Independent Auditors Report

Transcription

1 Financial Statements Independent Auditors Report Balance Sheets Statements of Income Statements of Cash Flows Simplified Notes to Financial Statements Material Events Explanatory Analysis of Consolidated Financial Statements Condensed Financial Statements 75 Annual Report

2 Independent Auditors Report

3 Deloitte To the Shareholders of Distribución y Servicio D&S S.A. We have audited the consolidated balance sheets of Distribución y Servicio D&S S.A. and subsidiaries and the individual balance sheets of Distribución y Servicio D&S S.A. as of December 31, and and the respective consolidated and individual statements of income and of cash flows for the years then ended, all expressed in thousands of constant Chilean pesos. These financial statements (including the related notes) are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Chile. 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 presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the consolidated financial position of Distribución y Servicio D&S S.A. and subsidiaries and the individual financial position of Distribución y Servicio D&S S.A. as of December 31, and and the related results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Chile. The notes to the accompanying financial statements have been derived from the notes to the individual and consolidated financial statements of the Company filed with the Chilean Superintendency of Securities and Insurance, on which we have issued our auditors reports of today s date. The accompanying notes exclude only the additional information required by that regulator that is not necessary for an adequate understanding of the financial statements. The translation of the financial statements into English has been made for the convenience of readers outside Chile. February 25, 2008 Cristián Alvarez Parra As specified in Note 18 to the financial statements, the Company recorded an account receivable due by Disco S.A., for the balance of the amount due for the sale of Supermercados Ekono Argentina S.A. Management has evaluated the recoverability of said matter, concluding that no provision is needed at December 31,. In consideration to the variability of the argentinean jurisprudence in regards to the pesification effects, the last result of the legal actions that the Company remains pending for the collection of this account receivable, will not be foreseen until the end of these. 77 Annual Report

4 BALANCE SHEETS at december 31, and. (In thousands of Chilean pesos - ) ASSETS CONSOLIDATED INDIVIDUAL CURRENT ASSETS: Cash and banks 43,363,001 33,222,710 1,142,565 2,602,884 Marketable securities 1,567,214 2,964,135 2,257,664 3,703,403 Trade accounts receivable 107,297, ,152,855 67,495 6,308,753 Notes receivable 8,562,653 2,121,062 14,547 83,100 Sundry debtors 31,878,086 18,894, ,641 2,254,995 Notes and accounts receivable from related companies 2,958,662 1,678, ,595, ,379,810 Inventories 158,550, ,163, , ,635,219 Refundable taxes 36,710,545 8,958,929 7,455,197 6,161,436 Prepaid expenses 2,631, , , ,986 Deferred taxes 5,262,097 4,246,847 65, ,760 Other current assets 11,960,272 25,019, ,767 14,044,648 Total current assets 410,741, ,279, ,112, ,700,994 FIXED ASSETS: Land 222,078, ,559,550 17,055,712 12,722,313 Buildings and infrastructure 618,010, ,009,854 90,223,541 63,483,766 Machinery and equipment 221,859, ,858,842 3,351,301 3,027,100 Other 124,875, ,478,344 30,771,423 48,134,692 Technical revaluation 2,962,368 4,649, Accumulated depreciation (436,103,506) (381,846,358) (51,768,139) (45,190,055) Total fixed assets 753,682, ,710,045 89,633,838 82,177,816 OTHERS: Investments in related companies 8,545,828 8,487, ,977, ,829,316 Investments in other companies 82,192 82,192 82,192 82,192 Goodwill 37,296,092 40,008,595 6,823,180 7,207,585 Notes and accounts receivable from related companies long term - - 6,511, ,265,566 Long term accounts receivable 177,208, ,103,239 24,644,529 27,453,766 Deferred taxes - long term 11,847,597 14,034,411 1,359,248 - Other 32,143,552 28,900,255 17,019,034 18,865,655 Total other assets 267,124, ,615, ,417, ,704,080 TOTAL ASSETS 1,431,548,213 1,294,605,113 1,009,164,368 1,238,582,890 Accompanying notes 1 to 20 are an integral part of these financial statements

5 BALANCE SHEETS at december 31, and. (In thousands of Chilean pesos - ) LIABILITIES AND SHAREHOLDERS EQUITY CONSOLIDATED INDIVIDUAL CURRENT LIABILITIES: Borrowings: Short term 193,485,370 63,656, ,331,453 62,909,541 Long term - current portion 8,890,434 2,190,243 8,890,434 2,190,243 Promissory notes 65,905,976 68,155,449 65,905,976 68,155,449 Debentures and bonds 12,831,608 9,817,032 9,979,840 8,617,500 Current portion of other long-term liabilities 2,844,072 3,660, , ,342 Dividends payable 12,946,130-12,946,130 - Accounts payable 259,652, ,014,596 6,336, ,431,720 Sundry creditors 8,595,641 5,884, ,432 4,510,842 Due to related companies ,476,740 Accruals 25,291,238 22,171,797 2,837,806 5,584,437 Withholdings 5,027,754 5,517, ,240 5,654,100 Unearned income 146, , Other current liabilities 7,088,136 1,566,122 7,088,136 94,643 Total current liabilities 602,705, ,634, ,038, ,103,638 LONG TERM LIABILITIES: Borrowings 137,341, ,652, ,341, ,652,823 Bonds and promissory notes 119,582, ,977,283 31,584,316 64,740,635 Sundry creditors 7,195,693 4,861, , ,359 Accruals 1,472,440 7,761, ,291 3,408,198 Deferred taxes ,119 Other long term liabilities 612, ,161 61,322 65,860 Total long term liabilities 266,205, ,733, ,485, ,242,994 MINORITY INTEREST (3,308) SHAREHOLDERS EQUITY Paid-in capital 430,345, ,345, ,345, ,345,355 Other reserves (13,539,130) (7,060,532) (13,539,130) (7,060,532) Retained earnings 119,114, ,264, ,114, ,264,334 Net income for the year 52,680,923 42,586,878 52,680,923 42,586,878 Interim dividends (25,961,206) (13,899,777) (25,961,206) (13,899,777) Total shareholders equity - net 562,640, ,236, ,640, ,236,258 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 1,431,548,213 1,294,605,113 1,009,164,368 1,238,582,890 Las notas 1 a 20 adjuntas forman parte integral de estos estados financieros 79 Annual Report

6 Statements of Income For the years ended december 31, and. (In thousands of Chilean pesos - ) Statements of Income CONSOLIDATED INDIVIDUAL NET REVENUE 1,905,780,467 1,822,218, ,802,645 1,723,039,988 COST OF SALES (1,365,292,218) (1,320,395,327) (153,567,978) (1,336,760,119) GROSS MARGIN 540,488, ,822,718 31,234, ,279,869 SELLING AND ADMINISTRATIVE EXPENSES (443,392,654) (431,463,911) (34,054,719) (373,136,245) OPERATING INCOME 97,095,595 70,358,807 (2,820,052) 13,143,624 Financial income 1,137,947 2,891,828 12,509,412 11,456,851 Equity in income of related companies 1,083,652 1,636,230 69,130,342 53,890,746 Other non-operating income 497, , , ,932 Equity in losses of related companies (34,450) (2,832) - (15,988,177) Amortization of goodwill (2,711,989) (2,635,817) (384,405) (2,231,627) Financial expenses (29,101,050) (25,508,082) (21,824,245) (19,113,852) Other non-operating expenses (5,871,150) (1,201,002) (1,859,846) (715,783) Price - level restatement (1,430,282) 978,143 (4,750,525) 243,754 Exchange differences 946, ,480 (796,282) (70,587) NON-OPERATING (LOSS) INCOME (35,482,995) (22,627,855) 52,275,941 28,152,257 INCOME BEFORE INCOME TAX 61,612,600 47,730,952 49,455,889 41,295,881 INCOME TAX (8,930,448) (5,177,279) 3,225,034 1,290,997 CONSOLIDATED INCOME 52,682,152 42,553,673 52,680,923 42,586,878 MINORITY INTEREST (1,229) 33, NET INCOME FOR THE YEAR 52,680,923 42,586,878 52,680,923 42,586,878 Accompanying notes 1 to 20 are an integral part of these financial statements

7 Statements of Cash Flows For the years ended december 31, and. (In thousands of Chilean pesos - ) Statements of Cash Flows CONSOLIDATED INDIVIDUAL CASH FLOWS FROM OPERATING ACTIVITIES: Net income for the year 52,680,923 42,586,878 52,680,923 42,586,878 Loss (gain) on sale of property, plant and equipment (73,316) (126,340) - - Charges (credits) to income that do not represent cash flows: Depreciation for the year 60,354,907 55,910,069 6,632,450 6,875,308 Write-offs and accruals 43,976,534 45,148, Equity in income of related companies (1,083,652) (1,636,230) (69,130,342) (53,890,746) Losses in income of related companies 34,450 2,832-15,988,177 Amortization of goodwill 2,711,989 2,635, ,405 2,231,627 Price - level restatement - net 1,430,282 (978,143) 4,750,525 (243,754) Exchange differences - net (946,757) (382,480) 796,282 70,587 Other charges to income that do not represent cash flows 4,141,087 1,321,706 2,271, ,696 (Increase) decrease in assets affecting cash flows: Trade accounts receivable (86,026,363) (94,007,446) 6,309,810 (1,538,516) Inventories (386,768) (12,955,675) 155,878,162 (27,224,164) Other assets (13,758,659) 11,147,967 2,398,603 (574,517) Increase (decrease) in liabilities affecting cash flows: Accounts payable related to operating income 638,065 13,873,801 (227,095,288) 6,439,572 Interest payable 2,374,633 (776,118) 2,232, ,861 Income tax payable 2,610,349 1,801,702 (5,339,583) 1,357,969 Other accounts payable (3,632,803) (1,374,907) (10,995,084) 494,180 Value added tax and other accounts payable (29,680,410) (3,694,456) (2,945,738) (4,080,648) Loss on minority interest 1,229 (33,205) - - Net cash provided by (used in) operating activities 35,365,720 58,464,572 (81,170,443) (9,801,490) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings 292,805, ,253, ,767, ,446,232 Bonds and promissory notes 64,217, ,059,790 64,150,000 79,351,416 Payment of dividends (26,851,932) (28,198,841) (26,851,932) (28,198,841) Payment of loans (138,053,719) (92,330,868) (99,533,733) (91,257,289) Payment of bonds and promissory notes (92,269,778) (149,399,597) (92,032,579) (149,153,233) Payment of other loans from related companies - (6,800,070) (4,123,450) (11,377,749) Payment of charges for issuing and placing shares (102,915) (1,669,265) (102,915) (79,552) Other financing disbursements (7,514,721) (5,687,352) (7,514,721) (5,687,347) Net cash provided by (used in) financing activities 92,229,903 26,227,324 57,758,361 (64,956,363) CASH FLOWS FROM INVESTING ACTIVITIES Sale of property, plant and equipment 6,532,157 1,312, Purchase of property, plant and equipment (122,833,780) (85,582,555) (15,193,502) (3,530,140) Collection of other loans to related companies - 7,937 33,392,935 25,317,703 Other investing income 871, , ,534 37,322,027 Other investing expenses (6,504,375) (18,764,452) (521,661) (11,561,038) Payment of capitalized interest (991,848) (537,832) - - Permanent investments (less) (446,123) Other loans to related companies (1,280,319) Net cash (used in) provided by investing activities (124,206,832) (102,649,390) 18,550,306 47,102,429 NET CASH FLOW FOR THE YEAR 3,388,791 (17,957,494) (4,861,776) (27,655,424) EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS (6,826,213) (2,192,147) (10,107,375) (2,637,350) NET DECREASE IN CASH AND CASH EQUIVALENTS DURING THE YEAR (3,437,422) (20,149,641) (14,969,151) (30,292,774) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 46,860,423 67,010,064 16,111,716 46,404,490 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 43,423,001 46,860,423 1,142,565 16,111,716 Accompanying notes 1 to 20 are an integral part of these financial statements 81 Annual Report

8 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) In the opinion of the Company s Management, these notes to the financial statements provide information that is sufficient, but less detailed than the information provided in the notes to the individual and consolidated financial statements that have been filed with the Chilean Superintendency of Securities and Insurance (SVS) and the Chilean Stock Exchanges, where they are publicly available. 1. CONSOLIDATED GROUP Distribución y Servicio D&S S.A. is listed in the Securities Register of the Superintendency of Securities and Insurance under number 0593 and on the New York Stock Exchange (NYSE) under the acronym DYS; hence it is subject to oversight by these entities. The Company is also listed on the Madrid Stock Exchange (LATIBEX) under the acronym XDYS. Within the consolidated group, the subsidiary, Sociedad Anónima Inmobiliaria Terrenos y Establecimientos S.A., is listed in the Securities Register of the Superintendency of Securities and Insurance under number The indirect subsidiary Servicios y Administración de Créditos Comerciales Presto S.A. is listed in the Superintendency of Banks and Financial Institutions (SBIF). The consolidated group comprises Distribución y Servicio D&S S.A. ( the Company ) and the following subsidiaries: Ownership interest (direct and indirect) % % Inversiones D&S Chile Ltda Administradora de Concesiones Comerciales de Supermercados S.A Administradora de Concesiones Comerciales de Hipermercados S.A Comercial D&S S.A. (Ex - Magallanes S.A.) Servicios Financieros D&S S.A Ekono S.A Maquinsa Equipamiento S.A Distribuidora y Comercializadora Farmalider S.A Grupo de Restaurante de Chile S.A Desarrollos de la Patagonia S.A S.A. Inmobiliaria Terrenos y Establecimientos Comerciales

9 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES a. Accounting period - These financial statements cover the calendar years ended December 31, and. b. Basis of preparation - The consolidated financial statements were prepared according to generally accepted accounting principles in Chile issued by the Chilean Institute of Accountants and regulations issued by the Superintendency of Securities and Insurance; if there are any discrepancies, the latter prevail. c. Basis of presentation - For purposes of comparison with the financial statements, all amounts in the financial statements, have been updated in accordance with the change in the Consumer Price Index (7.4%). d. Basis for consolidation - These consolidated financial statements include assets, liabilities, income and cash flows of the Company and its subsidiaries. All significant transactions and balances between consolidated companies have been eliminated in consolidation, unrealized gains (losses) have been eliminated and the minority interest in subsidiaries has been recognized. The financial statements of the following subsidiaries also include the consolidation of other companies: 1.- The financial statements of the subsidiary Inversiones D&S Chile Ltda. consolidate subsidiaries Servicios Financieros D&S S.A., Comercial D&S S.A. and Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales. 2.- The financial statements of the indirect subsidiary Comercial D&S S.A. (Ex-Magallanes S.A.), consolidate the subsidiaries Administradora de Concesiones Comerciales de Supermercados S.A., Administradora de Concesiones Comerciales de Hipermercados S.A., Desarrollos de la Patagonia S.A., Ekono S.A., Grupo de Restaurantes Chile S.A. and Maquinsa Equipamientos S.A. 3.- The financial statements of the indirect subsidiary Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales S.A., consolidate the subsidiaries Rentas e Inversiones Maipú S.A., Sermob S.A., Rentas e Inversiones La Dehesa S.A., Rentas e Inversiones Puente Alto Ltda., Rentas e Inversiones Viña del Mar Ltda., Rentas e Inversiones Antofagasta Ltda., Rentas e Inversiones Gran Avenida Ltda., Rentas e Inversiones Quillota Ltda., Rentas e Inversiones Linares Ltda., Rentas e Inversiones Los Andes Ltda. and Rentas e Inversiones Las Rejas Ltda The financial statements of the indirect subsidiary Administradora de Concesiones Comerciales de Supermercados S.A. consolidate the subsidiaries Supermercado Grecia Ltda., Supermercado Vicuña Mackenna Ltda., Supermercado Macul Ltda., Supermercado Gran Avenida Ltda., Supermercado Tobalaba Ltda., Supermercado Plaza Egaña Ltda., Supermercado José María Caro Ltda., Supermercado Maipú Ltda., Supermercado Apoquindo Ltda., Supermercado Plaza Italia Ltda., Supermercado Norte Grande Ltda., Supermercado Vespucio Sur Ltda., Supermercado Tomás Moro Ltda., Supermercado Almac S.A., Supermercado Ñuñoa Ltda., Supermercado Colón Ltda., Supermercado Estoril Ltda., Supermercado La Dehesa Ltda., Supermercado Independencia Ltda., Supermercado Iquique Ltda., O Clock S.A., Hipermercado Talca Ltda., Supermercado La Frontera Ltda., Supermercado Los Morros Ltda., Supermercado Arica Ltda., Supermercado Los Domínicos Ltda., Supermercado Recoleta Ltda., Supermercado Plaza Lyon Ltda., Supermercado Pedro de Valdivia Ltda., Supermercado Vitacura Ltda., Supermercado Manuel Montt Ltda., Logística Transporte y Servicios Ltda., Supermercado La Calera Ltda., Supermercado Quilpué Ltda., Escuela de Capacitación Técnica S.A., Supermercado Kennedy Ltda., Supermercado Pajaritos Ltda., Supermercado San Bernardo Ltda., Supermercado Santa Rosa Ltda., Supermercado Osorno Ltda., Supermercado Marina Ltda., Comercial Outlet Ltda., Supermercado Miraflores Alto Ltda., Supermercado Einstein Ltda., Supermercado La Ligua Ltda., Supermercado Los Andes Ltda., Supermercado San Pablo Ltda., Supermercado Consistorial Ltda., Supermercado Eyzaguirre Ltda., Supermercado Nonato Coo Ltda., Supermercado Rojas Magallanes Ltda. Supermercado Vicente Méndez Ltda., Supermercado Ciudad del Este Ltda., and Supermercado Pedro Montt Ltda The financial statements of the indirect subsidiary Administradora de Concesiones Comerciales de Hipermercados S.A., consolidate the subsidiaries Supermercado Buenaventura Ltda., Supermercado Viña del Mar Ltda., Hipermercado Alameda Ltda., Hipermercado Puente Alto Ltda., Hipermercado Maipú Ltda., Hipermercado Departamental Ltda., Hipermercado Gran Avenida Ltda., Hipermercado Santa Amalia Ltda., Hipermercado El Belloto Ltda., Hipermercado Lonquén Ltda., Hipermercado Bío Bío Ltda., Hipermercado Antofagasta Ltda., Hipermercado La Serena Ltda., Hipermercado La Reina Ltda., Hipermercado Temuco Ltda., Hipermercado Puente Nuevo Ltda., Hipermercado Concepción Ltda., Hipermercado Calama Ltda., Hipermercado Rancagua Ltda., Hipermercado Los Angeles Ltda., Hipermercado Matucana Ltda., Hipermercado Valdivia Ltda., Hipermercado Puerto Montt Ltda., Hipermercado Recreo Ltda., Hipermercado Valparaíso Ltda., Hipermercado Curicó Ltda., Hipermercado Huechuraba Ltda., Hipermercado Plaza Vespucio Ltda., Hipermercado Quillota Ltda., Hipermercado Coquimbo Ltda., Hipermercado Copiapó Ltda., Hipermercado Ovalle Ltda., Hipermercado Talagante Ltda., Hipermercado Linares Ltda., Hipermercado Huérfanos Ltda., Supermercado del Maule Ltda., Hipermercado Los Angeles Ltda. and Hipermercado Santa Teresa de los Andes Ltda. Hipermercado Quilín Ltda., Hipermercado Vespucio Maipú Ltda., Hipermercado Avenida Central Ltda., Hipermercado Cordillera Ltda., Hipermercado Quilicura Ltda., Hipermercado Velásquez Oeste Ltda., and Hipermercado Maipú 3 Poniente Ltda. 83 Annual Report

10 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 6.- The financial statements of the indirect subsidiary Servicios Financieros D&S S.A. consolidate the subsidiaries Servicios y Administración de Créditos Comerciales Presto S.A., Administradora de Créditos Comerciales Presto Ltda., Corredores de Seguros Presto Ltda., Soc. de Serv. de Comercialización y Apoyo Financiero y de Gestión Presto Ltda., Servicios de Marketing MDC Ltda., Lider Domicilio Ventas y Distribución Ltda., Servicios de Recaudación Presto Ltda., Inversiones y Rentas Presto Ltda., Servicios de Viajes y Turismo Lider Ltda. and Presto Telecomunicaciones S.A. (which includes its subsidiary Astro S.A.). 7.- The financial statements of the indirect subsidiary Desarrollos de La Patagonia S.A. consolidate the subsidiaries Hipermercado Punta Arenas Ltda. and Rentas e Inversiones Punta Arenas Ltda. e. Price - level restatement - The financial statements have been price-level restated according to Chilean generally accepted accounting principles to reflect the effects of the changes in the purchasing power of the Chilean peso. The main indicator considered for this purpose is the change in the Consumer Price Index (7.4% in and 2.1% in ). f. Basis of translation - Assets and liabilities denominated in foreign currency and in unidades de fomento (inflation index-linked units of account) are stated in Chilean pesos at the year-end rates of $ in and $ in for US dollars, and $19, in and $18, in for the unidades de fomento. g. Marketable securities - Marketable securities are investments in shares, mutual funds and funds in cash management programs, which are stated as follows: Mutual funds are stated at the year-end value of the units. Cash management program - These are recorded at the lower of acquisition cost, which is equivalent to funds transferred and under cash management, and the fair value of the respective investment portfolios at year-end. h. Inventories - Inventories are stated at price-level restated cost, which does not exceed the net realizable value. The realization inventory reserve registered by the Company, is based on an analysis carried out by Management, which considered criteria as inventory turnover, aging and price of realization expected for these products. i. Estimate for uncollectible accounts - In order to cover the risk of uncollectible accounts, the Parent Company and its subsidiaries have calculated overall provisions for past-due debtors and notes receivable at December 31, and, respectively, based on recognizing past-due debts. At December 31, and, the indirect subsidiary Servicios y Administración de Créditos Comerciales Presto S.A. made its provisions by applying an expected write-off rate for each segment of the portfolio, plus a provision for additional risks for renegotiated debts, and wrote-off 100% of debts past due for more than 180 days. These provisions are presented net of trade accounts receivable, notes receivable and sundry debtors in the balance sheet. Management considers that such allowances are sufficient and that the net balances are recoverable. j. Property, plant and equipment - Property, plant and equipment are stated at their monetarily corrected purchase cost. The consolidated Group includes the cost of financing works in progress as part of the cost of purchase of property, plant and equipment under construction. Such capitalization is calculated considering the average rate of the actual cost of financing, according to current regulations. The technical revaluation was determined based on a study by independent consultants, in accordance with Circular 1592 of the Superintendency of Securities and Insurance. k. Depreciations - Depreciation is calculated using the straight-line method, considering the estimated remaining useful life of the assets. l. Leased assets - Assets acquired under finance leases are booked as purchases of property, plant and equipment, recognizing the full obligation and interests on an accrual basis. These assets are not legally owned by the Company until it exercises its purchase option. m. Sale and leaseback transactions - The Company records the sale and leaseback of assets using the same value of the assets prior to the transaction. These assets are not legally owned by the Company until it exercises its purchase option. The losses arising from these transactions are amortized over the term of the respective contract and are included in leased assets under Other property, plant and equipment.

11 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) n. Investment in related companies - Investments in related companies made prior to January 1, 2004 are valued under the equity method of accounting (VPP). This method consists of allocating the respective proportion of the equity of the investee to each of the Company s investments and recognizing any variation in such equity on a proportional basis, as stipulated in Circular 368 of the Superintendency of Securities and Insurance and Technical Bulletin 42 of the Chilean Institute of Accountants. Investments made after January 1, 2004 in the equity securities of entities over which the Company exerts significant influence are valued at their fair value on acquisition, revaluing the assets and liabilities of the investee, as stipulated in circular No. 1,697 of the Superintendency of Securities and Insurance ( SVS ) and Technical Bulletin No. 72 of the Chilean Association of Accountants. Combinations of companies under common control have been recorded under pooling of interests, according to Technical Bulletin 72 of the Chilean Institute of Accountants. ñ. Goodwill Goodwill is monetary restated and amortized considering the estimated term of return of the investment, which according with the study carried out by Management over the future cash flow of the business and the economic factors involved, it is estimated in 20 years. o. Bonds payable and Commercial Paper - Bonds payable and Commercial Paper are reported as liabilities at the par value of the bonds and Commercial Paper subscribed. The difference between the proceeds and the par value at the time of placement is deferred, and then amortized using the effective interest method. Additionally, the expenses incurred in the issuance and placement of these instruments are deferred and amortized straight-line in terms of the length of each issuance. p. Income tax and deferred taxes - The Company has recognized income tax obligations according to legal stipulations in force at year-end. Deferred taxes arising from temporary differences, tax losses or other events creating differences between tax and book balances are recorded in conformity with Technical Bulletin 60 of the Chilean Institute of Accountants and its supplements. q. Vacations - The annual cost of employee vacations and other benefits is recognized on an accrual basis. r. Severance indemnities - The liabilities for voluntary severance indemnities paid to employees are accrued at the discounted present value of the vested benefits using a 5% discount annual rate (6% in ) and considering future service until retirement for women and men. s. Operating revenues - The Company and its subsidiaries record their operating revenues in accordance with Technical Bulletin 70 of the Chilean Institute of Accountants. t. Computer software - Computer software acquired as computer packages is booked in Other property, plant and equipment at its restated cost and is amortized over 4 years. u. Research and development expenses - Research and development expenses are charged to income. Over the last five years no significant research and development expenses have been incurred. v. Use of estimates - The preparation of the financial statements according to generally accepted accounting principles in Chile requires managements to make estimates and suppositions affecting the amounts reported for assets and liabilities and disclosures of contingent assets and liabilities, as well as the amount of income and expenses for the year. Actual results could be different from such estimates. w. Derivative contracts - The Company has entered into derivative contracts with financial institutions. Rights and liabilities in force under said contracts are stated at market value at year-end and are recorded in accordance with Technical Bulletin 57 of the Chilean Institute of Accountants. x. Statement of cash flows - Cash equivalents includes balances of cash, investments in closed end mutual fund units and investments in repurchase agreements whose date of redemption is less than 90 days. 85 The net cash flow provided by operating activities represents the net cash input (used) during the period due to operations that affect the income of the Company. Annual Report

12 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) y. Time deposits - Time deposits are stated at the investment value plus accrued interest at year-end. z. Accrued pesos provision - In indirect subsidiary Servicios Marketing MDC Ltda., estimated cost of granting gifts to customers through discounts in purchases is accrued when the customer has reached the minimum level to exchange them. Also, the Company accrues the estimated cost of granting gifts to customers when, based on historical information, estimates that said customers will accrue and redeem their gift (discount). aa. Sale of portfolio In indirect subsidiary Servicios y Administración de Créditos Comerciales Presto S.A., interests for sale of portfolio of sale coupons with credit card, are accrued against income statement in the period of the contract. At the same time, the corresponding account receivable (sale coupons) is credited. ab. Development stage of subsidiary Until December 31,, the Company recorded a development stage of subsidiary in accordance with Circular 981of Superintendency of Securities and Insurance. Starting on January 1,, the balance recorded as development stage of subsidiary is balanced against retained earnings in accordance with Circular 1819 of Superintendency of Securities and Insurance. ac. Instruments purchased under agreement to resell - Instruments purchased under agreement to resell are recorded at their acquisition price plus accreted interest under the effective interest method. ad. Investments in other companies - Investments in other companies are stated at initial investment cost plus corresponding monetary correction. ae. Compensation plan The Company has implemented a compensation plan to its executives through the grant of stock purchase options. In absence of an specific chilean accounting standard in this matter, and in accordance with the dispositions contained in Technicall Bulletin 56 of the Colegio de Contadores de Chile A.G., the Company has adopted the criteria to record, to value and disclose these transactions in accordance with IFRS 2, share-based payments, recording the effect of the fair value of the options granted, charging payroll expense, in the term of these options will become irrevocable. 3. ACCOUNTING CHANGES During the period ended on December 31,, there have not been carried out significant changes in the application of accounting principles, relevant changes in any accounting estimate nor changes in the issuer entity in regards to prior year, which could significantly affect the interpretation of the current financial statements. 4. PRICE LEVEL RESTATEMENT AND EXCHANGE DIFFERENCES The details of the monetary correction and exchange differences credited (charged) to income are as follows: CONSOLIDATED INDIVIDUAL Shareholders equity (37,115,645) (11,020,370) (37,115,645) (11,020,370) Property, plant and equipment - net 52,711,878 14,489,468 5,987,751 1,855,853 Inventories 1,211, , ,716 Investments in related companies 584, ,674 37,089,061 11,833,372 Exchange differences 946, ,480 (796,282) (70,587) Indexation (14,825,191) (1,837,566) (10,926,765) (2,387,689) Income statement accounts (3,997,424) (1,303,779) 215,073 (551,128) (Loss) gain from changes in the purchasing power of the Chilean peso (483,525) 1,360,623 (5,546,807) 173,167

13 5. MARKETABLE SECURITIES Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) The detail of marketable securities is as follows: CONSOLIDATED INDIVIDUAL Bonds (1) , ,779 Mutual funds (fixed income securities) 60,000 1,321,653-1,192,772 Funds delivered to third parties 1,507,214 1,642,482 1,506,583 1,641,852 Total 1,567,214 2,964,135 2,257,664 3,703,403 (1) These correspond to the bonds issued by the subsidiary Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales on November 9, 1992 with semi-annual payments starting October 1, 1995 and nominal interest of 6.5% per year payable semi-annually starting October 1, These bonds do not have any special guarantees. 87 Annual Report

14 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 6. SHORT- AND LONG-TERM TRADE ACCOUNTS RECEIVABLE Short-term: The detail of short term debtors is as follows: Concept Amount Consolidated Individual Balance Amount Balance Amount Balance Amount Balance Trade accounts receivable Allowance for uncollectible accounts 135,170, ,297, ,638, ,152, ,592 67,495 6,348,780 6,308,753 (27,872,565) - (21,485,889) - (319,097) - (40,027) - Notes receivable 10,953,593 8,562,653 4,080,332 2,121, ,884 14, ,238 83,100 Allowance for uncollectible accounts (2,390,940) - (1,959,270) - (139,337) - (196,138) - Sundry debtors 33,002,351 31,878,086 20,081,083 18,894, , ,641 2,386,259 2,254,995 Allowance for uncollectible accounts (1,124,265) - (1,186,525) - (122,220) - (131,264) - At December 31,, short-term Sundry debtors include 26,005,418 (13,008,959 in ) of accounts receivable from BCI Factoring S.A., for the factoring of certain accounts receivable of the indirect subsidiary Servicios y Administración de Créditos Comerciales Presto S.A. Long-term: The detail of long term debtors is as follows: Concept Amount Consolidated Individual Balance Amount Balance Amount Balance Amount Balance Trade accounts receivable 152,564, ,564, ,639, ,639, Sundry debtors 24,644,529 24,644,529 27,463,365 27,463,365 24,644,529 24,644,529 27,453,766 27,453,766 At December 31,, long-term sundry debtors include 23,713,921 (27,288,351 at December 31, ) equivalent to US$47,724,690.03, which corresponds to the portion unpaid by Disco Sociedad Anónima, from Argentina ( Disco ), from the original account receivable of US$90,000,000 which said company maintained with Distribution and Service D&S S.A. after the sale of the shares of Supermercados Ekono S.A. (Argentina) in 1999, and which was due on May 2, Said amount was not fully paid by Disco S.A., under the argument that the pesification law in Argentina stipulates that liabilities expressed and payable in American Dollars should have been converted into Argentinean Pesos. Due to non payment of the full amount of the liability agreed to in the sale agreement of the shares of Ekono to Disco, the Company sued the guarantor of this obligation, Disco/Ahold International Holdings, N.V. ( DAIH ), in the Courts of Holland Antilles, due to the lack of payment of the liability. On September 5, 2005, the first instance Holland Antilles Court rejected the suit by the Company against DAIH. Said first instance verdict was confirmed by the Holland Antilles Appeal Court through sentence dictated on August 22,.

15 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Accordingly, in 2005, the Company initiated legal actions in Holland against the parent company of DAIH, Royal Ahold, for the contractual responsibility that this last had in the intervention that it carried out to cause the prejudicial acts that DAIH and Disco performed against the Company when inappropiate refused the payment of the amount due. On May 30,, the Courts of the city of Haarlem, Holland, resolved to overrule, in first instance, the suit for indemnity for injuries presented by the Company against Royal Ahold. This action aimed to make effective the responsibility that Royal Ahold had for the noncompliance, by Disco and DAIH, as main debtor and guarantor, respectively, for the obligation of the full payment of this companies in regards to the sale of shares of Ekono to Disco. The verdict in this matter is a verdict of first instance, susceptible of appeal. D&S will appeal to this verdict within the term that the applicable law confers to it. The referred resolution does not relate to the rights and actions to collect that D&S is exerting against Ahold in Argentina, in regards to the unpaid balance of the sale price of the shares of Ekono S.A., rights and actions that the Company maintains intact. On August 22,, the Company initated the conducive procedures in Argentina for the collection of the unpaid balance due to the referred sale of shares, against its main debtor, Disco. On June 5,, the Judge of First instance dictated sentence favorable to D&S in the trial of constitution of arbitral tribunal against Disco due to its reticence to allow the constitution of the ad-hoc tribunal that has to analyze its claim. After the sentence, between October 30 and November 5,, D&S and Disco have reached an arbitrary agreement for which the rules to designate the members of the Arbitral Tribunal have been settled as well as the procedural rules that will govern the arbitration. Finally, on December 27,, with the intervention of the nominative authority which fell on the President of the Tribunal de Arbitraje General de la Bolsa de Comercio de Buenos Aires, the President for the ad-hoc Arbitral Tribunal has been designated. As indicated in the note of subsequent events, the ad-hoc Arbitral Tribunal that will state the verdict in the claim promoted by D&S against Disco have been formally constituted on February 7, 2008, and additionally on February 22, 2008, D&S has formally presented its claim against Disco (see contingencies and commitments note). In the opinion of Argentinean and Dutch legal advisors to the Company, based on the facts and legal precedent in Argentina and Holland, the probability of recovering the full amount (or a significant portion thereof) is reasonably high. Management has evaluated the recoverability of the amount due at December 31, and concluded that no allowance is required. However, given the variability of the argentinean jurisprudence in regards to the pesification effects, the last result of the legal actions that the Company remains pending for the collection of this account receivable, will not be foreseen until the end of these. 7. INVENTORIES Inventories are valued as explained in Note 2h, and the detail is as follows: Consolidated INDIVIDUAL Merchandise for sale 156,568, ,694, , ,166,843 Imports in transit 2,981,990 2,262,890-2,262,889 Supplies 1,449,383 1,343,975-1,343,976 Provision for merchandise for sale (2,449,532) (138,489) - (138,489) Total 158,550, ,163, , ,635, Annual Report

16 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 8. PROPERTY, PLANT AND EQUIPMENT The detail of property, plant and equipment is as follows: Consolidated INDIVIDUAL Land 222,078, ,559,550 17,055,712 12,722,313 Buildings and infrastructure: Buildings 563,418, ,398,057 75,842,108 63,086,648 Construction in progress 54,591,748 9,611,797 14,381, ,118 Machinery and equipment 221,859, ,858,842 3,351,301 3,027,100 Other: Leased assets 38,491,629 47,430,716 3,667,054 21,526,978 Fixtures and others 86,383,967 73,047,628 27,104,369 26,607,714 Subtotal 1,186,823,945 1,071,906, ,401, ,367,871 Technical revaluation: Land 2,412,253 4,099, Buildings 550, , Subtotal 2,962,368 4,649, Total fixed assets - gross 1,189,786,313 1,076,556, ,401, ,367,871 Accumulated depreciation at beginning of year (375,748,599) (325,936,289) (45,135,689) (38,314,747) Depreciation for year (60,354,907) (55,910,069) (6,632,450) (6,875,308) Total fixed assets - net 753,682, ,710,045 89,633,838 82,177,816 Useful lives assigned to property, plant and equipment: The detail of the useful lives assigned to property, plant and equipment is as follows: Buildings and infrastructure Machinery and equipment Leased assets Other Fixtures 20 to 60 years 4 to 7 years 5 to 7 years 4 years 10 years

17 9. INVESTMENTS IN RELATED COMPANIES Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Consolidated financial statements The detail of investments in related companies is as follows: Ownership interest % Book value of investment Equity in income (loss) of investee Alimentos y Servicios Ltda, ,415,905 1,354, , ,243 Inversiones Solpacific S,A, (57,596) (22,289) (34,450) (2,832) Inmobiliaria Mall Calama S,A ,823,552 1,444, , ,717 Alvi Supermercados Mayoristas S,A, ,363,967 5,710, , ,270 Total 8,545,828 8,487,307 1,049,202 1,633,398 Individual financial statements The detail of investments in related companies is as follows: Ownership interest Book value of investment Equity in income (loss) of investee % % Inversiones D&S Chile Ltda. (1) ,790, ,674,492 68,147,182 11,594,768 S.A. Inmob. Terrenos y Establecimientos Comerciales ,269,570 Adm. de Conc. Comerciales de Supermercados S.A (2,018,099) Adm. de Conc. Comerciales de Hipermercados S.A (5,302,756) Rentas e Inversiones La Dehesa S.A Rentas e Inversiones Puente Alto Ltda (356) Rentas e Inversiones Gran Avenida Ltda ,096 Rentas e Inversiones Viña del Mar Ltda ,333 Rentas e Inversiones Antofagasta Ltda ,912 Rentas e Inversiones Linares Ltda ,882 Inmobiliaria Mall Calama S.A ,823,552 1,444, , ,717 Comercial D&S S.A. (ex-magallanes S.A.) (1) y (2) (5,143,206) Comercializadora de Vestuario S.A ,035,666 Maquinsa Equipamiento S.A ,493,085 Distribuidora y Comercializadora Farmalider S.A. (3) ,304 Grupo de Restaurante Chile S.A (2,130) Servicios Financieros D&S S.A ,479,842 Corredora de Seguros Presto Ltda ,912 Desarrollos de La Patagonia S.A (976,029) Rentas e Inversiones Punta Arenas Ltda (3) Rentas e Inversiones Quillota Ltda (3) Alvi Supermercados Mayoristas S.A ,363,967 5,710, , ,270 Total 596,977, ,829,316 69,130,342 37,902, Annual Report

18 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) (1) On November 3,, the Company Inversiones D&S Chile Ltda. was created, with a paid-in capital of 431,300,000 (historic), of which 431,299,569 (historic) were subscribed by Distribución y Servicio D&S S.A. through surrender, transfer and contribution in control of shares and social rights for an amount of 485,917,871 (historic). The detail of said shares and social rights are the following: Maquinsa Equipamiento S.A. Comercial D&S S.A. S.A. Inmob. Terres y Establec. Comerciales Rentas e Inversiones La Dehesa S.A. Servicios Financieros D&S S.A. Rentas e Inversiones Puente Alto Ltda. Rentas e Inversiones Gran Avenida Ltda. Rentas e Inversiones Viñal del Mar Ltda. Rentas e Inversiones Antofagasta Ltda. Rentas e Inversiones Linares Ltda. Rentas e Inversiones Quillota Ltda. Comercializadora de Vestuario S.A. Adm. de Concesiones Comerciales de Hipermercados S.A. Adm. de Concesiones Comerciales de Supermercados S.A. Grupo de Restaurantes S.A. EKONO S.A. Desarrollo de la Patagonia S.A. Distribuidora y Comerc.Farmalider S.A. 11,999,887 shares 1,701,403 shares 233,176 shares 1 share 9,999 shares 1% of the Social rights 1% of the Social rights 1% of the Social rights 1% of the Social rights 1% of the Social rights 1% of the Social rights 999,900 shares 199 shares 1,552 shares 89,900 shares 99 shares 9,999 shares 4,316,000 shares At the Extraordinary Meeting of Shareholders of Comercial D&S S.A. (Ex-Magallanes S.A.), held on November 15,, an increase of paidin capital was agreed to for 61,923,619 (historic), through the issuance of 55,736,831 shares, to which Inversiones D&S Chile Ltda. fully subscribed, through contribution, surrender and transfer of the following companies, which at the date of the subscription had a book value of 58,008,903 (historic): Maquinsa Equipamiento S.A. Comercializadora de Vestuario S.A. Adm. de Concesiones Comer. de Hipermercados S.A. Adm. de Concesiones Comer. de Supermercados S.A. Grupo de Restaurantes S.A. EKONO S.A. Desarrollo de la Patagonia S.A. Distribuidora y Comerc Farmalider S.A. 11,999,887 shares 999,900 shares 199 shares 1,552 shares 89,900 shares 99 shares 9,999 shares 4,316,000 shares (2) On January 7, 2004, the agreements adopted in Assignment Agreement, a document, signed on December 19, 2003, were completed pursuant to which Carrefour Nederland B.V. sold 1,701,403 shares of Carrefour Chile S.A., equivalent to % of the latter s stock, to Distribución y Servicio D&S S.A. at a price of EUR 99,999,940. On the same date and based on the same document, Intercross Roads B.V. (a related Company of Carrefour Nederland B.V.) sold 1 share of Carrefour Chile S.A., equivalent to % of the latter s shares, to Administradora de Concesiones Comerciales de Hipermercados S.A. (Subsidiary of Distribución y Servicio D&S S.A.), at a price of EUR 60, whereby Distribución y Servicio D&S S.A. acquired all the shares issued by Carrefour Chile S.A. On the same date of purchase, the purchased company changed its firm name from Carrefour Chile S.A. to Magallanes S.A. The Extraordinary Meeting of Shareholders of Magallanes S.A., held on October 4, 2005, agreed to divide the Company into two, as of October 1, As a result of the division, Inmobiliaria Magallanes S.A. was created. On November 25, 2005, Distribución y Servicio D&S S.A. purchased a share in Inmobiliaria Magallanes S.A from its subsidiary Administradora de Concesiones Comerciales de Hipermercados S.A., thereby holding all the shares issued by former. In so doing, Distribución y Servicio D&S S.A. merged all the assets, liabilities and equity of Inmobiliaria Magallanes S.A. On December 27, 2005, Distribución y Servicio D&S S.A. sold all the property, plant and equipment received from the merger with Inmobiliaria Magallanes S.A. to its subsidiary Sociedad Anónima Terrenos y Establecimientos Comerciales. The price of sale was 56,458,786 (historic) and the book value of the property, plant and equipment on the date of sale was 44,928,762 (historic). The Company s profit from this

19 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) transaction was 11,530,024 (historic), which is deferred over the remaining useful life of the property, plant and equipment sold, according to the provisions of Technical Bulletin 72 of the Chilean Institute of Accountants, and is included in Unrealized income, reducing the investment in the subsidiary Inversiones D&S Chile Ltda. At December 31, and. The property, plant and equipment sold also included 2,173,770 (historic) from the higher appraised value considered in the initial investment in Magallanes S.A. (currently Comercial D&S S.A.) At December 31,, the detail of the reconciliation of fair values of assets and liabilities acquired in the purchase of Magallanes S.A. (currently Comercial D&S S.A.) is as follows: Book value of purchased assets and liabilities 48,476,165 Higher appraisal value of property, plant and equipment (a) 2,475,700 Fair value of purchased assets and liabilities 50,951,865 (a) At December 31,, this fair value is presented as part of the investments in Inversiones D&S Chile Ltda. (3) On January 26, 2005, Distribución y Servicio D&S S.A. became the Parent of Distribuidora y Comercializadora Farmalider Ltda., by paying all the capital increase of 3,900,000 agreed to on that same date by the partners Administradora de Concesiones Comerciales de Hipermercados S.A. and Administradora de Concesiones Comerciales de Supermercados S.A. The capital increase was paid by capitalizing the accounts receivable maintained with Distribuidora y Comercializadora Farmalider Ltda. by Distribución y Servicio D&S S.A. On the same date, Distribuidora y Comercializadora Farmalider Ltda. also became a closely held corporation and changed its name from Distribuidora y Comercializadora Farmalider Ltda. to Distribuidora y Comercializadora Farmalider S.A. In an Extraordinary Shareholders Meeting held on December 15,, the Board of Directors of Distribución y Servicio D&S S.A. ( D&S ) approved an agreement with Farmacias Ahumada S.A. ( FASA ), FASA will use their own name and lease, the stores of pharmacies that D&S operates through Distribuidora y Comercializadora Farmalider S.A. 10. GOODWILL The detail of goodwill is as follows: Alvi Supermercados Mayoristas S.A. 6,823,180 7,207,585 Total individual balance sheet 6,823,180 7,207,585 Maquinsa Equipamiento S.A. 7,725,621 8,600,220 Comercial D&S S.A. 22,352,317 23,749,337 Supermercados La Frontera S.A. 176, ,179 Alimentos y Servicios Ltda. 121, ,644 Astro S.A. 97, ,630 Total consolidated balance sheet 37,296,092 40,008, Annual Report

20 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 11. LONG-TERM LIABILITIES Long-term liabilities at December 31, and mature as follows: CONSOLIDATED INDIVIDUAL 1 to 3 years 59,505,064 53,663,161 52,640,344 46,220,246 3 to 5 years 54,023,570 45,384,533 48,861,508 39,771,810 5 to 10 years 65,984,717 87,020,993 54,067,876 75,135,750 More than 10 years 86,692, ,664,738 13,915,396 36,115,188 Total 266,205, ,733, ,485, ,242,994 Loans from banks and financial institutions are denominated in Unidades de Fomento (inflation index-linked units of account) and bear interest at rates of TAB + spread for the loans denominated in pesos, and 3.28% for the loans denominated in Unidades de Fomento. Sundry creditors and notes payable are denominated in Unidades de Fomento and US dollars and bear interest at annual rates of 8.5% for those denominated in Unidades de Fomento and 8.05% for those in US dollars. The bonds are denominated in Unidades de Fomento and accrue interest at an annual rate of between 4.2% and 6.5%. The promissory notes are denominated in Chilean pesos and accrue interest at an annual rate of 6.5%. 12. ACCRUALS AND WRITE-OFFS Consolidated a. Accruals included in current liabilities: Consolidated Profit - sharing 4,941,107 2,345,402 Vacations 4,446,185 5,683,244 Severance indemnities 906,292 1,114,099 Other 14,997,654 13,029,052 Total 25,291,238 22,171,797 b. Accruals included in long-term liabilities: These correspond to severance indemnities for 1,472,440 and 7,761,397 at December 31, and, respectively. c. Write - offs - During and, accounts receivable have been written off for 35,418,444 and 44,623,504, respectively.

21 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Individual a. Accruals included in current liabilities: INDIVIDUAL Profit - sharing 307, ,789 Vacations 87,269 1,069,781 Severance indemnities Other 2,441,795 4,114,867 Total 2,837,806 5,584,437 b. Presented as long-term liabilities These correspond to severance indemnities for 308,291 and 3,408,198, at December 31, and, respectively. c. Write-offs - No write-offs were made in and. 95 Annual Report

22 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 13. SHAREHOLDERS EQUITY The changes in the shareholders equity accounts are as follows: Paid-in capital Other reserves Retained earnings Net income for the year Interim dividends Total Balances at January 1, 392,452,496 (1,241,963) 85,479,491 37,982,220 (26,366,880) 488,305,364 Transfers 37,982,220 (37,982,220) - Development stage (2,053,438) (2,053,438) Shares in treasury (5,276,173) (5,276,173) Recognition of equity value adjustment (10,537) (10,537) Dividends paid (26,366,880) 26,366,880 Monetary correction 8,241,503 (45,379) 2,038,992 25,936 10,261,052 Interim dividends (12,968,000) (12,968,000) Net income for the year 39,652,587 39,652,587 Balances at December 31, 400,693,999 (6,574,052) 97,080,385 39,652,587 (12,942,064) 517,910,855 Price-level restatement 29,651,356 (486,480) 7,183,949 2,934,291 (957,713) 38,325,403 Balances at December 31, price-level restated 430,345,355 (7,060,532) 104,264,334 42,586,878 (13,899,777) 556,236,258 Balances at January 1, 400,693,999 (6,574,052) 97,080,385 39,652,587 (12,942,064) 517,910,855 Transfers 26,710,523 (39,652,587) 12,942,064 - Shares in treasury (6,196,981) (6,196,981) Recognition of equity value (3,902) (3,902) adjustment Conversion difference adjustment (78,819) (78,819) Dividends paid (12,968,000) (12,968,000) Monetary correction 29,651,356 (685,376) 8,291,671 (142,006) 37,115,645 Interim dividends (25,819,200) (25,819,200) Net income for the year 52,680,923 52,680,923 Balances at December 31, 430,345,355 (13,539,130) 119,114,579 52,680,923 (25,961,206) 562,640,521 Paid-in capital - In accordance with article 10 of Law Nº18,046, monetary correction of capital has been included in the paid-in capital. The Company s paid-in capital is divided into 6,520,000,000 no-par-value shares. Profit distribution policy In accordance with the Company s by-laws, at least 30% of the net income for the year profits must be allocated to distributing cash dividends, unless the Shareholders Meeting unanimously agrees otherwise. Other reserves - The detail is as follows:

23 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Technical revaluation of property, plant and equipment (1) 1,490,531 1,490,531 Capital increase expenses reserve (2) (2,869,069) (2,869,069) Recognition of equity value adjustment (3) (36,936) (33,947) Other reserves 39,301 39,301 Shares in treasury reserve (4) (13,202,069) (5,687,348) Share-based payment options (5) 1,117,931 Accumulated adjustment due to conversion differences (6) (78,819) Total (13,539,130) (7,060,532) (1) This corresponds to the proportion in technical revaluations made by the subsidiaries in prior years. (2) This corresponds to expenses incurred in the placement of shares issued in accordance with the capital increase approved by the Thirteenth Extraordinary Meeting of Shareholders, which is recorded in accordance with Circular No.1736 of the SVS. (3) During and, the Parent has purchased shares, acquired ownership interests and subscribed and paid capital increases in various companies of the Consolidated Group. The net gain (loss) obtained from the above transactions has been charged to Other reserves. (4) During July and August the Company carried out diverse operations of purchase of shares of its own issuance for 36,000,000 shares, at an average price of $ per share. During August, operations of purchase of shares of own issuance were carried out by a total of 29,200,000 shares, at an average nominal price of Ch$ The mentioned purchase of shares of its own issuance, is directed toward a compensation plan for managers and executives of the Company and its subsidiaries with treasury stock agreed to by the Extraordinary Meeting of Shareholders held on October 26, 2004, and which plan was approved by the Board of Directors in an Ordinary Meeting held on June 27,. (5) Share-based payment compensation plan. The compensation plans mentioned in prior paragraph 4, and which have mostly been granted by the Company to its executives during the year, in absence of chilean accounting standard in this matter, and in accordance with the dispositions contained in Bulletin Technical 56 of Colegio de Contadores de Chile A.G., these have been recorded in the financial statements in accordance with IFRS 2, share-based payments. According to this accounting standard, the Company has recorded in its financial statementss the value of the services that will be received in compensation for the options granted. Due to it is not possible to reliably estimate the fair value of the services that will be received, the amount was determined as the equivalent to the fair value of the options granted. Considering the fact that the options will become irrevocable within fourteen months from the grant date, the services will be received in the same period and in the same proportion, though the payroll expense determined at the grant date of the options will be deferred in the same term. The charge in income recorded in the period was 1,117,931, crediting Other Reserves. (6) Corresponds to the adjustment recorded due to difference in conversion carried out by the associated Alvi Supermercados Mayoristas S.A. in relation to the subsidiary that this company maintains abroad. Dividends The Board of Directors in session 292 held on January 22, 2008, approved an Eventual Dividend of Ch$2.0 per share. The Board of Directors in session held on April 24,, approved a Definitive Dividend of $2.0 per share. The Board of Directors in session 271 held on November 24,, approved and Interim Dividend of $2.0 per share, which was ratified by the Ordinary Meeting of Shareholders held on April 24,. 97 The Board of Directors in session 259 held on November 24,, approved an Interim Dividend of $2.0 per share, which was ratified by the Ordinary Meeting of Shareholders held on March 28,. The Board of Directors in session 253 held on July 26, 2005, approved an Interim Dividend of $2.0 per share, which was ratified by the Ordinary Meeting of Shareholders held on March 28,. Annual Report

24 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Deficit during development stage of subsidiaries Until December 31,, the organization settling in expenses of the indirect subsidiaries Ekono S.A., Presto Telecomunicaciones S.A., Servicios de Viajes y Turismos Lider Ltda. and Inversiones y Rentas Presto Ltda. were recorded in accordance with Circular 981 of the Superintendency of Securities and Insurance (SVS). In December 31,, the balance recorded under this item was balanced against retained earnings in accordance with the new Circular 1819 of the Superintendency of Securities and Insurance (SVS), which supersedes Circular INCOME TAX AND DEFERRED TAXES a. Income tax The Company s and some of its direct and indirect subsidiaries net taxable income calculated for tax purposes is approximately 1,859,409 (2,494,530 in ). The net taxable income calculated for tax purposes of some direct and indirect subsidiaries of Distribución y Servicio D&S S.A. is approximately ( in ). The detail of the provision for payable income tax is as follows: CONSOLIDATED INDIVIDUAL First category income tax (9,803,038) (9,682,512) Article 21 tax (248,791) Less: Monthly provisional payments 6,889,907 9,293, ,712 3,386,256 Credit for donations, personnel training and real estate 5,454,210 5,318,621 18, ,271 Recovery of first category tax from applying tax losses: For the year 1,859,409 2,494,530 1,638,570 1,786,986 From prior years 2,575, ,268 1,899,393-20% credit Law (Arica Law) 7,880 7,880 7,880 7,880 Prior year first category income tax to recover 178,233 1,132,631-1,096,834 Net income tax (payable) refundable 7,161,611 8,781,976 3,861,883 6,161,436 At December 31, and, refundable income tax in the consolidated balance sheet is shown together with other credits, such as VAT credit, in Refundable taxes in current assets. Taxable retained earnings: At December 31,, the Company and its indirect subsidiaries SAITEC, Maquinsa Equipamientos S.A. and Servicios y Administración de Créditos Comerciales Presto S.A., among others, have unremitted taxable earnings of 174,367,335 (159,590,063 in ) which have first category credit, which will be transferred to the shareholders when dividends are distributed. Absorption of tax losses with tax income from prior years: At December 31,, the Company and some of its subsidiaries have tax losses in current year of 10,937,700, which have been absorbed against the pre-existing the tax loss carryforwards, originating income tax assets for 1,859,409 (2,494,530 in ). Accumulated Tax loss: At December 31, and, some of its subsidiaries have tax loss carryforwards of 136,078,747 and 151,045,812, respectively.

25 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) b. Deferred taxes b.1. Consolidated deferred taxes - The detail of accumulated balances of deferred taxes is as follows: Concept Balances at December 31, Balances at December 31, Deferred Assets Short Term Long Term Deferred Liabilities Short Term Long Term Deferred Assets Short Term Long Term Deferred Liabilities Short Term Long Term Allowance for uncollectible accounts 1,169, ,248 Provision for vacations 755, ,151 Leased assets 730, ,645-1,228,990 Depreciation of property, plant and equipment 5,017,982-5,276,760 Severance indemnities 154, , ,397 1,319,437 Other events 8,576 - Realization allowance on inventory 416,420 23,543 Accrued interest 202, ,205 Sundry provisions 458, ,086 Capitalized financial cost 593,491-12, ,430 Provision for sundry debtors 191, ,709 Deferred charges 942,887 1,996, ,510 1,563,508 Tax losses 3,587,728 17,686,250 2,797,551 20,385,707 Derivative contract 1,264,382 Total 6,935,336 19,209,523 1,673,239 8,551,947 5,161,890 21,705, ,043 8,772,688 Compplementary accounts (net of accumulated amortization) (1,190,021) (348,513) (1,450,468) Total 6,935,336 19,209,523 1,673,239 7,361,926 5,161,890 21,356, ,043 7,322,220 In and, short-term and long-term deferred tax receivables are shown on the balance sheet net of short-term and long-term deferred tax payable respectively. 99 Annual Report

26 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) b.2. Individual deferred taxes - The detail of accumulated balances of deferred taxes is as follows: Concept Balances at December 31, Balances at December 31, Deferred Assets Short Term Long Term Deferred Liabilities Short Term Long Term Deferred Assets Short Term Long Term Deferred Liabilities Short Term Long Term Allowance for uncollectible accounts 77,934 40,148 Provision for vacations 14, ,863 Leased assets 802,861 1,064,591 Depreciation of property, plant and equipment 106,161 Severance indemnities , ,393 Realization allowance on inventory 23,543 Sundry provisions ,108 Sundry debtors 20,777 22,315 Capitalized financing cost 414, ,625 Deferred charges 49,530 36,214 53, ,663 Derivative contract 1,264,382 Total 114,647 1,422,952 49,530 1,253, , ,393 53,217 2,081,879 Compplementary accounts (net of accumulated amortization) (1,190,021) (1,438,367) Total 114,647 1,422,952 49,530 63, , ,393 53, ,512 In and, short-term deferred tax receivables is shown on the balance sheet net of short-term deferred tax payable. In, long-term deferred tax asset is presented in the balance sheet net of long-term deferred tax liability. In, long-term deferred tax liability is presented in the balance sheet net of long-term deferred tax asset. c. The credit (charge) to income for income tax is as follows: CONSOLIDATED INDIVIDUAL Current tax expense Provision for income tax for the year (9,803,038) (9,682,512) - (248,791) Prior year adjustment 188,243 (1,261,927) 328,739 (528,612) Deferred taxes Changes in deferred taxes (1,083,498) 3,157,563 1,506, ,996 Tax benefit from tax losses 1,859,409 2,494,530 1,638,570 1,786,985 Effect of amortization of complementary accounts of deferred tax assets and liabilities (88,066) 115,067 (248,346) (60,581) Other debits and credits to the account (3,498) Income tax (8,930,448) (5,177,279) 3,225,034 1,290,997

27 15. OTHER CURRENT ASSETS The balance of other current assets is as follows: Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) CONSOLIDATED INDIVIDUAL Repurchase agreements - 12,316,060-12,316,060 Time deposits on guarantees 2,860,735 2,858,696 Guarantee on sale of portfolio 3,288,825 3,339, Derivative contracts - Futures - 1,248,135-1,248,135 Promissory notes placement expense 35,068 37,789 35,068 37,789 Bond placement discount 264, , , ,412 Bond placement expense 324, , , ,252 Deferred charges of issuance and renewal of credit cards 3,187,377 2,044,650 Other 1,999,022 2,559,680 - Other current assets 11,960,272 25,019, ,767 14,044, Annual Report

28 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) 16. BALANCES AND TRANSACTIONS WITH RELATED PARTIES a. Balances with related parties - The principal balances with subsidiaries, shareholders and related companies are as follows: Accounts receivable Accounts payable CONSOLIDATED: Short term: Aquapuro S.A. 572, , Inversiones Solpacific S.A. 107, , Inmobiliaria Mall Calama S.A. 1,335,427 1,339, Aquanatura S.A. 280, Alvi Supermercados Mayoristas S.A. 663, Total short term 2,958,662 1,678, INDIVIDUAL: Short Term: Administradora de Concesiones Comerciales de Hipermercados S.A. y filiales - 43,759,127-17,314,853 Administradora de Concesiones Comerciales de Supermercados S.A. y filiales - 30,661,943-13,252,468 Sociedad Anónima, Inmobiliaria - Terrenos y Establecimientos Comerciales y filiales 8,738,638 11,067, Inmobiliaria Mall Calama S.A. 1,335,427 1,339, Servicios y Adm. de Créditos Comerciales Presto S.A. 77,157, ,912, Comercial D&S S.A. 163,312,639 18,421, Ekono S.A. 4,563, Aquapuro S.A. 572, , Adm. de Créditos Comerciales Presto Ltda ,908,114 Distribuidora y Com. Farmalider S.A. - 2,255, Grupo de Restaurantes de Chile S.A , Desarrollos de La Patagonia S.A. - 10, Corredora de Seguros Presto Ltda , Serv. de Marketing MDC Ltda ,089,414 Maquinsa Equipamientos S.A. 1,197, ,694,380 Aquanatura S.A. 280, Others - 317, ,511 Total short term 252,595, ,379,810-93,476,740 Long term: Sociedad Anónima, Inmobiliaria Terrenos y Establecimientos Comerciales S.A. 6,511,759 6,993, Servicios y Adm. de Créditos Comerciales Presto S.A ,271, Total long term 6,511, ,265,

29 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) b. Transactions - The principal transactions with related companies are summarized as follows: CONSOLIDATED Transaction Income (expense) Interest and indexation on current account balance 242,549-38,357 - Purchase of merchandise 24,334,535 21,633, Professional services 5,833,189 4,204,179 (4,966,071) (4,204,502) Verification of checks 185, ,537 (155,768) (370,199) Lease of real estate 236,722 26,876 (236,722) (26,876) Borrowings 3,985,414 3,689,185 (3,349,087) (3,100,155) Advertising and communications 1,569,449 1,204,987 (1,318,864) 1,204,987 INDIVIDUAL Lease of real estate 7,281,125 8,142,801 5,682,944 8,142,801 Consignment commissions 451, ,542,629 (379,441) (130,542,629) Interest and indexation on current account balance 13,338,378 9,059,043 11,600,086 6,358,719 Purchase of merchandise 24,334,535 21,633, Sales of merchandise 5,857,331-4,922,127 - Operating leases - 2,566,890 - (2,566,890) Professional services 402,283 94,667 (402,283) - Advertising 1,569,449 1,875,226 (1,318,864) (1,875,226) 17. OTHER NON-OPERATING INCOME AND EXPENSES a. Other income - The detail of other non-operating income is as follows: Consolidated Individual Gain on sale of shares - 680, ,798 Gain on sale of property, plant and equipment 226, , Income tax recovery 251, ,490 - Other income 19,895 24, Total 497, , , , Annual Report

30 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) b. Other expenses - The detail of other non-operating expenses is as follows: CONSOLIDATED INDIVIDUAL Deferred charges write-off (1,312,118) Restructuring expenses (a) (1,967,542) - (141,166) - Farmalider S.A. sale reserve write-off (800,000) - (800,000) - Falabella S.A. merge expenses write-off (205,835) - (430,583) - Donations (490,026) (628,722) - - Loss on sale of property, plant and equipment (177,637) - (9,512) - Other expenses (917,992) (572,280) (478,585) (715,783) Total (5,871,150) (1,201,002) (1,859,846) (715,783) (a) Corresponds to extraordinary charges due to a voluntary retirement benefit, for one time only, offered by the Company to those persons with more than 20 years in the Company. 18. CONTINGENCIES AND COMMITMENTS a. Direct commitments: The Company and its subsidiaries have commitments for imports of inventories and fixed assets through bank letters of credit for 5,401,371. b. Indirect commitments: 1. The Company has assumed the commitment with Citibank N.A. of maintaining its ownership interest in Aquapuro S.A. 2. In accordance with the approval given by the Board of Directors in 2005 in order to have Securitized Bonds as financing alternative, during presentations to the Superintendency of Securities and Insurance have been done and in December the regulatory entity approved the first issuance of these bonds for an amount of MCh$85,000 compound by MCh$55,000 of Serie A and MCh$30,000 of Serie D Subordinated, with which the issuance is in condition to be made as the Board of Directors decides. At the date of issuance of this report, Management is evaluating the best alternative of issuance of these bonds. c. Management restrictions and financial covenants: Distribución y Servicio D&S S.A.: In accordance with the long-term syndicated loan credit agreements signed with Banco Estado (agent) and its bond issuance agreements the Company must comply with certain financial indicators calculated based on its consolidated financial statements, presented on a quarterly basis to the Superintendency of Securities and Insurance (SVS). Coverage of financial expenses, understood as the coefficient between the Ebitda (Operating income plus depreciation) and financial expenses must be, greater than 3.5. At December 31,, the coverage was Leverage, understood as the coefficient between current liabilities (which generate interest) and net shareholders equity, must be less than 1.2. At December 31,, the leverage was Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales: In accordance with the bond issuance agreements of the indirect subsidiary Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales, compliance must be kept with certain financial indicators calculated based on its consolidated financial statements, presented on a quarterly basis to the Superintendency of Securities and Insurance (SVS).

31 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Leverage, understood as the coefficient between current liabilities (which generate interest) and net shareholders equity, must be less than 1.3. At December 31,, the leverage was Real estate assets must be maintained for an amount greater or equal to UF 12,000,000, understood as real estate assets from fixed assets accounts Land plus Buildings and Infrastructure and which are given in lease to Distribución y Servicios D&S S.A. or any related company, these contracts must be effective until December 31, At December 31,, the Company is in compliance with this restriction. Shareholders equity must be greater than UF 12,000,000. At December 31, the Company is in compliance with this restriction. Lawsuits: At December 31,, the Company and its subsidiaries have litigations pending against them due to lawsuits related to their normal operations, most of which do not entail any risk of significant loss, according to the Company s legal counsel. The causes are detailed below: 1) 82 civil trials which total amount related is 4,561,267. 2) 289 trials of Local Police, with a total amount related of 1,127,093. 3) 105 labor trials in which the Company is sued, with an amount related of 1,222,332. Additionaly, the Company and its subsidiaries have trials as plaintiff which are summarized as follows: 1) 56 criminal trials, which amount is undetermined 2) 3 trials of Local Police, with a total amount related of 500 3) 136 civil trials, which total amount related is 419,182 4) 53 labor trials, by a total amount of 113,022. At December 31,, long-term sundry debtors include 23,713,921 (27,288,351 at December 31, ) equivalent to US$47,724,690.03, which corresponds to the portion unpaid by Disco Sociedad Anónima, from Argentina ( Disco ), from the original account receivable of US$90,000,000 which said company maintained with Distribution and Service D&S S.A. after the sale of the shares of Supermercados Ekono S.A. (Argentina) in 1999, and which was due on May 2, Said amount was not fully paid by Disco S.A., under the argument that the pesification law in Argentina stipulates that liabilities expressed and payable in American Dollars should have been converted into Argentinean Pesos. Due to non payment of the full amount of the liability agreed to in the sale agreement of the shares of Ekono to Disco, the Company sued the guarantor of this obligation, Disco/Ahold International Holdings, N.V. ( DAIH ), in the Courts of Holland Antilles, due to the lack of payment of the liability. On September 5, 2005, the first instance Holland Antilles Court rejected the suit by the Company against DAIH. Said first instance verdict was confirmed by the Holland Antilles Appeal Court through sentence dictated on August 22,. Accordingly, in 2005, the Company initiated legal actions in Holland against the parent company of DAIH, Royal Ahold, for the contractual responsibility that this last had in the intervention that it carried out to cause the prejudicial acts that DAIH and Disco performed against the Company when inappropiate refused the payment of the amount due. On May 30,, the Courts of the city of Haarlem, Holland, resolved to overrule, in first instance, the suit for indemnity for injuries presented by the Company against Royal Ahold. This action aimed to make effective the responsibility that Royal Ahold had for the noncompliance, by Disco and DAIH, as main debtor and guarantor, respectively, for the obligation of the full payment of this companies in regards to the sale of shares of Ekono to Disco. The verdict in this matter is a verdict of first instance, susceptible of appeal. D&S will appeal to this verdict within the term that the applicable law confers to it. The referred resolution does not relate to the rights and actions to collect that D&S is exerting against Ahold in Argentina, in regards to the unpaid balance of the sale price of the shares of Ekono S.A., rights and actions that the Company maintains intact. 105 Annual Report

32 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) On August 22,, the Company initated the conducive procedures in Argentina for the collection of the unpaid balance due to the referred sale of shares, against its main debtor, Disco. On June 5,, the Judge of First instance dictated sentence favorable to D&S in the trial of constitution of arbitral tribunal against Disco due to its reticence to allow the constitution of the ad-hoc tribunal that has to analyze its claim. After the sentence, between October 30 and November 5,, D&S and Disco have reached an arbitrary agreement for which the rules to designate the members of the Arbitral Tribunal have been settled as well as the procedural rules that will govern the arbitration. Finally, on December 27,, with the intervention of the nominative authority which fell on the President of the Tribunal de Arbitraje General de la Bolsa de Comercio de Buenos Aires, the President for the ad-hoc Arbitral Tribunal has been designated. As indicated in the note of subsequent events, the ad-hoc Arbitral Tribunal that will state the verdict in the claim promoted by D&S against Disco have been formally constituted on February 7, 2008, and additionally on February 22, 2008, D&S has formally presented its claim against Disco (see contingencies and commitments note). In the opinion of Argentinean and Dutch legal advisors to the Company, based on the facts and legal precedent in Argentina and Holland, the probability of recovering the full amount (or a significant portion thereof) is reasonably high. Management has evaluated the recoverability of the amount due at December 31, and concluded that no allowance is required. However, given the variability of the argentinean jurisprudence in regards to the pesification effects, the last result of the legal actions that the Company remains pending for the collection of this account receivable, will not be foreseen until the end of these. e. Others: On May 17,, the controllers of the Company and the majority of the members of the controlling group of S.A.C.I. Falabella celebrated a merge agreement in the terms of the articles 99 and 100 of the Law with the purpose of merge both companies. On June 7,, this merge was subjected to consultation by the Tribunal de Defensa de la Libre Competencia ( TDLC ). As indicated in Subsequent Events note, on January 31, 2008, the TDLC rejected the merge agreed with the majority of the members of the controlling group of S.A.C.I. Falabella. In the event that the recourses were interposed against the resolution of the TDLC and if the merge were finally approved by the corresponding regulatory entities and consumed, the shareholders of Falabella and the shareholders of D&S would become shareholders of the absorbent entity. Sanctions: On February 22,, the General Manager of subsidiary Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales S.A. was censured for not complying with the five-day period after the end of the respective calendar quarter for presenting the list of shareholders as at December 31, 2005, pursuant to the provisions of Section III of Circular 1481 of the SVS. On February 26,, a censure sanction was applied to the members of the Board of Directors of Distribución y Servicio D&S S.A. and Sociedad Anónima Inmobiliaria Terrenos y Establecimientos Comerciales due to violation of the disposition of the title III of the Circular 1533 of the Superintendency of Securities and Insurance (SVS). During the period from January 1st to December 31,, the Company, its Directors and its Managers have not been penalized by the Superintendency of Securities and Insurance, or by any other inspection agency. 19. CASH FLOW INFORMATION Consolidated: Investments that did not generate cash flows during the year, but do involve future flows, involve purchases of property, plant and equipment on credit for 5,895,731 (8,377,734 in ). Interest paid was 22,399,694 and 22,878,201 in and, respectively. Interest collected was 921,278 and 2,577,805 in and, respectively.

33 Simplified Notes to the Financial Statements (In thousands of Chilean pesos ) Individual: Investments that did not generate cash flows during the year, but do involve future flows, involve purchases of property, plant and equipment on credit for 372,276 (ThCh746,971 in ). Interest paid was 18,083,752 and 15,665,508 in and, respectively. Interest collected was 657,543 and 2,554,954 in and, respectively. 20. SUBSEQUENT EVENTS On January 31, 2008, the Tribunal de Defensa de la Libre Competencia ( TDLC ), rejected the merge of the Company with Falabella S.A.C.I.. The controllers of both companies are evaluating the eventual interplead of recourses against the resolution of the TDLC that rejected the merge agreed. In regards to the trial that the Company maintains against Disco in Argentina, as indicated in Contingencies and Commitments note, on February 7, 2008, the Tribunal Arbitral was formally constituted and on February 22, 2008, Distribución y Servicio D&S S.A. presented the arbitral claim against Disco. These diligences belong to the normal proceeding of the case and therefore do not modify the situation and conclusion of Management indicated in Contingencies and Commitments note. Between January 1 and the date of issuance of these financial statements (February 25, 2008), no subsequent events have occurred that might significantly affect them. 107 Annual Report

34 Material Events ADDITIONAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS. As at 31 December and (1) On 28th February, the Company reported the following material event: in accordance with the provisions set forth in article 90 and second subsection of article 100 of Law No and in the B and C subparagraph of paragraph 2.2 under Section II General Regulation No. 30 issued by the Superintendencia (Securities & Insurance Commission), we hereby report the following MATERIAL EVENT related to Distribución y Servicio D&S S.A. ( D&S ): At an ordinary meeting held on 27th February, D&S s Board of Directors approved for the Company to redeem/prepay all of the Series B-1 and B-2 Bonds issued by D&S charged to the issue registered at the Securities & Insurance Commission on 15th November 2000 under number 237. The prepayment will be made together with the payment of the thirteenth coupon of Series B-1 y B-2, i.e., on 2nd April (hereinafter, the Prepayment Date ). The complete prepayment of the Bonds requires the disbursement in full on the Prepayment Date equivalent to 200,000 UF (indexed peso) for capital that corresponds to Series B-1, and 1,000,000 UF for capital that corresponds to Series B-2. The Company shall also pay the interests accrued and outstanding up to the relevant date. The prepayment shall be made in order to cut down D&S s financial costs; this cut will have a positive, but not substantial effect on the Company. (2) On 19th April, the Company reported the following material event: it explains Press information and it Communicates a Confidential Event as a Material Event, where it is reported that D&S is undergoing an analysis, assessment and implementation process of different financial options, with its own capital or obtained specially for this purpose, so as to drive growth and develop its financial services operations and other related matters grouped under the PRESTO brand (the PRESTO Business ), in order to achieve the full potential of this business. In view of the foregoing, all the options under analysis indicate that D&S should continue in the PRESTO business. Regarding the above, the D&S subsidiary that holds the credit rights to the PRESTO credit card transactions has already registered a set of securitized bonds before the Securities and Insurance Commission. Furthermore, D&S is currently assessing several other options, such as for PRESTO to issue bonds, and explore the potential of joint interest in the PRESTO business with different entities specialized in the financial sector. Regarding the last option, D&S has received indicative non-binding offers from certain finance companies. It is not true, as erroneously reported by the Diario Financiero newspaper in its 13th April edition, that D&S and BBVA have reached an agreement, preliminary or not, in order to manage PRESTO operations. The information contained in the abovementioned newspaper article is partly false and partly incorrect. D&S does not know the source thereof. Nevertheless, in the interest of the extensive information publicly available about D&S and its operations, we hereby inform the market that on 5th April, D&S signed with Banco Bilbao Vizcaya Argentaria, Chile ( BBVA Chile ), an exclusivity, negotiation and confidentiality agreement to establish an appropriate contractual framework that will ensure direct negotiations regarding the possibility of joint interest in the business of mass consumer financial services, and to set forth the terms and conditions under which they would sign a preliminary memorandum of understanding for the negotiations required to agree on the final instruments as, at the time, will be developed and provided for the abovementioned project, and which subsequently will have to be approved by the board of both parties. As for the above, pursuant to the provisions set forth in articles 90 and 100 of Law No and in paragraph 2.2 under Section II General Regulation No. 30 of said Commission, and in order to clarify the false and incorrect information that has been circulating in the press concerning such events, we hereby inform the market as a MATERIAL EVENT regarding D&S, the following confidential event reported to said Commission on 5th April : Dear Superintendent: Pursuant to the provisions of the fourth subsection of article 100 of Law No and in subparagraph D of paragraph 2.2 under Section II of the General Regulation No. 30 of the abovementioned Commission, the undersigned hereby, as members of the board of Distribución y Servicio D&S S.A. (the Company ), a publicly traded corporation listed in the securities registry under No. 0593, we report the following as a CONFIDENTIAL EVENT:

35 Material Events ADDITIONAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS. As at 31 December and a) That at a meeting held on 4th April, the board of directors was informed of the non-binding offers received from HSBC, BBVA and Itaú banks, for the possible signing of a strategic Alliance or joint venture in order to acquire a stake in the consumer financial business, through the contribution, made by Company, of its PRESTO credit card business; and, b) That at the same meeting the board of directors instructed and authorized the CEO and Mr. Elías Ayub Uauy to undertake the following actions: i) have direct negotiations with BBVA, so that within a month as of 4th April, an offer is submitted or a memorandum of understanding is signed, both solid and binding for the joint development of a partnership project with regard to operating the Company s financial business, however, this does not necessarily rule out the other offers received; subsequently, the abovementioned offer or memorandum have to be considered and approved by the board of directors; ii) sign, as soon as possible, an instrument with BBVA, either party acting individually, which provides an appropriate framework to hold the negotiations and exchange confidential information with said bank for the purposes set forth in the preceding numeral (i); and, iii) keep the board properly informed of the progress and achievement gained during the negotiations held. In view of the fact that conversations with BBVA Chile are still at an initial stage, and the uncertainty of whether an agreement will be reached or not with such entity on the proposed project, it is therefore impossible, at present, to forecast the impact it would have on D&S s performance. (3) On 26th April, and pursuant to the provisions set forth in article 9 and in the second subsection of article 100 of Law No , in paragraph 2.2 under Section II General Regulation No. 30 of said Commission and in Circular 660 thereof, we report the following MATERIAL EVENT: at an ordinary meeting held on 24th April, the shareholders of Distribución y Servicio D&S S.A. ( D&S ), a publicly traded corporation listed in the Commission s Securities Registry under No. 0593, approved the distribution of a final dividend of Ch$2 per share. D&S s capital is divided into 6,520,000,000 common, registered, non-par-value, single and unique series shares. In accordance with the authorization for such matters approved at an extraordinary shareholders meeting held on 26th October 2004, the Company has to date a total of 36,000,000 of its own shares in a stock option compensation programme. Pursuant to provisions set forth in the second subsection of article 27 of law on Publicly Traded Corporations, such shares are not entitled to pay out dividends. Therefore, the dividend reported herein will not be distributed to the own shares in the Company s portfolio, but to the remaining 6,484,000,000 shares of D&S equity. The dividend shall be paid on 17th May to shareholders listed in D&S s shareholders register on the closing date thereof, 11th May, except for own shares that the Company has in portfolio, which will be as described above. The notice referred to in Circular No. 660 of said Commission will be published in El Mercurio newspaper on 2nd May. The approved dividend stated above, the 42nd paid out by D&S, shall come from earnings for the fiscal year ending on 31st December. Such dividend will be distributed as follows: a) For shareholders who have duly requested so in writing, the dividend shall be deposited in their current account or savings account as designated for such purpose and the respective deposit receipt shall be posted; b) For shareholders who have duly requested so in writing, the final dividend shall be sent by certified mail in the form of an order cheque; or, c) Order cheques will be personally withdrawn by the shareholder or his/her duly authorized representative from the offices of the Company s Department of Shares, i.e., Depósito Central de Valores S.A., Depósito de Valores - DCV, located at Huérfanos 770, 22nd floor, district of Santiago. (4) On 18th May, and pursuant to the provisions set forth in article 90 and in the second subsection of article 100 of Law No and in paragraph 2.2 under Section II General Regulation No. 30 of said Commission, we hereby rectify the MATERIAL EVENT reported yesterday concerning the merger of Distribución y Servicio D&S S.A. ( D&S ) and S.A.C.I. Falabella ( Falabella ) in terms of the following. 109 Annual Report

36 Material Events ADDITIONAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS. As at 31 December and In the abovementioned material event statement it is declared that the percentage of Falabella shares held by the Falabella controlling shareholders with whom the D&S controlling shareholders have entered into a merger agreement would be for 64.39%. Said information has a typing error. The share percentage of Falabella controlling shareholders with whom the D&S controlling shareholders have entered into a merger agreement is for 74.39%. (5) On 17th May, and pursuant to the provisions set forth in article 9 and in the second subsection of article 100 of Law No and in paragraph 2.2 under Section II General Regulation No. 30 of said Commission, we hereby report the following MATERIAL EVENT: 1. At an extraordinary meeting on the same date, the board of directors of Distribución y Servicio D&S S.A. ( D&S ), has been informed of the merger agreement (the Merger Agreement ) reached by D&S controlling shareholders, who control 63.62% of the participating shares issued by D&S (the D&S Controlling Shareholders ), on the one hand; and on the other, the majority of the controlling shareholders of S.A.C.I. Falabella ( Falabella ), who hold 64.39% of the participating shares issued by said company (the Falabella Controlling Shareholders ). 2. The Merger Agreement provides, through stages and procedures described therein, that the D&S and Falabella controlling shareholders shall undertake and cause whatever is required for D&S and Falabella to merge into whichever one will be the surviving company pursuant to the criteria set forth in the Merger Agreement (the Surviving Company ). 3. Upon executing the merger, the shares issued by D&S will be exchanged for 23% of the shares of the Surviving Company, and the shares issued by Falabella shall be exchanged for 77% of the shares issued by the Surviving Company. 4. The Merger Agreement provides that the merger shall be executed within 60 days as of the date the main terms and conditions are fulfilled, including, but not limited to, the following terms and conditions approved by the D&S and Falabella controlling shareholders: 4.1. That there are no significant restrictions or in any other way have a significant or adverse effect upon the freedom of the Surviving Company to perform operations that D&S and Falabella have carried out individually in the past Until the time the merger is completed no events or circumstances have occurred, apart from events and circumstances that affect the general economy of the countries where both companies operate, that have a substantial and adverse effect upon the value of D&S or Falabella Register or maintain registered the Surviving Company with the Securities and Exchange Commission of the United States of America ( SEC ) for a period subsequent to the merger agreed by both parties. (6) On 18th May, and pursuant to the provisions set forth in article 9 and in the second subsection of article 10 of Law No and in paragraph 2.2 under Section II General Regulation No. 30 of said Commission, we hereby report that the MATERIAL EVENT, presented on 17th May regarding the merger of Distribución y Servicio D&S S.A. (D&S) and S.A.I.C. Falabella (Falabella), has been corrected as follows: In the statement of the abovementioned material event it is declared that the percentage of Falabella shares, held by Falabella controlling shareholders with whom the D&S controlling shareholders have entered into a merger agreement, totals 64.39%. Said information has a typing error. The percentage of Falabella shares, held by the controlling shareholders with whom the D&S controlling shareholders have entered into a merger agreement, is for 74.39%. (7) On 23rd May, a copy of the merger agreement entered into by both the D&S and Falabella controlling shareholders, which is additional information relevant to the material event of the merger, is sent to you on 17th May. (8) On 31st October, on 26th April, and pursuant to the provisions set forth in article 90 and in the second subsection of article 100 of Law No and in paragraph 2.2 under Section II General Regulation No. 30 of said Commission and in Circular 660 thereof, we hereby report the following MATERIAL EVENT; at an ordinary meeting held on 30th October, the board of directors of Distribución y Servicio D&S S.A. ( D&S ), a publicly traded corporation listed in the Commission s Securities Register under No. 0593, approved the distribution of interim dividend at Ch$2 per share. D&S s capital is divided into 6,520,000,000 common, registered, non-par-value, single and unique series shares. In accordance with the authorization for such matters at an extraordinary shareholders meeting held on 26th October 2004, the Company has to date a total of 65,200,000 of its own shares in a stock option compensation programme. Pursuant to provisions set forth in the second subsection of article 27 of law on Publicly Traded Corporations, such shares are not entitled to pay out dividends. Therefore, the dividend reported herein will not be distributed to the own shares in the Company s portfolio, but to the remaining 6,454,800,000 shares of D&S equity.

37 Material Events ADDITIONAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS. As at 31 December and The dividend shall be paid on 26th November to shareholders listed in D&S s shareholders register on the closing date thereof, 20th November May, except for own shares that the Company has in portfolio, which will be as described above. The notice referred to in Circular No. 660 of said Commission will be published in El Mercurio newspaper on 13th November. The approved dividend stated above, the 43rd paid out by D&S, shall come from earnings for the fiscal year ending on 31st December. Such dividend will be distributed as follows: a) For shareholders who duly requested so in writing, the dividend shall be deposited in their current account o savings account as designated for such purpose and the respective deposit receipt shall be posted; b) For shareholders who duly requested so in writing, the final dividend shall be sent by certified mail in the form of an order cheque; or, c) Order cheques shall be personally withdrawn by the shareholder or his/her duly authorized representative from the offices of the Company s Department of Shares, i.e., Depósito Central de Valores S.A., Depósito de Valores - DCV, located at Huérfanos 770, 22nd floor, district of Santiago. (9) On 23rd January 2008 and pursuant to the provisions set forth in article 90 and in the second subsection of article 100 of Law No and in paragraph 2.2 under Section II of General Regulation No. 30 of said Commission and in Circular 660 thereof, we hereby report the following MATERIAL EVENT: at an ordinary meeting held on 22nd January 2008, the board of directors of Distribución y Servicio D&S S.A. ( D&S ), a publicly traded corporation listed in the Commission s Securities Register under No. 0593, approved the distribution of eventual dividend at Ch$2 per share. D&S s capital is divided into 6,520,000,000 common, registered, non-par-value, single and unique series shares. In accordance with the authorization for such matters at an extraordinary shareholders meeting held on 26th October 2004, the Company has to date a total of 65,200,000 of its own shares in a stock option compensation programme. Pursuant to provisions set forth in the second subsection of article 27 of law on Publicly Traded Corporations, such shares are not entitled to pay out dividends. Therefore, the dividend reported herein will not be distributed to the own shares in the Company s portfolio, but to the remaining 6,454,800,000 shares of D&S equity. The dividend shall be paid on 14th February 2008 to shareholders listed in D&S s shareholders register on the closing date thereof, 8th February 2008, except for own shares that the Company has in portfolio, which will be as described above. The notice referred to in Circular No. 660 of said Commission will be published in El Mercurio newspaper on 4th February The approved dividend stated above, the 44th paid out by D&S, shall come from earnings for the fiscal year ending on 31st December. Such dividend will be distributed as follows: a) For shareholders who duly requested so in writing, the dividend shall be deposited in their current account o savings account as designated for such purpose and the respective deposit receipt shall be posted; b) For shareholders who duly requested so in writing, the final dividend shall be sent by certified mail in the form of an order cheque; or, c) Order cheques shall be personally withdrawn by the shareholder or his/her duly authorized representative from the offices of the Company s Department of Shares, i.e., Depósito Central de Valores S.A., Depósito de Valores - DCV, located at Huérfanos 770, 22nd floor, district of Santiago. (10) On 31st January 2008, and pursuant to the provisions set forth in article 90 and in the second subsection of article 100 of Law No and in paragraph 2.2 under Section II General Regulation No. 30 of said Commission and in Circular 660 thereof, we hereby report the following MATERIAL EVENT: 1. On the same date, the Honourable Tribunal de Defensa de la Libre Competencia (Antitrust Court) of the Republic of Chile notified its Resolution No. 24/2008, regarding the non-legal proceeding No. NC N , of the Requesting Parties Messrs. S.A.C.I. Falabella Controlling Shareholders and Distribución y Servicio D&S S.A. Controlling Shareholders(hereinafter, D&S ), regarding the request for the approval of the Merger between S.A.C.I. Falabella and Distribución y Servicio D&S S.A (hereinafter, the Resolution ). 2. The Resolution sets forth that there is no option for the request filed by the Distribución y Servicio D&S S.A. controlling shareholders and the S.A.C.I. Falabella controlling shareholders[ ] and, therefore, the requested operation has not been approved. 111 Annual Report

38 Material Events ADDITIONAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS. As at 31 December and 3. Therefore, the Honourable Antitrust Court has decided to reject the merger between S.A.C.I. Falabella and D&S, requested by the controlling shareholders of both companies. 4. D&S has kept its operations permanently independent and, therefore, the Resolution does not affect its normal business operations, financial status, legal status nor the development of its business plans. 5. A copy of the Resolution is available on the website of the Honourable Antitrust Court ( (11) On 31st January 2008, and pursuant to the provisions set forth in article 90 and in the second subsection of article 100 of Law No and in paragraph 2.2 under Section II of General Regulation No. 30 of said Commission and in Circular 660 thereof, we hereby report as additional information to the MATERIAL EVENT sent on this date regarding the matter referred to: 1. We acknowledge receipt of your statement, Ord. No with the same date as when the additional information is requested, as to whether D&S shall adopt further measures related to the Resolution (as defined in the preceding Material Event). 2. D&S is currently analysing in detail the Resolution in order to decide what steps to take on matters within the Company s competence. 3. Therefore, at present, no actions have been adopted or shall be adopted that D&S can report.

39 Explanatory Analysis of Consolidated Financial Statements As at 31 December & 1. ANALYSIS OF RESULTS The results for the fiscal years ended 31 December and show the following indicators: MAIN INDICATORS REVENUES January-December January-December Variation / % Revenues % Revenues % Revenues 1,905,780, % 1,822,218, % 4.59% Gross Profit 540,488, % 501,822, % 7.71% Selling & Administrative Expenses 443,392, % 431,463, % 2.76% Operating Income 97,095, % 70,358, % 38.00% Interest Expenses 2 9,10 1, % 25,508, % 14.09% Non-Operating Income (35,482,995) % (22,627,855) % 56.81% R.A.I.I.D.A.I.E. 152,642, % 128,893, % 18.43% Net Income 52,680, % 42,586, % 23.70% Initial Equity 556,236, ,453, % Net Income / Initial Shareholders Equity (Annualized) 9,47% - 7,9 5 % - - Results of operations as at 31 December show a net income of Ch$52,681 million compared to a net income of Ch$ 42,587 million for the same period in, representing a 23.7% increase. This result is explained by the 38.0% increase in operating income and the 56.8% increase in other non-operating expenses. 1.1 REVENUES The net revenue of the Company and its subsidiaries for the period ending 31 December was Ch$1,905,780 million representing a 4.6% increase compared to the same period, which was Ch$ 1,822,218 million. This variation is due to a 6.7% increase in sales and a 25.9% increase in revenue from the financial division due to an average 19.7% increase in outstanding receivables during the period, and more Presto card transactions reflected in a 13.1% increase in the average balance per account during the period. As at 31 December, same store sales reached a 3.9% nominal value. During, 13 new stores were opened: 7 Express de Lider supermarkets, 4 Hiper Lider hypermarkets and 2 Bodegas discount stores. However, some stores were closed: Lider Kennedy and Express Parque Arauco stores were closed in January, Express Talca La Florida in August and Express Chuquimata in October. In January, a new Ekono discount format was launched. As at December, 32 stores were opened in different locations in the Metropolitan Region. 1.2 GROSS PROFIT The gross profit for the period ending 31 December was Ch$ 540,488 million compared to Ch$ 501,823 million for the same period in, accounting for a 7.7% increase. As a revenue percentage, gross profit increased to 28.4% as at 31 December from 27.5% for the same period the previous year. 113 Annual Report

40 Explanatory Analysis of Consolidated Financial Statements As at 31 December & 1.3 SELLING, AND ADMINISTRATIVE EXPENSES The selling, and administrative expenses for the period January-December was Ch$ 443,393 million, improving 2.8% compared to Ch$ 431,464 million for the same period in, mainly due to the incorporation of new stores and an increase in other operating expenses the financial services. As a revenue percentage, the selling, and administrative expenses were 23.3% in compared to 23.7% in. The selling and administrative expenses related to the operations of the financial services division improved by 21.1% to Ch$ 103,032 million during the period January-December, compared to Ch$ 85,115 million for the same period in. This increase is mainly due to a 14.5% increase in reserves for uncollectable receivables and an 18.3% increase of the operating expenses (entered under other expenses) related to organizational growth and to marketing activities implemented by the financial services division that, in turn, have driven growth by 25.9% in total revenue and 19.7% increase in outstanding receivables during the period under review compared to the same period in. 1.4 OPERATING INCOME Operating income for the period ending 31 December was for Ch$ 97,096 million compared to Ch$ 70,359 million in, representing a 38.0% increase. As a revenue percentage, the operating income was 51% in compared to 3.9% in. 1.5 NON-OPERATING INCOME Non-operating income for the period ending 31 December, shows losses for Ch$ 35,483 million compared to Ch$ 22,628 million in losses for, representing a 56.8% increase in losses. As a revenue percentage, the non-operating income was -1.8% in compared to -1.2% in.

41 Explanatory Analysis of Consolidated Financial Statements As at 31 December & 2. BALANCE SHEET ANALYSIS The main balance sheet indicators as at 31 December and are as follows: Condensed Balance Sheet Variation / Current Assets 410,741, ,279, % Fixed Assets 753,682, ,710, % Operating Assets 1,164,424,142 1, 0 61,9 8 9, % Other Assets 267,124, ,615, % Total Assets 1,431,548,213 1,294,605, % Current Liabilities 602,705, ,634, % Long-Term Liabilities 266,205, ,733, % Total Debt 868,911, ,368, % Minority Interest (3,308) % Equity 562,640, ,236, % Total LiabilIties 1,431,548,213 1,294,605, % Financial Ratios Variation / Total Debt 868,911, ,368, % Financial Debt 548,077, ,971, % Liquidity Ratio Times Acid Ratio Times Total Debt/Total AsseTs Times Total Debt /Equity Times Financial Debt/Equity Times Interest Expense Coverage Times Short-Term Liabilities % 69 % 60% Long-Term Liabilities % 31% 40% Activity Ratios Inventory Turnover Times Inventory Days Day Profitability Ratios Return on Equity % % 7.95% Return on Assets % 3.68% 3.29% Return on Operating Assets % % 4.01% Earnings per Share Ch$ Dividend Yield % % 2.19% 115 Annual Report

42 Explanatory Analysis of Consolidated Financial Statements As at 31 December & 2.1 Assets As at 31 december, the Company s assets accounted for ch$ 1,431,548 million compared to ch$1,294,605 million for the same period in, representing a 10.6% Increase. This variation is due to an increase in long-term debtors of the presto credit card and to the new fixed assets that were purchased. 2.2 Liabilities Total liabilities as at 31 december were ch$ 868,911 million, compared to ch$738,368 million for the same period, which represented a 17.7% Increase. The financial debt, i.e., Borrowings or debts with banks, leasing institutions and sundry creditors for purchasing property, represent the most important part of total liability (63.1%) And it increased by 25.7% From ch$ 435,972 million as at 31 december to $ 548,078 million as at 31 december. As at 31 december, the Company restructured its short-term debt by issuing bonds for uf 4,500,000 of its subsidiary sociedad anónima inmobiliaria terrenos y establecimientos comerciales (placement rate uf ) For a 22-year term, along with structuring a syndicated loan for ch$ 119,788 million at the bank rate (tab) + 40 points (equivalent to uf %) For an 8-year term, with a 2-year grace period. At the same time, the Company paid series a bonds for an amount of uf 3,500,000 at uf + 7% annual rate. In march, the Company signed a new-long term loan with banco citibank for uf 1,200,000 at 3.28% Fixed rate and for a 7-year term. The Company used the loan to prepay series b bonds for uf 1,200,000 at uf + 6.5% Rate. 2.3 Debt/equity ratio The rate to measure total liabilities divided by equity increased from 1.33 Times as at 31 december to 1.54 Times as at 31 december. If the financial debt divided by equity is taken into account, it increased 0.78 Times from 31 december to 0.97 Times as at 31 december, as a result of an increased financial debt. 2.4 Liquidity The liquidity ratio was 0.69 Times as at 31 december compared to 0.83 Times for the same period in. The percentage of short-term financial debt as at 31 december was 51.8% Compared to 33.8% For the same period in. 2.5 Acid-test ratio The acid-test ratio dropped from 0.47 Times as at 31 december to 0.43 Times as at 31 december. 2.6 Interest expense coverage ratio Interest expense coverage ratio, defined as the quotient between ebitda (operating income plus depreciation) and interest expense, was 5.4 Times as at 31 december compared to 5.0 Times for the same period in. This variation is due to a 24.7% Increase in ebitda. The ebitda margin as at 31 december was 8.3% Compared to 6.9% For the same period in. 2.7 Inventory turnover rate As at 31 december inventory turnover was 8.9 Times compared to 8.2 Times for the same period in. Inventory days dropped from 44.5 Days as at 31 december to 41.1 Days as at december.

43 2.8 Profitability ratios: return on equity, on total assets and total operating assets Explanatory Analysis of Consolidated Financial Statements As at 31 December & The profitability ratios were higher compared to the same period in. As at 31 december, return on equity was 9.5% Compared to 8.0% For the same period the previous year; return on total assets was 3.7% Compared to 3.3% For the same period the previous year and return on operating assets was 4.5% Compared to 4.0% For the same period the previous year. This variation is due to the higher net income obtained in of ch$52,681 million compared to ch$ 42,587 million net income for the period, representing a 23.7% Increase. 2.9 Earnings per share Earnings per share as at 31 december was ch$ 8.1 Compared to ch$ 6.5 As at 31 december. This increase is because the net income for the period under review was ch$52,681 million compared to ch$ 42,587 million net income for the same period the previous year. 3. Book value and market value of assets Assets are valued according to the generally accepted accounting principles and standards (gaap) and the instructions issued by the superintendencia de valores y seguros (local sec). Based on estimations and projections, we have revised the values of fixed assets, other long-term assets and intangibles, in order to determine if there has been a permanent decrease in the value thereof, when facts or events have indicated that the book value of such assets may be unrecoverable. However, the Company s policy is to adjust the depreciation allowance for all fixed assets that have been abandoned or otherwise deemed have no useful life. As at 31 december and there have been no assets in such conditions. Furthermore, the management does not have projects, planes or intentions that may significantly affect the valuation or appreciation of shares in the financial statement s. 4. Market risk analysis The Company s equity investment in the local or foreign market through ads holders involves a certain degree of risk. Investors in our company must carefully consider the following risk factors and other information included in the supplementary information, as well as the Company s annual report and/or any interim report. Risks related to the Company. The main risk that the Company faces for its development, plus the mitigating factors are: 4.1 Competition The supermarket industry is recognized as being highly competitive and therefore decreasing margins. The number, type of competitors and the level of competition vary depending on product prices and quality, range of services and customer services, etc. Given the strength of its brand, positioning and strategy development, the Company is well prepared to face new competitors entering the market. 4.2 New market players The Company competes in the supermarket industry, with different formats, such as the ekono convenience stores, express de lider supermarkets, lider hypermarkets and recently with the bodega acuenta discount format. Each of these formats has real and potential competition. Recently, saieh rendic, a local company, acquired the unimarc assets and several other local chains, becoming an important stakeholder in the retail industry. However, does not rule out that this company or any other, national or foreign may continue growing or entering this industry in the medium-term. Furthermore, an advantage for the Company, in order to face current and potential competition, is that it has a clear low-price positioning, which helps it to continue being market leader. 117 Annual Report

44 Explanatory Analysis of Consolidated Financial Statements As at 31 December & 4.3 Concentration of activities 55.8% of the Company s operations are concentrated in the metropolitan region (store sales). However, the Company plans include continuing to expand into other cities across chile. 4.4 Available capital for future expansion The management cannot totally assure that the Company will generate sufficient cash flow or obtain sufficient borrowings to finance the investment requirements for future expansion. The Company s capacity to have access to financial markets in sufficient amounts and at acceptable financing costs, to finance the operations and the required capital expansions will depend, to a large extent, on market conditions over which the Company has no control, and therefore, no assurances can be given that this would be the case. 4.5 Exposure to market factors The Company is subject to market fluctuations related to: * Interest rates * Exchange rate fluctuations 4.6 Interest rate risk The Company has analyzed the financial liabilities exposed to interest rate fluctuations, 22.3% of the Company s financial debt is at tab rate + spread, another 24.2% Represent bonds issued by the Company and its subsidiary, sociedad anónima inmobiliaria terrenos y establecimientos comerciales (saitec), at rates ranging between uf + 4.2% And uf + 6.5%. Another 12.0% Corresponds to commercial papers issued at rates between 5.9% And 7.4%. Another 23.9% Corresponds to fixed rate loans ranging between 3.28% And 8.28% Per year. The Company uses certain risk management models, as well as specialized consulting services and, in order to cover the risk of significant increases of the variable interest rate that could cause a rise in interest expenses, the Company has taken out an insurance for guaranteed interest rate at a fixed rate of uf % Of the new long-term syndicated loan. 4.7 Exchange rate variation risk The Company has no considerable debt in foreign currency. As at 30 december, the Company had us$ denominated letters of credit for us$ 45.4 Billion, which are exposed to exchange rate risks. At the same time, the Company holds notes receivable in us dollars equivalent to u$ 47.7 Billion related to the sale of supermercados ekono s.a. (Argentina). The Company implements some risk management models, as well as specialized consultancy services, and as a hedge against a possible drop in exchange rate in the near future, which could result in losses due to currency adjustment, the Company, if necessary, has taken out a currency insurance to hedge against eventual exchange rate fluctuations. 5. Market fluctuations In the opinion of management, there are no significant changes in the market where the Company operates, nor in its relevant competitors or in its relative market share, except as stated in point 4.2 Above.

45 6. Revenues by formats and business areas Company sales by formats as at 31 december and are as follows: Explanatory Analysis of Consolidated Financial Statements As at 31 December & Formats Sales % sales % revenues Sales % sales % revenues Var. % / Supermarket 282, % 247, % 14.07% Hypermarket 1,268, % 1, 2 3 4, % 2.81% Ekono 12, % Pharmacy 1, % 3 7, % % Total sales formats 1,565, % 82.13% 1,519, % % 3.01% Other areas 340, % 302, % 12.50% Total revenues 1,905, % 1,822, % 4.59% Sales by business area Groceries 891, % 828, % 7.63% Perishables 436, % 414, % 5.43% Non-food 235, % 239, % -1.57% Pharmacy 1, % 3 7, % % Total sales 1,565, % 1,519, % 3.01% As at 31 december, format sales correspond to 82.1% Of total revenue, compared to 83.4% For the same period the previous year. Store sales had a 3.0% Increase. The breakdown of sales by format shows a 14.1% Increase in sales for the supermarket format and 2.8% For the hypermarket format. As for the business areas managed by the Company, groceries increased by 7.6%, Perishables by 5.4% And non-food area dropped by 1.6%. In december an agreement was signed by farmacias ahumadas providing that it would operate the farmalider stores and d&s would receive a percentage of the revenue related to lease payment and it would have a share in the net income from such stores. 119 Annual Report

46 Explanatory Analysis of Consolidated Financial Statements As at 31 December & 7. Key components of the cash flow statement December December %VAR. / Operating activities 35,365,720 58,464, % Financing activities 92,229,903 26,227, % Investment activities (124,206,832) (102,649,390) 21.00% Net cash flow for period 3,388,791 (17,957,494) % During the period under review, the Company generated a net cash flow increase of ch$ 3,389 million, broken down as follows: Operating activities generated a positive net cash flow of ch$ 35,366 million, due to a net income of ch$ 52,681 million for the period under review, plus charges to net income not representing cash flow for ch$ 110,619 million, minus the variation of assets and liabilities that affect the operating flow, amounting to ch$127,861 million. Financing activities generated a positive cash net flow of ch$92,230 million, produced by netting out borrowings and payments of bank loans, notes and debentures and dividend payments. Investment activities generated a negative net cash flow of ch$ 124,207 million basically due to the disbursement and incorporation of fixed assets. Rodrigo Saldivia B. Gerente de Contabilidad Alejandro Droste Gerente de Finanzas Corporativo Santiago, 28 de febrero de 2008.

47 Condensed Financial Statements Inversiones D&S Chile Ltda. and subsidiaries NOTES TO THE CONDENSED INFORMATION 1. BASIS OF PRESENTATION The accompanying condensed financial information has been extracted from the financial statements of the subsidiaries that are available for inspection at the Company s offices. Such financial statements also have been filed with the Superintendency of Securities and Insurance where they are available to the general public. 2. SIGNIFICANT ACCOUNTING PRINCIPLES The accounting policies applied by all of the Group companies are summarized in Note 2, Summary of Significant Accounting Policies. 3. RELATIONSHIP BETWEEN THE COMPANIES The relationships between the Group companies, and their relationships with the Parent, are described in Note Annual Report

48 Consolidated Balance Sheet At december 31, and at december 31,. (In thousands of Chilean pesos - ) ASSETS CURRENT ASSETS: Cash and banks 42,220,436 30,619,827 Marketable securities 60, ,510 Trade accounts receivable 146,854, ,307,930 Notes and accounts receivable from related companies 770,276 93,591,685 Inventories 157,728, ,097 Income tax receivables 29,255,349 7,219,619 Deferred taxes 5,196,980 3,906,538 Other current assets 13,699,729 10,749,381 Total current assets 395,786, ,052,587 PROPERTY, PLANT AND EQUIPMENT 1,058,625, ,497,195 Accumulated depreciation (385,551,642) (337,316,985) PROPERTY, PLANT AND EQUIPMENT - NET 673,073, ,180,210 OTHER: 210,008, ,025,746 TOTAL ASSETS 1,278,868,778 1,065,258,543 LIABILITIES CURRENT LIABILITIES: Borrowings 36,587,500 5,256,724 Notes and accounts payable 261,736,448 26,946,215 Notes and accounts payable to related companies 250,406, ,816,411 Accruals and withholdings 27,340,946 20,228,748 Others 127,989 1,471,480 Total current liabilities 576,199, ,719,578 LONG TERM: Long-term debts 95,629,570 95,528,138 Notes and accounts payable to related companies 6,511, ,265,566 Long-term accruals 1,715,783 5,411,900 Total long-term liabilities 103,857, ,205,604 MINORITY INTEREST (3,908) 288 SHAREHOLDERS EQUITY 598,815, ,333,073 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 1,278,868,778 1,065,258,543 The attached notes form an integral part of these financial statements.

49 Consolidated Statements of Income for the Years Ended Consolidated income statements for the year ended december 31 of and for the 61 day period ended december 31 of, in thousand Chilean pesos (). OPERATION REVENUE 540,318,129 81,459,521 OPERATION EXPENSES (452,331,761) (67,103,637) GROSS MARGIN 87,986,368 14,355,884 NON OPERATING INCOME (EXPENSE): Financial expenses (7,379,672) (1,061,573) Equity in income of related companies 100, ,590 Other non-operating income 246,079 92,869 Equity in losses of related companies (34,450) - Amortization of goodwill (2,327,584) (366,047) Other non-operating expenses (4,011,305) (227,002) Price - level restatement 3,320,252 (1,343,773) Exchange differences 1,743, ,770 Other expenses - net (8,343,148) (2,086,166) INCOME BEFORE INCOME TAX 79,643,220 12,269,718 Income tax (12,155,482) (641,724) INCOME BEFORE MINORITY INTEREST 67,487,738 11,627,994 Minority interest (1,160) (33,215) NET INCOME FOR THE YEAR 67,486,578 11,594,779 The attached notes form an integral part of these financial statements. 123 Annual Report

50 Consolidated Statements of Cash Flow for the Years Ended Consolidated income statements for the year ended december 31 of and for the 61 day period ended december 31 of, in thousand Chilean pesos (). CASH FLOWS FROM OPERATING ACTIVITIES: Income for the year 67,486,578 11,594,779 Gain on sale of property, plant and equipment (58,059) (77,544) Net charges to income that do not represent cash flow 101,920,071 20,999,735 Net credits to income that do not represent cash flow (5,129,334) (819,361) Net variations in assets that affect cash flow (265,297,075) (34,219,438) Net variations in liabilities that affect cash flow 217,460,582 4,483,351 Minority interest 1,160 33,215 Net cash provided by operating activities 116,383,923 1,994,737 CASH FLOWS FROM FINANCING ACTIVITIES: Income obtained from financing activities 69,038, ,109 (Payments to) Proceeds from loans from related companies (122,163,275) 47,822,448 Dividendos pagados - - Other disbursements (38,865,902) (2,027,332) Net cash (used in) provided by financing activities (91,991,106) 46,063,225 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (107,640,277) (23,554,493) Sale of property, plant and equipment 5,755, ,738 Other investments 85,444,484 (8,218,408) Net cash used in investing activities (16,440,193) (31,119,163) NET CASH FLOW FOR THE YEAR 7,952,624 16,938,799 EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS 3,579,106 (431,210) NET INCREASE IN CASH AND CASH EQUIVALENTS 11,531,730 16,507,589 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 30,749,337 14,241,748 CASH AND CASH EQUIVALENTS AT END OF YEAR 42,281,067 30,749,337 The attached notes form an integral part of these financial statements.

51 Shareholder s Information Trade Name Distribución y Servicio D&S S.A. Legal Status Publicly held (stock) corporation Chilean Tax Identification Number Registration Number at Securities Registry 0593 Corporate Office D&S School of Service Avenida Presidente Eduardo Frei Montalva N 8301, Quilicura, Santiago, Chile Zip Code Contact Information Telephone : (56-2) Fax : (56-2) E- mail : info@dys.cl Website : D&S Corporate Finance Avenida del Valle N 725, 5th Floor, Ciudad Empresarial, Huechuraba, Santiago, Chile Telephone: (56-2) Fax: (56-2) Saitec S.A. Real Estate Avenida del Valle N 725, 5th Floor, Ciudad Empresarial, Huechuraba, Santiago, Chile Telephone: (56-2) Fax: (56-2) Financial Services D&S S.A. Avenida del Valle N 737, Ciudad Empresarial, Huechuraba, Santiago, Chile Telephone: (56-2) Fax: (56-2) Investor Relations Alejandro Droste B. Chief Financial Officer Telephone: (56-2) adroste@dys.cl Number of Shareholders 1,267 General Shareholders Meeting The Annual General Shareholders Meeting will be held on Tuesday April 29th, 2008, at 10:00 am, at the corporate offices on Avenida Presidente Eduardo Frei Montalva N 8301, Quilicura. Trading Symbols DYS (NYSE) D&S (Chilean Stock Exchanges) XDYS (Latibex) Shares Outstanding at Year End At 12/31/: Stock Exchanges New York Stock Exchange (NYSE) Bolsa de Comercio de Santiago Bolsa Electrónica de Chile Bolsa de Valores de Valparaíso Latibex (Madrid Stock Exchange) Auditors Deloitte Av. Providencia N 1760, 8th Floor, Providencia, Santiago, Chile Telephone: (56-2) Legal Representative Mr. Enrique Ostalé C., Chief Executive Officer Risk Rating Agencies Fitch Chile Alcántara N 200, 2nd Floor, Suite 202, Las Condes, Santiago, Chile Feller & Rate Clasificadora de Riesgo Isidora Goyenechea N 3621, 11th Floor, Las Condes, Santiago, Chile Stock Management Company Depósito Central de Valores DCV Huérfanos N 770, 22nd Floor, Santiago, Chile Miguel Núñez S. Finance Manager Telephone: (56-2) mnunez@dys.cl 125 Annual Report

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53 Company Organization Chart - December 127 Annual Report

54 Graphic Design Stormind Ltda. Edition Gestión Social Photographer Juan Dintrans Alarcón Printed Fyrma Gráfica

55 Distribución y Servicio D&S S.A. Ave. Presidente Eduardo Frei Montalva N Quilicura - Santiago - Chile Phone: (56 2)