23 – LITIGATION AND CONTINGENCIES

23.1 Lawsuits and other legal actions:

In the opinion of the Company’s legal counsel, the Parent Company and its subsidiaries do not face legal or extrajudicial 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 CLP 778,065 thousand (CLP 942,173 thousand in 2019). 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 CLP 295,856 thousand 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 CLP 47,945,921 thousand (CLP 66,070,162 thousand in 2019). 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 Deposit in courts 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, 2020 and 2019, amounted to CLP 21,054,433 thousand and CLP 32,166,823 thousand, respectively.

Part of the assets held under warranty by Rio de Janeiro Refrescos Ltda. as of December 31, 2014, are in the process of being released and others have already been released in exchange for guarantee insurance and bond letters for BRL 1,525,587,904, with different Financial Institutions and Insurance Companies in Brazil, these entities receive an annual commission fee of 0.79%. and 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) totaling BRL 2,471,137,390 at December 31, 2020.

The Company does not share the position of the Brazilian tax authority in these procedures and considers that it 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 legal 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. As a result of the acquisition of Companhia de Bebidas Ipiranga in 2013 and pursuant to this criterion and although there are contingencies listed only as possible for BRL 701,660,858 (amount includes adjustments for current lawsuits) a start provision has been generated in the accounting of the business combination for BRL 139,596,221 equivalent to CLP 19,098,159 thousand.

Other tax contingencies.

They refer to ICMS-SP tax administrative processes that challenge the credits derived from the acquisition of tax-exempt products acquired by the Company from a supplier located in the Manaus Free Zone. The total amount is BRL 409,075,280 being assessed by external attorneys as a remote loss, so it has no accounting provision.

The company was challenged by the federal tax authority for tax deductibility of a portion of goodwill in the 2014-2016 period arising from the acquisition of Companhia de Bebidas Ipiranga. The tax authority understands that the entity that acquired Companhia de Bebidas Ipiranga is Embotelladora Andina and not Rio de Janeiro Refrescos Ltda. In the view of external lawyers, such a statement is erroneous, classifying it as a possible loss. The value of this process is BRL 463,613,817, as of December 31, 2020.

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 CLP 1,300,587 thousand (CLP 2,065,496 thousand in 2019). 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 CLP 34,747 thousand (CLP 3,488 thousand in 2019). Management considers it is unlikely that non-provisioned contingencies will affect income and equity of the Company, in the opinion of its legal advisors.

23.2 Direct guarantees and restricted assets:

Guarantees and restricted assets are detailed as follows:

Guarantees that commit assets included in the financial statements:

Committed assets

Accounting value

Guaranty creditor

Debtor name

Relationship

Guaranty

Type

12.31.2020

12.31.2019

CLP (000’s)

Transportes San Martin

Embotelladora Andina S.A.

Parent Company

Cash

Trade accounts and other account receivable

2,907

2,805

Cooperativa Agricola Pisquera Elqui Limitada

Embotelladora Andina S.A.

Parent Company

Cash

Other non-current financial assets

1,216,865

Inmob. e invers. supetar Ltda.

Transportes Polar

Subsidiary

Cash

Other non-current non-financial assets

4,579

María Lobos Jamet

Transportes Polar

Subsidiary

Cash

Other non-current non-financial assets

2,566

2,565

Bodega San Francisco

Transportes Polar

Subsidiary

Cash

Other non-current non-financial assets

8,606

6,483

Workers Claims

Rio de Janeiro Refrescos Ltda.

Subsidiary

Judicial deposit

Other non-current non-financial assets

5,329,947

6,600,863

Civil and tax claims

Rio de Janeiro Refrescos Ltda.

Subsidiary

Judicial deposit

Other non-current non-financial assets

5,882,379

12,186,432

Governmental institutions

Rio de Janeiro Refrescos Ltda.

Subsidiary

Plant and Equipment

Property, plant & equipment

9,842,108

13,379,610

Distribuidora Baraldo S.H.

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

169

250

Acuña Gomez

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

253

375

Nicanor López

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

181

268

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

—

36,313

Municipalidad San Antonio Oeste

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

18,650

27,598

Municipalidad Carlos Casares

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

754

1,116

Municipalidad Chivilcoy

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

116,641

172,602

Others

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

Granada Maximiliano

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

1,521

2,250

Cicsa

Embotelladora del Atlántico S.A.

Subsidiary

Cash deposit

Other current non-financial assets

2,114

3,128

Several lessors

Embotelladora del Atlántico S.A.

Subsidiary

Cash deposit

Other current non-financial assets

13,140

15,289

Aduana de EZEIZA

Embotelladora del Atlántico S.A.

Subsidiary

Cash deposit

Other current non-financial assets

286

422

Municipalidad de Junin

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

243

360

Almada Jorge

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

2,064

3,054

Mirgoni Marano

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

Farias Matias Luis

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

947

1,401

Temas Industriales SA - Embargo General de Fondos

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

156,759

DBC SA C CERVECERIA ARGENTINA SA ISEMBECK

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

19,009

28,129

Coto Cicsa

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

3,379

5,001

Cencosud

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

2,112

3,125

Mariano Mirgoni

Embotelladora del Atlántico S.A.

Subsidiary

Judicial deposit

Other non-current non-financial assets

105,936

—

Marcus A.Peña

Paraguay Refrescos

Subsidiary

Property

Property, plant & equipment

4,011

3,955

Mauricio J Cordero C

Paraguay Refrescos

Subsidiary

Property

Property, plant & equipment

814

917

José Ruoti Maltese

Paraguay Refrescos

Subsidiary

Property

Property, plant & equipment

655

738

Alejandro Galeano

Paraguay Refrescos

Subsidiary

Property

Property, plant & equipment

1,132

1,275

Ana Maria Mazó

Paraguay Refrescos

Subsidiary

Property

Property, plant & equipment

1,077

1,213

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

Committed assets

Amounts involved

Guaranty Creditor

Debtor name

Relationship

Guaranty

Type

12.31.2020

12.31.2019

CLP (000’s)

Labor procedures

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guaranty receipt

Legal proceeding

1,527,347

2,819,285

Administrative procedures

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guaranty receipt

Legal proceeding

8,860,598

10,432,633

Federal Government

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guaranty receipt

Legal proceeding

147,841,989

138,635,908

State Government

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guaranty receipt

Legal proceeding

46,031,398

54,803,911

Sorocaba Refrescos

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guaranty receipt

Guarantor

2,736,159

3,715,186

Others

Rio de Janeiro Refrescos Ltda.

Subsidiary

Guaranty receipt

Legal proceeding

1,715,099

3,757,062

Aduana de EZEIZA

Embotelladora del Atlántico S.A.

Subsidiary

Surety insurance

Faithful compliance of contract

3,150

673,854

Aduana de EZEIZA

Andina Empaques Argentina S.A.

Subsidiary

Surety insurance

Faithful compliance of contract

143,615

506,623