NOTE 21 -- CONTINGENCIES AND COMMITMENTS

21.1 Lawsuits and other legal actions:

In the opinion of the Company’s legal counsel, the Parent Company and its subsidiaries do not face judicial or extra-judicial contingencies that might result in material or significant losses or gains, except for the following:

Embotelladora del Atlántico S.A. faces labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$948,042. Management considers it unlikely that non-provisioned contingencies will affect the Company’s income and equity, based on the opinion of its legal counsel. Additionally, Embotelladora del Atlántico S.A. maintains time deposits for an amount of ThCh$656,817 to guaranty judicial liabilities

Rio de Janeiro Refrescos Ltda. faces labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$55,518,871 Management considers it unlikely that non-provisioned contingencies will affect the Company’s income and equity, based on the opinion of its legal counsel. As it is customary in Brazil, Rio de Janeiro Refrescos Ltda. maintains judicial deposits and assets given in pledge to secure the compliance of certain processes, irrespective of whether these have been classified as a possible, probable or remote. The amounts deposited or pledged as legal guarantees as of December 31, 2018 and December 31, 2017, amounted to ThCh$31,143,415 and ThCh$31,953,725, respectively.

To ensure fulfillment of the obligations arising from judicial proceedings faced in Brazil, Rio de Janeiro Refrescos Ltda., has taken guarantee insurance and guarantee letters amounting to R$986,396,119 with different financial institutions and insurance companies in Brazil, through which these entities after a 0.44% annual commission, become responsible of fulfilling obligations with the Brazilian tax authorities should any trial result against Rio de Janeiro Refrescos Ltda. Additionally, if the warranty and bail letters are executed, Rio de Janeiro Refrescos Ltda. promises to reimburse to the financial institutions and Insurance Companies any amounts disbursed by them to the Brazilian government.

Main contingencies faced by Rio de Janeiro Refrescos are as follows:

Tax contingencies resulting from credits on tax on industrialized products (IPI).

Rio de Janeiro Refrescos is a party to a series of proceedings under way, in which the Brazilian federal tax authorities demand payment of value-added tax on industrialized products (Imposto sobre Produtos Industrializados, or IPI) allegedly owed by ex-Companhia de Bebidas Ipiranga. The initial amount demanded reached R$1,330,473,161 (historical amount without adjustments), corresponding to different trials related to the same cause. In September 2014, one of these trials for R$598,745,218, was settled in favor of the Company, and additionally during 2017 several trials were settled in favor of the Company in the amount for R$135,282,155 however, there are new lawsuits arising after the purchase of ex-Companhia de Bebidas Ipiranga (October 2013) that amount to R$346,232,541.

The Company rejects the position of the Brazilian tax authority in these procedures and considers that Companhia de Bebidas Ipiranga was entitled to claim IPI tax credits in connection with purchases of certain exempt raw materials from suppliers located in the Manaus free trade zone.

Based on the opinion of its advisers, and judicial outcomes to date, Management estimates that these procedures do not represent probable losses and has not recorded a provision on these matters.

Notwithstanding the above, the IFRS related to business combination in terms of distribution of the purchase price establish that contingencies must be measured one by one according to their probability of occurrence and discounted at fair value from the date on which it is deemed the loss can be generated. According to this criterion, from a total of identified contingencies amounting R$1,138,749,846 (including readjustments of current lawsuits), the Company recorded a provision for the beginning of business combination accounting in the amount R$203,070,206 equivalent to ThCh$36,411,450.

Tax contingencies on ICMS and IPI causes.

They refer mainly to tax settlements issued by advance appropriation of ICMS credits on fixed assets, payment of the replacement of ICMS tax to the operations, untimely IPI credits calculated on bonuses, among other claims.

The Company does not consider that these judgments will result in significant losses, given that their loss, according to its legal counsel, is considered unlikely. However, the accounting standards of financial information related to business combination in terms of distribution of the purchase price, establish contingencies must be valued one by one according to their probability of occurrence and discounted to fair value from the date on which it is deemed that the loss can be generated. According to this criterion, an initial provision has been made in the business combination accounting for an amount of R$76,883,016 equivalent to ThCh$ 13,785,489.

Embotelladora Andina S.A. and its Chilean subsidiaries face labor, tax, civil and trade lawsuits. Accounting provisions have been made for the contingency of a probable loss because of these lawsuits, totaling ThCh$5,970,453. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.

Paraguay Refrescos S.A. faces tax, trade, labor and other lawsuits. Accounting provisions have been made for the contingency of any loss because of these lawsuits amounting to ThCh$15,160. Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.

21.2 Direct guarantees and restricted assets:

Guarantees and restricted assets are detailed as follows:

Guarantees that compromise assets including in the financial statements:

Balance pending payment on the closing date

Provided by

Committed assets

of the financial statements

Guarantee in favor of

Name

Relationship

Guarantee

Type

12.31.2018

12.31.2017

ThCh$

Industria Metalúrgica Inamar Ltda.

Embotelladora Andina S.A.

Parent Company

Land

Property, plant and equipment

—

17,991,202

Gas Licuado Lipigas S.A.

Embotelladora Andina S.A.

Parent Company

Cash and cash equivalents

Trade and other receivables

1,140

Hospital Militar

Servicios Multivending

Subsidiary

Cash and cash equivalents

Trade and other receivables

—

4,727

Parque Arauco

Servicios Multivending

Subsidiary

Cash and cash equivalents

Trade and other receivables

—

5,345

Aeropuerto Nuevo Pudahuel

Servicios Multivending

Subsidiary

Cash and cash equivalents

Other receivables

—

10,129

Hospital FACH

Servicios Multivending

Subsidiary

Cash and cash equivalents

Other receivables

—

697

Inmob. E Invers. Supetar Ltda

Transportes Polar S.A.

Subsidiary

Cash and cash equivalents

Other non-current, non-financial assets

4,579

Bodegas San Francisco Ltda.

Transportes Polar S.A.

Subsidiary

Cash and cash equivalents

Other non-current, non-financial assets

—

6,483

Maria Lobos Jamet

Transportes Polar S.A.

Subsidiary

Cash and cash equivalents

Trade and other receivables

2,565

Reclamaciones Trabajadores

Rio de Janeiro Refrescos Ltda.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

5,336,644

4,626,086

Reclamaciones Civiles Y Tributarias

Rio de Janeiro Refrescos Ltda.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

12,597,136

13,104,186

Instituciones Gubernamentales

Rio de Janeiro Refrescos Ltda.

Subsidiary

Property, plant and equipment

13,209,635

14,223,453

Distribuidora Baraldo S.H.

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

369

659

Acuña Gomez

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

553

989

Nicanor López

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

395

707

Labarda

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

Municipalidad Bariloche

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

21,420

38,315

Municipalidad San Antonio Oeste

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

40,682

72,768

Municipalidad Carlos Casares

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

1,645

2,943

Municipalidad Chivilcoy

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

254,430

455,104

Others

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

140

Granada Maximiliano

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

3,317

5,934

Cicsa

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

4,612

8,249

Locadores Varios

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

46,169

53,900

Aduana De EZEIZA

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

3,013

6,608

Municipalidad De Junin

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

1,592

5,755

Almada Jorge

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

4,949

8,853

Municipalidad De Picun Leufu

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

128

Migoni Marano

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

112

—

Farias Matias Luis

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

309

1,226

Temas Industriales SA - Embargo General de Fondos

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

231,077

—

Gomez Alejandra Raquel

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

Lopez Gustavo Gerardo C/Inti Saic Y Otros

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

226

403

Fondo Fima Ahorro Plus C

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, financial assets

—

519

Tribunal Superior De Justicia De La Provincia De Córdoba

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current, non-financial assets

290

—

DBC SA C CERVECERIA ARGENTINA SA ISEMBECK

Embotelladora del Atlántico S.A.

Subsidiary

Judicial Deposit

Other non-current, non-financial assets

41,465

—

Marcus A.Peña

Paraguay Refrescos

Subsidiary

Building

Property, plant and equipment

4,164

3,782

Mauricio J Cordero C

Paraguay Refrescos

Subsidiary

Building

Property, plant and equipment

904

800

José Ruoti Maltese

Paraguay Refrescos

Subsidiary

Building

Property, plant and equipment

758

715

Alejandro Galeano

Paraguay Refrescos

Subsidiary

Building

Property, plant and equipment

1,251

1,107

Ana Maria Mazó

Paraguay Refrescos

Subsidiary

Building

Property, plant and equipment

1,191

1,054

Total

31,816,784

50,651,324

Guarantees provided without obligation of assets included in the financial statements:

Provided by

Committed assets

Amounts involved

Warranty creditor

Name

Relationship

Guarantee

Type

12.31.2018

12.31.2017

ThCh$

Importadora Casa y Regalos

Trans-Heca S.A.

Subsidiary

Guarantee insurance

Compliance lease contract

—

2,050

Inmobiliaria e Inversiones Gestion Activa Ltda

Trans-Heca S.A.

Subsidiary

Guarantee insurance

Compliance lease contract

—

4,585

Inmobiliaria Portofino

Red de Transportes comerciales Ltda.

Subsidiary

Guarantee insurance

Guarantee bond

—

900

Teléfonica Chile S.A.

Red de Transportes comerciales Ltda.

Subsidiary

Guarantee insurance

Guarantee bond

—

1,000

Inmobiliaria San Martin Logista S.A

Red de Transportes comerciales Ltda.

Subsidiary

Guarantee insurance

Guarantee bond

—

3,461

Employee procedures

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guarantee insurance

Judicial action

2,601,353

1,496,862

Administrative procedures

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guarantee insurance

Judicial action

8,233,853

7,185,511

Gobierno Federal

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guarantee insurance

Judicial action

116,192,877

91,903,312

Gobierno Estadual

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guarantee insurance

Judicial action

43,015,207

20,527,817

HSBC

Sorocaba Refrescos S.A.

Associate

Loan

co-signers

3,586,095

3,716,747

Otros

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guarantee insurance

Judicial action

3,236,092

2,449,103

Aduana de Ezeiza

Embotelladora del Atlántico S.A.

Subsidiary

Bond insurance

Faithful fulfillment of contract

699,502

63,777

Aduana de Ezeiza

Andina Empaques S.A.

Subsidiary

Bond insurance

Faithful fulfillment of contract

182,459

347,990