-------------
|
| 52.1%
|
-----------------------------
-------------------| Crisaleris de Chile S.A. |----
| ----------------------------- |
| 99.9% | 98.3%
| |
------------------------ ----------------
| Cristalchile | | CIECSA S.A. |
| Communicationes S.A. |--- ----------------
------------------------ | |
| | |
| 50.0% | |
| | 0.25% |
----------------------- | ------------------------------------------
| Cordillera Holding | | | | | |
| Communicaciones Ltda | | | 99.9% | 49.9% | 81.5% | 50.0%
------------------------ | | | | |
| | -------------- ----------- ---------- --------------
| 99.5% | | Megavision | | Zig-Zag | |Simetral| | Ediciones |
| | | | | S.A. | | S.A. | | Chiloe S.A.|
------------------------ | -------------- ----------- ---------- --------------
| Cordillera |--- |
| Communicaciones Ltda | | 74.8%
------------------------ |
| -------------------
| 99.99% | Ediciones |
| | Financieras S.A.|
---------------------------- -------------------
| Metropolis-Intercom S.A. |
----------------------------

-35-

Television Broadcasting and Other Media

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 communications 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 67 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 the 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 our 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. and the remaining 49% by Televisa.
Red Televisiva Megavision S.A.'s ownership structure remained

-36-

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$4.8 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 Grupo
Televisa, S.A. de C.V. of Mexico 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. of 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$3.8
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$ 4.6 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 S.A. and Ediciones Financieras
S.A. to Recoletos Chile Ltda., leaving Comunicacion, Informacion, Entretencion
y Cultura S.A. and Recoletos (Chile) Ltda. with a 50% ownership interest in
Ediciones Chiloe S.A. Comunicacion, Informacion, Entretencion y Cultura S.A.
does not maintain a direct stake in Ediciones Financieras S.A. However,
Ediciones Chiloe S.A. has a 74.8% stake in Ediciones Financieras S.A.

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.

Cable Business

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.

-37-

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 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, a web site was developed to improve communication with
customers, and Metropolis-Intercom S.A. began to charge customers for the
monthly programming magazine. The "Pay Per View" system was also established,
which allows customers to watch movies at peak times.

-38-

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 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 transactions for a total amount of US$ 270 million. As of December
31, 2000, Cristalchile and Liberty Media Corporation each owned 50% of
Cordillera Comunicaciones Ltda. 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.

Metropolis-Intercom S.A. provides cable television services in the
Metropolitan Region of Santiago and in the Fifth Region, and in the cities of
Iquique, Rancagua, Los Angeles, Temuco, Valdivia and Puerto Montt; as well as
high-speed internet services in Santiago. Its market share in the cable TV
business is around 35% at the national level, while in the city of Santiago it
reaches approximately 52%. In the broadband internet business despite having
only 2 years of operations, its market share reaches approximately 15%.

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 2002
(including satellite television). Despite this growth, the market is far from
saturated. In Chile, approximately 23% of all homes and 21% of homes passed
are connected to cable television, compared to 67.4% and 70.0% respectively in
the United States. In Argentina 50% of homes passed are connected to cable
television.

During 2002, Metropolis-Intercom increased high-speed internet
services customers by 86%, ending the period with 23,500 clients. In the cable
TV business we were affected by a high rate of unemployment, by strong
competition and by weakening of the Chilean peso. In year 2002 Metropolis
registered a net customer loss which originated mainly during the first half
of the year. The weakening of the Chilean peso resulted in programming cost
increases, which was partially transferred to prices. Therefore, average fees
raised compared with 2001. The period ended with 239,000 subscribers in the
basic service. However, in spite of the ceasing of operations of the PSN
premium sports channel, Metropolis managed to keep a significant number of
premium customers reaching 31,500 subscribers towards the end of the year, and
a growing number of digital service premium subscribers.

In 2002, we focused our efforts in the internet business, in
improving our information systems, in re-orienting various processes towards a
better customer service and in an aggressive rationalization and
cost-reduction program.

-39-

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; (ii) they can be provided only within Chile; and (iii) they
cannot provide access to or from public telecommunications networks.

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.

Broadcast Television

Red Televisiva Megavision S.A. is a television network that offers a
full array of broadcast services. Approximately 54.9% of Red Televisiva
Megavision S.A.'s air time is currently dedicated to syndicated programming,
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.

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 26.1% during 2002 (19.1%
in 2001)[2]. Red Televisiva Megavision S.A.'s programming has enabled it to
maintain a stable audience share of approximately 21.5% over the last five
years.

_________________

[2] Measured between 7:30AM and 1:30AM, (i.e.: 18 hours daily) from Monday
through Sunday.

-40-

The following table sets forth Red Relevisiva Megavision's monthly
audience share:

Monthly Audience Share (1)
----------------------------------------------------------------------------------------------------------------------
Annual
Jan. Feb. Mar Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Avg.
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------

1995 20.5 27.2 22.3 21.4 23.4 22.4 21.5 23.4 20.6 19.0 20.5 20.3 21.3
1996 21.4 27.4 19.0 17.2 16.5 17.8 19.0 19.9 20.8 19.4 19.4 17.3 19.5
1997 17.7 21.6 18.4 17.0 16.8 17.6 16.8 16.4 17.4 18.9 18.9 19.7 18.0
1998 21.9 32.7 24.1 23.8 22.8 26.2 22.0 20.5 21.3 20.3 20.3 22.1 23.1
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

________________
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 year 2002 measured between 7:30a.m. and 1:30 a.m.

During 2002, the Chilean TV industry grew by approximately 8%. Red
Televisiva Megavision S.A. amply surpassed that figure increasing net sales by
47.9% in 2002, reaching Ch$24,557 million, from Ch$16,606 million in 2001.
Higher sales and improved programming produced an operating profit during the
year of Ch$5,965 million, compared with Ch$654 million in 2001. Red Televisiva
Megavision S.A. reported a net profit of Ch$3,671 million in 2002, compared
with a Ch$695 million net loss during 2001.

The following table sets forth the relative audience share of
Chilean television broadcasters in the Santiago Metropolitan Region for the
periods indicated:

Relative Audience Share (1)

BROADCASTERS 1998 (2) 1999 (2) 2000 (2) 2001 (3) 2002 (3)
------------------------- ----------- ----------- ----------- ----------- -----------

Channel 2 2.1 2.3 1.6 1.1 1.1
Channel 4 3.9 5.6 8.6 9.1 8.9
Channel 5 1.9 1.3 1.2 1.1 1.0
Channel 7 29.8 30.0 28.7 31.0 29.1
MEGA 23.1 19.8 19.3 19.1 26.1
Channel 11 10.2 12.3 12.7 12.2 12.2
Channel 13 29.0 28.6 28.0 26.4 21.6
-------- -------- -------- -------- --------
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 Monday through Sunday, from 7:30 a.m. to 1:30 a.m.

Publishing

Our publishing operations are conducted through Comunicacion,
Informacion, Entretencion y Cultura S.A., which as of December 31, 2002, had a
49.9% interest in Zig-Zag S.A. 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,
2002, Ediciones Chiloe S.A. had a 74.8% interest in Ediciones Financieras
S.A., which publishes El Diario Financiero, a Chilean financial newspaper that
enjoys nationwide circulation. During 2002, Ediciones Chiloe S.A. and

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Zig-Zag S.A. recorded a net loss of Ch$89 million and a net profit of Ch$85
million respectively, as compared to a net profit of Ch$16 million and a net
profit of Ch$134 million in 2001, respectively.

Description of Property

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 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
mechanically 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.

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.

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 Apoquindo and Gertrudis Echenique in
Santiago. Sociedad Anonima Vina Santa Rita S.A owns two floors (the 6th and
7th) of the neighbouring Edificio Metropolis to house its respective central
administrative offices.

Sociedad Anonima Vina Santa Rita S.A owns six production plants. Its
principal facilities are located in Alto Jahuel (Buin) and the others are in
Los Lirios (Rancagua); Pirhuin (Lontue) and Palmilla (Colchagua). Vina Carmen
S.A.'s facilities are located North of Sociedad Anonima Vina Santa Rita S.A in
Alto Jahuel; and Vina Dona Paula's facilities are located in Ugarteche in the
province of Mendoza, Argentina.

In 1992, Sociedad Anonima Vina Santa Rita S.A purchased the original
Hacienda Sociedad Anonima Vina Santa Rita S.A 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 style. Sociedad Anonima Vina Santa Rita S.A has remodeled the manor
and refurbished the grounds for use as a guesthouse and business retreat. In
addition, during the third quarter of 1997, Sociedad Anonima Vina Santa Rita
S.A incorporated a subsidiary in Argentina, Dona Paula, which at the time,
included acquiring approximately 800 hectares of land in the Mendoza province.

In March of 1997, Crowpla Reicolite S.A. began operating a new
15,000-square meter plant in Pudahuel on the outskirts of Santiago. After the
joint venture agreement with Embotelladora Andina S.A., Envases CMF S.A.
centralized during 2002 its production and operations in a single facility.
Red Televisiva Megavision S.A. operates its television broadcasting station
from wholly-owned facilities on Av. Vicuna Mackenna, in Santiago.

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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 39
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 Sociedad Anonima Vina Santa
Rita S.A, Comunicacion, Informacion, Entretencion y Cultura S.A., Cristalchile
Comunicaciones S.A. and Constructora Apoger S.A., respectively.

In April 1997, January 1998, July 1999, December 2000 and June 2001,
we increased our interest in Comunicacion, Informacion, Entretencion y Cultura
S.A. to 88.84%, 91.61%, 96.6%, 98.1% and 98.2%, respectively. In January 1996,
we increased our interest in Cristal Owens Plasticos S.A. and in Reicolite to
99.99%, and subsequently merged them to form Crowpla Reicolite S.A., which
commenced joint operations in January 1997. Then in June 2001, Crowpla
Reicolite S.A. entered into a joint venture with Envases Multipack S.A., thus
creating the 50% owned Envases CMF S.A. In August 1996 and August 1999, we
increased our ownership interest in Sociedad Anonima Vina Santa Rita S.A to
51.5% and 56.1%, respectively, but in August 2000, we decreased our ownership
interest to 54.10%. In August 2002, Comunicacion, Informacion, Entretencion y
Cultura S.A. increased its stake in Red Televisiva Megavision S.A. to 99.99%.

The results of the 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
sectors, has experienced growth during recent years, which has resulted in
increased overall demand for our packaging products. Sales of wine bottles
accounted for 61.8% of net sales of our glass containers during 2002, and
59.2% of net sales during 2001. 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 the our Chilean customers and the
price of Chilean exports packaged in the our containers and of Sociedad
Anonima Vina Santa Rita S.A's wines may become less attractive to purchasers
of these exports.

During the last several years, our packaging operations have
experienced a concentration in sales to 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

-43-

competition from non-glass containers comprised mostly of plastic substitutes.
Over the same period, Sociedad Anonima Vina Santa Rita S.A'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): 2000 2001 2002
--------------------------- ---------- ----------- -----------
Product Sector
Wine 60.1% 59.2% 61.8%
Beer 10.7% 14.1% 14.9%
Soft Drinks 16.3% 14.9% 13.0%
Liquor 9.4% 8.3% 7.5%
Food 2.7% 2.7% 2.2%
Pharmaceuticals 0.8% 0.8% 0.6%
TOTAL 100% 100% 100%
___________________
(1) Each respective year ends December 31st.

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
2000 2001 2002
------------------ ---------------------- -----------------------
Ch$ % Ch$ % Ch$ %
--------- ------- ---------- --------- ---------- ---------

Glass Packaging 61,522 41.2 67,757 46.3 71,057 44.1
Wine (Sociedad Anonima Vina Santa Rita S.A) 63,844 42.7 67,028 45.9 71,721 44.5
Media & Communications (Comunicacion, 15,949 10.7 16,606 11.4 24,815 15.4
Informacion, Entretencion y Cultura S.A.)
Plastic Packaging (Envases CMF) 13,004 8.7 --(3) -- --(3) --
Real Estate (Apoger) 415 0.3 1,169 0.8 --(4) --
Adjustment (2) (5,422) (3.6) (6,373) (4.4) (6,536) (4.1)
-------- ----- -------- ------ -------- -----
TOTAL 149,311 100.0% 146,187 100.0% 161,057 100.0%
======== ===== ======== ====== ======== =====
__________________
(1) Figures include the our participation in the results of our subsidiaries
accounted for under the equity method of accounting for those periods
prior to the dates that results of such subsidiaries were consolidated.
(2) 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.
(3) Year 2001 and 2002 sales are not consolidated since our stake in Envases
CMF is 50%.
(4) Constructora Apoger S.A. did not have any sales in 2002 because 100% of
its office space was sold by 2001.

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The following table sets forth certain financial information as a
percentage of our net sales for the periods indicated:

Year ended December 31,
------------------------------------------------
YEAR: 2000 2001 2002
--------------------------------------------- -------------- --------------- ---------------

Net Sales (1) ............................. 149,311 146,187 161,057
Net Sales ................................. 100% 100% 100%
Cost of Sales (1) ......................... 93,531 90,086 94,778
Cost of Sales ............................. (62.6) (61.6) (58.8)
Gross Margin .............................. 37.4 38.4 41.2
Selling & Administrative expenses (1) ..... 24,003 22,538 24,669
Selling & Administrative expenses ......... (16.1) (15.4) (15.3)
Operating income .......................... 21.3 23.0 25.8
Non-operating income (loss) ............... (4.8) (6.0) (8.1)
Equity in net income (loss) of related .. (1.9) (5.2) (5.5)
companies
Interest income (expense), net .......... (0.4) (2.9) (2.7)
Other non-operating income (expense), net (0.6) 2.8 (1.7)
Price-level restatement ................. (1.8) (0.7) 1.9
Income tax ................................ (2.6) (3.5) (4.0)
Extraordinary items ....................... -- 1.3 --
Minority interest ......................... (2.2) (2.2) (2.8)
Net Income (1) ............................ 18,098 18,304 17,661
------ ------ ------
Net Income ................................ 12.1% 12.5% 11.0%
____________________
(1) Set forth in millions of constant pesos of December 31, 2002 purchasing power.

Critical Accounting Policies and Estimates

Financial Reporting Release No. 60, which was released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation
of the financial statements. Critical accounting policies are defined as those
that are reflective of significant judgments and uncertainties, which would
potentially result in materially different results under different assumptions
and conditions. 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. In
addition, financial Reporting Release No. 61 was recently released by the
Securities and Exchange Commission to require all companies to include a
discussion to address, among other things, liquidity, off-balance sheet
arrangements, contractual obligations and commercial commitments.

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.

-45-

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, plant, equipment, investments
in other companies, intangible and other assets. Factors we consider important
which could trigger an impairment review include the following:

* significant underperformance relative to expected historical or
projected future operating results;

* significant changes in the manner of use of the acquired assets or
the strategy for our overall business; and

* 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$157,149 million as of December 31, 2002 and Ch$155,646 million
as of December 31, 2001. During 2002, 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 this
analysis showed that the goodwill in consolidated subsidiaries was not
impaired because estimated future discounted cash flows were sufficient to
recover goodwill. Net goodwill amounted to Ch$9,142 million and
Ch$9,725million as of December 31, 2001 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.

-46-

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$114,903 million and Ch$109,653
million as of December 31, 2001 and 2002, respectively.

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, 2002. 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$722 million and Ch$2,827
million as of December 31, 2001 and 2002, respectively.

Fair value of Financial Derivative Instruments

Our financial derivative instruments consist of short duration
foreign currency forward exchange contracts to purchase U.S. dollars and sell
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 significantly. The net liability related to forward contracts was
Ch$2,813 million and Ch$622 million as of December 31, 2001 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
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

-47-

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. As of December 31, 2002, financial statements of Rayen Cura
S.A.I.C. include recognition of an exchange rate of 3.32 Argentine pesos per
U.S. dollar. The subsidiary Cristalchile Inversiones S.A. adjusted financial
statements of Rayen Cura S.AI.C. as of December 31, 2002, to recognize the
devaluation of the Argentine peso, that went from 1.7 to 3.32 Argentine pesos
per U.S. dollar.

The accounting charge to results as a consequence of the devaluation
of the Argentine peso was Ch$3,060 million as of December 31, 2002 (Ch$2,293
million in 2001).

2002 Compared with 2001

Our consolidated results include the results of each of Sociedad
Anonima Vina Santa Rita S.A, 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 do not consolidate with Metropolis-Intercom and Rayen Cura
S.A.I.C., their respective operating companies.

Net Sales

Our consolidated sales reached Ch$161,057 million (US$224.1
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%),
Sociedad Anonima Vina Santa Rita S.A (7.0%), and Comunicacion, Informacion,
Entretencion y Cultura S.A. (49.4%). During 2002, net sales from the glass
container operations, Sociedad Anonima 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$71,057
million (US$98.9 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.

Sociedad Anonima Vina Santa Rita S.A's consolidated net sales
increased by 7.0% reaching Ch$71,721 million (US$99.8 million) in 2002.
Sociedad Anonima Vina Santa Rita S.A's wine

-48-

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. Sociedad Anonima Vina Santa Rita S.A 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$24,815 million (US$34.5 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 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 already sold 100% of 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
Sociedad Anonima Vina Santa Rita S.A include, among other things, the cost of
raw materials, such as sand, PET, 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$94,778 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$41,445
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 Sociedad Anonima Vina Santa Rita S.A totaled
Ch$44,557 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 Sociedad Anonima Vina Santa Rita S.A's 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
grapes, 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 grapes in
the Chilean wine market.

Cost of sales for Comunicacion, Informacion, Entretencion y Cultura
S.A. totaled Ch$15,313 million in 2002, as compared to Ch$13.366 million in
2001, a 14.6% increase. However, cost

-49-

of sales as a percentage of Comunicacion, Informacion, Entretencion y Cultura
S.A.'s 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$24,669 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$5,623 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 Sociedad Anonima Vina Santa
Rita S.A totaled Ch$15,535 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.

Selling and administrative expenses for Comunicacion, Informacion,
Entretencion y Cultura S.A. totaled Ch$3,583 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$41,610 million
(US$57.9 million), which represents a 24.0% increase compared with 2001. Of
this, Ch$23,989 million came from the glass container business, Sociedad
Anonima Vina Santa Rita S.A accounted for Ch$11,630 million and Comunicacion,
Informacion, Entretencion y Cultura S.A. accounted for Ch$5,919 million.
Consolidated operating margins increased to 25.8% during 2002 (23.0% in 2001).

Operating income from the glass container operations totaled
Ch$23,989 million (US$33.4 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 Sociedad Anonima Vina Santa Rita S.A increased
by 1.0% to Ch$11,630 million during 2002. Operating margin for Sociedad
Anonima Vina Santa Rita S.A 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$5,919 million in 2002, compared to an operating income
of Ch$654 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$5,965 million (US$8.3
million) in 2002, compared with Ch$654 million operating income in 2001.
Operating margin increased importantly as well, from 3.9% in 2001 to 23.9% of
net sales in 2002.

-50-

Non-operating Income

During 2002, we recorded a consolidated non-operating loss of
Ch$13,002 million, compared with a Ch$8,699 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
--------- ---------

Equity in net loss of related companies (7,616) (8,902)
Goodwill amortization (847) (647)
Interest expense, net (4,215) (4,287)
Price-level restatement, net (2,338) (1,951)
Foreign currency translations, net 1,387 4,948
Other non-operating income (expense), net 4,929 (2,163)
--------- ---------
TOTAL non-operating loss (8,699) (13,002)

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$2,977 million profit, and the association in the plastic
container market through a joint venture between Crowpla Reicolite S.A. and
Multipack, which generated a Ch$2,050 million gain on the transfer to
joint-venture during 2001. In 2002, we recorded a higher net loss from equity
method investments that amounted to Ch$8,902 million (Ch$7,616 million in
2001), mainly due to higher losses in Rayen Cura S.A.I.C. (Ch$2,124 million in
2002, Ch$1,823 million in 2001) as a consequence of the Argentine peso
devaluation[3] and Cordillera Comunicaciones Ltda.. The latter net loss
includes a Ch$4,055 million charge (Ch$4,073 million 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$4,948 million in 2002 compared to Ch$1,387 million
in 2001).

Minority Interest

During 2002, minority interest participation in income was Ch$4,550
million compared to Ch$3,266 million during 2001. This increase is primarily
explained by improved performance at Sociedad Anonima Vina Santa Rita S.A,
Comunicacion, Informacion, Entretencion y Cultura S.A. and Envases CMF S.A.
during 2002.

Income Taxes

Our tax expense was Ch$6,398 million in 2002 compared to Ch$5,132
million in 2001. Our effective tax rate was 22.4% in 2002, as compared to
19.2% in 2001.

Extraordinary Items

In 2002 we did not record extraordinary items. In 2001 we had a
Ch$1,839 million income from extraordinary items, corresponding to a reversal
of a maintenance provision for Furnace C in the glass container business.

________________
[3] Considering an exchange rate of 3.32 Argentine pesos per US dollar.

-51-

Net Income

During 2002, our net income was Ch$17,661 million (US$24.6 million),
compared to Ch$18,303 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$13,002 million in 2002 (Ch$8,699 million in
2001), a higher income tax (Ch$6,398 million in 2002 compared to Ch$5,132
million in 2001), and an increase in the participation by the minority
interest in results from operations in subsidiary companies (Ch$4,550 million
in 2002 compared to Ch$3,266 million in 2001) and the absence of extraordinary
items during year 2002 (Ch$1,839 million in 2001).

During 2002, Sociedad Anonima Vina Santa Rita S.A's net income was
Ch$9,263 million (US$12.9 million), representing a 24.6% increase over 2001.
Comunicacion, Informacion, Entretencion y Cultura S.A. recorded a net profit
of Ch$3,148 million (US$4.4 million) in 2002, compared with a Ch$271 million
(US$0.4 million) net income during 2001. Cristalchile Comunicaciones S.A.
(99.99% owned by Cristalerias and 50.0% owner of Cordillera Comunicaciones
Ltda.), had a net loss of Ch$8,528 million (US$11.9 million) during 2002,
compared with a net loss of Ch$7,245 million in 2001. Cordillera
Comunicaciones Ltda. (owner of 99.99% of Metropolis-Intercom) posted a net
loss of Ch$17,047 million (US$23.7 million) in 2002, compared to a net loss of
Ch$14,490 million in 2001. This result is largely explained by the impact of a
Ch$12,885 million net loss at Metropolis-Intercom S.A. (Ch$10,132 million net
loss in 2001). The latter net loss includes a Ch$11,517 million goodwill
amortization charge in 2002 (Ch$9,591 million in 2001), coming mainly from the
HFC network (acquired in July 2000). Cristalchile Inversiones (owner of 40% of
Rayen Cura S.A.I.C.) recorded a net loss of Ch$2,478 million (US$3.4 million)
during 2002 compared to a Ch$2,204 million net loss in 2001. Constructora
Apoger S.A. recorded a net income of Ch$0.4 million in 2002 and a net loss of
Ch$4 million in 2001. The plastic container company, Envases CMF S.A. (50%
owned by Cristalerias), had net income of Ch$2,550 million in 2002 compared to
a Ch$1,893 million net income in 2001.

2001 Compared with 2000

The consolidated results of our company include the results of each
of Sociedad Anonima Vina Santa Rita S.A, Comunicacion, Informacion,
Entretencion y Cultura S.A., Cristalchile Comunicaciones S.A., Cristalchile
Inversiones 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 do not consolidate Metropolis-Intercom S.A. and Rayen Cura
S.A.I.C., their respective operating companies.

Net Sales

Our consolidated net sales reached Ch$146,187 million (US$203.4
million), which represents a 9.6% increase over year 2000, adjusting year
2000's sales for the de-consolidation of Crowpla Reicolite S.A. and Ediciones
Chiloe S.A. during the period. This increase is primarily explained by higher
sales in the glass container business (10.1%), Sociedad Anonima Vina Santa
Rita S.A (5.0%), and Red Televisiva Megavision S.A. (27.5%). During 2001, net
sales from the glass container operations, Sociedad Anonima Vina Santa Rita
S.A and Comunicacion, Informacion, Entretencion y Cultura S.A. were 46.3%,
45.9% and 11.4% of total consolidated net sales, respectively.

In 2001, the glass container operations reported sales of Ch$67,757
million (US$94.3 million), a 10.1% increase over 2000. Sales volume measured
in tons increased by 5.9% to 234,740 tons during 2001, while average prices
per ton as measured in constant pesos increased approximately 4.0%

-52-

during 2001. Net sales of glass containers to the wine industry showed growth
over 2000, due to a 4.0% increase in exports of bottled wine, which reached
21.4 million cases in 2001. Net sales to the non-alcoholic beverage sector
remained stable due to the success of the 1,000cc glass bottle, which proved
to be the cheapest container of the family-size bottle segment. Net sales in
the beer sector increased significantly during the year because of new
returnable and non-returnable formats introduced to boost beer consumption.
Sales of containers to the food industry increased due to the increase in
demand for certain containers used for food exports, as well as a higher
demand for formats sold in the local market.

Sociedad Anonima Vina Santa Rita S.A's net sales increased by 5.0%
reaching Ch$67,028 million (US$93.3 million) in 2001. Wine sales in liters to
the domestic market, grew by 11.0%, while export volumes increased by 2.1%
during 2001. Prices in the local market dropped by 13.0% in real terms as a
result of the drop in costs of raw materials due to a large harvest of grapes
in 2001, which caused an oversupply of wine. Sales in constant pesos to the
domestic market decreased by 3.0% while export sales rose by 14.0% during 2001
as a result of a 2.1% increase in volumes and a 23.5% depreciation of the
Chilean peso against the U.S. dollar during 2001. This increase in volume
sales in the export market was largely because of increased exports to Europe,
15.1%; the United States, 0.6%; partially offset by lower sales to Canada,
24.1%; Latin America, 7.3%; and Asia plus Africa, 20.2% during the year.
Sociedad Anonima Vina Santa Rita S.A wines sold for an average price of
US$30.1 per case, 1.6% lower than in 2000. However this price was more than
26% higher than the average export price for the Chilean wine industry as a
whole, which averaged US$23.85 per case in 2001.

Comunicacion, Informacion, Entretencion y Cultura S.A.'s net sales
during 2001 reached Ch$16,606 million (US$23.1 million), representing a 27.5%
increase over 2000, all from its main subsidiary, Red Televisiva Megavision
S.A. This considerable increase was attributable to new programming from Red
Televisiva Megavision S.A., initiated in the first quarter of 2001, which led
to increased advertising sales. Red Televisiva Megavision S.A. had an average
audience share of 19.4% in 2001 (19.3% in 2000).

Constructora Apoger S.A. recorded sales of Ch$1,169 million (US$1.6
million) in 2001, compared to Ch$415 million (US$0.6 million) in 2000. As of
December 31, 2001, Constructora Apoger S.A. had sold 100% of the office
building it constructed in the area of Las Condes, Santiago.

Cost of Sales

Consolidated cost of sales during 2001 was Ch$90,086 million,
representing a 9.6% increase over 2000, adjusting for the deconsolidation of
Envases CMF and Ediciones Chiloe S.A. However, as a percentage of sales, costs
maintained at 53.3%.

Cost of sales for the glass container operations was Ch$40,996
million during 2001, representing a 15.4% increase over 2000. This increase
was principally attributable to the fact that we imported more products
(namely, the "contour" Coke bottle) due to the reconstruction of Furnace C,
higher depreciation charges coming from the new furnace and 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
increased from 57.7% in 2000 to 60.5% in 2001.

-53-

Cost of sales for Sociedad Anonima Vina Santa Rita S.A totaled
Ch$41,383 million in 2001, representing a 1.6% increase over 2000. Higher
volumes in both the export and local markets help explain this increase. Cost
of sales as a percentage of Sociedad Anonima Vina Santa Rita S.A's net sales
decreased from 63.8% in 2000 to 61.7% in 2001. Cost of raw materials, such as
grapes, in the local market dropped 25.4% in real terms as a result of the
2001 harvest, which surpassed that of 2000 and caused an oversupply of grapes
to the wine market.

Cost of sales for Comunicacion, Informacion, Entretencion y Cultura
S.A. totaled Ch$13,366 million in 2001, a 12.5% increase over 2000. Cost of
sales, as a percentage of Comunicacion, Informacion, Entretencion y Cultura
S.A.'s net sales increased from 74.5% in 2000 to 80.5% in 2001.

Selling and Administrative Expenses

Consolidated selling and administrative expenses in 2001 totaled
Ch$22,539 million, representing an 8.0% increase over 2000, adjusting for the
deconsolidation of Envases CMF S.A. and Ediciones Chiloe S.A. As a percentage
of sales, however, selling and administrative expenses decreased from 15.6% in
2000 to 15.4% in 2001. This decrease was principally attributable to lower
selling and administrative expenses from Red Televisiva Megavision S.A.

Selling and administrative expenses for the glass container
operations totaled Ch$5,398 million in 2001, representing a 5.6% increase over
2000. However, as a percentage of sales, SG&A expenses remained at 8.0%.

Selling and administrative expenses for Sociedad Anonima Vina Santa
Rita S.A totaled Ch$14,128 million in 2001, representing a 6.0% increase over
2000. This increase was principally 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$2,586 million in 2001, representing a
39.3% decrease from 2000 due to changes in the accounting criteria and a cost
reduction implemented by management in Red Televisiva Megavision S.A..

Operating Income

Consolidated operating income for 2001 was Ch$33,562 million
(US$46.7 million), which represents an 8.8% increase compared with 2000,
adjusting for the deconsolidation of Envases CMF and Ediciones Chiloe S.A. Of
this, Ch$21,363 million came from the glass container business, Sociedad
Anonima Vina Santa Rita S.A accounted for Ch$11,517 million, and Comunicacion,
Informacion, Entretencion y Cultura S.A. accounted for Ch$654 million.
Consolidated operating margins remained unchanged at 23.0% during 2001 (23.1%
in 2000).

Operating income from the glass container operations totaled
Ch$21,363 million (US$29,7 million) in 2001, a 2.2% increase over 2000.
However, as a percentage of sales the operating income decreased from 34.0% in
2000 to 31.5% in 2001. This was mainly due to: higher purchases of imported
products (Coke "contour" bottles) with lower margins due to the reconstruction
of furnace C, higher depreciation charges coming from the new furnace, and
higher costs resulting 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.

-54-

Operating income for Sociedad Anonima Vina Santa Rita S.A increased
by 17.5% to Ch$11,517 million during 2001, primarily because of a decrease in
the price of raw materials (wines and grapes) in the domestic market (25.4%)
and an increase in sales. Operating margins for Sociedad Anonima Vina Santa
Rita S.A increased from 15.4% in 2000 to 17.2% in 2001.

Comunicacion, Informacion, Entretencion y Cultura S.A. moved from an
operating loss of Ch$185 million in 2000 to an operating profit of Ch$654
million during 2001. This is due mainly to improved operating results in Red
Televisiva Megavision S.A.. Improved programming produced higher advertising
spending and increased operating profits reaching Ch$654 million (US$0.9
million) in 2001 at Red Televisiva Megavision S.A., compared with Ch$78
million operating profit in 2000. Operating margins for Comunicacion,
Informacion, Entretencion y Cultura S.A. turned from negative in 2000 to 3.9%
of sales in 2001.

Non-operating Income

During 2001, we recorded a consolidated non-operating loss of
Ch$8,699 million, compared with a Ch$7,163 million loss during 2000. The
following table sets the non-operating income for the periods indicated:

Year Ending December 31,
---------------------------------------------
(Millions of constant pesos)
---------------------------------------------
2000 2001
------------- -------------

Equity in net loss of related companies (2,883) (7,617)
Goodwill amortization (833) (847)
Interest expense, net (2,186) (4,215)
Price-level restatement, net (2,190) (2,338)
Foreign currency translation, net 1,057 1,387
Other non-operating income (expense), net (128) 4,930
---------- ----------
TOTAL non-operating loss (7,163) (8,699)

Non-operating results fell from a loss of Ch$7,163 million (US$10.0
million) during 2000 to a loss of Ch$8,699 million (US$ 12.1 million) during
2001. This loss is attributed mainly to: (1) a higher net loss from
subsidiaries, that reached Ch$7,616 million, in part due to: (a) a higher loss
in Cordillera Comunicaciones Ltda. (cable business), (b) a Ch$2,204 million
loss from our investment in Rayen Cura S.A.I.C., and (c) a Ch$298 million loss
through Sociedad Anonima Vina Santa Rita S.A for our investment in Vina Dona
Paula S.A., the latter two losses resulted form the effects of the Argentine
peso devaluation[4]; and 2) higher interest expenses corresponding to a US$100
million syndicated loan maintained by our company. Those losses were offset by
an extraordinary income generated from: (1) the sale of 1,834,997 shares of
CGE (Compania General de Electricidad), which generated a Ch$2,977 million
profit; (2) the joint venture between Crowpla Reicolite S.A. and Envases
Multipack S.A., which generated a Ch$2,050 million gain on transfer to the
joint-venture during 2001.

Minority Interest

During 2001, minority interest participation in income was Ch$3,266
million and Ch$2,641 million during 2000. This increase is primarily explained
by the improved performance at

_________________
[4] Considering an exchange rate of $1.7 Argentine pesos per U.S. dollar as
of Dec. 31, 2001.

-55-

Sociedad Anonima Vina Santa Rita S.A., Comunicacion, Informacion, Entretencion
y Cultura S.A. and Envases CMF S.A. during 2001.

Income Taxes

Our tax expense was Ch$5,132 million and Ch$3,876 million in 2001
and 2000, respectively. Our effective tax rate was 19.2% in 2001, as compared
to 15.7% in 2000.

Extraordinary Items

During 2001, we registered an extraordinary income from the reversal
of a maintenance provision for Furnace C in our glass container business, that
amounted Ch$1,839 million. During 2000, no extraordinary items were recorded.

Net Income

During 2001, our net income was Ch$18,304 million (US$25.5 million),
a 1.1% increase over 2000. This increase is primarily explained by higher
operating profits in Sociedad Anonima Vina Santa Rita S.A. and Comunicacion,
Informacion, Entretencion y Cultura S.A., as well as by an extraordinary
income of Ch$1,837 million generated in the glass division as a result of a
reversal of a provision of furnace C, which was originally made for
maintenance but was finally rebuilt

During 2001, Sociedad Anonima Vina Santa Rita S.A's net income was
Ch$7,436 million (US$10.3 million), representing a 16.4% increase over 2000.
Comunicacion, Informacion, Entretencion y Cultura S.A. recorded a net profit
of Ch$271 million (US$0.4 million) in 2001, compared with a Ch$991 million net
loss (US$1.4 million) during 2000. Cristalchile Comunicaciones S.A. (99.99%
owned by Cristalerias and 50.0% owner of Cordillera Comunicaciones Ltda.) had
a net loss of Ch$7,245 million (US$10.1 million) during 2001 compared with a
net loss of Ch$4,090 million in 2000. Cordillera Comunicaciones Ltda. (owner
of 99.99% of Metropolis-Intercom) posted a net loss of Ch$14,490 million
(US$20.2 million) in 2001, compared to a net loss of Ch$7,862 million in 2000.
This result is largely explained by: (i) the impact of a loss of Ch$10,132
million in Metropolis-Intercom S.A. (Ch$3,879 million net loss in 2000); (ii)
a goodwill amortization charge of Ch$4,073 million, of which Ch$2,549 million
originated from the purchase of 40% of Metropolis-Intercom S.A. in July of
2000. The aforementioned acquisition generated goodwill totaling US$70.0
million, which is being amortized over a period of 20 years. Cristalchile
Inversiones recorded a net loss of Ch$2,204 million (US$3.1 million) during
2001. Constructora Apoger S.A. recorded a net loss of Ch$4 million and a loss
of Ch$10 million in 2001 and 2000, respectively. The plastic container
company, Envases CMF S.A., had net income of Ch$1,893 million and Ch$625
million in 2001 and 2000, respectively.

Liquidity and Capital Resources (2002 compared with 2001)

We generated a net cash flow from operations of Ch$49,376 million in
2002 and Ch$40,468 million in 2001. At December 31, 2002, we had working
capital of Ch$137,958 million, compared with working capital of Ch$71,623
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].

-56-

Our total consolidated assets increased by 11.7% from Ch$404,922
million at December 31, 2001 to Ch$452,478 million on December 31, 2002.

Total individual assets for the glass container operations increased
by 15.0% from Ch$313,840 million in 2001 to Ch$360,763 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) long-term bond issue effected in the
local market in August, 2002. Sociedad Anonima Vina Santa Rita's total
consolidated assets increased by 3.4% from Ch$118,008 million on December 31,
2001, to Ch$122,079 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$33,051 million on December 31, 2002 from Ch$28,127 million at December
31, 2001.

As of December 31, 2002 and 2001, our consolidated ratios of current
assets to current liabilities were 4.51:1 and 2.38:1, respectively. Total
current assets were Ch$177,258 million and Ch$123,494 million, as of December
31, 2002 and 2001, respectively.

Total consolidated current liabilities were Ch$39,300 million and
Ch$51,871 million as of December 31, 2002 and 2001, respectively. As of
December 31, 2002 and 2001, consolidated long-term liabilities, including
minority interest totaled Ch$181,848 million and Ch$133,261 million,
respectively.

Shareholders' consolidated equity increased to Ch$231,330 million as
of December 31, 2002 from Ch$219,790 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 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 for our company,
including accrued interest, was Ch$137,395 million on December 31, 2002 and
Ch$104,728 million at December 31, 2001. Short-term indebtedness with
financial institutions and the public was Ch$6,320 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$44,278 million in long-term obligations to
banks and financial institutions and Ch$88,744 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.

During 2002, we incurred capital expenditures of Ch$15,499 million
at consolidated level which included Ch$10,300 million (US$14.3 million)
related to the glass container business. The latter included US$6.5 million
for the partial refurbishing of furnace A and of its glass-forming machines.
In 2001, we incurred capital expenditures of Ch$33,712 million at consolidated
level and Ch$26,474 million

-57-

in the glass container business. The latter included the reconstruction and
capacity expansion of furnace C.

A significant amount of our cash equivalents is denominated in U.S.
dollars and is maintained in this currency to meet debt service obligations
for U.S. dollar denominated debt. As of December 31, 2002, at consolidated
level we had Ch$82,871 million (US$115.3 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 2003. 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, 2002, 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, 2002:

As of December 31, 2002
-----------------------------------------------------------------------
Less than 1
Contractual Obligations Total year 1-3 years 4-5 years After 5 years
-------------------------------------- ------------- ----------- ------------ ----------- ---------------
(Ch$ millions)

Long-term Debt 139,512 6,309 9,943 71,172 51,907
Capital Lease Obligations -- -- -- -- --
Operating Leases -- -- -- -- --
Unconditional Purchase Obligations -- -- -- -- --
Total Contractual Cash Obligations 139,512 6,309 9,943 71,172 51,907

Liquidity and Capital Resources (2001 compared with 2000)

Our total consolidated assets increased by 8.0% from Ch$374,790
million at December 31, 2000 to Ch$404,922 million on December 31, 2001.

Total individual assets for the glass container operations increased
by 7.5% from Ch$291,879 million in 2000 to Ch$313,840 million in 2001. This
increase in assets is primarily explained by a US$33 million investment in the
glass container business, which includes US$28 million for the reconstruction
of and capacity increase of furnace C, which currently has an annual capacity
of 90,000 tons. Sociedad Anonima Vina Santa Rita S.A's total consolidated
assets increased by 21.6% from Ch$97,013 million on December 31, 2000, to
Ch$118,008 million on December 31, 2001, 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 decreased
to Ch$28,127 million on December 31, 2001 from Ch$30,342 million in December
31, 1999.

As of December 31, 2001 and 2000, our consolidated ratios of current
assets to current liabilities were 2.38:1 and 2.46:1, respectively. Total
current assets were Ch$123,494 million and Ch$117,553 million, as of December
31, 2001 and 2000, respectively.

As of December 31, 2001 and 2000, consolidated long-term
liabilities, including minority interest, totaled Ch$133,261 million and
Ch$117,726 million, respectively. Total consolidated current

-58-

liabilities were Ch$51,871 million and Ch$47,657 million as of December 31,
2001 and 2000, respectively.

Shareholders' consolidated equity increased to Ch$219,790 million as
of December 31, 2001 from Ch$209,406 million as of December 31, 2000. Our
ratio of debt to equity increased from 0.79:1 on December 31, 2000 to 0.84:1
on December 31, 2001. The reason behind this increase is a bond placement for
ChUF 1,200,000 effected by Sociedad Anonima Vina Santa Rita S.A on January,
2001, offered at a 6.75% annual interest rate. The proceeds were used to
refinance debt.

Total consolidated indebtedness for our company with financial
institutions and the public, including accrued interest, was Ch$104,995
million at December 31, 2001. Short-term indebtedness was Ch$19,130 million,
which represented the short-term debt plus current portion of long-term debt
owed to banks, financial institutions and the public. At year-end 2001,
long-term indebtedness (excluding the short-term portion) was Ch$65,346
million in long-term debt with banks and financial institutions and Ch$20,519
million in long-term obligations with the public represented by bonds. We
believe that the terms and conditions of pir 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, for the
consolidated financial statements.

During 2001, we incurred capital expenditures of Ch$26,474 million
in the glass container business. This figure included the reconstruction and
capacity expansion of furnace C. In 2000, we incurred capital expenditures of
Ch$20,401 million. This figure included a complete additional production line
for furnace B, the beginning of the refurbishing of furnace C, the expansion
of the raw material mixing plant and a second electrostatic precipitator to
reduce emissions of particular materials.

A significant amount of our cash equivalents is denominated in U.S.
dollars and is maintained in this currency to meet debt service obligations
for U.S. dollar denominated debt. As of December 31, 2001, at consolidated
level our company had Ch$39,751 in cash, time deposits and marketable
securities, a substantial portion of which is available to our company for
future investments. 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, 2001, 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 Chilean Technical Bulletin No. 64 on Inflation and Price-Level
Restatement

As explained in detail in Note 2(e) to the consolidated financial
statements, in accordance with the Chilean foreign currency translation
standard Technical Bulletin No. 64, we are required to restate non-monetary
assets and liabilities, equity and income and expense accounts to reflect the
effect of variations in the purchasing power of the Chilean peso, thus
reflecting indirectly the gain, or loss, resulting from holding or owning
monetary assets and liabilities. For all the above balances, the restatement
is based on the variation of the official Consumer Price Index of the National
Institute of Statistics, with the exception of inventories, which are restated
or adjusted to current cost, whichever is lower, and assets and liabilities in
foreign currency, which are adjusted to closing exchange rates.

Certain companies in Chile finance current assets and fixed assets
with short and long-term liabilities in foreign currency. Because assets are
generally restated using the Consumer Price Index and liabilities in foreign
currencies are restated to closing exchange rates, the price-level restatement
line in the income statement is affected by the relationship between local
inflation and the U.S. dollar

-59-

exchange rate for the Chilean peso. The loss registered during 2002 under
price-level restatement is basically due to the negative impact of some
accounts denominated in foreign currencies. The real depreciation of the
Chilean peso against the dollar was approximately 9.7% during the year.
Moreover, in 2002, the effect of adjusting shareholders' equity for the local
inflation during the year, plus the revaluation of liabilities, was greater
than the price-level restatement of non-monetary assets (principally property,
plant and equipment) resulting in a loss for monetary correction during the
year. This situation reflects the loss of purchasing power of the Chilean peso
in comparison to the U.S. dollar. Please, see Note 28 for the consolidated
financial statements.

Because of Chile's history of relatively high inflation, the
financial markets have developed a system of borrowing or lending in Unidades
de Fomento[5], or UFs. Most long-term assets and liabilities in pesos are
indexed in UFs, and the adjustment to the closing value is reflected in the
price-level adjustment account. The use of UF-denominated transactions offsets
the effect of inflation in the preparation of price-level adjusted financial
statements. For example, a company with UF-denominated obligations will record
both a financing cost (from the adjustment to the value of the UF due to the
effects of inflation) and a price-level gain (from holding a liability during
a period of inflation) of comparable amounts, excluding the difference between
actual inflation and the inflation rate used for purposes of the UF index,
which has a lag of one month. In the case of a UF-denominated asset, the
price-level adjustment (a loss) and the UF valuation (a gain) also offset each
other, with the exception of the one month lag in the UF index referred to
above.

The actual line-by-line restatement of the principal non-monetary
assets and liabilities, equity and income and expense accounts is set forth in
the following table:

2001 2002
--------------- --------------

Inventories 678 732
Fixed Assets 3,792 3,733
Investment in Related Companies 2,420 3,032
Marketable Securities 101 116
Short term debtors 245 229
Accs. Receivable related companies 9 717
Long term debtors 290 6
Time Deposits 204 0
Other non-monetary assets 312 1,287
Expenses and cost accounts 1,896 2,748
Equity (6,118) (6,243)
Obligations with the public (597) (2,341)
Accs payable related companies (1) (648)
Short term provisions (24) (7)
Short term creditors (2) (43)
Long term provisions (101) (106)
Non-monetary liabilities (2,851) (581)
Minority interest (63) (960)
Income accounts (2,527) (3,622)
------- -------
Income (Loss) from Price Level Restatement (2,338) (1,951)

________________
Please, see Note 2(b) and Note 26 of the consolidated financial statements for
additional information on the determination of the price-level restatement.

________________
[5] This index is adjusted on a daily basis.

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Impact of 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 recharacterized our foreign investments into U.S.
dollars under this requirement as follows:

- Monetary assets and liabilities are translated at year-end
rates of exchange between the United States dollar and the
local currency.
- All non-monetary assets, liabilities, and shareholders' equity
are translated at historical rates of exchange between the
United States dollar and the local currency.
- Income and expense accounts are translated at average rates of
exchange between the United States dollar and the 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, 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.

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 39 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, 2000,
2001 and 2002 was Ch$19,308 million, Ch$15,052 million and Ch$17,703 million
respectively. Net income under Chilean GAAP for the years ended December 31,
2000, 2001 and 2002 was Ch$18,098 million, Ch$18,304 million and Ch$17,661
million respectively. Net income under U.S. GAAP was 6.7% higher than under
Chilean GAAP in 2000 and 17.8% lower than under Chilean GAAP in 2001. Net
income under U.S. GAAP was 0.2% higher than under Chilean GAAP in 2002.

-61-

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.

Our company's directors and executive officers, as of December 31,
2002, 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
Manuel Correa Ossa Director 1986
Juan Agustin Figueroa Yavar Director 1994
Patricio Garcia Dominguez Director 1975
Hernan Somerville Senn Director 1989
Alfonso Swett Saavedra Director 1981
Cirilo Elton Gonzalez Chief Executive Officer 1990
Eduardo Acuna Donoso Technical Manager 1992
Benito Bustamante Castagnola Comptroller 1981
Jose Miguel Del Solar Concha Human Resources Manager 2001
Juan Jose Edwards Guzman Commercial Manager 1995
Leonardo Harsch Marschang Quality Manager 1998
Danilo Jordan Franulic Commercial Manager 1989
Daniel Navajas Urbina Operations Manager 1992

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Current Position
Name Position Held Since
----------------------------- ---------------------------------------- ----------------
Rodrigo Palacios Fitz-Henry Chief Financial Officer 2001
Enrique Ide Valenzuela Financial Adviser 1996
_________________
(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 Compania
Electrometalurgica S.A. and other companies within the Elecmetal Group,
including Compania Sud Americana de Vapores, S.A., Sociedad Anonima Vina Santa
Rita S.A, Red Televisiva Megavision S.A., Metropolis-Intercom 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, Quemchi S.A., Compania SudAmericana de Vapores,
S.A., SudAmericana Agencias Aereas y Maritimas S.A., Sociedad Anonima Vina
Santa Rita S.A., Metropolis-Intercom S.A., Ediciones Financieras S.A., ME
Global Inc. (U.S.A)(all within the Elecmetal Group), and Chairman of the board
of directors of Inversiones Siemel S.A. and Siglo XXI. Mr. Sanchez was the
General Manager (Chief Executive Officer) of Vina Sociedad Anonima Vina Santa
Rita S.A. (from 1980 to 1983) and of Compania de Petroleos de Chile S.A.
(COPEC) (from 1985 to 1990).

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 Compania
Electrometalurgica 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).

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
Industriales Forestales S.A., Compania Chilena de Fosforos S.A., Cicecorp S.A.
and Banco Bice.

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. 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.

-63-

Manuel Correa Ossa. Mr. Correa is an attorney and has been a
Director of our company since 1986. He is also director of Maritima de
Inversiones S.A., Navarino S.A. within the Elecmetal Group and professor of
Tax and Economic Law at the Pontificia Universidad Catolica de Chile and
Universidad Los Andes. He is member of Estudio Correa y Lyon, a Santiago law
firm.

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, Quemchi
S.A., Navarino S.A. and Sociedad Anonima Vina Santa Rita S.A within the
Elecmetal Group. He is a senior partner of Figueroa y Coddou Abogados, 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 in the Chilean Government.

Patricio Garcia Dominguez. Mr. Garcia has been a Director of our
company since 1975. Mr. Garcia also serves as a director of Elecmetal, Quemchi
S.A., Navarino S.A., Compania SudAmericana 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 Covadonga S.A., Bolsa de Valores de Valparaiso, Compania de
Inversiones La Espanola S.A. and Inversiones Hispania S.A.

Hernan Somerville Senn. Mr. Somerville is an attorney and has been a
Director of our company since 1989. In addition, he currently serves as a
Director of Maritima de Inversiones S.A., Red Televisiva Megavision S.A. and
Sociedad Anonima Vina Santa Rita S.A within the Elecmetal Group; and Director
of Corp Banca and Enersis S.A. He is also the Chairman of the Chilean
Association of Banks and Financial Institutions and Past President of the
Latin-American Association of Banks (FELABAN) and a Partner of Asesorias
Financieras Ltda. (FINTEC). From 1983 to 1988 Mr. Somerville was a director of
the Central Bank of Chile and chief debt negotiator for the restructuring of
Chile's external debt.

Alfonso Swett Saavedra. Mr. Swett has been a Director of our company
since 1981. He serves as a Director of Elecmetal, Quemchi S.A., Navarino S.A.,
Red Televisiva Megavision S.A. and Sociedad Anonima Vina Santa Rita S.A 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 a director of Maritima de Inversiones S.A.,
Vice-President of Rayen Cura S.A.I.C., within the Elecmetal Group. Prior to
joining our company, he was Chief Executive Officer of Elecmetal, 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.

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.

-64-

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.

Leonardo Harsch Marschang. Mr. Harsch holds a degree in chemical
engineering from the Universidad de Concepcion and has served as our company's
Quality Control Manager since 1998.

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.

Enrique Ide Valenzuela. Mr. Ide is an electrical engineer from the
Academia Politecnica Naval and holds a master's degree in business
administration from Harvard University. He has served as our company's
Financial Adviser since 1996. Mr. Ide is also Vice-President of Development of
the Elecmetal Group.

Compensation of Directors and Officers

For the year ending December 31, 2002, the aggregate amount of
compensation paid by our company to all directors and executive officers was
Ch$1,516 million. Members of the board of directors receive per diem fees and
participate in our company's net profits. As a group, directors receive
aggregate payments of Ch$742 million corresponding to year 2002. 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 16, 2002, appointed the
members of the Audit Committee for year 2002 as follows:

* Mr. Juan Agustin Figueroa Yavar; President;
* Mr. Joaquin Barros Fontaine; and
* Mr. Patricio Claro Grez.

-65-

The Audit Committee conducts monthly meetings and its main duties are, among
others:

* Supervising and controlling the proper functioning of our
operations;
* Examining transactions with directors or related companies
pursuant to the terms of Article 44 and Article 89 of the
Chilean Companies Act;
* Reviewing the audit reports prepared by the internal
controller and supervising the appropriateness of the
Controlling Division's attributions; and
* Interacting with, and propose the name of, the independent
auditors and rating agencies.

Employees

As of December 31, 2002, we have 707 permanent employees,
approximately 72.6% of whom were represented by two different labor unions in
collective bargaining negotiations with our company. As of December 31, 2002,
the average tenure of our full time employees was approximately 12.8 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 the year and a 6-year collective bargaining
agreement with workers' union, "Sindicato de Trabajadores No 1" in 2001.

We do not maintain any pension or retirement programs for our
employees. 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 our common stock, which represents our total registered capital
stock.

The following table sets forth certain information regarding the
ownership of our common stock, as of December 31, 2002, 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 our common
stock:

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December 31, 2002
----------------------------------------
# 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 4,067,179 6.35
The Bank of New York (1) 3,652,680 5.71
________________
(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, 2002, the
beneficial owner of approximately 52.14% of the outstanding shares of our
common stock of our company, and thereby has voting control of our company.

Compania Electrometalurgica 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 Sociedad Anonima Vina Santa Rita S.A). On December 31, 2002, 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 Cia. Electrometalurgica 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 our 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 Electrometalurgica S.A. and its subsidiaries and affiliates
are free to dispose of their shares of our 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 Sociedad Anonima Vina Santa Rita S.A,
Comunicacion, Informacion, Entretencion y Cultura S.A., Cristalchile
Comunicaciones S.A., 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$355
million in 2001 and Ch$382 million in 2002.

-67-

Purchases from Affiliates

Our company, including Sociedad Anonima Vina Santa Rita S.A,
Comunicacion Informacion Entretencion y Cultura S.A., 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$1,920 million charge in 2001 and a Ch$34 million credit in
2002.

Related company Loans

During 2002, we did not grant nor receive payments of loans from
related companies. The balance of loans to related companies, as of December
31, 2001, is shown in the following table:

Loans Loans Paid Balance
Ch$ Ch$ Ch$
----------- -------------- --------------
Quemchi S.A. 51,500 51,500 --
Envases CMF -- 1,282,655 --

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.

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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 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 44.6% of our net income
for the past five years.

Dividend payments were approved at the annual ordinary shareholders'
meetings, held on April 15, 1997, April 15, 1998, April 13, 1999, April 14,
2000 and April 10, 2001, with respect to our net income for each year. In
1998, the board of directors approved the proposal to distribute 43% of our
net income through payment of dividend No. 136. The dividend was approved at
the shareholders' meeting held on April 13, 1999. 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 2002, the shareholders approved at the general shareholders'
meeting the payment of the proposed dividend of 50% of the net income for 2002
with the remainder to be deposited into Reserve Funds. The board of directors
was authorized to issue provisional dividends against the profits of 2002 and
to distribute interim dividends against the Future Dividends Fund without the
need to call a new meeting of shareholders for that purpose.

In 2003, the shareholders approved at the general shareholders'
meeting to distribute 40% of the net income for 2003 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 2003 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 which, 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

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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.

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).

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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)
------------------------- ----------- ------------ ----------------

1997 73.00 0.168 0.504
1998 111.00 0.235 0.705
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
__________________
(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

On May 18, 1998, Cordillera Comunicaciones Ltda., Holdings, Bresnan
International Partners, Comunicaciones de Chile Uno Limitada, and Cristalchile
Comunicaciones S.A. (the "Plaintiffs") commenced arbitration proceedings in
Chile against Intercom, Invercom, and Compania de Telecomunicaciones de Chile
S.A. (the "Defendants") to resolve a dispute among the parties concerning the
development of internet services through Metropolis-Intercom S.A. On February
7, 1996, in order to develop certain businesses through Metropolis-Intercom
S.A., the parties formed Metropolis-Intercom Holding S.A. and
Metropolis-Intercom S.A., and entered into the following agreements: (i) a
shareholders' agreement among Cordillera Comunicaciones Ltda., Holdings,
Bresnan International Partners, Comunicaciones de Chile Uno Limitada,
Cristalchile Comunicaciones S.A., Intercom, Invercom and Metropolis-Intercom
Holding S.A.; (ii) a letter of agreement among the parent companies of the
parties to this shareholders' agreement; (iii) a network purchase agreement
between Cordillera Comunicaciones Ltda. and Compania de Telecomunicaciones de
Chile S.A. pursuant to which Compania de Telecomunicaciones de Chile S.A.
agreed to purchase Cordillera Comunicaciones Ltda.'s network and (iv) a
30-year renewable service agreement between Compania de Telecomunicaciones de
Chile S.A. and Metropolis-Intercom S.A. pursuant to which Compania de
Telecomunicaciones de Chile S.A. agreed to provide Metropolis-Intercom S.A.
with transmission services (the foregoing agreements, collectively referred to
as the relevant agreements). The Plaintiffs contended, among other things,
that the Defendants refused to develop the Internet business through
Metropolis-Intercom S.A. as contemplated in the relevant agreements.
Accordingly, the Plaintiffs demanded in the arbitration the specific
performance by the Defendants of the relevant agreements and the bylaws of
Metropolis-Intercom Holding S.A. and Metropolis-Intercom S.A. If the foregoing
was not feasible, the Plaintiffs demanded the recission of the relevant
agreements, and sought, among other things, the return of the network that
Compania de Telecomunicaciones de Chile S.A. purchased from Cordillera
Comunicaciones Ltda. pursuant to the network purchase agreement. In each case,
the Plaintiffs sought to recover US$100,000,000 in liquidated

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damages under the shareholders' agreement and any other damages that the
Defendants may have caused. In addition, the Plaintiffs sought to recover from
the Defendants certain amounts owing under the network purchase agreement.

On August 28, 1998, the Defendants answered the claim denying its
merits. With the answer, the Defendants also filed a counterclaim against the
Plaintiffs seeking to recover US$100,000,000 in liquidated damages and any
other damage that the Plaintiffs may have caused under the shareholders'
agreement on the grounds that, in their view, the Plaintiffs, and not the
Defendants, breached the shareholders' agreement.

On December 18, 1998, during the pendency of the arbitration, the
Defendants were prohibited from providing internet services through the cable
network used for cable television. In December 1999, the arbitrator, Mr.
Urrejola, ordered an injunction that prohibited Compania de Telecomunicaciones
de Chile S.A. from developing Internet services via any means other than
telephone lines.

On May 18, 2000, our company, through our unconsolidated subsidiary,
Cordillera Comunicaciones Ltda., which owned 60% of Metropolis-Intercom S.A.,
announced it had judicially settled the arbitration. Pursuant to the
settlement, Cordillera Comunicaciones Ltda. agreed to acquire the 40% interest
of Metropolis-Intercom S.A. owned by Compania de Telecomunicaciones de Chile
S.A. Cordillera Comunicaciones Ltda. is 50% owned by our subsidiary
Cristalchile Comunicaciones S.A. and 50% owned by Liberty Media International.

The settlement required a total of US$270 million to be paid by our
unconsolidated subsidiary, Cordillera Comunicaciones Ltda. for the following:
(i) the acquisition of the above-mentioned 40% interest in Metropolis-Intercom
S.A.; (ii) the acquisition of 100% of the HFC network used by
Metropolis-Intercom S.A. and its associated assets; and (iii) the acquisition
of 100% of the Plataforma Tecnica Red Multimedia S.A., a subsidiary of
Compania de Telecomunicaciones de Chile S.A. that provides installation and
maintenance services for the HFC Network.

It was also agreed that Compania de Telecomunicaciones de Chile S.A.
would grant Metropolis-Intercom S.A. the use of sections of its fiber optic
network, chambers, pipes, and access to buildings, spaces, and services in
Compania de Telecomunicaciones de Chile S.A.'s facilities for
approximately US$4 million.

Before the execution of definitive settlement agreements, the
parties agreed to follow such steps as may be required by the Chilean
antitrust authorities, and to perform customary due diligence.

The settlement amount was paid as follows: (i) US$250 million 90
days after execution of definitive settlement agreements and (ii) US$20
million to be paid at the end of the fifth year after execution of definitive
settlement agreements with interest at the rate of 6% per year.

In addition to the foregoing, 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

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under the symbol "CGW." The ADSs have been issued by The Bank of New York in
its role as the depositary. In 2002, the Chilean stock market accounted for
approximately 57.7% of the trading volume of the common stock, while 42.3% of
the trading took place on the New York Stock Exchange.

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
--------- ------- --------
1997....................... 3,052,833 3,500 1,950
1998....................... 6,088,707 2,350 1,715
1999....................... 2,969,005 2,780 1,995
2000....................... 5,103,766 3,820 2,580
2001
1st quarter................ 1,088,956 3,576 3,300
2nd quarter................ 1,203,574 4,250 3,319
3rd quarter................ 1,061,362 4,700 4,050
4th quarter................ 1,146,719 4,450 3,620
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
December 2002.............. 78,181 4,450 4,030
January 2003............... 253,691 4,650.1 4,450
February 2003.............. 121,619 4,650 4,600
March 2003................. 139,330 4,630 4,580
April 2003................. 119,156 5,450 4,580
May 2003................... 315,647 6,100 5,405
________________
(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 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
--------- ------- --------
1996....................... 3,701,482 3,285 2,490
1997....................... 2,247,362 3,450 1,975
1998....................... 1,576,038 2,350 1,720
1999....................... 691,236 2,665 2,010
2000....................... 1,175,055 3,700 2,750
2001
1st quarter................ 115,636 3,550 3,370
2nd quarter................ 1,058,258 4,245 3,401
3rd quarter................ 506,232 4,680 4,058
4th quarter................ 868,881 4,325 3,630
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
December 2002.............. 3,500 4,300.00 4,300.00
January 2003............... 20,937 4,650.00 4,530.00
February 2003.............. 20,096 4,654.00 4,630.00

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Ch $ Per Share(1)
Share ---------------------------
Volume High Low
--------- ------- --------
March 2003................. 5,000 4,600.00 4,600.00
April 2003................. 9,109 5,295.00 5,000.00
May 2003................... 147,709 6,060.00 5,358.20
_______________
(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$34.3
trillion (US$47.7 billion), as of December 30, 2002, and an average monthly
trading volume of Ch$204 billion (US$284 million) during 2002.

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:

US$ Per ADS(1)
ADS Trading --------------------------
Volume High Low
----------- --------- ---------
1996....................... 4,010,000 24.88 18.00
1997....................... 2,044,200 25.38 18.13
1998....................... 4,537,000 15.50 10.50
1999....................... 8,640,300 16.50 12.44
2000....................... 4,134,800 22.25 14.50
2001
1st quarter................ 751,900 19.20 17.13
2nd quarter................ 777,200 20.35 16.25
3rd quarter................ 414,900 20.75 18.20
4th quarter................ 583,400 19.25 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
December 2002.............. 17,900 18.65 16.80
January 2003............... 38,600 19.26 18.60
February 2003.............. 31,600 19.15 18.10
March 2003................. 28,900 19.05 18.25
April 2003................. 37,200 22.00 19.15
May 2003................... 122,900 26.50 21.71
________________
(1) Trading began on January 24, 1994.

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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 245 companies with listed shares as of
December 30, 2002. The Santiago Stock Exchange is Chile's principal exchange,
and it accounted for approximately 72.6% of the equity trading volume in Chile
during 2002. Approximately 25.9%, 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 1.5% 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 163 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 is 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
________________
(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 2002.
(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,

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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 said 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
said 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 our 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 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

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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 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.

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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
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 transfers of shares effected by the corporation 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 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
individuals 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

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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:

* 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;

* 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

* 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:

* 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;

* 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

* 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:

* A principal and its agents;

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* Spouses and relatives up to certain level of kindred;

* Entities within the same business group; and

* 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 with such ties in their ownership, management or
credit liabilities 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:

* A company and its controller;

* All the companies with a common controller and the latter; and

* 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:

* 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;

* The company has a significant level of indebtedness and that the
business group has a material participation as a lender or
guarantor;

* 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

* 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.

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 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. 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.

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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.

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 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 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.

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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, our
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 XV of the
Securities Market Law, which may apply when a 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.

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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 16.5%; it will be 17.0% during 2004 and
onwards. 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 16.5% 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 (16.5% of Ch$100) (16.5)
Net distributable income 83.5
Dividend distributed (30% of net distributable income) 25.05
Withholding Tax (35% of the sum of Ch$25.05 dividend
plus Ch$4.95 First Category Tax paid) (10.5)
Credit for 30% of First Category Tax 4.95
Net additional tax withheld (5.55)
Net dividend received 19.5
Effective dividend withholding rate 22.16%

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:

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

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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 for 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
16.5%, 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 No.19,601,
dated January 18, 1999. The deposit and withdrawal of shares of our 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 ADS that represent said stock) shall be
subject to First Category Tax and to 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
16.5% 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.

Pursuant to legislation enacted on July 29, 1998, Law No. 19.578,
any taxpayer who during the tax years 1999 through 2002, inclusive,
obtained a gain in the sale, through a Chilean stock exchange, of shares of
publicly traded corporations that are significantly traded in stock exchanges
at the time of their acquisition may elect to declare, and to pay, for such
capital gain, either (a) the First Category Tax as a sole tax or (b) in the
case of foreign holders, at a rate of 35.0%, provided that such acquisition
has occurred in a Chilean stock exchange when such shares were not newly
issued at the time

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of their acquisition. This option is not available if the sale of share is
made to a company in which the seller holds an interest.

An amendment to the Chilean Income Tax Law, Law No.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:

* A fund that makes public offers of its shares in a country
which public debt has been rated investment grade by an
international risk classification agency qualified by the
Superintendencia de Valores y Seguros;

* 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;

* 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;

* A pension fund that is exclusively formed by individuals
that receive their pensions on account of capital
accumulated in the fund;

* A fund regulated by Law No. 18.657, or the Foreign Capital
Investment Funds Law, in which case all holders of its
shares must reside abroad or be qualified as local
institutional investors; or

* 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.

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

* Be organized abroad and not be domiciled in Chile;

* Not participate, directly or indirectly, in the control of
the issuers of the securities in which it invests and not
hold, directly or indirectly, 10.0% or more of such
companies' capital or profits;

* Execute an agreement in writing with a Chilean bank or
securities broker in which the intermediary is responsible
for the execution of purchase and sale orders and for the
verification, at the time of the respective remittance,
that such remittances relate to capital gains that are
exempt from income tax in Chile or, if they are subject to
income tax, that the applicable withholdings have been
made; and

* Register in a special registry with the Chilean Internal
Revenue Service.

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Pursuant to a recently enacted amendment to the Chilean Income Tax
Law published on November 7, 2001 (Law No. 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:

* 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

* 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 No. 3708 whereby it allowed Chilean
issuers of ADSs to amend the deposit agreements to which they are parties in
order to include a clause that states that, in the case that the exchanged
shares are sold by the ADSs' holders 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 day 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 of a
foreign holder, 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 the material United States
federal income tax consequences of an investment in ADSs or shares of our
common stock. 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 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, financial
institutions, tax-exempt entities, life insurance companies, persons holding
ADSs or shares of our common stock as part of a hedging, or conversion
transaction, constructive sale or a straddle, persons owning 10% or more of
the voting stock of our company, or persons whose functional currency is not
the United States dollar. For purposes of calculating the foreign tax credit,
dividends paid on the 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

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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 (i) 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, (ii) is obligated
to make payments related to the dividends or (iii) holds the shares of our
common stock in arrangements in which the U.S. holder's expected economic
profit, after non-U.S. taxes, is insubstantial 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
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
withholdings. 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.

PROSPECTIVE PURCHASERS 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) a United States citizen or resident;

(ii) a corporation or partnership created or organized in or under
the laws of the United States or any political subdivision thereof;

(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 a United States fiduciary 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. Holders of
ADSs (or ADRs evidencing ADSs) will be treated as the owners of
the shares of common stock represented by those ADSs.

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 U.S.
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.

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

-87-

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 its 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 ordinary income or loss.

Furthermore, the discussion below is based upon the provisions of
the Code and regulations, rulings and judicial decisions thereunder as of the
date hereof, and such authorities may be repealed, revoked or modified so as
to result in U.S. federal income tax consequences different from those
discussed below.

To the extent that the amount of any distribution exceeds the our
current and accumulated earnings and profits for a taxable year, the
distribution will be first 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 deposition of the shares of common
stock or ADSs), and the balance in excess of adjusted basis will be taxed as
capital gain recognized on sale of exchange. Consequently, such distributions
in excess of the our current and accumulated earnings and profits would not
give rise to foreign source income and a U.S. holder would not be able to use
the foreign tax credit arising from any Chilean withholding tax imposed on
such distribution unless such credit can be applied (subject to applicable
litigations) against U.S. tax due on other foreign source income in the
appropriate category for foreign tax credit purposes.

Distributions to U.S. holders of additional shares of common stock,
or preemptive rights, with respect to shares of common stock that are made, as
part of a pro-rata distribution, to all shareholders of our company, will
generally not be subject to federal income tax. We do not believe that it is,
for U.S. federal income tax purposes, a passive foreign investment company,
and expect to continue our operations in such a manner that we will not become
a passive foreign investment company. If, however, we do become a passive
foreign investment company, U.S. holders could be subject to additional
federal income taxes on certain distributions or gains with respect to ADSs or
shares of common stock, plus an interest charge on certain taxes treated as
having been deferred by the U.S. holder under the passive foreign investment
company rules of the U.S. federal income tax laws.

Capital Gains

U.S. holders will recognize capital gain or loss for federal income
tax purposes, upon the sale or other disposition, of ADSs or shares (or
preemptive rights with respect to such shares) in an amount equal to the
difference between the amount realized for the ADS or share of common stock,
and the U.S. holder's basis in the ADS or share of common stock. Such gain or
loss will 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 deposits or
withdrawals of shares of common stock in exchange for ADRs or on the exercise
of preemptive rights. Any gain or loss recognized by a U.S. holder generally
will be treated as U.S. source gain or loss. Consequently, in the case of a
disposition of shares of common stock (which, unlike a disposition of ADRs,
will 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 ADSs by a foreign holder, but
such taxes generally will apply to the transfer at death or by gift of shares
of common stock by a foreign holder. The amount of any inheritance tax paid to
Chile may be eligible for credit against the amount of U.S. federal estate tax
imposed on the estate of a U.S. holder. Prospective purchasers should consult
their personal tax advisors to determine whether and to what extent they may

-88-

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) to
U.S. holders other than certain exempt recipients such as corporations, and a
backup withholding tax will apply to such amounts if the U.S. holder fails to
provide an accurate identification number or to report interest and dividends
required to be shown on its federal income tax returns. The amount of any
backup withholding from a payment to an U.S. holder will be allowed as a
credit against the U.S. holder's United States federal income tax liability.

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, Las Condes,
Santiago, Chile, Attention: Investor Relations. Telephone requests can be
directed to 011-562-787-8855.

ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk (2002)

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) exchange rate fluctuations. The most significant
interest rate risk is our exposure to changes in the LIBOR and TAB[6] rates
that could affect consolidated bank liabilities, which totaled approximately
Ch$48,651 million as of December 31, 2002.

The most significant exchange rate risk is in the variation of the
Chilean peso against the U.S. dollar. We had operating liabilities of
approximately Ch$52,182 million and operating assets of approximately
Ch$10,789 million denominated in U.S. dollars as of December 31, 2002. In
addition, we had non-operating assets denominated in U.S. dollars of
approximately Ch$73,495 million and US$106.2 million in financial investments
denominated in U.S. dollars.

We mitigate exchange rate fluctuation risk in our U.S. denominated
bank liabilities through U.S. sales exports, a net investment hedge in
Argentina, and 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. The U.S. dollar-denominated sales during 2002
totaled approximately Ch$59,108 million. Despite our sales in U.S. dollars,
coupled with U.S. dollar-based financial investments and

_________________

[6] 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-

futures, we believe, to the best of our knowledge, that a variation in the
peso/U.S. dollar parity could have a significant impact on net income.

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.

We have entered into foreign currency forward exchange contracts in
the amount of US$130.6 million in 2002 to manage exposure related to certain
foreign currency commitments, certain foreign currency denominated balance
sheet positions, and certain anticipated foreign currency denominated
expenditures. These foreign currency forward exchange contracts have been
designated, and are effective as hedges.

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, 2002, consolidated bank
liabilities totaled approximately Ch$48,651 million, of which Ch$41,441
million correspond to loans in foreign currency at variable interest rates
related to the 6-month LIBOR, Ch$6,147 million correspond to loans in
adjustable pesos in UFs exposed to changes in the 6-month TAB and Ch$1,062
million in loans in pesos at a fixed annual rate of 4.94%.

Furthermore, as of December 31, 2002, we held a total of
approximately Ch$101,061 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, 2002
(Ch$ in millions)
------------------------------------------------------------------------------
Short-term Long-Term
------------------------------------ -------------------------------------
Floating rate Fixed rate Floating rate Fixed rate
------------------------ ---------- ------------------------ ----------
LIBOR TAB LIBOR TAB
------ ------ ------- -------

Bank liabilities............... 3,016 1,142 214 38,425 5,005 848
Bonds.......................... 1,947 88,744
------ ------ -------- ------- ------- -------
Total debt..................... 3,016 1,142 2,161 38,425 5,005 89,592
Time deposits ................. 12,982
Marketable securities.......... 67,463
Other current assets........... 15,407
------ ------ -------- ------- -------
Total investments.............. -- -- 95,852 -- -- --
------ ------ -------- ------ ------ ------
Net Debt (Investments)......... 3,016 1,142 (93,691) 38,425 5,005 89,592
________________
(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.

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-

-90-

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.

As of December 31, 2002
Expected maturity date
-------------------------------------------------------------------------------------------
Total Debt
(incl. 2003 Fair
2003 2004 2005 2006 2007 Thereafter maturities) Value (1)
---- ---- ---- ---- ---- ---------- ----------- ---------
(Ch$ Equivalent in millions)

Bank Liabilities
Short and long-term Bank
Liabilities:
Fixed Rate:
Ch$ denominated (3) .......... 10.5 -- -- -- -- -- 10.5 10.5
Average interest rate (%)..... 3.2 -- -- -- -- --
US$ denominated............... -- -- -- -- -- -- -- --
Average interest rate (%)..... -- -- -- -- -- --
Variable Rate
Ch$ denominated (3)........... 1,407.9 2,498.5 1,551.2 896.9 855.0 -- 7,209.5 7,209.5
Average interest rate (%)(4).. 3.87 2.56 3.16 2.22 2.21 --
US$ denominated............... 2,954.4 2,249.6 294.6 1.8 35,930.5 -- 41,430.9 41,430.9
Average interest rate (%)..... 2.42 2.49 4.24 3.20 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% in 02/01/03.

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.

As of December 31, 2002
Expected maturity date
------------------------------------------------------------------------------------
Total Debt
(incl. 2003 Fair
2003 2004 2005 2006 2007 Thereafter maturities) Value (1)
---- ---- ---- ---- ---- ---------- ----------- ---------
Ch$ Equivalent in millions

Bonds
Short-term:
Fixed Rate
ChUF$ denominated -- -- -- -- -- -- -- --
Interest rate (%) -- -- -- -- -- -- -- --
Long-Term:
ChUF$ denominated 1,946.8 -- 3,348.8 -- -- 85,395.0 90,690.7 91,051.2
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, 2002, we held U.S. dollar-denominated operating assets
totaling approximately Ch$10,789 million and U.S. dollar-denominated
liabilities of approximately Ch$52,182 million. As a result, we had a net
exposure of Ch$41,393 million.

The table below provides information about the our U.S.
dollar-denominated operating assets and liabilities:

December 31, 2002
(Ch$ in millions)
-----------------
On-Balance Sheet Financial Instruments (1)
Assets
Cash ............................................. 329.8
Miscellaneous Receivables......................... 4,447.4
Other assets...................................... 6,012.2
----------

-91-

December 31, 2002
(Ch$ in millions)
-----------------
Total assets........................................ 10,789.4
----------
Liabilities
Obligations to Banks.............................. 39,983.4
Accounts payable.................................. 3,127.2
Documents payable................................. 2,344.0
Accrued expenses.................................. 5,371.1
Miscellaneous Creditors........................... 1,356.7
----------
Total liabilities................................... 52,182.4
==========

As of December 31, 2002, we held approximately Ch$3,268 million in
U.S. dollar-denominated time deposits, Ch$63,617 million in marketable
securities, as well as foreign currency forward contracts to purchase U.S.
dollars totaling Ch$93,850 million (US$ 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, 2002
Expected maturity date
---------------------------------------------------------------------------------
Fair
2003 2004 2005 2006 2007 Thereafter Total Value
---- ---- ---- ---- ---- ---------- -------- ---------

On-Balance Sheet Financial
Instruments (Ch$ in millions)

US$ Time Deposits............... 3,268 -- -- -- -- -- 3,268 3,268
Marketable Securities........... 63,617 -- -- -- -- -- 63,617 63,741
Long-Term Bonds................. -- -- 9,840 -- -- -- 9,840 10,390
Reverse Repurchase agreements... 5,636 -- -- -- -- -- 5,636 5,636
Anticipated Transactions and Expected transaction date
Related Derivatives (Ch$ in millions)
Forward Exchange agreements
(Receive US$/Pay UF): (1)....
Contract Amount (2)............. (622) -- -- -- -- -- (622) 1,065
Average Contractual Exchange Rate
(UF/US$)..................... 0.04295
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 2002, approximately 36.7% of our consolidated
sales (Ch$59,108 million) were denominated in U.S. dollars. These sales
stemmed primarily from the exports of wine from Sociedad Anonima Vina Santa
Rita S.A (approximately Ch$37,593 million) and from sales by Cristalerias in
Chile for contracts denominated in U.S. dollars (approximately Ch$21,515
million). Furthermore, during 2002, 27.4% of our consolidated costs, or
Ch$25,969 million, were denominated in U.S. dollars. As a result, we could
experience a gain on exchange rate fluctuations should the peso rise in value
against the U.S. dollar.

Considering both the operating results of our company and the
investments and futures contracts denominated in U.S. dollars, it does not
appear that a variation in the peso/U.S. dollar parity would have a
significant impact on the our consolidated results of operation, although no
such guarantee can be given to that effect.

-92-

Furthermore, as of December 31, 2002, we held investments in
Argentina of Ch$20,557 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.

Quantitative and Qualitative Disclosures about Market Risk (2001)

We face market risk in two major areas: (i) variations in interest
rates, and (ii) exchange rate fluctuations. The most significant interest rate
risk is our exposure to changes in the LIBOR and TAB[7] rates that could affect
consolidated bank liabilities, which totaled approximately Ch$84,209 million
as of December 31, 2001.

The most significant exchange rate risk is in the variation of the
Chilean peso against the U.S. dollar. We had operating liabilities of
approximately Ch$92,357 million and operating assets of approximately
Ch$25,807 million denominated in U.S. dollars as of December 31, 2001. In
addition, we had non-operating assets denominated in U.S. dollars of
approximately Ch$21,396 million and Ch$23,445 million in financial investments
denominated in U.S. dollars.

We manage exchange rate fluctuation risk in our U.S.-denominated
bank liabilities through U.S. sales exports, a net investment hedge in
Argentina, and 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. The U.S. dollar-denominated sales during 2001
totaled approximately Ch$32,888 million. Despite our sales in U.S. dollars,
coupled with U.S. dollar-based financial investments and futures, we believe,
to the best of our knowledge, that a variation in the peso/U.S. dollar parity
could have a significant impact on net income.

We have entered into foreign currency forward exchange contracts in
the amount of US$140.9 million in 2001 to manage exposure related to certain
foreign currency commitments, certain foreign currency denominated balance
sheet positions, and certain anticipated foreign currency denominated
expenditures. These foreign currency forward exchange contracts have been
designated, and are effective as hedges.

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, 2001, consolidated bank
liabilities totaled approximately Ch$84,209 million, of which 98.8% was a
floating-rate debt. All of our peso-denominated floating-rate debt is exposed
to changes in the six-month TAB rate and all of our interest payments on
foreign currency long-term floating rate debt is tied to the three and
six-month LIBOR.

Furthermore, as of December 31, 2001, we held a total of
approximately Ch$36,850 million in short and long-term financial investments.
The interest rates for these investments vary at each renewal.
_________________

[7] 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.

-93-

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, 2001
(Ch$ in millions)
---------------------------------------------------------------------------------
Short-term Long-Term
--------------------------------------- ----------------------------------------
Floating rate Fixed rate Floating rate Fixed rate
----------------------- ------------ --------------------------- -----------
LIBOR TAB LIBOR TAB
------------ ---------- ------------- ------------

Bank liabilities................. 12,864 3,912 2,087 62,896 2,449
Bonds............................ 267 20,520
------ ----- ------- ------ ----- ------
Total debt....................... 12,864 3,912 2,354 62,896 2,449 20,520
Marketable securities............ 13,436
Time deposits.................... 23,414
Other current assets............. 11,807
------ ----- ------- ------ ----- ------
Total investments................ -- -- 48,657 -- -- --
------ ----- ------- ------ ----- ------
Net Debt (Investments)........... 12,864 3,912 (46,303) 62,896 2,449 20,520
====== ===== ======= ====== ===== ======
_________________
(1) Dollar-denominated assets and liabilities have been converted to pesos
based on the Observed Exchange Rate, as of December 31, 2001, which was
Ch$654.79 = US$1.00.

The following table summarizes the debt obligations held by our
company, as of December 31, 2001, 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, 2001, which was Ch$654.79=US$1.00.

As of December 31, 2001
Expected maturity date
--------------------------------------------------------------------------------------
Total
Debt
(incl. 2001 Fair
2002 2003 2004 2005 2006 Thereafter maturities) Value (1)
-------- ------- -------- --------- ------ ---------- ------------ ----------
(Ch$ Equivalent in millions)

Bank Liabilities
Short and long-term Bank
Liabilities:
Fixed Rate
Ch$ denominated (3) ............. 2,086.4 -- -- -- -- -- 2,086.4 2,086.4
Average interest rate (%)........ 7.18 -- -- -- -- -- -- --
US$ denominated.................. 20.1 -- -- -- -- -- 20.1 20.1
Average interest rate (%)........ 7.60 -- -- -- -- -- -- --
Variable Rate
Ch$ denominated (3).............. 3,918.8 864.1 1,376.2 167.5 41.9 -- 6,368.5 6,390.5
Average interest rate (%)........ 7.41 7.39 7.30 8.27 8.27 -- -- --
US$ denominated.................. 12,837.6 22,026.7 21,354.3 19,514.9 -- -- 75,733.5 76,244.9
Average interest rate (%)........ 3.48 3.22 3.17 3.03
___________________
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, 2001, on Cristalerias' variable
rate debt, and for fixed rate debt, the average prevailing interest rate
on December 31, 2001, on Cristalerias' fixed rate debt.
3. These figures were calculated based on the Observed Exchange Rate, as of
December 31, 2001, which was Ch$654.79=US$ 1.00.

The following table summarizes the public debt obligations held by
our company as of December 31, 2001. The table presents principal payment
obligations that exist by maturity date and the related interest rate.

-94-

As of December 31, 2001
Expected maturity date
-------------------------------------------------------------------------------------
Total
Debt
(incl. 2001 Fair
2002 2003 2004 2005 2006 Thereafter maturities) Value (1)
-------- --------- -------- -------- -------- ---------- ----------- ----------
(Ch$ Equivalent in millions)

Bonds
Short-term:
Fixed Rate -- -- -- -- -- -- -- --
ChUF$ denominated -- -- -- -- -- -- -- --
Interest rate (%)
Long-Term: 267.0 418.8 -- 3,350.1 97.2 16,655.4 20,786.4 20,728.8
ChUF$ denominated
Interest rate (%) 6.59 6.59 -- 6.29 6.29 6.29 -- --

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, 2001, we held U.S. dollar denominated operating assets
totaling approximately Ch$25,807 million and U.S. dollar denominated
liabilities of approximately Ch$92,357 million. As a result, we had a net
exposure of Ch$66,551.4 million.

-95-

The table below provides information about our U.S.
dollar-denominated operating assets and liabilities:

December 31, 2001
(Ch$ in millions)
-----------------
On-Balance Sheet Financial Instruments (1)
Assets
Cash ........................................... 480.8
Miscellaneous Receivables....................... 6,432.9
Other assets.................................... 18,892.8
----------
Total assets...................................... 25,806.4
----------
Liabilities
Obligations to Banks............................ 75,753.9
Accounts payable................................ 3,535.6
Documents payable............................... 3,938.2
Accrued expenses................................ 6,342.6
Miscellaneous Creditors......................... 2,787.0
----------
Total liabilities................................. 92,357.6
==========

As of December 31, 2001, we held approximately Ch$13,402 million in
U.S. dollar-denominated time deposits, as well as foreign currency forward
contracts to purchase U.S. dollars totaling Ch$95,028 million (US$ 140.9
million).

Also, as of December 31, 2001, we held EURO futures exchange
contracts for investment purposes, to purchase Euros (payable in U.S. dollars)
for (euro)3.5 million, which could have an impact on our net income should
variations occur in the value of the Euro against the U.S. dollar.

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, 2001
Expected maturity date
------------------------------------------------------------------------------------
Fair
2002 2003 2004 2005 2006 Thereafter Total Value
--------- -------- -------- --------- -------- ----------- -------- ---------

On-Balance Sheet Financial
Instruments (Ch$ in millions)

US$ Time Deposits.............. 13,402 -- -- -- -- -- 13,402 13,402
Marketable Securities.......... 10,043 -- -- -- -- -- 10,043 9,878
Long-Term Bonds................ -- -- -- 9,342 -- -- 9,342 9,238
Reverse Repurchase agreements.. 8,785 -- -- -- -- -- 8,785 8,778
Anticipated Transactions and Expected transaction date
Related Derivatives (Ch$ in millions)
Forward Exchange agreements
(Receive US$/Pay UF): (1)
Contract Amount (2)............ (2,331) (461) -- -- -- -- (2,792) (1,483)
Average Contractual Exchange
Rate (UF/US$)................ 0.04295
Forward Exchange agreements
(Receives Euros/Pays US$)
Contract Amount (3)............ (21) -- -- -- -- -- (21) (4)
Average Contractual Exchange
Rate (US$/Euro).............. 0.8919
________________
(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, 2001, which was Ch$654.79=US$1.00.
(3) These figures were calculated on the basis of the peso-Euro exchange rate
as of December 31, 2001, which was Ch$578.18=1.00.

In addition, during 2001, approximately 22.5% of our consolidated
sales (Ch$32,888 million) were denominated in U.S. dollars. These sales
stemmed primarily from the exports of wine from

-96-

Sociedad Anonima Vina Santa Rita S.A (approximately Ch$32,789 million) and
from sales by Cristalerias in Chile for contracts denominated in U.S. dollars
(approximately Ch$99 million). Furthermore, during 2001, 26.1% of our
consolidated costs, or Ch$29,395 million, were denominated in U.S. dollars. As
a result, we could experience a gain on exchange rate fluctuations should the
peso rise in value against the U.S. dollar.

Considering both our operating results and the investments and
futures contracts denominated in U.S. dollars, it does not appear that a
variation in the peso/U.S. dollar parity would have a significant impact on
our consolidated results of operation, although no such guarantee can be given
to that effect.

Furthermore, as of December 31, 2001, we held investments in
Argentina of Ch$18,952 million as represented by a 40% ownership interest in
Rayen Cura S.A.I.C., which has been recalculated in U.S. dollars as required
under BT 64.

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 Officers 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.

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.]

-97-

ITEM 16: RESERVED

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:

Index to Audited Consolidated Financial Statements.............. F-1

Independent Auditors' Report.................................... F-2

Consolidated balance sheets at December 31, 2001 and 2002....... F-3

Consolidated statements of income for the years ended
December 31, 2000, 2001 and 2002.............................. F-6

Consolidated statements of cash flows at December 31, 2000,
2001 and 2002................................................. F-8

Notes to the Consolidated Financial Statements.................. F-10

The following consolidated financial statements of Cordillera
Comunicaciones Ltda. and its subsidiaries are also included at the end of this
annual report:

Index to Audited Consolidated Financial Statements.............. G-1

Independent Auditors' Report.................................... G-2

Consolidated balance sheets at December 31, 2001 and 2002....... G-4

Consolidated statements of income for the years ended
December 31, 2000, 2001 and 2002.............................. G-6

Consolidated statements of cash flows at December 31, 2000,
2001 and 2002................................................. G-7

Notes to the Consolidated Financial Statements.................. G-9

ITEM 19: EXHIBITS

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

INDEX TO EXHIBITS

Exhibit Number Description
-------------- -----------
8.1 List of Cristalerias Subsidiaries (filed herewith).

-98-

12.1 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).

12.2 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).

-99-

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant certifies that it meets all the
requirements for filing on Form 20-F and has duly caused this annual report to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Santiago, Chile on June 26, 2003.

CRISTALERIAS DE CHILE S.A.

/s/ Cirilo Elton Gonzalez
---------------------------
Chief Executive Officer

-100-

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 annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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
annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us and others within
those entities, particularly during the period in which this report
is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls and procedures which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls;

-101-

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

/s/ CIRILO ELTON GONZALEZ

Cirilo Elton Gonzalez
Chief Executive Officer
Cristalerias de Chile S.A.
Dated: June 26, 2003

-102-

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.

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls;

-103-

/s/ Rodrigo Palacios Fitz-Henry

Rodrigo Palacios Fitz-Henry
Chief Financial Officer
Cristalerias de Chile S.A.
Dated: June 26, 2003

-104-

-------------------------------------------------
CRISTALERIAS DE CHILE S.A. AND SUBSIDIARIES
------------------

CONSOLIDATED FINANCIAL STATEMENTS
as of December 31, 2001 and 2002 and for each of the
three years in the period ended December 31, 2002
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 F2
Audit Report of Langton Clarke - 2000 and 2001 F3

Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2001 and 2002 F4 - F5
Consolidated Statements of Income for each of the three years in
the period ended December 31, 2002 F6
Consolidated Statements of Changes in Shareholders' Equity for each
of the three years in the period ended December 31, 2002 F7
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 2002 F8 - F9
Notes to the Consolidated Financial Statements F10

------------

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 sheet of Cristalerias de
Chile S.A. and Subsidiaries (the "Company") as of December 31, 2002, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year 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 audit. The consolidated financial statements
of the Company as of December 31, 2001 and for the years in the period ended
December 31, 2000 and 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 audit in accordance with generally accepted auditing
standards 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
audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, 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
the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles in Chile.

Accounting principles generally accepted in Chile vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected consolidated shareholders' equity as of
December 31, 2002 and the consolidated results of operations for the year
ended December 31, 2002, to the extent summarized in Note 39 of the Notes to
the consolidated financial statements.

/s/ Ernst & Young
ERNST & YOUNG LTDA.
Santiago, Chile February 24, 2003,
(except for Notes 35 and 39 for which the date is May 23, 2003).

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)

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, 2002 and thousands of U.S. dollars)

As of December 31,
----------------------------------------------
ASSETS 2001 2002 2002
----------- ----------- -------
ThCh$ ThCh$ ThUS$
(Note 2(o))

CURRENT ASSETS:
Cash...................................................... 2,900,337 2,425,761 3,376
Time deposits (Note 4).................................... 23,413,747 12,982,446 18,066
Marketable securities (Note 4)............................ 13,436,597 67,463,193 93,880
Current receivables, net of allowance for doubtful
accounts of ThCh$544,859 and ThCh$697,830 respectively
(Note 5)................................................ 37,733,763 43,099,251 59,976
Accounts receivable from related companies (Note 6)....... 449,442 399,415 556
Inventories (Note 7)...................................... 29,666,183 31,811,537 44,268
Recoverable taxes, net (Note 8)........................... 1,523,749 787,730 1,096
Prepaid expenses.......................................... 1,189,454 1,701,260 2,367
Deferred income taxes (Note 8)............................ 1,303,002 1,180,218 1,642
Other current assets (Note 9)............................. 11,877,278 15,407,492 21,441
----------- ----------- -------
Total current assets.................................. 123,493,552 177,258,303 246,668
----------- ----------- -------

PROPERTY, PLANT AND EQUIPMENT (Note 11):
Land...................................................... 13,319,101 12,929,190 17,992
Buildings and construction................................ 53,629,839 55,190,482 76,802
Machinery and equipment................................... 129,528,026 131,168,485 182,531
Other property, plant and equipment....................... 10,249,127 11,141,157 15,504
Technical revaluation of property, plant and equipment.... 8,534,965 7,637,391 10,628
Less: Accumulated depreciation............................ (82,859,701) (90,643,797) (126,138)
----------- ----------- -------
Net property, plant and equipment..................... 132,401,357 127,422,908 177,319
----------- ----------- -------

OTHER ASSETS:
Investments in related companies (Note 12)................ 114,902,606 109,652,954 152,590
Investments in others companies (Note 13)................. 1,473,174 817,425 1,138
Long-term receivables..................................... 223,769 194,959 271
Accounts receivables from related companies (Note 6)...... 11,796 1,428 2
Intangibles, net (Note 15)................................ 10,773,453 10,665,333 14,842
Goodwill, net (Note 14)................................... 9,141,721 9,724,996 13,533
Other Assets (Note 16).................................... 12,501,069 16,740,112 23,295
----------- ----------- -------
Total other assets.................................... 149,027,588 147,797,207 205,671
----------- ----------- -------
Total assets.......................................... 404,922,497 452,478,418 629,658
=========== =========== =======

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

F-2

As of December 31,
-----------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 2001 2002 2002
----------- ----------- -------
ThCh$ ThCh$ ThUS$
(Note 2(o))

CURRENT LIABILITIES:
Short-term bank liabilities (Note 17)..................... 2,086,319 10,485 15
Current portion of long-term bank liabilities (Note 17)... 16,776,735 4,362,318 6,070
Current portion of bonds payable (Note 19)................ 266,976 1,946,818 2,709
Dividends payable......................................... 1,010,830 722,643 1,006
Trade accounts payable.................................... 12,376,400 13,266,514 18,461
Miscellaneous creditors................................... 828,642 2,416,074 3,362
Accounts payable to related companies (Note 6)............ 1,997,682 881,593 1,227
Accrued expenses (Note 20)................................ 9,852,525 10,765,192 14,981
Withholdings.............................................. 2,807,819 2,687,706 3,740
Unearned income........................................... 1,515,501 1,618,517 2,252
Other current liabilities (Note 18)....................... 2,351,566 622,410 866
----------- ----------- -------
Total current liabilities............................... 51,870,995 39,300,270 54,689
----------- ----------- -------

LONG-TERM LIABILITIES:
Long-term bank liabilities (Note 17)...................... 65,345,584 44,278,133 61,616
Bonds payable (Note 19)................................... 20,519,412 88,743,836 123,494
Accounts payable.......................................... 267,198 14,069 20
Miscellaneous creditors................................... 2,356,320 2,481,029 3,453
Accrued expenses (Note 20)................................ 6,934,552 5,571,401 7,753
Deferred income taxes (Note 8)............................ 2,024,793 4,006,808 5,576
Other Long-Term Liabilities (Note 22)..................... 461,345 -- --
----------- ----------- -------
Total long-term liabilities............................. 97,909,204 145,095,276 201,912
----------- ----------- -------

COMMITMENTS AND CONTINGENCIES (Note 31):

MINORITY INTEREST (Note 23):................................ 35,351,936 36,752,742 51,144

SHAREHOLDERS' EQUITY (Note 24):
Authorized, subscribed and paid-in capital represented by
64,000,000 shares with no par value..................... 64,749,257 64,749,257 90,103
Share premium............................................. 27,598,395 27,598,393 38,405
Other reserves............................................ 8,054,384 9,713,099 13,517
Retained earnings......................................... 101,084,597 111,608,719 155,312
Net income for the period................................. 18,303,729 17,660,662 24,576
----------- ----------- -------
Total shareholders' equity.............................. 219,790,362 231,330,130 321,913
----------- ----------- -------
Total liabilities and shareholders' equity............ 404,922,497 452,478,418 629,658
=========== =========== =======

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

F-3

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, 2002 and thousands of U.S. dollars)

Years ended December 31,
-----------------------------------------------------------------
2000 2001 2002 20002
ThCh$ ThCh$ ThCh$ ThUS$
----------- ----------- ----------- -------
(Note 2(o))

OPERATING RESULTS:
Net sales........................................ 149,310,928 146,186,680 161,057,260 224,123
Cost of Sales.................................... (93,531,098) (90,085,963) (94,777,899) (131,891)
----------- ----------- ----------- -------
Gross margin..................................... 55,779,830 56,100,717 66,279,361 92,232
Selling and administrative expenses.............. (24,002,727) (22,538,654) (24,669,053) (34,329)
----------- ----------- ----------- -------
Operating income............................... 31,777,103 33,562,063 41,610,308 57,903
----------- ----------- ----------- -------

NON-OPERATING RESULTS:
Net interest income (expense) (Note 25).......... (2,185,270) (4,214,590) (4,286,800) (5,965)
Equity participation in net income (loss) of
related companies (Note 12).................... (2,882,816) (7,616,440) (8,902,380) (12,388)
Other non-operating income (Note 25)............. 1,827,659 6,911,068 1,264,313 1,759
Other non-operating expense (Note 25)............ (2,788,854) (2,828,764) (4,073,817) (5,669)
Price-level restatement, net (Note 26)........... (2,189,816) (2,337,770) (1,951,347) (2,715)
Foreign currency translation, net (Note 27)...... 1,056,754 1,387,438 4,948,358 6,886
----------- ----------- ----------- -------
Non-operating income (loss).................... (7,162,343) (8,699,058) (13,001,673) (18,092)
----------- ----------- ----------- -------

Income before income taxes and minority
interest..................................... 24,614,760 24,863,005 28,608,635 39,811
Income taxes (Note 8).......................... (3,876,363) (5,131,781) (6,397,813) (8,903)
Extraordinary income (Note 28)................. -- 1,838,626 -- --
----------- ----------- ----------- -------

Income before minority interest................ 20,738,397 21,569,850 22,210,822 30,908
Minority interest (Note 23).................... (2,640,735) (3,266,121) (4,550,160) (6,332)
Net income .................................. 18,097,662 18,303,729 17,660,662 24,576
=========== =========== =========== =======

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

F-4

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,
2000................... 58,236,091 24,822,255 4,953,007 71,410,952 19,767,748 -- 179,190,053
Profit distribution 2000. -- -- 271,408 19,496,340 (19,767,748) -- --
Dividends................ -- -- -- (7,878,400) -- -- (7,878,400)
Price-level restatement
of equity accounts..... 2,737,096 1,166,646 245,548 4,102,281 -- -- 8,251,571
Currency translation
adjustment............. -- -- 696,131 -- -- -- 696,131
Subsidiary start-up
stage deficit.......... -- -- (107,536) -- -- -- (107,536)
Net income for the year.. -- -- -- -- -- 17,042,239 17,042,239
---------- ---------- --------- ---------- ----------- ---------- -----------

Balance as of
December 31, 2000...... 60,973,187 25,988,901 6,058,558 87,131,173 -- 17,042,239 197,194,058
========== ========== ========= ========== =========== ========== ===========
Balance as of
December 31, 2000
restated to constant
Chilean Pesos as of
December 31, 2002...... 64,749,256 27,598,394 6,433,764 92,527,207 -- 18,097,662 209,406,283
========== ========== ========= ========== =========== ========== ===========
Balance as of January 1,
2001................... 60,973,187 25,988,901 6,058,558 87,131,173 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...... 62,863,356 26,794,556 7,819,791 98,140,385 -- 17,770,611 213,388,699
========== ========== ========= ========== =========== ========== ===========

Balance as of
December 31, 2001
restated to constant
Chilean Pesos as of
December 31, 2002...... 64,749,257 27,598,395 8,054,384 101,084,597 -- 18,303,729 219,790,362
========== ========== ========= ========== =========== ========== ===========
Balance as of January 1,
2002................... 62,863,356 26,794,556 7,819,791 98,140,385 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
Subsidiary start-up
stage deficit.......... -- -- -- -- -- -- --
Net income for the year.. -- -- -- -- -- 17,660,662 17,660,662
---------- ---------- --------- ----------- ----------- ---------- -----------

Balance as of
December 31, 2002...... 64,749,257 27,598,393 9,713,099 111,608,719 -- 17,660,662 231,330,130
========== ========== ========= =========== =========== ========== ===========

As of December 31, 2000, 2001 and 2002 there were 64,000,000 shares
authorized, issued and outstanding.

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

F-5

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, 2002 and thousands of U.S. dollars)

Years ended December 31,
----------------------------------------------------------------
2000 2001 2002 2002
---------- ---------- ---------- --------
ThCh$ ThCh$ ThCh$ ThUS$
(Note 2(o))

CASH FLOWS FROM OPERATING ACTIVITIES:

NET INCOME FOR THE PERIOD.......................... 18,097,662 18,303,729 17,660,662 24,576

Net (gain) loss on sale of property and equipment (109,021) (44,499) 49,939 69
Net (gain) loss on sale of other assets.......... (260,589) (2,049,647) -- --
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation..................................... 11,794,247 12,134,998 13,574,923 18,891
Amortization of intangibles...................... 281,193 1,246,915 773,561 1,076
Write-offs and provisions........................ 3,732,973 3,998,246 8,434,618 11,737
Equity in net loss of related companies.......... 2,882,816 7,616,440 8,902,380 12,388
Amortization of goodwill......................... 833,727 847,140 646,652 900
Price-level restatement, net..................... 2,189,816 2,337,770 1,951,347 2,715
Foreign exchange gain, net....................... (1,056,754) (1,387,438) (4,948,358) (6,886)
Other, net....................................... (69,973) (837,060) 3,671,371 5,109
CHANGES IN OPERATING ASSETS:
Increase in current receivable................... (4,578,302) (6,047,801) (4,599,635) (6,401)
Increase decrease in inventories................. 2,406,274 856,465 (3,611,483) (5,026)
Increase in other assets......................... (3,915,002) (3,742,788) (1,895,462) (2,638)
CHANGES IN OPERATING LIABILITIES:
Increase (decrease) in trade accounts payable.... (153,392) 1,658,817 1,303,379 1,814
Increase (decrease) in bank liabilities.......... (153,741) (1,095,130) 2,410,065 3,354
Increase in income tax........................... 661,133 1,563,827 576,264 802
Increase (decrease) in accounts payable to
related companies.............................. (112,165) 2,097,675 (198,737) (277)
(Decrease) increase in withholdings.............. 399,483 (255,341) 124,243 173
Loss in minority interest........................ 2,640,735 3,266,121 4,550,160 6,332
---------- ---------- ---------- ------

NET CASH PROVIDED BY
OPERATING ACTIVITIES............................... 35,511,120 40,468,439 49,375,889 68,708
---------- ---------- ---------- ------

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

F-6

Years ended December 31,
------------------------------------------------------------------
2000 2001 2002 2002
----------- ----------- ----------- -------
ThCh$ ThCh$ ThCh$ ThUS$
(Note 2(o))

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of subsidiary shares...... 1,534,396 -- -- --
Borrowings from banks and others................. 70,363,176 8,715,708 3,142,367 4,373
Bonds payable.................................... -- 18,856,531 68,393,557 95,175
Borrowings from related companies................ 1,474,263 1,966,969 77,767 108
Dividends paid................................... (8,974,087) (9,736,945) (9,154,477) (12,739)
Payment of loans................................. (11,298,550) (12,060,059) (45,098,497) (62,758)
Payment for bond issuance costs.................. -- -- (3,832,239) (5,333)
Repayment of bonds............................... (921,406) (1,089,374) (1,050,312) (1,462)
Payment of loans from related companies.......... (3,461,968) (2,297,881) (322,556) (449)
Other sources of financing....................... (92,677) 973,079 -- --
Other finance payments........................... (1,376,039) (161,858) (454,221) (632)
----------- ----------- ----------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES.......... 47,247,108 5,166,170 11,701,389 16,283
----------- ----------- ----------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and....... 810,269 1,510,843 237,039 330
Proceeds from sales of permanent investment...... 1,888,230 948,448 1,381 2
Proceeds from sales of other investments......... 49,232,803 55,427,477 11,353,947 15,800
Proceeds from loans from related companies....... 1,924,861 1,370,986 89,932 125
Proceeds from forwards contracts................. 1,021,062 10,511,931 4,988,134 6,941
Additions to property, plant and equipment....... (20,400,973) (33,712,000) (15,499,312) (21,568)
Permanent investments............................ (85,955,667) (4,050,846) (4,072,027) (5,667)
Investment in financial instruments.............. (24,434,440) (66,928,178) (1,593,175) (2,217)
Related company loans............................ (1,964,551) (156,216) (30,696) (43)
Other investing activities....................... (712,908) 111,234 (472,880) (658)
----------- ----------- ----------- -------
NET CASH USED IN INVESTING ACTIVITIES.............. (78,591,314) (34,966,321) (4,997,657) (6,955)
----------- ----------- ----------- -------
TOTAL NET CASH FLOW OF THE PERIOD.................. 4,166,914 10,668,288 56,079,621 78,036
EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS... (1,864,186) (1,289,677) (1,691,174) (2,353)
----------- ----------- ----------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......... 2,302,728 9,378,611 54,388,447 75,683
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD........................................... 27,227,439 29,530,167 38,908,778 54,144
----------- ----------- ----------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD. 29,530,167 38,908,778 93,297,225 129,827

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

F-7

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, 2002 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, wine production, and construction 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.

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 (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 materially 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-8

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, 2002 except as indicated)

2. Summary of Significant Accounting Policies, continued:

(a) Basis for preparation of financial statements, continued:

As of December 31, 2001 and 2002, Cristalerias consolidated the
following companies:

Name % Participation
------------------------------------------------
2000 2001 2002
---- ---- ----

Cristalchile Comunicaciones S.A. ............... 99.99 99.99 99.99
Constructora Apoger S.A. "Apoger" (1)........... 88.00 80.00 80.00
CIECSA S.A. and subsidiaries "CIECSA" (2)....... 98.11 98.21 98.21
Sociedad Anonima Vina Santa Rita "Santa
Rita" (3)..................................... 54.10 54.10 54.10
Cristalchile Inversiones S.A. .................. -- 99.99 99.99
Crowpla Reicolite S.A. (4)...................... 99.99 -- --

(1) Apoger consolidates its subsidiary, Monte Azul Ltda. which it
owns 99.0%.

(2) Consolidated CIECSA S.A. includes the balances of its subsidiary,
Megavision S.A. of which it owned 78.01% and 99.99% beginning August
27, 2002. 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 created on March 1, 2001.
(4) On June 29, 2001, Cristalerias contributed its investment in
Crowpla Reicolite S.A. to a joint-venture with Andina Inversiones
Societarias S.A. reducing its ownership from 99.99% to 50%. The
joint-venture is not consolidated as neither party has control.

(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-9

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, 2000......................................................... 106.82 4.7%
November 30, 2001......................................................... 110.10 3.1%
November 30, 2002......................................................... 113.36 3.0%

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, 2000......................................................... 106.94 4.5%
December 31, 2001......................................................... 109.76 2.6%
December 31, 2002......................................................... 112.86 2.8%

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, 2000.......................................................... 15,769.92
December 31, 2001.......................................................... 16,262.66
December 31, 2002.......................................................... 16,744.12

F-10

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, 2002 purchasing power, unless
otherwise stated. For comparative purposes, the December 31, 2000 and
2001 financial statements, and the amounts disclosed in the related
footnotes have been restated by 6.2%(1) and 3.0%, respectively, in
order to present such information in terms of Chilean pesos as of
December 31, 2002. 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 2000 figures multiplied by 3.1% then
multiplied by 3.0%

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 2000 2001 2002
------ ------ ------
Ch$ Ch$ Ch$

U.S. Dollar........................... US$ 573.65 654.79 718.61
Pound Sterling........................ GBP 856.58 948.01 1,152.91
German Mark (1)....................... DEM 275.50 296.36 --
Italian Lira (1)...................... ITL 0.28 0.30 --
Swiss Franc........................... CHF 354.87 390.62 517.69
French Franc (1)...................... FRF 82.15 88.36 --
Danish Corona (1)..................... DKK 72.25 77.82 --
Euro.................................. EUR 538.84 578.18 752.55
Argentina peso (2).................... ARG 573.65 385.17 216.45

(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
a "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, 2002, in accordance with SVS
Circular No. 81. The conversion of Argentine subsidiary financial
statements reflect the conversion rate of 1.7 pesos to 1 U.S. dollar.

F-11

2. Summary of Significant Accounting Policies, 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 adjusted 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-12

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 may account 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.

As of December 31, 2001, Envases CMF S.A. (formerly Crowpla Reicolite
S.A.) has not been consolidated as it is included in investments in
related companies. On June 29, 2001, the Company contributed this
investment to a joint venture in Crowpla Reicolite with Andina
Inversiones Societarias S.A., reducing its ownership share from
99.99% to 50.00%.

(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. Each employee is entitled to
receive one month's salary for every year of service with the
Company.

F-13

2. Summary of Significant Accounting Policies, continued:

(i) Deferred income taxes and tax income:

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.

(j) Allowance for doubtful accounts:

The Company and its subsidiaries have made an allowance for doubtful
accounts, which is deducted from accounts receivables and notes
receivables. The criteria used in determining the allowance is based
on the age 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 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, 2001 and 2002, there
are no negative goodwill amounts recorded.

F-14

2. Summary of Significant Accounting Policies, continued:

(m) Foreign currency forward exchange contracts:

The Company has entered into foreign currency forward exchange
contracts to manage exposure related to certain foreign currency
commitments, certain foreign currency denominated balance sheet
positions, and certain anticipated foreign currency denominated
expenditures. Some of these foreign currency forward exchange
contracts have been designated, 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 and Other Long-term Liabilities for the years
ending December 31, 2001 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 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, 2002 closing exchange rate of Ch$718.61 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.

Cash flows related to the Company's activities such as interest paid,
interest income, dividends received and all other cash flows not
classified as investment or financing are recognized under "Cash Flow
from Operating Activities".

(q) Repurchase and Resale agreement operations:

The financial instruments acquired with resale agreement are
presented at their acquisition value plus the interests and
adjustments accrued at the closing of the fiscal year and they are
classified as Other Current Assets.

F-15

2. Summary of Significant Accounting Policies, continued:

(r) Bonds:

Bonds payable are recorded at the face value of the bonds. The
difference between the face value and the proceeds received, equal to
the premium or discount, is deferred and amortized over the term of
the bonds.

(s) Computer Software:

The Company and Vina Santa Rita acquired computer packages from third
parties, which are recorded as Fixed Assets and amortized over 36
months by Cristalerias and 48 months by the subsidiary Vina 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 Vina Santa Rita's consolidated subsidiary Dona Paula S.A.

F-16

3. Changes in Accounting Principles

There were no changes in accounting principles during the years ended
December 31, 2001 and 2002 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 2001 2002
--------------------------------------------------------- -------- ---------- ----------
ThCh$ ThCh$

Banco Santander-Santiago................................. US$ 4,392,573 --
ScotiaBank (formerly Sudamericano)....................... US$ -- 304,098
Banco J.P. Morgan Chase Bank............................. US$ -- 1,186,587
Banco Deutsche bank Chile S.A............................ US$ -- 1,777,751
Banco Credito e Inversiones.............................. US$ 4,578,611 --
Banco A. Edwards......................................... US$ 4,431,434 --
Banco Santander-Santiago................................. UF 2,294,448 --
Banco A. Edwards......................................... UF 908,165 --
Banco Santander-Santiago................................. UF 4,347,838 --
ScotiaBank (formerly Sudameericano)...................... UF 1,357,577 --
Citibank, N.A............................................ UF 1,103,101 --
Banco Santander-Santiago................................. Ch$ -- 9,714,010
---------- ----------
Total.................................................... 23,413,747 12,982,446
========== ==========

F-17

4. Time Deposits and Marketable Securities, continued

Marketable securities consist of the following:

2001 2002
--------- ---------
ThCh$ ThCh$

Treasury Bonds and mutual funds..................................... 9,995,244 63,464,642
Equity securities................................................... 3,367,606 3,799,340
Other............................................................... 73,747 199,211
--------- ---------
Total............................................................... 13,436,597 67,463,193
========== ==========

5. Current receivables

Current receivables are summarized as follows:

2001 2002
---- ----
ThCh$ ThCh$

Trade accounts receivable........................................ 33,150,103 38,262,076
Miscellaneous accounts receivable................................ 669,275 704,449
Notes receivable................................................. 4,459,244 4,830,556
---------- ----------

Sub-total........................................................ 38,278,622 43,797,081
Less: Allowance for doubtful accounts............................ (544,859) (697,830)
---------- ----------
Total............................................................ 37,733,763 43,099,251
========== ==========

F-18

6. Related Party transactions:

The following table details amounts receivable from and payable to
related parties as of December 31, 2001 and 2002:

Balance Receivable Balance Payable
----------------------- -------------------------
2001 2002 2001 2002
-------- ------- --------- -------
ThCh$ ThCh$ ThCh$ ThCh$

Short-term
Metropolis - Intercom (indirect affiliate company)... 34,607 53,547 37,303 --
Inversiones Bayona S.A. (shareholder)................ -- -- 182,697 124,163
Servicios y Consultorias Hendaya S.A. (shareholder).. 4,450 4,655 175,492 120,721
Elecmetal S.A. (majority shareholder)................ 1,059 850 673,002 457,380
Editorial Zig-Zag S.A. (affiliate)................... 283,966 234,248 -- --
Cordillera Comunicaciones Ltda. (affiliate).......... -- -- 206,834 --
Claro y Co. (common board members)................... 294 238 20,293 39,884
Distribuicion via Directa (common control)........... -- -- -- --
Envases CMF S.A. (affiliate)......................... 56 138 18,537 87,164
Marketing Meter Ltda. (affiliate).................... -- -- -- 9,865
Cia Subamericana de Vapores (common control)......... 1,634 17,300 13,866 6,723
Vina Los Vascos S.A. (indirect affiliate)............ 120,044 85,421 8,333 7,312
Rayen Cura S.A.I.C. (affiliate)...................... -- 2,900 -- 25,905
Ediciones Financieras S.A. (affiliate)............... 3,332 118 3,751 2,476
Televisa International S.A. De C.V................... -- -- 657,574 --
------- ------- --------- -------
Total Short-term............................ 449,442 399,415 1,997,682 881,593
======= ======= ========= =======

Long-term
Ediciones Chiloe S.A. (affiliate).................... 11,796 1,428 -- --
------- ------- --------- -------
Total Long-term............................. 11,796 1,428 -- --
======= ======= ========= =======

All related party transactions use estimated market rates.

F-19

6. Related Party transactions, continued:

Transactions with related parties that affect net income are as
follows:

Amount of transaction (Charge) Credit to income
---------------------------------- ------------------------------------
2000 2001 2002 2000 2001 2002
--------- --------- --------- ---------- ---------- ----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

CRISTALCHILE S.A.
Servicios y Consultorias Hendaya S.A.
(shareholder)
Services received............................. 1,264,569 1,272,951 1,317,364 (1,264,569) (1,272,951) (1,317,364)
Dividends paid................................ 742,426 775,500 716,167 -- -- --
Services Provided............................. 18,911 20,013 19,412 18,911 20,013 19,412
Sales......................................... 8,917 7,764 4,143 7,049 39 130
Sale of Fixed Assets.......................... 13,326 -- -- -- -- --
Cia Electro Metalurgica S.A. (shareholder)
Dividends paid................................ 2,847,160 2,973,996 2,746,458 -- -- --
Payments on company's behalf.................. 3,710 21 -- -- -- --
Purchase of industrial materials.............. 171 6,225 3,674 (171) -- --
Advertising sold.............................. 5,211 2,336 1,487 2,942 530 220
Services provided............................. 170 -- -- (170) -- --
Claro y Cia (common board member)
Legal Counsel................................. 147,051 168,676 233,010 (147,051) (168,676) (233,010)
Sales......................................... 356 1,277 887 112 356 294
Navarino S.A. (indirectly related company)
Services Provided............................. 9,799 9,867 9,816 9,799 9,867 9,816
Advertising sold.............................. 2,451 -- -- 2,451 -- --
Quemchi S.A. (indirectly related company)
Services Provided............................. 9,799 9,867 9,816 9,799 9,867 9,816
Loans Granted................................. 37,168 51,500 -- -- -- --
Repayment of Loans............................ 37,168 51,500 -- -- -- --
Interest on Loans Granted..................... 61 157 -- 61 157 --
Advertising sold.............................. 1,932 -- -- 1,932 -- --

Cia Sudamenricana de Vapores (indirectly
related company)
Shipping Services............................. 337,054 415,947 12,265 (337,054) (415,947) (12,265)
Advertising sold.............................. 36,195 -- -- 36,195 -- --
Advertising contracts......................... 87,610 54,933 26,667 87,610 54,933 26,667
Services received............................. 27,653 45,746 40,639 (27,653) (45,746) (40,639)
Sales......................................... 58,448 50,739 46,323 16,153 11,231 9,725
Rayen Cura S.A. (related company)
Direct Sales.................................. 54,501 39,549 183 16,473 10,537 --
Paid in Capital............................... 5,424,813 3,336,976 -- -- -- --
Repayment of Loans............................ -- 415 -- -- -- --

Cordillera Comunicaciones Ltda.
Broadcasting rights........................... -- -- 213,945 -- -- --

F-20

6. Related Party transactions, continued:

Amount of transaction (Charge) Credit to income
-------------------------------- ---------------------------------
2000 2001 2002 2000 2001 2002
------- ------- ------- ------- ------- -------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

CIECSA S.A.
Envases CMF S.A. (related company)
Purchase of Industrial Materials.............. -- 17,892 510,307 -- -- 49,523
Sales......................................... 143 178 194 104 36 64
Paid in Capital............................... -- 517,103 -- -- -- --
Repayment of Loans............................ 549,912 1,282,655 -- -- -- --
Interest on Loans Granted..................... 190,442 60,309 -- 190,442 60,309 --
Reimbursement of Expenses..................... -- 12,486 -- -- (12,486) --
Other......................................... -- -- 4,256 -- -- --
Editorial Zig-Zag S.A. (related company)
Advertising sold.............................. 22,237 -- -- 22,237 -- --
Televisa SA de CV (shareholder)
Sales......................................... 123,721 35,966 -- 123,721 35,966 --
Purchase of Materials......................... 1,268,317 1,855,521 -- (1,268,317) (1,855,521) --
Metropolis Intercom S.A. (related company)
Advertising sold.............................. 259,148 185,935 319,566 259,148 185,935 227,100
Subscription sold............................. 57,170 -- -- 57,170 -- --
Advertising purchased......................... 9,070 64,886 15,308 (9,070) (64,886) (15,308)
Sales......................................... -- -- 9,778 -- -- 3,240
Other......................................... -- -- 143 -- -- --
Empresa Editorial Televisa SA (related company)
Sales......................................... 21 -- -- (21) -- --
Forus SA (directors in common)
Advertising sold.............................. 36,106 -- 80,572 36,106 -- (2,036)
Indesa S.A. (related company)
Advertising sold.............................. 174 -- -- 174 -- --
Subscription sold............................. 91 -- -- 91 -- --
Maritima de Inversiones S.A. (directors in
common)
Advertising sold.............................. 1,845 -- -- 1,845 -- --
Subscription sold............................. 91 -- -- 91 -- --
Sonda S.A. (directors in common)
Subscription sold............................. 233 -- -- 233 -- --
Distribuidora Via Directa S.A.
Newspaper distribution........................ 166,279 -- -- (166,279) -- --
News Stands................................... 131,409 -- -- 131,409 -- --
Other......................................... 87 -- -- 87 -- --
Costanera S.A.C.I. (related company)
Advertising sold.............................. 4,715 -- -- 4,715 -- --
Program production............................ 189,937 80,116 -- (189,937) (80,116) --
Inversiones Bayona S.A. (majority shareholder)
Dividends..................................... 772,909 807,340 745,571 -- -- --
Vina Los Vascos S.A. (indirectly related
company)
Direct Sales.................................. 570,766 485,526 515,402 172,512 109,948 139,050
Purchase of Industrial Materials.............. 46,520 44,374 39,692 (56) -- --
Inmobiliaria Don Aberto S.A. (indirectly
related company)
Interest on Loans Granted..................... 6,131 970 -- 6,131 970 --
Loans Repaid.................................. 417,212 43,453 -- -- -- --
Dividends..................................... -- 46,361 -- -- -- --

F-21

6. Related Party transactions: continued

Amount of transaction (Charge) Credit to Income
--------------------------- ----------------------------
2000 2001 2002 2000 2001 2002
---- ---- ---- ---- ---- ----
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

S.A. VINA SANTA RITA
Inversions Pocuro Ltda
Subscription sold........................ 87 -- -- 87 -- --

CAP S.A. (related company)
Advertising sold......................... -- 2,575 -- -- 2,575 --

Ediciones Financieras S.A. (related
company)
Payments on company's behalf............. -- 10,269 -- -- -- --
Advertising sold......................... -- 56,368 26,855 -- -- (18,237)
Advertising purchased.................... 173 61,066 -- -- (61,066) --
Other sold............................... -- 4,829 9,421 -- 792 1,816
Services received........................ -- 8,967 6,859 -- (8,967) (6,859)
Sales.................................... 23,302 -- -- (23,302) -- --

Sociedad Agricola Vinedos Cullipeumo Ltda.
(related company)
Purchase of Industrial Materials......... -- 39,658 81,458 -- -- --

Carmen Luz Sanchez (related party)
Purchase of Industrial Materials......... -- 50,909 59,490 -- -- --

7. Inventories

Inventories have been valued in accordance with the policy described
in Note 2(e). The principal components are as follows:

2001 2002
--------- ---------
ThCh$ ThCh$

Finished products......................................................... 8,115,396 8,329,808
Raw materials and fuel.................................................... 15,939,664 17,205,395
Operating supplies and spare parts........................................ 2,973,635 2,604,989
Goods-in-transit.......................................................... 393,598 197,093
Foreign and local programming not yet transmitted......................... 2,243,890 3,474,252
---------- ----------

Total..................................................................... 29,666,183 31,811,537
========== ==========

F-22

8. Income and Deferred Taxes

The Company and its subsidiaries have recorded a current tax
provision of 16% in 2002, 15% in 2001 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, 2001 and 2002 are
calculated, as follows:

2001 2002
---------- ----------
ThCh$ ThCh$

Provision for current income taxes........................................ (3,987,529) (4,223,649)
Withheld employee taxes................................................... (8,552) (9,350)
---------- ----------
Total current taxes....................................................... (3,996,081) (4,232,999)

Credits:
Credit Art. 33............................................................ 44,380 78,510
Monthly income tax installments........................................... 4,923,300 4,344,607
Training expenditures..................................................... 108,761 122,451
Grants.................................................................... 74,319 47,968
---------- ----------
Total Credits............................................................. 5,150,760 4,593,536

Income tax refund......................................................... 1,154,678 360,537
Other credits............................................................. 369,071 427,193
---------- ----------
Recoverable taxes, net.................................................... 1,523,749 787,730
========= =======

F-23

8. Income and Deferred Tax, continued:

The income tax rate increased from 15% to 16% in 2002, increasing to
16.5% in 2003, and 17% in 2004. Deferred tax assets and liabilities as
of December 31, 2002, 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, 2001 and 2002 amounted to
ThCh$721,791 and ThCh$2,826,590, respectively, and is classified as
short and long-term as follows:

2001 2002
------------------------- ------------------------
Short Term Long Term Short Term Long Term
---------- --------- ---------- ---------
ThCh$ ThCh$ ThCh$ ThCh$

Deferred income tax assets:
Allowance for doubtful accounts........................ 87,806 -- 113,114 --
Advanced payments...................................... 256,234 -- 275,148 --
Vacation provision..................................... 171,918 -- 170,806 --
Severance payments..................................... 1,776 33,742 1,867 35,468
Packaging provision.................................... 165,411 -- 116,184 --
Machinery repairs provision............................ 133,274 -- -- --
Furnace repairs provision.............................. 183,446 552,278 321,645 293,169
Inventories obsolence provision........................ 40,988 -- 13,355 --
Spareparts obsolence provision......................... 96,247 -- 94,105 --
Bond discount amortization............................. 36,673 -- 58,626 --
Intangibles amortization............................... 229,979 -- 229,427 --
Deferred customs duties................................ 25,150 -- 14,109
Depreciation........................................... -- 4,304 -- 13,523
Unrealized earnings related companies.................. 130,216 1,183 119,885 52,934
Other provisions....................................... 116,564 96,437 91,826 103,587
Directors' fees........................................ 8,931 -- 20,236 --
Required bank reserve.................................. 13,538 -- 8,650 --
Accumulated tax losses................................. -- 5,290,538 -- 4,677,104
Complementary account, net of amortization............. (252,623) (4,776,497) (189,256) (4,045,345)
---------- --------- ---------- ---------
Total deferred income tax assets................... 1,445,528 1,201,985 1,459,727 1,130,440
---------- --------- ---------- ---------

Deferred income tax liabilities:
Depreciation........................................... -- 6,672,208 -- 7,977,645
Other events........................................... -- -- 12,630 1,018
Deferred customs duties................................ -- -- -- 152,217
Advanced expenses...................................... 44,738 -- 43,686 --
Bond discount.......................................... -- 238,974 51,666 798,042
Capitalized moldings................................... -- 270,621 -- 248,735
Deferred expenses...................................... 259,355 -- 171,527 --
Complementary accounts, net of amortization............ (161,567) (3,955,025) -- (4,040,409)
---------- --------- ---------- ---------
Total deferred income tax liabilities.............. 142,526 3,226,778 279,509 5,137,248
========== ========== ========= ==========
Net deferred tax asset (liability)................. 1,303,002 (2,024,793) 1,180,208 (4,006,808)
---------- ---------- --------- ----------

F-24

8. Income and Deferred Tax, continued:

Income tax expense as of December 31, 2000, 2001 and 2002 is as
follows:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Parent Company 1st category tax............................... (4,001,543) (3,996,081) (4,232,999)
Deferred tax expense.......................................... (141,380) (457,306) (2,182,871)
Tax benefit for tax losses.................................... 6,409 6,341 (38,992)
Deferred tax amortization..................................... 260,151 (634,251) 57,049
Deferred tax loss effect due to change in enacted income
tax rates................................................... -- (50,484) --
---------- ---------- ----------
Income tax expense............................................ (3,876,363) (5,131,781) (6,397,813)
========== ========== ==========

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.

2001 2002
---------- ----------
ThCh$ ThCh$

Reverse repurchase agreements (see Note 10)........................ 11,807,389 15,017,495
Other.............................................................. 69,889 389,997
---------- ----------
Total.............................................................. 11,877,278 15,407,492
========== ==========

F-25

10. Reverse repurchase agreements:

Carrying value as of
------------------------------
Purchase Maturity Purchase December 31,
Issuer Date Date Date 2002
--------------------------------------------------- ------------- ------------- ------------ ------------

B.C.I. C.B. ....................................... 30-12-2002 02-01-2003 823,000 823,027
B.C.I. C.B. ....................................... 30-12-2002 06-01-2003 333,000 333,017
BBV BHIF........................................... 28-11-2002 06-01-2003 802,582 803,999
BBV BHIF........................................... 04-12-2002 06-01-2003 647,578 648,579
BBV BHIF........................................... 09-12-2002 10-03-2003 620,857 621,673
BBV BHIF........................................... 02-12-2002 06-01-2003 718,610 719,843
SCOTIABANK SUD AMERICANO........................... 31-12-2002 08-01-2003 300,000 300,437
SCOTIABANK SUD AMERICANO........................... 13-12-2002 10-01-2003 100,000 100,159
SCOTIABANK SUD AMERICANO........................... 13-12-2002 29-01-2003 100,000 100,159
SCOTIABANK SUD AMERICANO........................... 25-10-2002 21-03-2003 368,000 360,696
SCOTIABANK SUD AMERICANO........................... 07-11-2002 25-04-2003 286,800 288,234
SCOTIABANK SUD AMERICANO........................... 14-11-2002 23-05-2003 283,415 288,115
SCOTIABANK SUD AMERICANO........................... 25-11-2002 20-06-2003 212,400 215,993
SCOTIABANK SUD AMERICANO........................... 30-12-2002 24-01-2003 107,792 107,801
B.C.I. C.B. ....................................... 06-12-2002 03-01-2003 3,011,491 3,018,518
SCOTIABANK SUD AMERICANO........................... 20-11-2002 10-01-2003 360,761 361,082
SCOTIABANK SUD AMERICANO........................... 20-12-2002 10-01-2003 3,001,960 3,005,372
INVERSIONES BOSTON C.B. ........................... 27-12-2002 03-01-2003 350,000 350,126
INVERSIONES BOSTON C.B. ........................... 30-12-2002 03-01-2003 300,000 300,028
BBV BHIF........................................... 27-12-2002 06-01-2003 510,847 517,511
BBV BHIF........................................... 27-12-2002 09-01-2003 141,902 143,753
BBV BHIF........................................... 23-12-2002 23-01-2003 697,080 718,922
BANCO DE CHILE..................................... 26-12-2002 03-01-2003 197,604 201,261
INVERSIONES BOSTON C.B. ........................... 27-12-2002 03-01-2003 390,000 390,140
INVERSIONES BOSTON C.B. ........................... 30-12-2002 03-01-2003 60,000 60,006
INVERSIONES BOSTON C.B. ........................... 30-12-2002 03-01-2003 155,000 155,014
INVERSIONES BOSTON C.B. ........................... 27-12-2002 03-01-2003 84,000 84,030
---------- ----------
Total.............................................. 14,964,679 15,017,495
========== ==========

F-26

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:

2001 2002
--------- ---------
ThCh$ ThCh$

Land...................................................................... 309,621 309,621
Buildings and construction................................................ 6,629,628 6,225,678
Machinery and equipment................................................... 1,595,716 1,102,092
--------- ---------

Total increase in value due to technical revaluation of property,
plant and equipment..................................................... 8,534,965 7,637,391
========= =========

F-27

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:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Depreciation of:
Property, plant and equipment......................... 11,437,834 11,870,652 13,368,405
Technical revaluation................................. 356,413 264,346 206,518
---------- ---------- ----------

Depreciation expense.................................. 11,794,247 12,134,998 13,574,923
========== ========== ==========

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

2001 2002
---------- ----------
ThCh$ ThCh$

Property, plant and equipment..................................... 76,268,275 84,743,751
Technical revaluation............................................. 6,591,426 5,900,046
---------- ----------
Accumulated depreciation.......................................... 82,859,701 90,643,797
========== ==========

12. Investments in Related Companies

The investments in related companies at each year-end are as follows:

2001 2001
------------------------ ----------------------
% ThCh$ % ThCh$
------ ----------- ------ -----------

Vina Los Vascos S.A. .................................. 43.00 4,580,828 43.00 5,057,334
Envases CMF S.A. ...................................... 50.00 14,739,455 50.00 15,995,324
Ediciones Chiloe S.A. ................................. 50.00 576,271 50.00 592,051
Cordillera Comunicaciones Ltda......................... 0.25 405,075 0.25 362,459
Cordillera Comunicaciones Holding Ltda. ............... 50.00 80,609,989 50.00 72,129,281
Editorial Zig-Zag...................................... 49.86 341,498 49.89 383,937
Inmobiliaria Don Alberto............................... 38.17 1,109 38.17 13
Rayen Cura S.A.C.I. ................................... 40.00 13,525,112 40.00 15,132,555
Simetral S.A. ......................................... 81.50 123,269 81.50 --
----------- -----------
Total.................................................. 114,902,606 109,652,954
=========== ===========

F-28

12. Investments in Related Companies, continued:

Income resulting from these investments for each year is as follows:

Participation in net income (loss)
---------- ---------- ----------
2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Vina Los Vascoa S.A. .......................................... 516,549 487,731 476,506
Envases CMF S.A. .............................................. -- 946,327 1,275,055
Inmobiliaria y Constructora Richelieu S.A. .................... 83 (466) --
Ediciones Chiloe S.A. ......................................... -- (37,711) (44,675)
Cordillera Comunicaciones Ltda. ............................... (20,265) (36,225) (45,738)
Cordillera Comunicaciones Holding Ltda. ....................... (4,032,834) (7,208,724) (8,480,708)
Editorial Zig-Zag S.A. ........................................ (5,008) 67,217 42,440
Inmobiliaria Don Alberto S.A. ................................. 10,882 (11,645) (1,095)
Rayen Cura S.A.C.I. ........................................... 647,777 (1,822,944) (2,124,165)
---------- ---------- ----------
Total.......................................................... (2,882,816) (7,616,440) (8,902,380)
========== ========== ==========

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.

Cordillera Comunicaciones Ltda.

In May 2000, Cristalerias settled an arbitration proceeding with
Telefonica CTC Chile (CTC), initiated in May 1998 to resolve the
dispute between the parties over the development of internet services
through Metropolis-Intercom, a joint-venture between the Company's
unconsolidated subsidiary, Cordillera Comunicaciones, and CTC. During
2000, the Company's equity-method investment, Cordilleras
Comunicaciones bought the remaining interest in Metropolis- Intercom
and the HFC network from CTC for US$ 270 million. Cordillera
Comunicaciones is 50% owned by both by the Company and Liberty Media.

The Company does not consolidate Cordillera Comunicaciones, as it does
not have control.

F-29

12. Investments in Related Companies, continued:

Vina Los Vascos S.A.

On September 15, 2000, Vina Santa Rita acquired an additional
2,188,680 shares of Vina Los Vascos S.A., in the amount of
ThCh$391,974 (historical pesos). This transaction generated goodwill
of ThCh$185,810. (historical pesos). With this acquisition Vina Santa
Rita's ownership percentage totals 43% as of December 31, 2002.

Editorial Zig-Zag S.A.

During September 2000, CIECSA bought an additional 18,379,380 shares
in Zig-Zag for ThCh$113,074 (historical pesos) to increase the
ownership percentage in Zig-Zag to 49.89%.

Editorial Zig-Zag increased its capital on February 26, 2001, CIECSA
S.A. bought 22,600,000 shares for ThCh$56,550 (historic), and
subsequently purchased 60,000 additional shares of Editorial Zig-Zag
S.A. for an amount of ThCh$150 (historic), maintaining its current
49.89% share.

Simetral S.A.

In October 2000, CIECSA S.A. formed Simetral S.A., with a 81.5%
ownership interest.

During the shareholders' meeting held on July 23, 2001, the
shareholders of Simetral S.A. agreed to increase the company's
capital by ThCh$284,044 (historic), divided in 1,000,000 shares to
ThCh$414,044 (historic) divided into 1,457,676 shares, through the
issuance of 457,676 shares with a value of Ch$284.0437 each.

CIECSA S.A. purchased 373,006 shares of this issuance on August 28,
2001, for a value of ThCh$105,950 (historic) maintaining its 81.5%
share of Simetral S.A.'s equity.

As of December 31, 2002 the investment in this subsidiary (Simetral
S.A.) has been consolidated since the company started operations in
January 1, 2002. As of December 31, 2001 Simetral S.A. was in the
development stage, therefore it was not consolidated.

F-30

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 includes the 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.

As of December 31, 2002, an exchange rate of 3.32 Argentine Pesos per
U.S. Dollar was recognized in Rayen Cura S.A.I.C.'s financial
statements. In turn, the subsidiary Cristalchile Inversiones S.A.,
adjusted Rayen Cura S.A.I.C.'s financial statements to reflect the
devaluation from 1.70 to 3.32 Argentine Pesos per U.S. Dollar.

In accordance with Chilean GAAP, CristalChile Inversiones S.A.
remeasured the Rayen Cura S.A.C.I. financial statements using a rate
of exchange of 1.70 and 3.32 Argentine Pesos per U.S. dollar as of
December 31, 2001 and 2002, respectively. The accounting charge to
results as a consequence of the foreign currency devaluation of the
Argentine Peso was ThCh$3,060,166 at December 31, 2002 and
ThCh$2,292,836 at December 31, 2001, respectively.

During 2002, the partners contributed US$9,900,000 in equal
proportions to Rayen Cura, maintaining the Company's 40% share.

In accordance with Technical Bulletin No. 64, the Company presents
the following information with respect to this foreign investment
(See Note 2(t)):

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Participation of Cristalchile in Rayen Cura S.A.I.C. ......... 10,957,380 13,525,112 15,132,555
Goodwill on investment, net of accumulated amortization....... 5,177,798 5,426,656 5,424,638
Total investment value........................................ 16,135,178 18,951,768 20,557,193
========== ========== ==========

Participation in net income (loss) for the year............... 647,777 (1,822,944) (2,124,165)
========== ========== ==========
Participation in net income available for dividends........... 453,443 -- --
========== ========== ==========

The investment in Rayen Cura S.A.I.C. is measured in U.S. dollars in
accordance with Technical Bulletin No 64.

F-31

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$548,525 as well as
the recognition of ThCh$48,925 from previously unrecognized earnings.
During the Shareholders' meeting held on September 27, 2002, the
shareholders agreed to increase the company's capital by ThCh$684,308
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$583,339, were paid by contributing 1,046
shares of Ediciones Financieras S.A. valued at ThCh$421,551 and
forgiveness of loans of ThCh$161,788.

On February 4, 2002, the shareholders of Ediciones Chiloe agreed to
purchase, 86,352 shares that had already been subscribed. The
subsidiary Ciecsa paid ChTh$19,859, 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$26,220,315 (historic pesos) divided into 56,000
shares, through the issuance of 29,000 shares equivalent to
ThCh$15,648,300 (historic). Andina Inversiones Societarias S.A.
purchased 28,000 shares worth ThCh$15,149,749 (historic), and
Cristalerias purchased 1,000 shares worth ThCh$498,552 (historic). 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$2,049,647
(historic), 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, which at December 31, 2002 totaled
ThCh$817,425 (ThCh$1,473,174 at December 31, 2001) are presented in
the tables:

Accounting value
Number of Share --------------------------
Corporation shares percentage 2001 2002
---------------------------------------------- ---------- -------- --------- --------

Internet Holding S.A. ........................ 65,765 7.42 879,529 219,883
Bazuca Com. INC............................... 266,500 7.89 590,583 597,542
Metropolis Intercom S.A. ..................... 1 0.00 22 --
Proser S.A. .................................. 50 1.50 3,040 --
--------- -------
Total......................................... 1,473,174 817,425
========= =======

F-32

14. Goodwill, net

Goodwill, net of accumulated amortization of ThCh$3,853,501 and
ThCh$4,500,253 as of December 31, 2001 and 2002, respectively, is as
follows:

2001 2002
--------- ---------
ThCh$ ThCh$

Editorial Zig-Zag S.A. ................................................... 113,966 107,677
Ciecsa S.A. .............................................................. 1,560,452 1,440,418
Sociedad Anonima Vina Santa Rita.......................................... 652,862 603,182
Red Televisiva Megavision S.A. ........................................... 75,684 926,272
Vina Los Vascos S.A. ..................................................... 1,312,101 1,222,809
Rayen Cura S.A. .......................................................... 5,426,656 5,424,638
--------- ---------
Goodwill, net............................................................. 9,141,721 9,724,996
========= =========

On August 27, 2002, CIECSA increased its ownership share in Red
Televisiva Megavision S.A. from 78.01% to 99.99%. This purchase was
accounted for under the purchase method, generating goodwill of
ThCh$859,231 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:

2001 2002
---------- ----------
ThCh$ ThCh$

Channel 9 and regional network frequency concessions...................... 10,079,464 10,079,464
Trademarks................................................................ 1,508,133 1,579,219
---------- ----------
11,587,597 11,658,683
Accumulated frequency amortization........................................ (676,061) (811,274)
Accumulated trademarks amortization....................................... (138,083) (182,076)
---------- ----------
Intangibles, net.......................................................... 10,773,453 10,665,333
========== ==========

F-33

16. Other Assets

Other assets at each period-end are as follows:

2001 2002
ThCh$ ThCh$

Inventories of domestic and foreign programming to be broadcast in over one
year.................................................................... 956,635 1,824,719
Celulosa Arauco bonds (1)................................................. 9,342,455 9,839,703
Bond discount............................................................. 1,107,665 3,427,683
Bond issuance costs....................................................... 239,185 1,212,679
Other..................................................................... 855,129 435,328
---------- ----------
Total Other assets........................................................ 12,501,069 16,740,112
========== ==========

(1) During 2001, the Company purchased Celulosa Arauco bonds with a
face value of ThCh$8,787,319 (approximately US$13,420,000) at an
annual rate of 6.95% with a maturity date of September 15, 2005.
A premium of ThCh$195,957 will be amortized over the term of the
bonds. 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, 2001 and 2002 are as
follows:

2001 2002
-------- --------
Bank Currency ThCh$ ThCh$

ScotiaBank (formerly Sudamericano)............................ UF 1,045,789 --
Banco Santander-Santiago...................................... Ch$ 1,034,580 --
Fondo Provincial de Mendoza................................... US$ 5,948 10,485
Banco Chile................................................... Ch$ 2 --
--------- ------
Total......................................................... 2,086,319 10,485
========= ======

The weighted-average annual interest rate on short-term borrowings
was 7.18% as of December 31, 2001 and 3.20% as of December 31, 2002.

F-34

17. Bank Liabilities, continued:

b) Long-term bank liabilities outstanding at each year-end are as
follows:

Balances as of December 31, 2001 Balances as of December 31, 2002
----------------------------------- ------------------------------------
Current Long-term Current Long-term
Type of portion Portion Total Portion Portion Total
Bank or Financial Institution Currency ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$
----------------------------------- -------- ---------- ---------- ---------- --------- ---------- ----------

Banco Santander-Santiago........... US$ 20,101 -- 20,101 -- -- --
J.P. Morgan Chase (syndicate)...... US$ 9,713,451 57,808,603 67,522,054 197,568 35,930,500 36,128,068
Banco Santander-Santiago........... UF 2,269,870 -- 2,269,870 272,826 -- 272,826
ScotiaBank (formerly Sudamericano). UF 1,250,634 411,176 1,661,810 408,557 1,607,297 2,015,854
Banco Santander-Santiago........... UF -- -- -- -- 1,812,831 1,812,831
Banco A. Edwards................... UF 187,325 1,494,018 1,681,343 291,527 1,208,181 1,499,708
Banco Argentaria................... US$ 251,296 628,240 879,536 265,304 397,955 663,259
Banco regional de Cuyo............. US$ -- 163,050 163,050 -- 51,925 51,925
Citibank, N.A. .................... US$ 1,871,006 3,814,363 5,685,369 1,969,621 2,096,091 4,065,712
Dresdner........................... US$ 1,002,058 481,742 1,483,800 521,954 -- 521,954
Banco del Estado................... Ch$ -- -- -- 265,536 796,611 1,062,147
Banco de Credito e Inversiones..... UF 210,994 544,392 755,386 169,425 376,742 546,167
---------- ---------- ---------- --------- ---------- ----------
16,776,735 65,345,584 82,122,319 4,362,318 44,278,133 48,640,451
========== ========== ========== ========= ========== ==========

2001 2002
----- -----

Weighted - average interest rate................ 4.49% 2.83%
Percentage of debt in foreign currency.......... 77.00% 68.00%
Percentage of debt in local currency............ 23.00% 32.00%

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, 2002 are as follows:

Year Ending December 31, ThCh$
------------------------ -----

2004................................ 4,748,134
2005................................ 1,845,786
2006................................ 19,718,963
2007................................ 17,965,250
Thereafter.......................... --
----------
Total............................... 44,278,133
==========

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 cannot exceed 2.5 to
1.0.
c) Interest coverage ratio cannot be less than 3.5 during 2002 and 4.0
thereafter, and
d) Net worth cannot be less than UF10,000,000.

As of December 31, 2002, the Company is in compliance with these
covenants.

F-35

18. Other Current Liabilities

As of December 31, 2002 there are balances in Other Current
Liabilities of ThCh$622,410 (ThCh$2,351,566 in 2001) corresponding to
forward contracts in foreign currency entered into by Cristalerias
and the subsidiaries, Vina Santa Rita and CIECSA S.A. (See Note 30
for further description of financial derivatives).

19. Bonds Payable

The Company has made the following public bond issuances:

Series A bonds

Bearer bonds issued in June 1991, denominated in UF (UF 200,000), are
repayable in 20 semiannual installments beginning December 1, 1993.
The effective annual interest rate is 6.70%, payable semi-annually in
arrears on December 1 and June 1.

Series C and D bonds Santa Rita

On January 23, 2001, 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 16 semiannual installments beginning in January
2007.

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
5.3% and UF 2,100,000 were issued with a maturity of 21 years at an
annual interest rate of 6.5%.

The bonds payable at each period-end consist of the following:

2001 2002
---------- ----------
ThCh$ ThCh$

Principal................................................................. 20,728,793 88,953,138
Accrued interest.......................................................... 57,595 1,737,516
---------- ----------
20,786,388 90,690,654

Current portion........................................................... (266,976) (1,946,818)
---------- ----------

Long-term portion......................................................... 20,519,412 88,743,836
========== ==========

F-36

19. Bonds Payable, continued

Scheduled maturities of the long-term portion of the principal of
these bonds as of December 31, 2002 are as follows:

Maturing during the year
Ending December 31, ThCh$
------------------------- -----------

2004..................................... --
2005..................................... 11,720,884
2006..................................... 8,467,197
2007..................................... 8,594,047
Thereafter............................... 59,961,708
----------
Total.................................... 88,743,836
==========

The above-mentioned bond issues contain certain restrictive covenants;
the most significant of which are summarized below:

a) Financial Indicators:

o Individual Balance--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 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, 2002, the Company is in compliance with these
covenants.

F-37

20. Accrued Expenses

The composition of short and long-term accrued expenses at each
year-end are as follows:

2001 2002
--------- -------
ThCh$ ThCh$
SHORT-TERM ACCRUED EXPENSES:

Board of Directors' share in profits (i).................................. 880,878 890,581
Staff severance indemnities (Note 21)..................................... 160,529 168,222
Furnace repairs and reconstruction (ii)................................... 1,146,537 2,010,283
Obligations for pallets................................................... 1,002,094 704,143
Accrued vacation.......................................................... 1,050,394 853,691
Royalty for authoring rights.............................................. 278,458 250,444
Publicity agency commissions.............................................. 2,319,686 3,090,845
Sales commissions......................................................... 552,545 361,339
Suppliers................................................................. 699,747 989,354
Insurance................................................................. 304,755 440,452
Machine repairs........................................................... 1,285,759 535,975
Other..................................................................... 171,143 469,863
--------- -------
Total short-term accrued expenses......................................... 9,852,525 10,765,192
========= ==========

LONG-TERM ACCRUED EXPENSES:

Staff severance indemnities (Note 21)..................................... 3,627,503 3,815,899
Furnace repairs and reconstruction (ii)................................... 3,307,049 1,755,502
--------- ---------
Total long-term accrued expenses.......................................... 6,934,552 5,571,401
========= =========

(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, 2002, 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$4,453,586 and ThCh$3,765,785 at December 31, 2001 and
2002, respectively.

F-38

21. Staff severance indemnities provisions

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:

2001 2002
--------- ---------
ThCh$ ThCh$

Balance at beginning of year 4,008,655 3,788,032
Provisions established during the year 291,958 296,809
Deconsolidation of Crowpla Reicolite S.A. (Note 12) (346,528) --
Payments (166,053) (100,720)
--------- ---------
Balance at year end 3,788,032 3,984,121
========= =========

22. Other Long Term Liabilities

At December 31, 2001 there was a balance of ThCh$461,345 corresponding
to forwards contracts entered into by the Company and its
subsidiaries, which expired in 2002.

At December 31, 2002 there were no long-term liabilities recorded for
forward contracts.

23. Minority Interest

The consolidated subsidiaries generating minority interest at each
year-end are as follows:

Equity Participation in net (income) loss Participation
----------------------- ---------------------------------- --------------------------
2001 2002 2000 2001 2002 2000 2001 2002
---------- ---------- ---------- ---------- ---------- ----- ----- -----
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ % % %

CIECSA S.A. Consolidated........ 2,099,896 268,747 290,778 147,813 (297,029) 1.89 1.79 1.79
Constructora Apoger S.A. ....... 9,972 10,053 2,113 833 (80) 20.00 20.00 20.00
Cristalchile Comunicaciones
S.A. ......................... 1,601 1,432 78 144 169 0.01 0.01 0.01
Crowpla Reicolite S.A. ......... -- -- (92) -- -- 0.01 -- --
S.A. Vina Santa Rita............ 33,240,467 36,472,510 (2,933,612) (3,414,911) (4,253,220) 45.90 45.90 45.90
---------- ---------- ---------- ---------- ----------
Total........................... 35,351,936 36,752,742 (2,640,735) (3,266,121) (4,550,160)
========== ========== ========== ========== ==========

F-39

24. Changes in Shareholders' Equity

(a) Other reserves:

As of December 31, 2001 and 2002, other reserves consist of the
following:

2000 2001 2002
--------- --------- ---------
ThCh$ ThCh$ ThCh$

Reserve for future capital increases.................. 3,627,997 3,967,957 4,157,114
Reserve for technical revaluation of Property, plant
and equipment....................................... 2,283,497 1,943,539 1,754,381
Currency translation adjustment....................... 636,466 2,269,712 3,801,604
Subsidiary start-up stage deficit..................... (114,196) (126,824) --
--------- --------- ---------
Total other reserves.................................. 6,433,764 8,054,384 9,713,099
========= ========= =========

(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 2000, 2001 and 2002 related to the
results of operations during 1999, 2000 and 2001, detailed below in
historic pesos:

Dividend per Share
Year Related to (historic pesos) Type of Dividend Date of Payment
--------------- ---------------- ---------------- ---------------

1999 22.00 Interim 01/2000
1999 59.10 Final 04/2000
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

F-40

25. Non-operating income and expense

Non-operating income during each year were as follows:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Interest income....................................... 3,098,689 2,924,594 2,552,689
Interest and other financial expense.................. (5,283,959) (7,139,184) (6,839,489)
---------- ---------- ----------
Net interest expense.................................. (2,185,270) (4,214,590) (4,286,800)
========== ========== ==========

Other non-operating income:
Net sales of materials and other...................... 39,573 20,795 5,022
Amortization of unrealized profit..................... 66,361 61,756 41,518
Gain on sale of investments........................... 260,589 5,950,392 --
Office rental......................................... 255,812 290,645 278,409
Indemnities........................................... 80,276 97,005 412,408
Taxation franchise ................................... 169,287 205,947 165,811
Forward contracts..................................... 458,014 -- --
Other................................................. 497,747 284,528 361,145
---------- ---------- ----------
Total other non-operating income...................... 1,827,659 6,911,068 1,264,313
========== ========== ==========

F-41

25. Non-operating income and expense, continued:

Non-operating expense during each year were as follows:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Amortization of goodwill............................. (833,727) (847,140) (646,652)
Amortization of intangibles.......................... (143,010) (162,877) (179,206)
Write-offs of accounts receivable.................... (50,918) (313,790) (1,013,178)
Board of Directors' participation in profits......... (129,964) (100,716) (183,869)
Banking expenses .................................... (45,558) -- --
Professional expenses................................ (652,551) (744,641) (772,901)
Indemnities.......................................... (162,741) (144,019) (15,318)
Communication........................................ (24,399) -- --
Insurance............................................ (9,525) (12,083) (29,975)
Other ............................................... (736,461) (503,498) (1,232,718)
---------- ---------- ----------

Total non-operating expense.......................... (2,788,854) (2,828,764) (4,073,817)
========== ========== ==========

26. Price-level restatement

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

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Shareholders' equity................................. (8,762,591) (6,117,564) (6,243,275)
Liabilities.......................................... (1,813,104) (3,575,967) (3,725,286)
Property, plant and equipment, net................... 5,512,548 3,792,032 3,733,408
Current assets....................................... 2,040,660 1,236,580 1,793,756
Other assets......................................... 3,233,209 3,021,948 4,324,449
Minority interest.................................... (1,507,629) (63,430) (960,172)
---------- ---------- ----------
Adjustment to balance sheet accounts................. (1,296,907) (1,706,401) (1,077,120)

Adjustment to income statement accounts.............. (892,909) (631,369) (874,227)
---------- ---------- ----------
Net price-level restatement effect................... (2,189,816) (2,337,770) (1,951,347)
========== ========== ==========

F-42

27. Foreign Currency Translation

A net gain was recorded in the years ending December 31, 2000, 2001
and 2002 related to differences in foreign exchange rates for
ThCh$1,056,754, ThCh$1,387,438 and ThCh$4,948,358, respectively, as
detailed below:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Cash.................................................. (159,581) (669,377) 1,688,277
Accounts Receivable................................... 10,206 217,637 1,280,465
Time Deposits......................................... 2,019,460 3,297,130 5,637,051
Inventory............................................. 309,118 373,112 498,830
Other Assets.......................................... 157,239 37,688 2,901,256
---------- ---------- ----------
Sub-total foreign exchange gains...................... 2,336,442 3,256,190 12,005,879

Short-term Bank Loans................................. (261,678) (903,524) (2,918)
Accounts Payable...................................... (243,632) (120,231) (336,057)
Notes Payable......................................... (580,170) (1,490,418) (416,317)
Short-term Misc. Creditors............................ (17,961) (36,123) (53,180)
Short-term Provisions................................. (58,092) (364,317) (91,053)
Long-term Bank Loans.................................. 641,305 1,623,564 (4,467,157)
Long-term Provisions.................................. (461,634) (378,107) (456,542)
Other Long-term Liabilities........................... (90,786) (177,639) (1,132,451)
Other Liabilities..................................... (207,040) (21,957) (101,846)
---------- ---------- ----------
Sub-total foreign exchange (losses)................... (1,279,688) (1,868,752) (7,057,521)
---------- ---------- ----------
Foreign Currency Translation, net..................... 1,056,754 1,387,438 4,948,358
========== ========== ==========

28. Extraordinary Items

For the year ended December 31, 2000 and 2002, there were no
extraordinary items.

For the year ended December 31, 2001, the provision for repairs on
Furnace C of ThCh$1,838,626 has been reversed net of taxes as an
extraordinary item because the furnace was completely rebuilt, instead
of being repaired.

29. Bond Issuance Costs

The Company and its subsidiary, Vina Santa Rita, issued bonds in
August 2002 and March 2001, respectively, and incurred issuance costs
of ThCh$5,001,950 as of December 31, 2002 (ThCh$1,388,109 in 2001).
These costs are classified as Other Current Assets and Other Assets
and are being amortized over the life of the bonds.

The charge to results for the amortization of these expenses in the fiscal
year 2002 amounts to ThCh$162,270 (ThCh$36,632 in 2001).

F-43

30. Financial Derivative Contracts:

The Company and its subsidiaries, Vina Santa Rita and CIECSA S.A.,
have entered into forward foreign currency contracts with notional
amounts of US$130,600,000 in 2002 (US$140,900,000 in 2001). As of
December 31, 2002, the net liabilities balance is presented in Other
Current Liabilities of ThCh$622,410. As of December 31, 2001 the net
liability balance of ThCh$2,812,911 is presented in Other Current
Liabilities of ThCh$2,351,566 and Other Long-Term Liabilities of
ThCh$461,345, respectively.

Additional information 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 Amount Hedged Amount at-risk Net Asset (Liability)
ThCh$ ThCh$ ThCh$ ThCh$
------------------- ------------------- --------------- --------------- -------------------------

24,741,181 1st Quarter 2003 (1) (1) 266,317
4,740,947 2nd Quarter 2003 (1) (1) 289,323
36,311,622 3rd Quarter 2003 (1) (1) (1,099,732)
12,744,802 4th Quarter 2003 (1) (1) (528,431)
1,331,880 1st Quarter 2003 1,331,880 1,437,220 95,944
1,331,000 1st Quarter 2003 1,331,000 1,437,220 76,193
675,300 1st Quarter 2003 675,300 718,610 14,820
668,000 1st Quarter 2003 668,000 718,610 40,269
668,000 1st Quarter 2003 668,000 718,610 41,303
1,328,800 1st Quarter 2003 (1) (1) 99,752
665,940 1st Quarter 2003 (1) (1) 49,410
675,300 1st Quarter 2003 (1) (1) 14,939
643,830 2nd Quarter 2003 (1) (1) 63,215
721,290 4th Quarter 2003 (1) (1) (3,730)
721,290 4th Quarter 2003 (1) (1) (4,136)
1,456,920 4th Quarter 2003 (1) (1) (20,899)
1,456,920 4th Quarter 2003 (1) (1) (20,681)
1,442,580 4th Quarter 2003 (1) (1) (7,362)
353,270 4th Quarter 2003 (1) (1) 5,538
353,270 4th Quarter 2003 (1) (1) 5,538

93,032,142 (622,410)

(1) Non-hedging instruments.

F-44

31. Commitments and Contingencies

Cristalerias de Chile S.A. and its subsidiaries have the following
commitments as of December 31, 2001 and 2002:

2001 2002
--------- ---------
ThCh$ ThCh$

(a) Guarantees
Guarantees given:
Contra-guarantee in favor of Societe de Participations
Financieres et Industrielles, France....................... 3,884,738 3,311,355
Co-ownership AGF and Metropolis buildings..................... 7,853 7,849
Mortgage on V. Mackenna building.............................. 2,269,870 2,085,657
Pledge guarantee of TV equipment with Banco Sudamericano...... 2,417,198 2,562,021
Other......................................................... -- 329,357
(b) Other commitments:
Advertisement contracts for future broadcast.................. 7,302,946 8,673,445

Cristalerias has ThCh$7,849 and Megavision has ThCh$6,726,558 in
assets pledged as of December 31, 2002.

Legal Proceedings: Cristalerias is party to various lawsuits arising
in the ordinary course of its business. 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
other than a total of ThCh$499,500 committed for pending civil and
labor lawsuits related to the subsidiary, Megavision as of December
31, 2002.

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 40% of the Company's grapes
are obtained from these contracts, while another 40% are obtained from
the Company's own vineyards and an additional 20% 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.

F-45

32. Guarantees from Third Parties:

The Company has received the following guarantees from third parties
as of December 31, 2001 and 2002:

2001 2002
------- -------
ThCh$ ThCh$

Item
Rental of BankBoston Real Estate Property........................... 6,162 6,160
Rental of property Telecomunicaciones Cono Sur Ltda................. 2,177 2,177
Rental of office 202 AGF Building................................... 3,937 6,127
Rental of office Metropolis Building................................ -- 3,168
Promissory Notes from Suppliers..................................... 1,033 1,674
Container Installation (Tersanoix S.A.)............................. 159,765 278,645
Purchase of posts and grapevine plants (Intelmaq)................... 36,103 45,186
Underground materials storehouse Buin Salfa Montajes................ 32,789 33,125
------- -------
Total............................................................... 241,966 376,262
------- -------

F-46

33. Foreign Currencies

As of December 31, 2001 and 2002, foreign currency denominated assets
and liabilities in the disclosed currencies are as follows:

Foreign
Currency 2001 2002
-------- ---------- ----------

Assets:
Cash................................................ US$ 712,853 458,933
Time deposits....................................... US$ 34,762,556 93,076,411
Accounts receivable................................. US$ 9,454,282 6,031,866
Prepaid expenses.................................... US$ 459,152 815,570
Other current assets................................ US$ 13,243,024 8,366,432
Inventories......................................... US$ 3,165,548 8,382,540
Other assets........................................ US$ 14,853,687 16,386,073

Current liabilities:
Short-term bank liabilities......................... US$ -- --
Current portion of long-term bank liabilities....... US$ 19,064,752 5,639,967
Current portion of long-term liabilities............ US$ 303,933 234,894
Trade accounts payable.............................. US$ 5,292,257 4,351,718
Trade accounts payable.............................. EUR -- 62,860
Notes payable....................................... US$ 5,813,853 3,261,839
EUR 37,500 57,531
Miscellaneous creditors............................. US$ -- 166,146
Accrued expenses.................................... US$ 4,500,984 5,031,418
Doubtful allowance.................................. EUR -- 682,254
Other current liabilities........................... US$ -- 866,130

Long-term liabilities:
Long-term bank liabilities.......................... US$ 93,257,495 50,000,000
Miscellaneous creditors............................. US$ 954,016 1,721,845
Notes payable....................................... US$ 2,784,229 --
Accrued expenses.................................... US$ 4,903,444 2,442,913
Other Long-term Liabilities......................... US$ 684,048 --

F-47

34. Sanctions:

During 2000, 2001 and 2002, no sanctions by the Chilean
Superintendency of Securities and Insurance have been applied to the
Company.

35. Subsequent Events:

On January 7, 2003, the Company paid a dividend of Ch$21 per share on
the 64,000,000 outstanding shares. The Board of Directors approved
this dividend in November 2002.

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.

36. Environment:

The Company is committed to the preservation of the environment.
During 2002, the Company invested ThCh$204,159 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, during 2002, the subsidiary, Vina Santa Rita S.A.
invested ThCh$32,675 to comply with the laws and regulations on
industrial processing and installations.

37. Shareholder Information:

During October 2001, the Bank of New York replaced Citibank N.A. as
the depositary bank of the American Depository Receipt holders.

During the years ended December 31, 2000, 2001 and 2002, share
transactions made by the directors, majority shareholders, and
parties related to the directors, according to the Share Register,
were as follows:

2000 2001 2002
-------------------- -------------------- --------------------
Purchases Sales Purchases Sales Purchases Sales
--------- ----- --------- ----- --------- -----

Directors...................... -- -- -- -- -- --
Majority shareholders-
Bank of New York............. 312,912 11,562,354 -- -- -- --
Citibank N.A................. 8,554,089 441,150 -- -- -- --

Related to Directors-.......... -- -- -- -- -- --
--------- ----- --------- ----- --------- -----
8,867,001 12,003,504 -- -- -- --
========= ========== ========= ===== ========= =====

F-48

37. Shareholder Information:

During the years ended December 31, 2000, 2001 and 2002, the
distribution of shareholders is as follows:

% of Participation Number of Shareholders
------------------------------- -------------------------------
Type of Shareholders 2000 2001 2002 2000 2001 2002
-------------------- ------ ------ ------ ----- ----- -----

10% or more...................... 46.71 34.03 34.03 2 1 1
Less than 10% and equal to or
greater than UF200............ 53.12 65.81 65.82 235 261 261
Less than 10% and less than UF200 0.17 0.16 0.15 866 831 815
------ ------ ------ ----- ----- -----
Totals........................... 100.00 100.00 100.00 1,103 1,093 1,077
====== ====== ====== ===== ===== =====
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.

38. Board of Directors' Remuneration:

Required disclosures of amounts paid to the Board of Directors of the
Company during each year are as follows:

2000 2001 2002
------- ------- -------
ThCh$ ThCh$ ThCh$

Share of previous year's net income............. 856,551 845,877 879,172
Fees for attendance at meetings................. 8,139 9,090 11,523
Payment of special services..................... 2,659 3,817 5,220
------- ------- -------
Total........................................... 867,349 858,784 895,915
======= ======= =======

As of December 31, 2002, the Company and its subsidiary Vina Santa Rita S.A.,
have accrued an estimated ThCh$890,581 (ThCh$880,878 in 2001) for 2002
Directors' remuneration that will be paid during 2003.

F-49

39. 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 (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, 2002 was 11.18%.

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(r).

F-50

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

As indicated in Note 2(e), finished and in-process products
are reported in the financial statements at restated direct
costs, 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(g) below.

(d) Income taxes:

Under Chilean GAAP, until December 31, 1999, 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, 2000, 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, 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 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:

(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.

F-51

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(d) Income taxes, continued:

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, 2000 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 l
(r) below.

(e) Accounting for investments in related companies:

The adjustment to related companies includes the effect on the
income and equity of the consolidated accounts of Cristalerias
of the adjustments for U.S. GAAP within the Company's equity
investees. These adjustments principally relate to deferred
taxes, production costs, and goodwill amortization. The
effects of this adjustment are included under paragraph I(r)
below.

(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(r) below to recognize the corresponding
decrease in net equity at the end of each year in which the
net income is earned.

F-52

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(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(g)
below.

(h) Classification 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(r) below.

(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
available-for-sale except for 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-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(g) below.

F-53

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(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 not have does 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(g) above.

(k) Unrealized profit and negative goodwill:

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. Additionally, under U.S. GAAP, the
excess of the fair value of the assets received over the
purchase price or negative goodwill 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(g) below.

F-54

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(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. 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 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 (g) 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.

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 transitional impairment test required by the
standard, which was performed during the first half of
2002 and 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 (q) below:

(a) 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 year ended December 31, 2002, and

(b) differences in the amount of impairment under
U.S. GAAP related to basis differences in the
original determination and subsequent
amortization methodology between Chilean GAAP
and U.S. GAAP.

F-55

Differences between Chilean and United States
Generally Accepted Accounting Principles, continued:

(l) Goodwill, continued:

(iii) The following details what the Company's net income
(loss) under U.S. GAAP would have been for the years
ended December 31, 2001 and 2000, excluding goodwill
amortization expense.

Amortization of goodwill under U.S. GAAP of
ThCh$141,117, ThCh$386,375 and ThCh$0 for the years
ended December 31, 2000, 2001 and 2002, respectively,
would be included in operating income for U.S. GAAP
purposes.

(iv) 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 superseded 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 is recorded based on an estimate of future
discounted cash flows, as compared to current carrying
amounts. For the years ended December 31, 2000, 2001,
and 2002 no additional amounts were recorded for
impairment under U.S. GAAP.

(m) Results of subsidiaries in the development stage:

Under Chilean GAAP, costs incurred during the development
stage of a subsidiary 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
charged to the income statement in the year incurred. The
effects are included under paragraph I(r) below.

F-56

39. 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.

In the opinion of the Company, 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.

(o) Derivative instruments:

During the year ended December 31, 2000, the Company entered
into foreign currency forward exchange contracts to transfer
its exposure in U.S. dollars to an exposure in UF. As
described in the Company's accounting policy in Note 2(m),
some of these foreign currency forward exchange contracts have
been designated, and are effective as hedges. For U.S. GAAP
purposes, the Company has recognized these forward contract
gains in results of operations, in accordance with SFAS 52.
The effects of the adjustments have been included under
paragraph I(r) below.

F-57

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(o) Derivative instruments, continued:

As of and for the years ended December 31, 2001 and 2002, 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 UF. Under Chilean GAAP, the
Company deferred forward contract gains and recognized losses.
The hedging criteria and documentation requirements under
Chilean GAAP are less onerous than U.S. GAAP. The Company
recorded a net liability of ThCh$2,812,911 and ThCh$622,410,
as of December 31, 2001 and 2002, 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.

As permitted, the Company applied SFAS No. 133 to only those
hybrid instruments that were issued, acquired, or
substantively modified after December 31, 1998.

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.

F-58

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(o) Derivative instruments, continued:

The Company is also exposed to foreign currency risk arising
from long-term debt denominated in U.S. dollars. This risk is
mitigated by the Company's export revenues which are in U.S.
dollars. Additionally, the Company records the foreign
exchange gains and losses on liabilities related to net
investments in foreign countries which are denominated in the
same currency as the functional currency of those foreign
investments. Such unrealized gains and losses are included in
the cumulative translation adjustment account in shareholders'
equity, and in this way act as a net investment hedge of the
exchange risk affecting the investments (see Note 24 for
further detail). The Company also uses short duration forward
foreign currency contracts, where possible, to manage its risk
related to foreign currency fluctuations.

The cumulative effect resulting from the adoption of SFAS No.
133 on January 1, 2001 was a net gain of ThCh$63,831 which is
presented net of tax of ThCh$11,949, 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, 2001 and 2002 is
included in paragraph I(q) below.

(o) 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$ 2,049,647 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 US GAAP, as
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 20 years
ago. The effect of the adjustment is included under paragraph
I(q) below.

F-59

39. 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, 2002):

2000 2001 2002
----------- ----------- ----------
ThCh$ ThCh$ ThCh$

Net income as reported under Chilean GAAP..... 18,097,664 18,303,729 17,660,662
Revaluation of property, plant and equipment
(paragraph I(b))............................ 355,732 339,959 206,194
Allocation of certain overhead costs to
inventories (paragraph I(c))................ 519,107 (272,129) (455,520)
Deferred income taxes (paragraph I(d))........ (299,877) 281,473 (333,294)
Accounting for investments in related
companies (paragraph I(e)).................. (196,454) (1,795,011) 193,540
Furnace repair provision (paragraph I(g))..... 316,073 (2,407,966) (687,801)
Capitalization of molds as property, plant
and equipment (paragraph I(h)).............. 139,482 513,101 229,807
Amortization of intangibles assets (paragraph
I(j))....................................... (66,996) (181,479) (102,988)
Amortization of unrealized profit (paragraph
I(k))....................................... 22,881 22,954 22,878
Goodwill (paragraph I(l))..................... (33,167) 1,658,058 --
Goodwill amortization (paragraph I(l))........ 456,183 (311,242) 646,652
Results of subsidiaries in the development
stage (paragraph I(m))...................... (114,196) (126,822) --
Derivative instruments (paragraph I(o))....... 125,785 1,105,224 362,538
Joint-venture accounting (paragraph I(p))..... -- (2,049,647) 170,804
Effect of minority interests on U.S. GAAP
adjustments................................. 230,395 (150,070) (206,259)
Deferred tax effect of the above adjustments.. (244,504) 57,884 210,902
----------- ----------- ----------
Net income in accordance with U.S. GAAP
before cumulative effect of change in
accounting principles....................... 19,308,108 14,988,016 17,702,287
----------- ----------- ----------
Cumulative effect of change in accounting
principle, net of taxes of ThCh$11,949 and
minority interest........................... -- 63,831 --
----------- ----------- ----------
Net income in accordance with U.S. GAAP ...... 19,308,108 15,051,847 17,702,287
----------- ----------- ----------
Other comprehensive income:
Unrealized holding gain on marketable
securities, net of applicable taxes
(paragraphs I(i))........................... 290,244 (1,025,000) 72,586
Foreign exchange translation adjustment....... 722,218 1,652,384 1,554,250
----------- ----------- ----------
Comprehensive income in accordance with U.S.
GAAP........................................ 20,320,570 15,679,231 19,329,123
========== ========== ==========

F-60

39. 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 equity amounts to U.S.
GAAP are as follows (all amounts are expressed in thousands of
constant Chilean pesos as of December 31, 2002):

2001 2002
----------- -----------
ThCh$ ThCh$

Net shareholders' equity as reported under Chilean GAAP...... 219,790,362 231,330,130
Revaluation of property, plant and equipment (paragraph I(b)) (8,534,966) (7,637,391)
Revaluation of property, plant and equipment, accumulated
depreciation (paragraph I(b)).............................. 6,591,426 5,900,046
Allocation of certain overhead costs to inventories
(paragraph I(c))........................................... 3,983,241 3,527,721
Deferred income taxes (paragraph I(d))....................... 535,014 201,720
Accounting for investments in related companies (paragraph
I(e))...................................................... 3,313,138 3,506,679
Minimum dividend required by Chilean law (paragraph I(f)).... (693,659) (1,994,263)
Furnace repair provision (paragraph I(g)).................... 4,453,586 3,765,785
Capitalization of molds as property, plant and equipment
(paragraph I(h))........................................... 1,823,202 2,053,009
Investments in marketable securities (paragraph I(i))........ 1,904,433 1,991,362
Intangible assets (paragraph I(j))........................... (1,800,754) (1,697,966)
Amortization of unrealized profit (paragraph I(k))........... (203,492) (180,614)
Goodwill (paragraph I(l)).................................... (2,914,497) (3,335,149)
Goodwill amortization (paragraph I(l))....................... 2,531,968 3,111,423
Derivative instruments (paragraph I(o))...................... 1,325,562 1,688,100
Joint-venture accounting (paragraph I(p)).................... (2,049,647) (1,878,843)
Effect of minority interests on U.S. GAAP adjustments........ (699,358) (395,412)
Deferred tax effect of the above adjustments................. (3,107,477) (3,332,723)
----------- -----------
Net equity in accordance with U.S. GAAP...................... 226,248,082 236,623,814
=========== ===========

F-61

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(r) 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, 2000, 2001
and 2002:

2000 2001 2002
----------- ----------- -----------
ThCh$ ThCh$ ThCh$

Balance as of January 1..................... 206,930,980 219,692,592 226,248,082
Dividends paid.............................. (8,547,222) (9,445,287) (7,652,787)
Change in minimum dividends accrued......... 988,264 321,546 (1,300,604)
Net income in accordance with U.S. GAAP..... 19,308,108 15,051,847 17,702,287
Foreign exchange translation adjustment..... 722,218 1,652,384 1,554,250
Unrealized holding gain (loss) on
marketable securities, net of applicable
taxes .................................... 290,244 (1,025,000) 72,586
----------- ----------- -----------
Balance as of December 31................... 219,692,592 226,248,082 236,623,814
=========== =========== ===========

(s) 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, 2000, 2001 and 2002 (in thousands
of constant Chilean pesos as of December 31, 2002).

F-62

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(s) Comprehensive Income, continued:

Before-Tax Tax (Expense) Net of Tax
Amount or Benefit Amount
--------- ------- ---------
For the year ended December 31, 2000 ThCh$ ThCh$ ThCh$

Unrealized holding gains on marketable
securities arising during period:............ 341,463 (51,219) 290,244
Foreign exchange translation adjustment........ 722,218 -- 722,218
--------- ------- ---------
Other comprehensive income..................... 1,063,681 (51,219) 1,012,462
========= ======= ==========

For the year ended December 31, 2001
Unrealized holding gains on marketable
securities arising during period:............ (1,183,476) 158,476 (1,025,000)
Foreign exchange translation adjustment........ 1,652,384 -- 1,652,384
--------- ------- ---------
Other comprehensive income..................... 468,908 158,476 627,384
========= ======= ==========

For the year ended December 31, 2002
Unrealized holding loss on marketable
securities arising during period:............ 86,929 (14,343) 72,586
Foreign exchange translation adjustment........ 1,554,250 -- 1,554,250
--------- ------- ---------
Other comprehensive income .................... 1,641,179 (14,343) 1,626,836
========= ======= ==========

The following represents accumulated other comprehensive
income balances as of December 31, 2001 and 2002 (in thousands
of constant Chilean pesos as of December 31, 2002).

As of December 31, 2001
------------------------------------------
Cumulative
Foreign
Unrealized Exchange Accumulated Other
Gains on Translation Comprehensive
Securities Adjustment Income

Beginning balance............................. 2,624,723 619,440 3,244,163
Current-period change......................... (1,025,000) 1,652,384 627,384
--------- --------- ---------
Ending balance................................ 1,599,723 2,271,824 3,871,547
========= ========= =========

As of December 31, 2002
------------------------------------------
Cumulative
Foreign
Unrealized Exchange Accumulated Other
Gains on Translation Comprehensive
Securities Adjustment Income

Beginning balance............................. 1,599,723 2,271,824 3,871,547
Current-period change......................... 72,586 1,554,250 1,626,836
--------- --------- ---------
Ending balance................................ 1,672,309 3,826,074 5,498,383
========= ========= =========

F-63

39. 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:

2000 2001 2002
------ ------ ------
Ch$ Ch$ Ch$

Chilean GAAP basic earnings per share (Ch$) (1)......... 282.78 286.00 275.95
====== ====== ======
U.S. GAAP basic earnings per share (Ch$1) (1):
U.S. GAAP earnings per share before cumulative effect
of change in accounting principle................... 301.69 235.19 276.61
Cumulative effect of change in accounting principle... -- 1.00 --
------ ------ ------
U.S. GAAP net earnings per share...................... 301.69 235.19 276.61
====== ====== ======

Weighted average number of common shares outstanding
(in thousands)........................................ 64,000 64,000 64,000
====== ====== ======

(1) There are no requirements to provide earning 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: 2000 2001 2002
--------- --------- ---------
ThCh$ ThCh$ ThCh$

Current tax expense....................................... 4,001,543 3,996,081 4,232,999
Deferred tax expense (benefit) and others as calculated
under Chilean GAAP:..................................... (125,180) 1,135,700 2,164,814
--------- --------- ---------
Charge for the year under Chilean GAAP.................... 3,876,363 5,131,781 6,397,813

U.S. GAAP Adjustments
Deferred tax effect of applying FAS 109................... 299,877 (281,473) 333,294
Deferred tax effect of adjustments to U.S. GAAP........... 244,504 (517,884) (210,902)
Deferred tax effect of cumulative effect of change in
accounting principle.................................... -- 11,949 --
--------- --------- ---------
Charge for the year under U.S. GAAP....................... 4,420,744 4,804,373 6,942,009
========= ========= =========

F-64

39. 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:

SFAS No. 109 Total SFAS No. 109
applied to SFAS No. 109 Deferred applied to SFAS No. 109 Total
Chilean applied to Taxes Chilean applied to Deferred
GAAP US GAAP under SFAS GAAP US GAAP Taxes under
Balances Adjustments No. 109 Balances Adjustments SFAS No. 109
---------- ---------- ----------- ---------- ---------- -----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Deferred income tax assets:
Tax loss carryforwards (1)...... 5,551,606 -- 5,551,606 4,677,104 -- 4,677,104
Furnace repair provision........ 735,723 (735,723) -- 614,814 (614,814 --
Provision for doubtful accounts. 87,806 -- 87,806 113,114 -- 113,114
Provision for items used in
warehousing................... 476,155 -- 476,155 302,873 -- 302,873
Accrued Vacation expense........ 171,776 -- 171,776 170,806 -- 170,806
Profit realized for tax
purposes, not for financial
accounting purposes........... 387,633 -- 387,633 447,967 -- 447,967
Staff severance indemnities..... 35,517 -- 35,517 37,335 -- 37,335
Other........................... 565,799 -- 565,799 460,755 -- 460,755
---------- ---------- ----------- ---------- ---------- -----------
Total deferred income tax assets 8,012,015 (735,723) 7,276,292 6,824,768 (614,814) 6,209,954
---------- ---------- ----------- ---------- ---------- -----------

Deferred income tax liabilities:
Depreciation.................... (7,328,747) -- (7,328,747) (7,977,645) -- (7,977,645)
Prepaid expenses................ (283,712) -- (283,712) (893,394) -- (893,394)
Inventories..................... (259,355) (637,319) (896,674) (171,527) (582,074) (753,601)
Molds........................... (270,621) (300,829) (571,450) (248,735) (338,747) (587,482)
Forwards Contracts.............. -- (227,027) (227,027) -- (278,536) (278,536)
Intangibles..................... -- 984,586 984,586 -- (1,220,680) (1,220,680)
---------- ---------- ----------- ---------- ---------- -----------
Other........................... -- (221,993) (221,993) (165,865) (297,872) (463,737)
---------- ---------- ----------- ---------- ---------- -----------

Total deferred income tax
liabilities................... (8,142,435) (2,371,754) (10,514,189) (9,457,166) (2,717,909) (12,175,075)
---------- ---------- ----------- ---------- ---------- -----------

Net deferred tax assets
(liabilities) resulting from
SFAS No. 109.................. (130,420) (3,107,477) (3,237,897) (2,632,398) (3,332,723) (5,965,121)
========== ========== =========== ========== ========== ===========

(1) In accordance with the current enacted tax law in Chile, such tax losses
may be carried forward indefinitely.

F-65

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(b) Income taxes, continued:

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 aresult of the following differences:

2000 2001 2002
------- --------- ---------
ThCh$ ThCh$ ThCh$

Tax provision at statutory Chilean tax rates. 3,626,543 3,183,366 3,940,512

Increase (decrease) in taxes resulting from:

Amortization of goodwill and other
intangibles................................ 100,337 (255,044) --
Price-level restatement not accepted for tax
purposes................................... 159,550 (158,349) (23,437)
Equity in net income of related companies.... 461,516 1,434,004 1,768,274
Tax credits and other permanent differences.. 72,798 600,396 1,256,660
------- --------- ---------
Effective tax provision...................... 420,744 4,804,373 6,942,009
======= ========= =========

The Chilean statutory first category (corporate) income tax
rate was 15% for 1999 through 2001, however tax rates
increased to 16% in 2002, with subsequent increases to 16.5%
in 2003, and 17% in 2004, 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 basis.

The Company had net operating tax-loss carry forwards
related to its subsidiaries of approximately ThCh$26,973,139
as of December 31, 2002 that can be carried forward
indefinitely.

The Company's subsidiaries Vina Dona Paula and Simetral were
not consolidated under Chilean GAAP until 2001 and 2002,
respectively, because these companies were in the
development stage prior to these respective years. Under
U.S. GAAP these subsidiaries would have been consolidated,
regardless of when their operations began.

Under U.S. GAAP, only instruments with an original maturity
of less than 90 days are considered to be cash and cash
equivalents. Cash flow amounts reconciled in accordance with
U.S. GAAP, as presented below include restatement to
constant Chilean pesos as of December 31, 2002 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.

F-66

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

Consolidation of the Company's development stage operations
would result in the following differences under U.S. GAAP:

2000 2001 2002 2002
---------- ---------- ---------- -------
ThCh$ ThCh$ ThCh$ ThUS$

Cash provided by operating activities reported under Chilean
GAAP.......................................................... 35,511,120 40,468,439 49,375,889 68,708
Effect of consolidation of subsidiary in Vina Dona Paula........ (489,856) -- -- --
Effect of consolidation of subsidiary in Simetral............... (147,119) (178,423) -- --
---------- ---------- ---------- -------
Cash provided by operating activities under US GAAP............. 34,874,145 40,290,016 49,375,889 68,708

Cash provided by financing activities reported under Chilean
GAAP.......................................................... 47,247,108 5,166,170 11,701,389 16,283
Effect of consolidation of subsidiary in Vina Dona Paula........ 1,270,389 -- -- --
Effect of consolidation of subsidiary in Simetral............... 298,944 156,563 -- --
Proceeds from loans from related companies...................... 1,924,861 1,370,986 89,932 125
---------- ---------- ---------- -------
Cash provided by financing activities under US GAAP............. 50,741,302 6,693,719 11,791,321 16,409

Cash used in investing activities reported under Chilean GAAP... (78,591,314) (34,966,321) (4,997,657) (6,955)
Effect of consolidation of subsidiary in Vina Dona Paula........ (683,077) -- -- --
Effect of consolidation of subsidiary in Simetral............... -- -- -- --
Proceeds from loans from related companies...................... (1,924,861) (1,370,986) (89,932) (125)
Reclassification of repurchase agreement........................ -- (360,696) (502)
---------- ---------- ---------- -------
Cash used in investing activities under US GAAP................. (81,199,252) (36,337,307) (5,448,285) (7,582)

Effect of inflation on cash and cash equivalents under Chilean
GAAP.......................................................... (1,864,186) (1,289,677) (1,691,174) (2,353)
Effect of consolidation of subsidiary in Vina Dona Paula........ -- -- -- --
Effect of consolidation of subsidiary in Simetral............... -- -- -- --
---------- ---------- ---------- -------
Effect of inflation on cash and cash equivalents under Chilean
GAAP.......................................................... (1,864,186) (1,289,677) (1,691,174) (2,353)

Net change in cash and cash equivalents under Chilean GAAP...... 2,302,728 9,378,611 54,388,447 75,684
Effect of consolidation of subsidiary in Vina Dona Paula........ 97,456 -- -- --
Effect of consolidation of subsidiary in Simetral............... 151,825 (21,860) -- --
Reconciliation of repurchase agreement.......................... -- -- (360,696) (502)
Net change in cash and cash equivalents under US GAAP........... 2,552,009 9,356,751 54,027,751 75,182

Cash and cash equivalents at beginning of year under Chilean
GAAP.......................................................... 27,227,439 29,530,167 38,908,778 54,144
Effect of consolidation of subsidiary in Vina Dona Paula........ 16,259 -- -- --
Effect of consolidation of subsidiary in Simetral............... -- 147,260 -- --
---------- ---------- ---------- -------
Cash and cash equivalents at beginning of year under US GAAP.... 27,243,698 29,677,427 38,908,778 54,144

F-67

2000 2001 2002 2002
---------- ---------- ---------- -------
ThCh$ ThCh$ ThCh$ ThUS$

Cash and cash equivalents at end of year under Chilean GAAP..... 29,530,167 38,908,778 93,297,225 129,827
Effect of consolidation of subsidiary in Vina Dona Paula........ 113,716 -- -- --
Effect of consolidation of subsidiary in Simetral............... 151,825 125,400 -- --
Reconciliation of repurchase agreement.......................... -- -- (360,696) (502)
---------- ---------- ---------- -------
Cash and cash equivalents at end of year under US GAAP.......... 29,795,708 39,034,178 92,936,529 129,325

F-68

39. 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:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Cash deposits that are cash equivalents.... 2,433,853 3,025,737 2,425,761
Time deposits that are cash equivalents.... 18,057,667 14,205,809 12,982,446
Mutual Funds............................... -- 9,995,243 63,663,854
Repurchase agreements...................... 9,304,188 11,807,389 13,864,468
---------- ---------- ----------
Total cash and cash equivalents............ 29,795,708 39,034,178 92,936,529
========== ========== ==========

Supplementary Cash flow information:

2000 2001 2002
---------- ---------- ----------
ThCh$ ThCh$ ThCh$

Interest paid................................ 3,913,397 6,499,529 3,378,116
Taxes paid................................... 3,988,928 3,988,197 3,555,133
Assets acquired under capital leases......... -- -- --

F-69

39. 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, 2002 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(r) above.

2000 2001 2002
----------- ----------- -----------
ThCh$ ThCh$ ThCh$

Current assets............................... 44,887,913 58,954,606 69,609,163
Non-current assets........................... 417,884,110 454,959,082 419,168,641
----------- ----------- -----------
Total assets................................. 462,772,023 513,913,688 488,777,804
=========== =========== ===========

Current liabilities.......................... 41,574,387 48,225,185 41,921,418
Non-current liabilities...................... 28,295,169 52,460,946 73,336,554
----------- ----------- -----------
Total liabilities............................ 69,869,556 100,686,131 115,257,972
=========== =========== ===========

Net sales.................................... 70,546,021 103,074,810 106,412,777
=========== =========== ===========
Gross profit................................. 20,225,294 25,077,584 22,300,597
=========== =========== ===========
Net loss..................................... (13,416,310) (30,534,000) 35,667,445
=========== =========== ===========
Company's share of loss (Note 12)............ (2,882,816) (7,616,440) (8,902,380)
=========== =========== ===========

(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-70

39. 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 and
Plastics Wines Communications Other Total
---------- --------- -------------- ----- -----
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

As for and for the year ended December
31, 2000
Revenues from external customers......... 74,525,730 63,842,926 15,949,158 (5,006,886) 149,310,928
Revenues from transactions with other
operating segments of the same
enterprise............................. 5,421,687 -- -- (5,421,687) --
Interest income.......................... 2,714,551 302,807 85,227 6,829 3,109,414
Interest expense......................... (2,847,694) (1,750,875) (682,527) (2,862) (5,283,958)
Depreciation............................. (8,030,658) (2,446,228) (1,317,361) - (11,794,247)
Amortization............................. (739,389) (146,987) (228,545) - (1,114,921)
Income tax expense ...................... (3,410,539) (1,147,951) 680,174 1,953 (3,876,363)
Earnings (loss) from equity-method ...... 658,742 516,549 (4,058,107) -- (2,882,816)
Net Income............................... 16,791,436 6,387,620 (5,070,873) (10,521) 18,097,662
Total Assets............................. 159,151,050 97,012,154 118,023,192 1,218,478 375,404,874
Capital Expenditures..................... 15,001,719 5,167,498 231,756 -- 20,400,973

As for and for the year ended December
31, 2001
Revenues from external customers......... 67,757,078 67,028,038 16,605,847 (5,204,283) 146,186,680
Revenues from transactions with other
operating segments of the same
enterprise............................. 6,373,234 -- -- (6,373,234) --
Interest income.......................... 1,656,071 1,193,645 73,471 1,407 2,924,594
Interest expense......................... (4,051,032) (2,563,464) (524,688) -- (7,139,184)
Depreciation............................. (7,867,375) (3,197,319) (1,070,304) -- (12,134,998)
Amortization............................. (1,535,101) (277,724) (255,760) (25,470) (2,094,055)
Income tax expense....................... (3,440,648) (1,733,259) 40,525 1,601 (5,131,781)
Earnings (loss) from equity-method....... (888,263) 487,731 (7,215,443) (465) (7,616,440)
Net Income............................... 20,049,713 7,436,467 (6,974,693) (2,207,758) 18,303,729
Total Assets............................. 158,749,084 118,008,460 109,151,997 19,012,954 404,922,495
Capital Expenditures..................... 25,590,432 7,822,019 299,549 -- 33,712,000

As for and for the year ended December
31, 2002
Revenues from external customers......... 71,056,947 71,721,372 24,815,458 (6,536,517) 161,057,260
Revenues from transactions with other
operating segments of the same
enterprise............................. 6,198,493 -- 338,024 (6,536,517) --
Interest income.......................... 1,870,384 604,540 76,960 805 2,552,689
Interest expense......................... (4,618,960) (1,815,348) (405,181) -- (6,839,489)
Depreciation............................. (9,015,353) (3,688,452) (871,118) -- (13,574,923)
Amortization............................. (601,774) (293,015) (525,424) -- (1,420,213)
Income tax expense....................... (4,034,644) (2,390,349) 27,881 (701) (6,397,813)
Earnings (loss) from equity-method....... (850,206) 476,506 (8,525,560) (3,120) (8,902,380)
Net Income............................... 16,254,706 9,263,143 (5,379,979) (2,477,208) 17,660,662
Total Assets............................. 204,187,737 122,078,793 105,594,082 20,617,806 452,478,418
Capital Expenditures..................... 10,300,088 4,681,190 518,034 15,499,312

F-71

39. 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$23,083,754, ThCh$29,093,690 and ThCh$31,381,538 for the
years ended December 31, 2000, 2001 and 2002, respectively.

(h) Supplementary information on marketable securities:

Supplementary information on available for sale marketable
securities is as follows:

As of December 31, 2001
-----------------------------------------------
Unrealized
Carrying value Holding Gains Market value
-------------- ------------- ------------
ThCh$ ThCh$ ThCh$

Bonds.......................................................... 73,747 -- 73,747
Equity securities and mutual funds............................. 13,362,850 1,904,433 15,267,283
---------- --------- ----------
Total.......................................................... 13,436,597 1,904,433 15,341,030
========== ========= ==========

After one year After five
But within years but
The contracted maturities of these securities are as follows: Within one year five years within 10 years
-------------- ------------- ---------------
ThCh$ ThCh$ ThCh$

Government securities.......................................... 73,747 -- --
Equity securities and mutual funds............................. 15,267,283 -- --
---------- --------- ----------
Total.......................................................... 15,341,030 -- --
========== ========= ==========

As of December 31, 2002
-----------------------------------------------
Unrealized
Carrying value Holding Gains Market value
-------------- ------------- ------------
ThCh$ ThCh$ ThCh$

Bonds.......................................................... 54,508,227 -- 54,508,227
Equity securities and mutual funds............................. 12,954,966 1,991,362 14,946,328
---------- --------- ----------
Total.......................................................... 67,463,193 1,991,362 69,454,555
========== ========= ==========

F-72

Bonds.......................................................... 54,508,227 -- --
Equity securities and mutual funds............................. 14,946,328 -- --
---------- --------- ----------
Total.......................................................... 69,454,555 -- --
========== ========= ==========

Equity stock investments and mutual fund investment do not
have a fixed maturity date, but are anticipated to be sold
within one year.

F-73

39. 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, 2001
-----------------------------------------------
Unrealized
Carrying value Holding Gains Market value
-------------- ------------- ------------
ThCh$ ThCh$ ThCh$

Bonds.............................................. 9,342,455 (104,201) 9,238,254
--------- -------- ---------
Total.............................................. 9,342,455 (104,201) 9,238,254
========= ======== =========

After one year After five years
The contracted maturities of these securities are as But within five but within 10
follows: Within one year years years
-------------- ------------- ------------
ThCh$ ThCh$ ThCh$

Bonds.............................................. -- 9,238,254 --
--------- --------- ---------
Total.............................................. -- 9,238,254 --
========= ========= =========

As of December 31, 2002
-----------------------------------------------
Unrealized
Carrying value Holding Loss Market value
-------------- ------------- ------------
ThCh$ ThCh$ ThCh$

Bonds.............................................. 10,038,914 351,335 10,390,249
---------- ------- ----------
Total.............................................. 10,038,914 351,335 10,390,249
========== ======= ==========

Bonds.............................................. -- 10,390,249 --
---------- ---------- ----------
Total.............................................. -- 10,390,249 --
========== ========== ==========

F-74

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(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 106
(Employers' Accounting for Post-retirement Benefits other than
Pensions) or SFAS 112 (Employers' Accounting for Post-employment
Benefits).

The Company had advertising expenses of ThCh$2,839,068,
ThCh$3,142,215 and ThCh$2,725,893 for the years ended December 31,
2000, 2001 and 2002. There were no significant lease obligations or
rental expenses for the years ended December 31, 2000, 2001 and 2002.

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 33.5% (16.8%, 8.9% and 7.8%), 31.2% (15.0%, 9.5% and
6.7%) and 33.73% (16.7%, 9.5% and 7.6%) of the Company's total net
sales for the years ended December 31, 2000, 2001 and 2002 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
2002
---------------------------------

Sector
Glass Container
Liquor 5.48%
Beer 4.12%
Soft Drink 8.64%
Wine 24.89%
Other Glass Container 4.59% 47.72%
TV Advertisement ----- 14.99%
Wine 37.29%
-----
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

F-75

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

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.

(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-76

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(k) Disclosure regarding the fair value of financial instruments,
continued:

2001 2002
---------------------------- ----------------------------
Carrying Estimated Fair Carrying Estimated
Value Value Value Fair Value
---------- ---------- ---------- ------------
ThCh$ ThCh$ ThCh$ ThCh$

Assets
Cash................................ 2,900,337 2,900,337 2,425,761 2,425,761
Time deposits....................... 23,413,747 23,386,916 12,982,446 12,982,446
Marketable securities............... 15,341,030 15,251,490 69,454,555 69,578,713
Other instruments................... 11,877,278 11,800,505 15,407,492 15,407,492
Current accounts receivable......... 38,183,205 38,183,205 43,498,666 43,498,666
Long-term receivables............... 235,565 235,565 196,387 196,387
Long-term other instruments......... 12,501,069 12,396,868 16,740,112 16,973,110
Forward contracts................... 2,570,467 2,570,467 2,445,381 2,445,381

Liabilities
Accounts payable.................... 12,643,598 12,643,598 13,280,583 13,280,583
Long-term bank liabilities.......... 82,122,319 82,655,648 48,640,451 48,640,451
Bonds payable....................... 20,786,388 20,786,388 90,690,654 90,690,654
Miscellaneous creditors............. 3,184,962 3,184,962 4,897,103 4,897,103
Forward contracts................... 4,057,817 4,057,817 1,379,792 1,379,792

The carrying amounts above are presented in accordance with U.S. GAAP.

The Company entered into foreign currency exchange contracts to transfer its
exposure in U.S. dollars to an exposure in UF. The Company's accounting policy
for such contracts is described in Note 2(m).

(l) Restrictions on payment of dividends:

As of December 31, 2002, the Company had undistributed earnings of
ThCh$3,262,328 in companies accounted for by the equity method,
included as a part of consolidated retained earnings.

Dividends received from such entities were ThCh$340,178, ThCh$450,004
and ThCh$235,405 for the years ended December 31, 2000, 2001 and 2002,
respectively.

F-77

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(m) Recent accounting pronouncements:

In January 2003, the Chilean Association of Accountants issued
Technical Bulletin No. 72, "Combinacion de Negocios Inversiones
Permanentes y Consolidacion de Estados Financieros". This standard
complements or replaces existing accounting literature for business
combinations under Chilean GAAP, and requires all acquisitions
initiated after January 1, 2003 to be accounted for using the
purchase method based on fair values of assets acquired and
liabilities assumed. In addition, in exceptional cases the
pooling-of-interest method may be used in reorganizations between
related parties or for those transactions, where there is no clear
acquirer. Technical Bulletin No. 72 continues to require the
amortization of goodwill, and specifies the requirement for an
impairment test. Notwithstanding any future transactions, the
adoption of Technical Bulletin No. 72 is not expected to have a
significant effect on the results of operations, financial position
or cash flows of the Company.

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 US 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. If
the Company reported in accordance with U.S. GAAP, the Company would
be required to adopt SFAS No. 143 effective January 1, 2003. The
Company does not expect the adoption to have a material impact on the
Company's results of operations or financial position.

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 Company is required to adopt the provisions of SFAS No. 146 for
exit or disposal activities that are initiated after December 31,
2002 and does not expect the adoption to have a material impact on
the Company's results of operations or financial position.

F-78

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(m) Recent accounting pronouncements, continued:

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 immediately to variable interest entities
created after January 31, 2003 and apply it to existing variable
interest entities as of January 1, 2003. The Company does not expect
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 will significantly change current 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 Company
has implemented FIN 45 as of December 31, 2002, noting no adjustments
to US GAAP were necessary as the fair values of all direct and
indirect guarantees were zero, see Note 31 for a detail of the
Company's guarantees.

F-79

39. 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, FAS 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. Upon adoption of SFAS 142 during 2002, the
Company did not recognize an impairment charge to reduce the carrying
value of goodwill.

In calculating the fair value of reporting units we 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, 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).......... 5,767,969 -- -- -- 337,542 6,105,511
S.A. Vina Santa Rita........ 1,018,067 -- -- -- -- 1,018,067
Vina Los Vascos S.A. ....... 1,649,718 -- -- -- -- 1,649,718
Zig-Zag S.A. ............... 120,922 -- -- -- -- 120,922
Red Televisiva Megavision
S.A. ..................... 198,669 408,383 -- -- -- 607,052
--------- ------- --------- --------- ------- ---------
Total....................... 8,755,345 408,383 -- -- 337,542 9,501,270
========= ======= ========= ========= ======= =========

(1) In thousands of constant Chilean pesos as of December 31, 2002, using
exchange rate of Ch$ 718,61 per US$

F-80

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(n) Goodwill, continued

The Company's intangible assets were ThCh$ 11,582,597 and ThCh$
11,658,683 and related accumulated amortization were ThCh$ 3,599,484
and ThCh$ 3,911,796 as of December 31, 2001 and 2002, 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$ 312,312 over each of the next five years, not
taking inflation or future purchases into account.

(o) Effects of conforming to U.S. GAAP

Certain 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, the effect of which is immaterial.
These reclassifications are as follows (the column labeled "U.S. GAAP
presentation" discloses amounts using a U.S. GAAP presentation,
although the amounts displayed have been determined in accordance
with Chilean GAAP):

2000
-----------------------------------------------------

U.S. GAAP
Chilean GAAP Reclassification Presentation
------------ ---------------- ------------
ThCh$ ThCh$ ThCh$

Operating income...................................... 31,777,103 (627,769) 31,149,334
Non-operating income.................................. 1,827,659 (702,612) 1,125,047
Non-operating expenses................................ (2,788,855) 1,330,381 (1,458,474)

2001
-----------------------------------------------------
U.S. GAAP
Chilean GAAP Reclassification Presentation
------------ ---------------- ------------
ThCh$ ThCh$ ThCh$

Operating income...................................... 33,562,063 6,852,327 40,414,390
Non-operating income.................................. 6,911,068 (6,491,826) 419,242
Non-operating expenses................................ (2,828,764) 1,478,125 (1,350,639)
Extraordinary income.................................. 1,838,626 (1,838,626) --

2002
-----------------------------------------------------
U.S. GAAP
Chilean GAAP Reclassification Presentation
------------ ---------------- ------------
ThCh$ ThCh$ ThCh$

Operating income...................................... 41,610,308 (1,507,029) 43,121,653
Non-operating income.................................. 1,264,313 (771,796) 492,517
Non-operating expenses................................ (4,073,817) 2,227,825 (1,790,676)

F-81

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(o) Effects of conforming to 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,
and current bond payable for the year-ended December 31, 2001, would
be stated as long-term because the debt was refinanced subsequent to
year-end. These reclassifications exclude consolidation of
development stage companies, the effect of which is immaterial. These
reclassifications are as follows (the column labeled "U.S. GAAP
presentation" presents amounts using U.S. GAAP format although the
amounts displayed have been determined in accordance with Chilean
GAAP):

2001
-----------------------------------------------------
U.S. GAAP
Chilean GAAP Reclassification Presentation
------------ ---------------- ------------
ThCh$ ThCh$ ThCh$

Total current assets 123,493,552 1,758,678 125,252,230
Total other assets 149,027,588 (1,107,665) 147,919,923
Total current liabilities 51,870,995 1,758,678 53,629,673
Total long-term liabilities 97,909,204 (1,107,665) 96,801,539

2002
-----------------------------------------------------
U.S. GAAP
Chilean GAAP Reclassification Presentation
------------ ---------------- ------------
ThCh$ ThCh$ ThCh$

Total current assets 177,258,303 1,062,561 178,320,864
Total other assets 147,797,207 (3,427,683) 144,369,524
Total current liabilities 39,300,270 1,062,561 40,362,831
Total long-term liabilities 145,095,276 (3,427,683) 141,667,593

F-82

39. Differences between Chilean and United States Generally Accepted
Accounting Principles, continued:

(p) Valuation and qualifying accounts:

Balance at Charged to Charged Balance
Beginning Of cost and to other at end of
Description period expenses accounts Deductions period
------ -------- -------- ---------- ------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

2000
----
Allowance for doubtful accounts:
Trade receivables........................... 622,367 177,705 (27,322) (216,569) 556,181

2001
----
Allowance for doubtful accounts:
Trade receivables........................... 556,181 168,092 (159,333) (20,081) 544,859

2002
----
Allowance for doubtful accounts:
Trade receivables........................... 544,859 221,553 (52,709) (15,873) 697,830

40. Consolidated Financial Statements of Cordillera Comunicaciones Ltda.
and Subsidiaries

In accordance with Chilean GAAP, as of December 31, 2002, the Company included
its equity method investment in Cordillera Comunicaciones Ltda. 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, 2000, 2001 and 2002 in the income statement account
"Equity participation in net income (loss) of related companies". 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,
2001 and 2002 and for the three years in the period ended December 31, 2002,
as Cordillera met the definition of a significant subsidiary under Rule 1-02
(w) of Regulation S-X as of December 31, 2002.

F-83

Cordillera Comunicaciones Ltda. and
Subsidiaries
------------

Consolidated Financial Statements as of
December 31, 2001 and 2002 and for the years
ended December 31, 2000, 2001 and 2002 together with
the Report of Independent Auditors

Cordillera Comunicaciones Ltda. and Subsidiaries
------------

Index to Consolidated Financial Statements

Pages
Report of Independent Auditors:
Audit Report of Ernst & Young - 2002 G1
Audit Report of Langton Clarke - 2000 and 2001 G2

Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2001 and 2002 G3-G4
Consolidated Statements of Income for each of the three years
in the period ended December 31, 2002 G5
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 2002 G6-G7
Notes to the Consolidated Financial Statements G8

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.

G-1

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Cordillera Comunicaciones Ltda.:

We have audited the accompanying consolidated balance sheet of Cordillera
Comunicaciones Ltda. and subsidiaries (the "Company") as of December 31, 2002
and the related consolidated statements of income and cash flows for the year
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 audit. The consolidated financial statements of the
Company as of December 31, 2001 and for the years ended December 31, 2000 and
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(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 audit 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
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cordillera
Comunicaciones Ltda. and subsidiaries as of December 31, 2002, and the results
of its operations and cash flows for the year then ended in conformity with
accounting principles generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected consolidated shareholders' equity as of
December 31, 2002 and the consolidated results of operations for the year
ended December 31, 2002, to the extent summarized in Note 28 of the Notes to
the consolidated financial statements.

ERNST & YOUNG LTDA.

Santiago, Chile February 28, 2003
(Except for Note 28 for which the date is May 23, 2003)

G-2

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Cordillera Comunicaciones Ltda.:

We have audited the accompanying consolidated balance sheets of Cordillera
Comunicaciones Ltda. (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
planand 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 Ltda. 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)

G-3

Cordillera Comunicaciones Ltda. And Subsidiaries
Consolidated Balance Sheets as of 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, 2002 and thousands of U.S. dollars)

As of December 31,
--------------------------------------------
2001 2002 2002
---------- ---------- ------
ASSETS ThCh$ ThCh$ ThCh$
Note 2(e)

CURRENT ASSETS
Cash........................................................ 213,387 400,283 557
Time deposits (Note 5)...................................... 3,995,173 11,357,192 15,804
Marketable securities (Note 6).............................. 608,110 804,386 1,119
Trade receivables, net of allowance for doubtful accounts
of ThCh$2,367,122 and ThCh$5,003,665, respectively (Note
7)........................................................ 2,948,853 3,702,615 5,152
Notes receivables........................................... 205,286 171,567 239
Miscellaneous receivables (Note 8).......................... 906,958 1,590,583 2,213
Notes and accounts receivables from related companies (Note
11)....................................................... 442,564 330,334 460
Income taxes recoverable, net (Note 24)..................... 908,053 83,952 117
Prepaid expenses (Note 9)................................... 2,319,830 849,534 1,182
Deferred income taxes (Note 24)............................. 498,127 617,521 859
Other current assets, net (Note 10)......................... 1,652,128 1,276,244 1,778
----------- ----------- -------
Total current assets........................................ 14,698,469 21,184,211 29,480
----------- ----------- -------

PROPERTY, PLANT AND EQUIPMENT (Note 12)
Land........................................................ 482,994 482,994 672
Buildings and other infrastructure.......................... 107,879,065 109,334,310 152,147
Machinery and equipment..................................... 8,492,038 9,840,812 13,694
Furniture and fixtures...................................... 3,537,159 3,724,807 5,183
Other property, plant and equipment......................... 14,545,420 14,057,278 19,562
Less: Accumulated depreciation.............................. (16,705,629) (24,626,415) (34,270)
----------- ----------- -------
Property, plant and equipment, net.......................... 118,231,047 112,813,786 156,988
----------- ----------- -------

OTHER ASSETS
Investment in other companies (Note 14)..................... 447,921 257,279 358
Goodwill, net (Note 15)..................................... 68,520,776 64,372,916 89,580
Intangibles, net............................................ 975,201 1,033,189 1,438
Deferred income taxes (Note 24)............................. 1,034,284 3,543,433 4,931
Other assets (Note 13)...................................... 11,537,363 11,910,924 16,575
----------- ----------- -------
Total other assets.......................................... 82,515,545 81,117,741 112,882
----------- ----------- -------
TOTAL ASSETS................................................ 215,445,061 215,115,738 299,350
=========== =========== =======

The accompanying notes are an integral part of
these consolidated financial statements

G-4

As of December 31,
---------------------------------------------
2001 2002 2002
----------- ----------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY ThCh$ ThCh$ ThCh$
Note 2(e)

CURRENT LIABILITIES
Banks and financial institutions, short term (Note 16)...... 892,000 16,604 23
Banks and financial institutions, current portion (Note 16). 43,442 42,165 59
Accounts payable (Note 17).................................. 14,979,289 13,109,525 18,243
Notes payable (Note 18)..................................... 1,402,778 205,579 286
Miscellaneous payables (Note 19)............................ 317,807 308,227 429
Notes and accounts payable from related companies (Note 11). 577,586 670,167 933
Accrued liabilities and withholdings (Note 20).............. 1,029,794 1,473,316 2,050
Unearned revenues (Note 21)................................. 361,474 820,307 1,142
----------- ----------- -------
Total current liabilities................................... 19,604,970 16,645,890 23,165
----------- ----------- -------

LONG-TERM LIABILITIES
Banks and financial institutions, non-current portion (Note
16)....................................................... 18,037,084 36,502,484 50,795
Long-term Notes payables (Note 22).......................... 14,716,144 16,554,379 23,037
Deferred income taxes (Note 24)............................. -- -- --
Accrued liabilities......................................... 1,057,168 429,623 598
----------- ----------- -------
Total long-term liabilities................................. 33,810,396 53,486,486 74,430
----------- ----------- -------
Minority interest........................................... (434) (118) --

Commitments and Contingencies (Note 26)

SHAREHOLDERS' EQUITY (Note 23)
Paid-in capital............................................. 192,277,623 192,277,623 267,569
Future capital reductions................................... (27,967,776) (27,967,776) (38,919)
Future capital contributions................................ 9,812,840 9,812,840 13,655
Price-level restatement..................................... 24,601,801 24,601,801 34,235
Accumulated deficit......................................... (22,204,462) (36,694,359) (51,063)
Net loss.................................................... (14,489,897) (17,046,649) (23,722)
----------- ----------- -------
Total Shareholders' equity.................................. 162,030,129 144,983,480 201,755
----------- ----------- -------
Total Liabilities and Shareholders' equity.................. 215,445,061 215,115,738 299,350
=========== =========== =======

The accompanying notes are an integral part of
these consolidated financial statements

G-5

Years ended December 31,
----------------------------------------------------------
2000 2001 2002 2002
ThCh$ ThCh$ ThCh$ ThUS$
---------- ----------- ----------- -----------
OPERATING INCOME Note 2(e)

Operating revenue............................ 46,226,268 47,275,426 46,279,832 64,402
Operating cost............................... (34,588,768) (38,151,360) (42,109,850) (58,599)
---------- ----------- ----------- -------
Operating margin............................. 11,637,500 9,124,066 4,169,982 5,803
---------- ----------- ----------- -------
Administrative and selling expenses.......... (19,565,832) (18,019,253) (15,414,744) (21,451)
---------- ----------- ----------- -------
Operating loss............................... (7,928,332) (8,895,187) (11,244,762) (15,648)
---------- ----------- ----------- -------

NON-OPERATING INCOME
Financial revenue............................ 876,964 145,954 360,209 501
Other non-operating.......................... 28,797 219 56,588 78
Financial expenses........................... (592,845) (1,678,793) (2,348,654) (3,268)
Other non-operating expenses................. (76,259) (1,482,382) (1,514,525) (2,108)
Goodwill amortization........................ (2,810,583) (4,082,401) (4,064,471) (5,656)
Price-level restatement, net (Note 4)........ 1,451,603 (627,352) (657,669) (915)
---------- ----------- ----------- -------
Non-operating income (loss).................. (1,122,323) (7,724,755) (8,168,522) (11,368)
---------- ----------- ----------- -------

Income before taxes and minority interest.... (9,050,655) (16,619,942) (19,413,284) (27,016)
Income taxes (Note 24)....................... 758,593 2,126,953 2,366,209 3,293
Minority interest............................ 185,863 3,092 426 1
---------- ----------- ----------- -------
Net loss..................................... (8,106,199) (14,489,897) (17,046,649) (23,722)
========== =========== =========== =======

The accompanying notes are an integral part of
these consolidated financial statements

G-6

Years ending December 31,
-----------------------------------------------------------
2000 2001 2002 2002
---------- ----------- ----------- -----------
ThCh$ ThCh$ ThCh$ ThUS$

CASH FLOWS FROM OPERATING ACTIVITIES Note 2(e)
Net loss.................................... (8,106,199) (14,489,897) (17,046,649) (23,722)
Charges (credits) to income that do not
represent cash flows
Depreciation.............................. 4,889,535 7,186,672 8,466,418 11,782
Amortization of software.................. 124,059 325,578 310,411 432
Residential Cable TV installations
amortization............................ 1,331,826 1,922,432 2,737,153 3,809
Other amortization........................ 54,627 157,577 3,967 6
(Profit) Loss in sale of fixed assets..... -- (6,782) -- --
Income Taxes.............................. -- (1,600,261) (2,363,999) (3,290)
Write-offs................................ -- 1,043,173 652,648 908
Allowance for doubtful accounts........... 2,592,700 3,633,872 3,007,655 4,185
Vacation provision........................ 246,165 282,367 163,324 227
Valuation and obsolescence provision...... 204,628 -- 126,179 176
Goodwill amortization..................... 2,810,583 4,082,401 4,064,471 5,656
Price-level restatement, net.............. (1,451,603) 627,352 657,669 915
Investment price level restatement........ 918,748 63,973 309,800 431
Accrued interest.......................... 367,536 342,640 884,625 1,231
Unrealized gain on forward contracts...... 14,210 238,179 1,515,148 2,108
Others.................................... 111,995 1,607,876 833,141 1,159
Decrease (increase) in accounts that affect
cash
Trade receivable (net)...................... (2,171,068) (4,451,947) (3,598,697) (5,008)
Miscellaneous receivables................. (815,989) 1,950,959 (710,298) (988)
Inventory................................. 462,634 1,054,768 -- --
Accounts receivable from related parties.. 6,572,482 (214,376) 95,392 133
Income taxes recoverable.................. (3,767,590) 3,241,094 814,148 1,133
Prepaid expenses.......................... (2,021,280) (1,401,177) 582,558 811
Deferred taxes............................ (243,953) (226,431) (147,137) (205)
Other current assets...................... (15,276) (1,638,779) 395,803 551
Banks liabilities......................... 464,033 131,047 (912,052) (1,269)
Accounts and notes payable................ 7,584,040 (597,420) (3,673,472) (5,112)
Miscellaneous creditors................... 3,812,666 (2,798,786) (659) (1)
Accrued liabilities and withholdings...... (411,097) (1,630,785) 261,506 364
Notes and accounts payable to related
parties................................. (4,987,201) (1,528,285) 870,122 1,211
Deferred revenues......................... 52,855 (236,637) 469,294 653
Other current liabilities................. (124,684) (1,267) -- --
Minority interest......................... (185,863) (3,092) (426) (1)
------------ ----------- ----------- -------
Cash flows from financing activities........ 8,313,519 (2,933,900) (1,231,957) (1,715)
------------ ----------- ----------- -------
Loan proceeds............................. -- 18,296,422 17,740,617 24,687
Increase in capital....................... 151,385,867 -- -- --

G-7

Years ending December 31,
-----------------------------------------------------------
2000 2001 2002 2002
---------- ----------- ----------- -----------
ThCh$ ThCh$ ThCh$ ThUS$

Payment of other loans from related
companies............................... (28,964) (40)
Total cash flows from financing activities.. 151,385,867 18,296,422 17,711,653 24,647

CASH FLOWS FROM INVESTING ACTIVITIES
Sale of property, plan and equipment...... -- 63,272 -- --
Purchase of property, plant and equipment. (100,628,644) (12,430,491) (3,561,781) (4,956)
Purchase of software and licenses......... (176,749) (859,246) (362,789) (505)
Additions to residential Cable TV
installations........................... (8,785,187) (3,824,686) (4,379,496) (6,095)
Investments in others companies........... (387,321) -- -- --
Investments in related companies.......... (55,605,910) -- -- --
Dividends paid............................ (345,390) -- -- --
------------ ----------- ----------- -------
Total cash flows from investing activities.. (165,929,201) (17,051,151) (8,304,066) (11,556)
------------ ----------- ----------- -------

Total net cash flow of the period........... (6,229,815) (1,688,691) 8,175,630 11,376
Effect of price-level restatement on cash
and cash equivalents...................... (630,349) (77,428) (430,439) (599)
------------ ----------- ----------- -------

Change in cash and cash equivalents during
the period................................ (6,860,164) (1,766,119) 7,745,191 10,777

Cash and cash equivalents at the beginning
of the period............................. 13,442,953 6,582,789 4,816,670 6,703
------------ ----------- ----------- -------

Cash and cash equivalents at the end of the
period.................................... 6,582,789 4,816,670 12,561,861 17,480
------------ ----------- ----------- -------

The accompanying notes are an integral part of
these consolidated financial statements

G-8

Note 1. Incorporation:

Cordillera Comunicaciones Ltda. (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. Summary of 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 accounting principles generally accepted in the
United States, 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 Ltda 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-9

Note 2. Summary of Accounting Policies, continued:

(a) General, continued:

The consolidated financial statements includes the following:

2000 2001 2002
---- ---- ----
% % %

Pacific Television Limitada............................... 99.5 99.5 99.5
Metropolis Intercom S.A. (1).............................. 99.9 99.9 99.9

(b) Periods covered

These financial statements reflect the Company's financial the results of its
operating and its cash flows for the years ended December 31, 2000, 2001 and
2002.

The Company has price-level-restated shareholders' equity and non - monetary
assets and liabilities at December 31, 2000, 2001, and 2002 in order to
reflect the effects of the changes in the purchasing power of the Chilean
peso. For this purpose, the change in the Chilean consumer price index is the
main indicator considered, which was 3.0% in 2002 (3.1% in 2001 and 4.7% in
2000).

(d) Assets and liabilities denominated in foreign currency:

Balances in foreign currencies have been translated into Chilean Pesos at the
Observe.

Exchange Rate as reported by the Central Bank of Chile as follows:

As of December 31,
------------------------------------------
Symbol 2000 2001 2002
--------- --------- ---------
Ch$ Ch$ Ch$

U.S. Dollar..................................... US$ 573.65 654.79 718.61
Unidad de Fomento............................... UF 15,769.92 16,262.66 16,744.12

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-10

Note 2. Summary of 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 at the December 31, 2002 closing exchange rate of Ch$718.61 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.

(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
uncollectable receivables. The allowance was computed by considering 100% of
the 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, principally movies, series and documentaries, are capitalized
and charged to cost when broadcasted or 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 remaining useful lives of the assets.

As described in Note 3, the Company changed the method of depreciation for the
External network from straight-line depreciation to depreciation determined on
a progressive method based on the estimated growth of the number of
subscribers, weighted by its price.

G-11

Note 2. Summary of Accounting Policies, continued:

(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 year ended
December 31, 2002 amortization charged to income totaled ThCh$310,411
(ThCh$325,578 in 2001 and ThCh$124,059 in 2000).

(m) Investment in other companies:

The investment in other companies is recorded at the lower of cost adjusted by
price-level restatement or market value.

(n) Goodwill:

Goodwill has resulted from comparing the price paid for cable television
operations with the net assets acquired. Goodwill is being amortized on a
straight-line method over 20 years.

(o) Other assets

This item is composed mainly of deferred costs of Cable TV residence
installations or drops, which are amortized over their remaining estimated
useful life. The amount amortized in 2002 equaled ThCh$ 2,737,153
(ThCh$1,922,432 in 2001 and ThCh$1,331,826 in 2000).

(p) Accrued vacation expense

In accordance with Technical Bulletin No.47 issued by the Chilean Association
of Accountants, employee vacation expenses are recorded on an accrued basis.

(q) Deferred revenues

Revenues from sale of services are deferred until the service is performed.

G-12

Note 2. Summary of Accounting Policies, continued:

(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, until the sale date of the contracts. Additionally, the
initial discount or premium is recorded in other current assets and is
amortized over the life of the contract.

(t) Cash and cash equivalents:

Cash and cash equivalents are comprised of cash, time deposits and marketable
securities with a remaining maturity of 90 days or less as of each year-end.

Note 3. Accounting Changes:

During 2001, the Company modified the criteria for depreciating its external
network with respect to 2000. Previously, the Company used a straight-line
method based on the estimated useful life of the network, however during the
year the Company changed its methodology to a progressive method based on the
estimated growth of the number of subscribers over the estimated useful life
of the network weighted by its price. The above meant recording a lesser
charge to income for depreciation in the amount of ThCh$1,872,680 during 2001.

As of January 1, 2001, the amortization rates of the Cable TV residence
installations were changed to be consistent with the estimated useful life of
five years used for installations originally installed by the Company,
effective from the purchase date of July 2000. The above meant a lesser charge
to income of ThCh$1,168,259.

G-13

Note 4. Price - Level Restatement, Net:

The detail of price - level restatement credited (charged) to income is as
follows:

2000 2001 2002
ThCh$ ThCh$ ThCh$
--------- -------- --------

Price-level restatement of:
Shareholders' equity.................................... (2,793,477) (5,307,586) (4,719,324)
Minority interest....................................... (1,415,901) -- --
Non-monetary liabilities................................ (477,398) (329,049) (1,010,040)
Non-monetary assets..................................... 6,264,143 6,223,791 5,979,606
Currency exchange difference:
Non-monetary liabilities.............................. (397,996) (2,526,028) (2,482,184)
Non-monetary assets................................... 344,970 1,350,700 1,540,471
Price-level restatement of income amounts............... (72,738) (39,180) 33,802
--------- -------- --------
Price-level restatement, net............................ 1,451,603 (627,352) (657,669)
========== ========== ==========

Note 5. Time Deposits:

Time deposits as of December 31, 2001 and 2002 are as follows:

2001 2002
Financial Institution Currency ThCh$ ThCh$
-------- --------- ----------

Corpbanca............................................... Ch$ 1,208,865 --
BHIF.................................................... Ch$ 872,832 --
Santander............................................... Ch$ -- 3,215,642
Banco Estado............................................ Ch$ 1,238,948 2,402,741
Credito e Inversiones................................... Ch$ -- 851,040
Chase Manhattan Bank, New York.......................... US$ 674,528 4,887,769
--------- ----------
Total................................................... 3,995,173 11,357,192
--------- ----------

G-14

Note 6. Marketable securities:

Details of marketable securities are as follows:

Type of
Financial lnstitution investment 2001 2002
--------- ---------
ThCh$ ThCh$

F.M. Security Check .............................. Mutual fund 608,110 804,386
--------- ---------
Total............................................. 608,110 804,386
========= =========

Note 7. Trade Receivables, net:

Trade receivables, net as of December 31, 2001 and 2002 are as follows:

2001 2002
ThCh$ ThCh$
------------ ------------

Cable Services......................................................... 3,892,442 5,840,893
Invoiced advertising receivable........................................ 1,423,533 2,865,387
Allowance for doubtful accounts-cable services monthly services........ (2,247,609) (4,887,836)
Allowance for doubtful accounts on advertisement....................... (119,513) (115,829)
------------ ------------
Total.................................................................. 2,948,853 3,702,615
============ ============

Provisions for doubtful accounts amounted to ThCh$3,007,655 for the years
ended December 31, 2002 (ThCh$3,633,872 in 2001 and ThCh$2,592,700 in 2000).

In addition, in 2002 ThCh$2,318,221 of accounts were written-off against the
allowance without affecting income (ThCh$2,571,577 in 2001 and ThCh$2,375,202
in 2000).

G-15

Note 8. Miscellaneous receivables:

Miscellaneous debtors as of December 31, 2001 and 2002 are as follows:

2001 2002
ThCh$ ThCh$
---------- ------------

Materials receivables.................................................. 256,068 208,248
Suppliers advances..................................................... 234,592 46,322
Employee advances...................................................... 24,577 14,331
Receivable from Cia. de Telecomunicaciones de Chile S.A................ 215,646 379,315
Receivables from advertising rights.................................... -- 898,476
Receivables from Comunicaciones Intercom S.A........................... -- 33,826
Other receivables...................................................... 176,075 10,065
---------- ------------
Total.................................................................. 906,958 1,590,583
========== ============

Note 9. Prepaid Expenses:

Prepaid expenses as of December 31, 2001 and 2002 are follows:

2001 2002
ThCh$ ThCh$
---------- ---------

Programming rights..................................................... 732,316 17,458
Advertising rights..................................................... 159,944 125,375
Prepaid transmission post usage rights................................. 846,573 1,411
Prepaid rent........................................................... 348,066 203,330
Prepaid insurance...................................................... 15,265 173,947
Other.................................................................. 217,666 328,013
---------- ---------
Total.................................................................. 2,319,830 849,534
========== =========

G-16

Note 10. Other Current Assets:

The Company has entered into forward foreign currency contracts with notional
amounts of US$65,000,000 and US$48,000,000 as of December 31, 2001 and 2002,
respectively. As of December 31, 2001 and 2002, the net asset balance of
ThCh$1,652,128 and ThCh$1,276,244 is presented in Other Current Assets.

a) As of December 31, 2002, the Company held forward contracts as detailed
below:

Financial Notional Maturity 2002
Institution Amount Date ThCh$
----------- --------- ---------- ---------
US$

SECURITY........................... 5,000,000 02/06/2003 171,169
SECURITY........................... 200,000 11/07/2003 --
SECURITY........................... 400,000 11/12/2003 --
SECURITY........................... 500,000 12/15/2003 --
SECURITY........................... 500,000 12/17/2003 --
SANTANDER.......................... 1,000,000 01/07/2003 30,222
SANTANDER.......................... 1,500,000 01/10/2003 --
SANTANDER.......................... 500,000 01/15/2003 --
SANTANDER.......................... 2,500,000 02/12/2003 --
SANTANDER.......................... 500,000 01/15/2003 --
SANTANDER.......................... 2,500,000 03/06/2003 88,857
SANTANDER.......................... 1,500,000 05/15/2003 90,591
SANTANDER.......................... 1,000,000 09/08/2003 --
SANTANDER.......................... 1,000,000 08/06/2003 --
SANTANDER.......................... 500,000 10/10/2003 --
CORPBANCA.......................... 200,000 11/07/2003 --
CORPBANCA.......................... 200,000 11/07/2003 --
CORPBANCA.......................... 1,500,000 12/17/2003 --
BBV-BHIF........................... 1,000,000 04/08/2003 34,188
BBV-BHIF........................... 6,000,000 05/06/2003 208,839
BANKBOSTON......................... 5,000,000 03/05/2003 156,506
BANKBOSTON......................... 4,000,000 04/08/2003 132,986
BCI................................ 2,000,000 04/10/2003 111,322
BCI................................ 2,500,000 04/08/2003 112,474
BCI................................ 750,000 07/11/2003 --
BCI................................ 250,000 07/11/2003 --
BCI................................ 500,000 10/10/2003 --
BCI................................ 500,000 11/07/2003 --
BCI................................ 500,000 12/07/2003 --
Santiago........................... 4,000,000 01/06/2003 139,090
------------ ------------
Total.............................. 48,000,000 1,276,244
------------ ------------

G-17

Note 10. Other Current Assets, continued:

b) As of December 31, 2001, the Company held forward contracts as
detailed below:

Financial Notional Maturity 2002
Institution Amount Date ThCh$
----------- --------- ---------- ---------
US$

SECURITY.......................... 26,000,000 1/8/2002 1,614,892
BCI............................... 2,500,000 3/3/2002 --
SANTANDER......................... 1,000,000 1/15/2002 --
SANTANDER......................... 2,500,000 2/15/2002 --
SANTANDER......................... 1,500,000 1/15/2002 --
SANTANDER......................... 2,500,000 4/9/2002 --
CORPBANCA......................... 1,500,000 4/22/2002 58,070
CORPBANCA......................... 2,500,000 5/10/2002 105,055
SANTANDER......................... 2,500,000 6/11/2002 --
SANTANDER......................... 2,500,000 7/16/2002 --
BBV-BHIF.......................... 2,500,000 5/14/2002 --
BBV-BHIF.......................... 2,500,000 5/14/2002 (34,552)
BANKBOSTON........................ 2,500,000 8/13/2002 --
BANKBOSTON........................ 1,500,000 9/3/2002 (68,529)
BANKBOSTON........................ 2,500,000 9/11/2002 --
BANKBOSTON........................ 2,500,000 10/15/2002 --
BCI............................... 1,000,000 12/16/2002 (22,808)
SANTANDER......................... 2,500,000 11/13/2002 --
BHIF.............................. 2,000,000 12/17/2002 --
BCI............................... 500,000 12/17/2002 --
------------ ------------
Total............................. 65,000,000 1,652,128
------------ ------------

G-18

Note 11. Balances and Transactions with Related Companies:

a) Balances with related companies as at December 31, 2001 and 2002 are
as follows:

2001 2002
Relationship ThCh$ ThCh$
------------ ---------- ----------

Short term accounts receivable:
Red Televisiva Megavision S.A.................................. Indirect 213,849 50,386
Ediciones Financieras S.A...................................... Indirect -- 1,754
Crown Media.................................................... Indirect -- 87,125
S.A. Vina Santa Rita........................................... Indirect 37,302 5,231
Bresnan Communications de Chile S.A............................ Indirect 191,413 185,838
---------- ----------
Total Short-term accounts receivable 442,564 330,334
========== ==========

Short term accounts payable:
Bresnan Communications Company Limited partnership............. Indirect 191,756 204,317
S.A. Vina Santa Rita........................................... Indirect 74,558 50,420
Red Televisiva Megavision S.A.................................. Indirect -- 135,411
Pramer......................................................... Indirect 139,245 105,581
Crown Media.................................................... Indirect 145,003 140,129
Ediciones Financieras S.A...................................... Indirect 11,230 21,427
Servicios y Consultorias Hendaya S.A........................... Indirect 15,794 12,882
---------- ----------
Total.......................................................... 577,586 670,167
========== ==========

G-19

Note 11. Balances and Transactions with Related Companies, continued:

b) Transaction with related companies during years ended December 31,
2000, 2001 and 2001 are as follows:

2000
ThCh$
---------------------------
Effect on
Income
Transaction (Charge)/
Company Relationship description Amount credit
------------------------------------ ------------ --------------------- ---------- ----------

S.A. Vina Santa Rita................ Indirect Advertising 36,350 30,805
Red Televisiva Megavision S.A....... Indirect Advertising 204,290 (173,477)
Ediciones Financieras S.A........... Indirect Advertising -- --
Serv. y Consultorias Hendaya S.A.... Indirect Invoicing of services 3,823 (3,823)
Pramer.............................. Indirect Programming 169,590 (169,590)
Crown Media......................... Indirect Programming 274,282 (274,282)
Claroy y Cia........................ Indirect Legal Fees 1,799,831 (1,799,831)

2001 2002
ThCh$ ThCh$
--------------------------- ---------------------------
Effect on Effect on
Income Income
(Charge)/ (Charge)/
Company Amount credit Amount credit
------------------------------------ ------- -------- -------- --------

S.A. Vina Santa Rita................ 138,620 126,194 15,308 15,308
Red Televisiva Megavision S.A....... 7,014 -- 319,566 319,566
Ediciones Financieras S.A........... 106,205 56,461 40,907 48,011
Serv. y Consultorias Hendaya S.A.... 4,944 (4,944) 19,000 (2,000)
Pramer.............................. 311,275 (311,275) 240,926 (240,906)
Crown Media......................... 309,433 (309,433) 207,695 (307,695)
Claroy y Cia........................ -- -- -- --

G-20

Note 12. Property, Plant and Equipment:

Property, Plant and Equipment as of December 31, 2001 and 2002 are as
follows:

2001 2002
ThCh$ ThCh$
----------- -----------

Land................................................................... 482,994 482,994
----------- -----------
Buildings and other infrastructure
Buildings.............................................................. 124,928 124,928
External Network....................................................... 105,782,584 107,931,361
Equipment installations................................................ 1,971,553 1,278,021
----------- -----------
Other installations.................................................... -- --
----------- -----------
Total.................................................................. 107,879,065 109,334,310
----------- -----------

Machinery and Equipment................................................ 8,492,038 9,840,812
----------- -----------

Furniture and Equipment................................................ 3,537,159 3,724,807
----------- -----------

Other property, plant and equipment
Vehicles............................................................... 964,904 858,055
Tools and instruments.................................................. 852,589 120,630
Other installations.................................................... -- --
Property, plant and equipment in transit............................... 68,957 4,277
Installations in rented offices........................................ 638,985 738,062
Cable TV materials..................................................... 3,211,841 2,527,782
Construction in progress............................................... 634,809 946,248
Leased Assets.......................................................... 329,857 329,857
Premium decoders....................................................... 7,843,478 8,532,367
----------- -----------

Total.................................................................. 14,545,420 14,057,278
=========== ===========

Depreciation:

Depreciation charged to income during the years ended December 31, 2000, 2001
and 2002 amounted to ThCh$4,889,535, ThCh$7,186,672 and ThCh$8,466,418,
respectively.

G-21

Note 13. Other Assets:

Other assets as of December 31, 2001 and 2002 are as follows:

2001 2002
ThCh$ ThCh$
---------- ----------

Long-term broadcast rights............................................ 1,375,442 1,470
Rental warranties..................................................... 80,196 83,159
Cable TV house installations, net..................................... 9,348,410 10,294,616
Other................................................................. 733,315 1,531,679
---------- ----------
Total................................................................. 11,537,363 11,910,924
---------- ----------

Note 14. Investment in other companies:

The composition of this item as of December 31, 2001 and 2002 is the
following:

2001 2002
ThCh$ ThCh$
------- -------

Bazuca.Com Chile S.A.................................................. 174,016 185,413
Internet Holding S.A.................................................. 273,905 273,900
Valuation allowance................................................... -- (202,034)
------- -------
Total................................................................. 447,921 257,279
------- -------

Note 15. Goodwill, net:

Goodwill, net of accumulated amortization as of December 31, 2000, 2001 and
2002 are as follows:

2000 2001 2002
ThCh$ ThCh$ ThCh$
----------- ----------- -----------

Metropolis Intercom............................. 95,891,254 95,891,254 95,891,254
Other........................................... 5,001,996 5,001,996 5,002,057
Accumulated amortization........................ (28,226,397) (32,372,474) (36,520,395)
----------- ----------- -----------
Goodwill, net.............................. 72,666,853 68,520,776 64,372,916
============ =========== ===========

G-22

Note 16. Banks and Financial Institutions Liabilities:

Banks and financial institutions liabilities as of December 31, 2001 and 2002
are as follows:

U.S. Dollars UF TOTAL
------------------------ ------------------------- -------------------------
2001 2002 2001 2002 2001 2002
----------- ----------- ----------- ----------- ----------- -----------
ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Short-term
Banco Credito e Inversiones.... 101,806 16,604 790,994 892,800 16,604
----------- ----------- ----------- ----------- ----------- -----------
Total....................... 101,806 16,604 790,994 -- 892,800 16,604
=========== =========== =========== =========== =========== ===========
Capital Owed................... 101,806 -- 784,711 886,517
----------- ----------- ----------- -----------
Current portion of
Long-term
Banco Estado................... -- -- -- 7,464 _ 7,464
Credito e Inversiones.......... 7,846 -- 7,846
Corbanca....................... 16,309 11,696 16,309 11,696
Banco Santiago................. -- -- 27,133 15,159 27,133 15,159
----------- ----------- ----------- ----------- ----------- -----------
Total....................... -- -- 43,442 42,165 43,442 42,165
=========== =========== =========== =========== =========== ===========
Long-term
Banco Santander-Santiago ...... -- -- 7,279,065 14,731,700 7,279,065 14,731,700
Banco Credito e Inversiones.... -- -- 3,474,499 7,030,935 3,474,499 7,030,935
Corpbanca...................... -- -- 3,641,768 7,369,933 3,641,768 7,369,933
Banco Estado................... -- -- 3,641,752 7,369,916 3,641,752 7,369,916
----------- ----------- ----------- ----------- ----------- -----------
Total....................... -- -- 18,037,084 36,502,484 18,037,084 36,502,484
=========== =========== =========== =========== =========== ===========

Scheduled maturities of the long-term bank obligations as of December 31, 2002
are as follows:

Year Ending December 31 ThCh$
------------------------------ ------------
2003......................... --
2004......................... 7,300,497
2005......................... 7,300,496
2006......................... 7,300,497
Thereafter................... 14,600,994
------------
Total........................ 36,502,484
============

G-23

Note 17. Accounts Payable:

The balance of the accounts payable as of December 31, 2001 and 2002 is the
following:

2001 2002
ThCh$ ThCh$
----------- -----------

Suppliers............................................................. 8,335,661 5,772,158
Programming........................................................... 3,276,710 5,112,384
Fees.................................................................. 8,283 1,297
TV Channels........................................................... 3,119,522 725,259
Other Accounts Payable................................................ 239,113 1,498,427
----------- -----------
Total................................................................. 14,979,289 13,109,525
----------- -----------

Note 18. Notes payable:

The composition as of December 31, 2001 and 2002 is the following:

Creditor Description 2001 2002
ThCh$ ThCh$
------------------------------------------------- ------------------ ---------- --------

Pan American Sports Network Int.................. Programming 1,378,449 --
Others........................................... Miscellaneous 18,818 205,579
Cia. de Seguros Las Americas S.A................. Vehicle insurance 5,511 --
---------- --------
Total............................................ 1,402,778 205,579
========== ========

Note 19. Miscellaneous payables:

The composition as of December 31, 2001 and 2002 is the following:

2001 2002
ThCh$ ThCh$
-------- --------

Cia. de Telecomunicaciones de Chile S.A................................ 220,296 213,880
Comunicaciones Intercom S.A............................................ 85,949 83,445
Others................................................................. 11,562 10,902
-------- --------
Total.................................................................. 317,807 308,227
-------- --------

G-24

Note 20. Accrued liabilities and withholdings:

The balance of Accrued liabilities and withholdings as of December 31,
2001 and 2002 is as follows:

2001 2002
ThCh$ ThCh$
--------- ---------

Other accruals........................................................ 51,393 9,551
Invoices.............................................................. 104,073 100,964
Vacations and staff benefits.......................................... 517,088 490,396
Fees provision........................................................ 3,351 3,349
Withholdings.......................................................... 353,889 869,056
--------- ---------
Total................................................................. 1,029,794 1,473,316
========= =========

Note 21. Unearned revenues:

Unearned revenues relates to advance billing on advertising contracts, which
have not yet been broadcast. As of December 31, 2001 and 2002, deferred
revenues were ThCh$361,474 and ThCh$820,307, respectively.

Note 22. Long-Term Notes Payable:

The balance of the long-term notes payable as of December 31, 2001 and 2002
are as follows:

On July 3, 2001, in connection with the purchase transaction involving Cia. de
Telecomunicaciones de Chile S.A. (CTC), the Company entered into a loan
agreement with CTC S.A. for a total of US$20,000,000 payable over 5 years with
an annual interest rate of 6%.

As of December 31,
Price-level Accrued -------------------------------------
Principal restated Principal Interest (6%) 2001 2002
US$ ThCh$ ThCh$ ThCh$ ThCh$
------------------ ------------------ ------------- ------------- -------------

20,000,000........ 14,372,200 2,182,179 14,716,144 16,554,379
------------- ------------- ------------- -------------
Total............. 14,372,200 2,182,179 14,716,144 16,554,379
============= ============= ============= =============

G-25

Note 23. Shareholders' Equity:

The movements during 2000, 2001 and 2002 of Shareholders' Equity are as
follows:

Paid-in Future capital Future capital Price -level
Capital reductions contributions restatement
------------ -------------- ------------- -----------
ThCh$ ThCh$ ThCh$ ThCh$

Balance at January 1, 2000................ 49,720,328 (27,153,181) 9,527,030 9,853,168
Reclassification of prior year net income. -- -- -- --
Capital contributions..................... 142,557,295 -- -- --
Price-level restatement................... -- -- -- 2,630,565
Net loss for the year..................... -- -- -- --)
------------ ------------ ------------ ------------
Balance at December 31, 2000.............. 192,277,623 (27,153,181) 9,527,030 12,483,733
------------ ------------ ------------ ------------
Price-level restatement
for comparison purposes................... 192,277,623 (28,834,777) 10,117,039 13,256,851
------------ ------------ ------------ ------------
Balance at January 1, 2001................ 192,277,623 (27,153,181) 9,527,030 12,483,733
Reclassification of prior year net loss... -- -- -- --
Price-level restatement................... -- -- -- 5,801,191
Net loss for the year..................... -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 2001.............. 192,277,623 (27,153,181) 9,527,030 18,284,924
------------ ------------- ------------ ------------
Price-level restatement
for comparison purposes................... 192,277,623 (27,967,776) 9,812,840 24,601,801
------------ ------------ ------------ ------------
Balance at January 1, 2002................ 192,277,623 (27,153,181) 9,527,030 18,284,924
Reclassification of prior year net loss... -- -- -- --
Price-level restatement................... -- (814,595) 285,810 6,316,877
Net loss for the year..................... -- -- --
------------ ------------ ------------ ------------
Balance at December 31, 2002.............. 192,277,623 (27,967,776) 9,812,840 24,601,801
============ ============ ============ ============

Accumulated Net loss
Deficit for the year Total
------------ ------------ ------------
ThCh$ ThCh$ ThCh$

Balance at January 1, 2000................ (13,401,068) 124,992 28,671,269
Reclassification of prior year net income. 124,992 (124,992) --
Capital contributions..................... -- -- 142,557,295
Price-level restatement................... -- -- 2,630,565
Net loss for the year..................... -- (7,633,459) (7,633,459)
------------ ------------ ------------
Balance at December 31, 2000.............. (13,276,076) (7,633,459) 166,225,670
------------ ------------ ------------
Price-level restatement
for comparison purposes................... (14,098,263) (8,106,199) 164,612,273
------------ ------------ ------------
Balance at January 1, 2001................ (13,276,076) (7,633,459) 166,225,670
Reclassification of prior year net loss... (7,633,459) 7,633,459 --
Price-level restatement................... (648,195) -- 5,152,996
Net loss for the year..................... -- (14,067,861) (14,067,861)
------------ ------------ ------------
Balance at December 31, 2001.............. (21,557,730) (14,067,861) 157,310,805
------------ ------------ ------------
Price-level restatement
for comparison purposes................... (22,204,462) (14,489,897) 162,030,129
------------ ------------ ------------
Balance at January 1, 2002................ (21,557,730) (14,067,861) 157,310,805
Reclassification of prior year net loss... (14,067,861) 14,067,861 --
Price-level restatement................... (1,068,768) -- 4,719,324
Net loss for the year..................... -- (17,046,649) (17,046,649)
------------ ------------ ------------
Balance at December 31, 2002.............. (36,694,359) (17,046,649) 144,983,480
============ ============ ============

G-26

Note 23. Shareholders' Equity, continued:

The Company is 99.50% owned by Cordillera Holding Limitada and 0.25% owned by
TCI Comunicaciones de Chile Uno Limitada (a subsidiary of Liberty Media
International) and 0.25% owned by Cristal Chile Comunicaciones S.A.
Cordillera Holding Limitada is 50% owned by TCI Comunicaciones de Chile Uno
Limitada and 50% owned by Cristal Chile Comunicaciones S.A.

On October 2, 2000, in the General Extraordinary Shareholders meeting, the
shareholders agreed to increase capital by ThCh$ 142,557,295 (historic pesos)
contributed by Cordillera Comunicaciones Holding Ltda. This was completed in
order to finance the purchase of the external network, equipment, premium
decoders and Cable TV materials.

Note 24. Income Taxes and Deferred Taxes:

a) Income taxes recoverable

As of December 31, 2001 and 2002, the Company had the following income taxes
recoverable:

2001 2002
ThCh$ ThCh$
--------- --------

Current income taxes and Article 21.................................... (3,123) (5,339)
Monthly income tax installments........................................ 11,283 11,283
Refundable tax credit.................................................. 351,772 --
Credit for training expenses........................................... 77,160 76,052
Credit value-added tax................................................. 470,961 1,956
--------- --------
Total............................................................... 908,053 83,952
========= ========

b) Income taxes

Income tax benefits for the years ended December 31, 2000, 2001, and
2002 are as follows:

2000 2001 2002
ThCh$ ThCh$ ThCh$
---------- ---------- ----------

Credit for absorbed earnings.................... 1,008,241 351,772 (161,804)
Amortization of complementary accounts.......... (319,925) 386,155 --
Deferred income taxes........................... 73,447 1,392,149 2,533,352
First category tax provision.................... (3,170) (3,123) (5,339)
---------- ---------- ----------
` 758,593 2,126,953 2,366,209
========== ========== ==========

G-27

Note 24. Income Taxes and Deferred Income Taxes, continued:

a) Deferred income taxes

As of December 31, 2002, and 2001 according to Technical Bulletin No.
60 issued by the Chilean Accountants Association on deferred income
taxes, the Company recorded deferred taxes for temporary differences as
follows:

As of December 31, 2001
--------------------------------------------------------------
Asset Liabilities
---------------------------- ----------------------------
Short-term Long-term Short-term Long-term
----------- ----------- ----------- -----------

Allowance for doubtful accounts. 314,174 -- -- --
Good and services provision..... 10,069 -- -- --
Assets provision................ 10,274 -- -- --
Unearned revenues............... 109,955 -- -- --
Vacation provision.............. 82,734 -- -- --
Accumulated depreciation........ 3,667 -- -- --
Forward Contract................ -- -- 32,746 --
Tax loss carryforwards (1)...... -- 9,303,930 -- --
Trademarks...................... -- 966 -- --
Leasing......................... -- 53,488 -- --
Accumulated depreciation........ -- -- -- --
Leasing operations.............. -- -- -- 55,366
Goodwill........................ -- -- -- 3,453,669
Software........................ -- -- -- 162,243
Rented installations............ -- -- -- 76,172
Accelerated depreciation........ -- -- -- 897,906
Complementary account........... -- (6,695,969) -- (3,017,225)
----------- ----------- ----------- -----------
Total........................... 530,873 2,662,415 32,746 1,628,131
=========== =========== =========== ===========

As of December 31, 2002
--------------------------------------------------------------
Asset Liabilities
---------------------------- ----------------------------
Short-term Long-term Short-term Long-term
----------- ----------- ----------- -----------

Allowance for doubtful accounts. 349,943 -- -- --
Good and services provision..... 38,026 -- -- --
Assets provision................ -- -- -- --
Unearned revenues............... 135,355 -- -- --
Vacation provision.............. 70,123 -- -- --
Accumulated depreciation........ -- -- -- --
Forward Contract................ 24,074 -- -- --
Tax loss carryforwards (1)...... -- 12,164,506 -- --
Trademarks...................... -- 1,613 -- --
Leasing......................... -- 50,768 -- --
Accumulated depreciation........ -- 4,430 -- --
Leasing operations.............. -- -- -- 54,592
Goodwill........................ -- -- -- 3,213,701
Software........................ -- -- -- 171,708
Rented installations............ -- -- -- 60,669
Accelerated depreciation........ -- -- -- 1,271,354
Complementary account........... -- (6,695,969) -- (2,790,109)
----------- ----------- ----------- -----------
Total........................... 617,521 5,525,348 -- 1,981,915
=========== =========== =========== ===========

(1) In accordance with the current enacted tax law in Chile, accumulated
tax losses can be carried-forward indefinitely.

G-28

Note 25. Board of Directors Compensation:

During the years ending December 31, 2000, 2001 and 2002 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 it 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.

Note 27. Subsequent Events

Management is not aware of any subsequent events between December 31, 2002 and
the issuance of these financial statements that would materially impact the
financial statements.

G-29

Note 28. Differences Between Chilean and United States Generally Accepted
Accounting Principles:

Accounting principles generally accepted in Chile ("Chilean GAAP") vary in
certain important aspects from those generally accepted in the United States
("U.S. GAAP"). 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 Company's financial statements do not include all disclosures (including
presentation) required by U.S. GAAP, as they have been prepared solely for the
purpose of inclusion in the Form 20-F filing of Cristalerias de Chile S.A.

The principal methods applied in the preparation of the accompanying financial
statements which have resulted in amounts which 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, 2002 was 11.18%.

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.

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 and
shareholders' equity, as determined with U.S. GAAP, does not include
adjustments to eliminate the effect of inflation accounting under Chilean
GAAP.

G-30

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, 2001 and 2002, 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 on the net income and shareholders' equity of
the Company is included in paragraph (h) below.

G-31

Note 28. Differences Between Chilean and United States Generally Accepted
Accounting Principles, continued:

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, and are amortized over a period up to a
maximum of 20 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.

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 transitional impairment test required by the
standard, which was performed during the first half of 2002 and 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 (h) below:

(a) The reversal of goodwill amortization recorded under Chilean GAAP
as of and for the year ended December 31, 2002, and
(b) Adjustment to record goodwill basis differences between Chile
GAAP and U.S. GAAP as of December 31, 2001 and 2002 and for the
three-year period ended December 31, 2002.

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 is

G-32

Note 28. Differences Between Chilean and United States Generally Accepted
Accounting Principles, continued:

recorded based on an estimate of future discounted cash flows, as compared to
current carrying amounts. For the years ended December 31, 2000, 2001, and
2002 no additional amounts were recorded for impairment under U.S. GAAP.

(d) Deferral of installation fees:

Under Chilean GAAP, the upfront fees received for the one-time installation of
cable service, have been recorded as revenue upon completion of the
installation. Under U.S. GAAP, the Company follows SFAS No. 51, "Financial
Reporting by Cable Television Companies" which requires these fees to be
recognized to the extent of direct selling costs incurred, while the remainder
is deferred and amortized over the expected customer relationship, which the
Company has estimated as 5 years. The effect of recognizing upfront hookup
revenues over the period of the expected customer relationship in accordance
with U.S. GAAP is included in the reconciliation of net income and shareholders'
equity in paragraph (h) below. No adjustment has been included in the
reconciliation to U.S. GAAP for direct selling costs, as such amounts are
immaterial and the application of US GAAP would not have produced
significantly different results.

(e) Derivative instruments:

As of and for the year ended December 31, 2000, the Company had entered into
foreign currency forward exchange contracts to transfer its exposure in U.S.
dollars to an exposure in UF. As described in the Company's accounting policy
in Note 2(s), some of these foreign currency forward exchange contracts have
been accounted as hedges. For U.S. GAAP purposes, the Company has recognized
these forward contract gains in results of operations, in accordance with SFAS
52. The effects of the adjustments have been included under paragraph (h)
below.

For the years ended December 31, 2001 and 2002, 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 UF. 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$1,652,128 and ThCh$1,276,244 as of December 31, 2001 and 2002,
respectively. Fair values under Chilean GAAP have been estimated using the
closing spot exchange rate at the period end.

G-33

Note 28. Differences Between Chilean and United States Generally Accepted
Accounting Principles, continued:

(e) Derivative instruments, continued:

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 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.

As permitted, the Company applied SFAS No. 133 to only those hybrid
instruments that were issued, acquired, or substantively modified after
December 31, 1998.

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$25,313) which is presented net of tax of
ThCh$4,467, 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 U.S. GAAP. The effect of the adjustment between the current market values
and the fair value for the years ended December 31, 2001 and 2002 is included
in paragraph (h) below.

(f) 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 estimated increase in the number of average
subscribers over the expected useful life of the network. 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 income and shareholders' equity in
paragraph (h) below.

(g) 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:

G-34

Note 28. Differences Between Chilean and United States Generally Accepted
Accounting Principles, continued:

(g) Investments in marketable securities, continued:

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 (h)
below.

(h) 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,
---------------------------------------------------

2000 2001 2002
ThCh$ ThCh$ ThCh$

Net loss, in accordance with Chilean GAAP............ (8,106,199) (14,489,897) (17,046,649)
Deferred income taxes (paragraph b).................. 844,396 (2,281,990) (1,777,112)
Amortization of goodwill (paragraph c)............... (1,248,779) (243,127) 4,124,406
Deferral of installation fees (paragraph d).......... (311,451) (63,203) (435,798)
Derivative instruments (paragraph e)................. -- 33,426 148,001
Depreciation (paragraph f)........................... -- (1,481,279) (1,212,032)
Effects of deferred taxes over the adjustments to
US GAAP.............................................. 46,717 263,551 258,044
---------- ----------- -----------

Net loss in accordance with US GAAP before
cumulative effect of change in accounting
principles........................................... (8,775,316) (18,262,519) (15,941,140)

Effect of change in accounting principles, net of
tax benefit of ThCh$4,467............................ -- (25,313) --
---------- ----------- -----------

Net loss in accordance with US GAAP.................. (8,775,316) (18,287,832) (15,941,140)
========== =========== ===========

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

G-35

Note 28. Differences Between Chilean and United States Generally Accepted
Accounting Principles, continued:

(h) Effect of conforming net loss and shareholders' equity to U.S. GAAP,
continued:

As of December 31,
-------------------------------
2001 2002
ThCh$ ThCh$

Shareholders' equity, in accordance with Chilean GAAP................. 162,030,129 144,983,480
Deferred income taxes (paragraph b)................................... (92,596) (1,869,708)
Effect in amortization of goodwill (paragraph c)...................... 7,419,406 11,543,811
Deferral of installation fees (paragraph d)........................... (374,654) (810,452)
Derivative instruments (paragraph e).................................. 3,645 151,646
Depreciation (paragraph f)............................................ (1,481,279) (2,693,311)
Effects of deferred taxes over the adjustments to U.S. GAAP........... 313,332 571,377
------------ ------------
Shareholders' equity, in accordance with U.S. GAAP.................... 167,817,983 151,876,843
============ ============

The following summarizes the changes in shareholders' equity under U.S. GAAP
during the years ended December 31, 2000, 2001 and 2002:

For the year ended December 31,
----------------------------------------------------
2000 2001 2002
ThCh$ ThCh$ ThCh$

Balance as of January 1......................... 42,132,790 186,105,815 167,817,983
Capital contributions........................... 152,748,341 -- --
Net loss in accordance with U.S. GAAP........... (8,775,316) (18,287,832) (15,941,140)
----------- ----------- -----------
Balance as of December 31....................... 186,105,815 167,817,983 151,876,843
=========== =========== ===========

G-36