ANNUAL REPORT OF FARMACIAS AHUMADA S.A 2002
Transcription
ANNUAL REPORT OF FARMACIAS AHUMADA S.A 2002
t m e n t c o m m i u s t t r r c y e n t r a n s p a n d p e e a c o f m i c i d e d ANNUAL REPORT OF FARMACIAS AHUMADA S.A 2002 a o n t i "This document is a free translation of the official Annual Report of Farmacias Ahumada S.A, originally issued in Spanish, that can be requested directly in our offices, or to investor@fasa.cl" [ I N D E X ] c o mmi tm e n t 1 Letter from the Chairman Identification of the Company Indicators of Interest Property Ownership and Control Board of Directors Organizational Structure Businesses Corporate Structure Information about Affiliates Identification of Other Companies and Related Companies Consolidated Financial Statements Individual Financial Statements Summarized Financial Statements Analysis of Financial Statements Relevant Facts c o m m i t m e n t c o m m i t m e n t l e t t e r f r o m i d e n t i f i c a t i o n o f t h e t h e c h a i r m a n c o m p a n y [ L E T T E R F R O M T H E C H A I R M A N ] JOSÉ CODNER CHIJNER Chairman of the Board Farmacias Ahumada S.A. To our Shareholders: 4 It is an honor for me to submit to you the 2002 Annual Report of Farmacias Ahumada S.A. (FASA), corresponding to the management of the company during the year 2002. states of that country, totaling 136,000 m2 of sales floor space. The company employs about 6,000 and serves about 100 million customers every year. The year that now ends will stand out as a very important landmark for the company: its entry into Mexico’s Retail Pharmacy sector. The decision to enter the Mexican pharmaceutical market –the largest in Latin America, with a population in excess of 100 million inhabitants– followed a rigorous strategic and financial analysis and represented the culmination of a 2 year process of mutual approaches and negotiations. Last December 23, the company materialized the acquisition of 67.95% of Mexico’s Farmacias Benavides (Far-Ben S.A. de C.V.) Pharmacy Chain investing US$ 45 million, by virtue of which we now control Far-Ben S.A. de C.V. and have become the largest Pharmacy Chain in Latin America. On the other hand, this complex global economic competitive environment in where we operate, with the financial results. year we had to face a very situation and a very tough those countries and markets ensuing deterioration of our Acquisition of FFarmacias armacias Bena vides Benavides The purchase of Farmacias Benavides in Mexico represents a very significant landmark in the history of our company. This purchase, in addition to our sustained sales growth in Chile, Brazil and Peru has transformed us into the main Pharmacy Chain in Latin America and one of the 12 largest in the world, with overall sales projections in the range of Ch$ 650,000 million; namely, in the order of US$ 900 million for 2003. Farmacias Benavides recorded 2002 sales over US$ 427 million, reaching a 3,1% market share in Mexico. It operates 523 Pharmacies throughout 108 cities and 17 Our control over Farmacias Benavides will enable FASA to generate significant advantages –both in terms of economies of scale as in our capacity to generate value and transfer of our business know-how– especially in managing Pharmacies and applying technology. Additionally, diversifying our income will enable us to ensure a stable long-term source of financing. In order to finance this acquisition, FASA issued a US$ 45 million 7 year Bond in the Chilean market, at a rate of UF + 5.79% per year. Such attractive terms, in addition to the 20% excess demand recorded when placing them, reflect the confidence of the market in the manner in which our Company is being managed and developed. This acquisition, however, is merely the first step toward meeting our strategic and profitability objectives. It is quite clear to us that our challenge in the years ahead will not be focused on the growth of sales –which we have met three years in anticipation of our plans as a result of our entry in Mexico– but rather, in being able to consolidate and make profitable our operations in each of the countries where FASA operates. [ L E T T E R F R O M T H E C H A I R M A N ] The extensive operational restructuring required by own pace of growth. Thus, during 2002, the increment of Farmacias Benavides constitutes a huge challenge for our Pharmacy counters was significantly higher than the 8,1% management. Moreover, each market in which we operate increment of the country’s pharmaceutical market. represents a different challenge that has to “This pur chase, in addition to our sustained sales purc be faced with a common competitive wth in Chile, Br azil and P eru has tr ansformed us transformed growth Brazil Peru strategy, suitable to be adapted to each gro specific market in the most effective and into the main Pharmac y Chain in Latin America and Pharmacy profitable manner possible. one of the 12 largest in the w orld, with o ver all sales world, ov erall FASA oper ations in Chile, Br azil and operations Brazil Peru. one of the 12 largest in the world, with overall sales projections in the rrange ange of Ch$ 650,000 million; namely ”. 2003”. namely,, in the order of US$ 900 million for 2003 Our operations in Chile, Brazil and Peru had to face an extremely difficult macroeconomic environment. The last two years were characterized by a contracted economic activity, weakening growth signals, and increasing social and political inestability, especially in some countries of Latin America. The expectations of increased economic activity have been continuously postponed because of a number of macroeconomic imbalances, the sharpening of the Middle East crisis, the drop of economic activity in the United States and a general slowdown in all the economies of Latin American and in Chile’s other main commercial partners. Additionally, in those countries in which we operate, the pharmaceutical market has increased its competitiveness, thus forcing us to adapt our strategy in order to achieve our predefined profitability objectives. A particularly competitive and complex enviroment has developed in Chile, such as we had not seen in the country for over a decade. The considerably higher margins of the year 2001, generated resources that enabled all market participants to expand over and above the industry’s These developments generated a strong competition among the different Drugstore Chains, unleashing a veritable price war toward the end of the last quarter of the year. The manner of confronting such aggressively competitive environment has lead us to boost our strategic focus, which will continue to be in increasing our operational efficiency so as to have a competitive and sustainable structure and to increase our market share of general merchandise and non-pharmaceutical products. In keeping with such strategy, last December the company started an aggressive cost reduction program that will bring about substantial savings to the company beginning in the year 2003. “It is quite clear to us that our cchallenge hallenge in the yyears ears ahead will not be focused on the gro wth of sales – w hic h we ha ve met growth whic hich hav three yyears ears in anticipation of our plans as a result of our entry in Mexico – but rrather ather ather,, in being able to consolidate and make profitable our oper ations in eac h of the countries operations each where FFASA ASA oper ates. operates. ates.”” 5 [ L E T T E R F R O M T H E C H A I R M A N On the other hand, we have continued to expand our “Drugstore”® type Pharmacy format, in tandem with the new habits of Chilean consumers that favors this type of convenience store format. Our future expansion plan is mostly geared towards incrementing our base of Pharmacies with self-service features, replacing our points of sale with small formats that depend almost exclusively from medication sales. We believe that –just as it happens in more developed markets such as those of the Northern Hemisphere and the United States in particular– these formats will continue to generate traffic based on their convenience, proximity and level of service. 6 During the year 2002, 74.6% (as compared to 77.8% in 2001) of our consolidated income and 83.0% (88.8% in 2001) of our EBITDA was generated by our operations in Chile, thus becoming our main source of business. Our 2002 market share -according to figures reported by IMS Health (the Nielssen equivalent for measuring pharmaceutical markets)– reached 33.1%, while sales increased by 6.7%. In Br azil, the environment of uncertainty generated by Brazil, the presidential elections and the subsequent macroeconomic imbalances made us reorient our short-term expansion plan there. The combined impact of a slower pace of expansion in the number of Pharmacies and an enhanced focus by management on internal operational improvements began to show its results during the year 2002 with a 46.2% growth in EBITDA, as compared to the year 2001 and a 15.4% growth in sales; both of them measured in local currency. Nevertheless, at the same time, we faced a devaluation of the Brazilian Real with respect to the Chilean Peso. ] Among the many operational improvements introduced in Brazil, it is important to highlight the roll out of SAP financial modules, the adaptation and modernization of the Distribution Center, and the introduction of the Recetario Magistral (compounding) customized prescription drugs, among the many other projects materialized. We expect management to continue focusing on optimizing internal operations in order to generate greater comparative advantages for the Company. Additionally, during the year 2003, we will begin to implement our exclusive agreement with GNC, Inc. for the Brazilian market. This, along with an expansion plan based solely on organic growth, will help to continue to improve the Company’s financial indicators for the year 2003. During the year 2002, 14.8% (14.4% in 2001) of our consolidated income and 6.3% (5.8% in 2001) of our consolidated EBITDA were generated by our operations in Brazil, where we reached a market share of 5.2% in the southern region of the country, as reported by IMS. Our oper ation in P eru finally completed our objective operation Peru of achieving nationwide market coverage during the year 2002. This strong expansion boosted our sales level by 26%, as compared with the previous year –measured in local currency– reaching a nationwide market share of 8.1%, a figure that is significantly higher than our closest competitor. Our plans for Peru are aimed at strongly enhancing our profitability during the coming years; we already have a solid base on which to continue to grow in terms of market share, without the need to grow significantly in terms of new sale outlets. During the year 2002, 10.6% (7.8% in 2001) of our consolidated income and 10.7% (5.4% in 2001) of our consolidated EBITDA were generated by our operations in Peru, where we achieved a market share of 15.2% in the city of Lima and of 8.1% nationwide. “F or the second consecuti ve yyear ear “For consecutiv ear,, FASA has been considered one of the w orld’ y Chains b y the orld’ss Top-10 Pharmac Pharmacy by prestigious North American magazine, Chain Drug Review Review,, in its December edition. edition.”” I n s u m , our consolidated sales grew by 7.4% (Ch$ 313,418 million) with respect to the results obtained in the year 2001. Operating costs amounted to Ch$ 235,902 million, as reflected by an increase of 8.6% with respect to 2001, while administrative & sale expenses totaled Ch$ 74,293 million (Ch$ 65,550 million in 2001). [ L E T T E R F R O M T H E C H A I R M A N The operating result for the year reached Ch$ 3,223 million (Ch$ 9,071 million in 2001), namely, 64.5% lower than that of 2001. Consolidated EBITDA reached Ch$ 8,667 million –2.8% of sales– representing a drop of 33.6% as compared to the year 2001, which was indeed a very atypical year. Finally, as a result of the events narrated above, the Company obtained a net profit of Ch$ 1,738 million –0.6% of sales– as compared to Ch$ 6,778 million obtained in 2001. The Company’s consolidated investments totaled Ch$ 12,651 million (Ch$ 10,521 million in 2001), aimed at increasing sales or implementing operative improvements, bringing about cost reductions; a permanent objective of Company policy. ] Shareholders Shareholders, we are pleased with progress to date, but we are mindful that our job is far from concluded. The challenge in the years ahead is to use the foundations that we have laid out to achieve increasing financial returns. Our 2002 results were below expectations; however, they provided us with lessons that behoove us to consider in order to commence 2003 with stronger than ever before. You may rest assured that our efforts will be aimed at maintaining the leadership that we have achieved and taking advantage of the opportunities that lie before us to add value to our shareholders. We are beginning this year 2003 with a strengthened organization, an efficient corporate area and collaborators who are guided by a clear vision and willing to assume challenges responsibly for the benefit of our shareholders, Clients and suppliers. Despite the short-term current deterioration of our 2002 financial results –when compared with the previous year– Cordially, our strategy has generated, and will to continue to generate, increasing returns that are higher than our capital cost. For the second consecutive year, FASA has been considered one of the world’s Top-10 Pharmacy Chains by the prestigious North American magazine, Chain Drug Review, in its December edition. Our suppliers recognize us as the best in the sector. Our investments in technology and our operational know-how have permitted us to generate important returns for our shareholders, while delivering the resources necessary to pursue our value creation strategy. Our Clients – according to independent surveys conducted recently– have distinguished us as the Pharmacy Chain that provides the best service in practically all the variables that were measured. 7 José Codner Chairman of the Board Farmacias Ahumada S.A. “W e are beginning this yyear ear 2003 with a “We strengthened organization, an efficient corpor ate area and collabor ators w ho are corporate collaborators who guided b y a clear vision and willing to by assume cchallenges hallenges responsibly for the benefit of our shareholders, Clients and suppliers”. [ I D E N T I F I C A T I O N O F T H E C O M P A N Y ] _ Business name: Farmacias Ahumada S.A. _ Commercial name: Farmacias Ahumada. _ Articles of Incorporation: Public Deed of November 28, 1997 granted before the Santiago Public Notary; Mr. Alvaro Bianchi Rosas. _ RUT – Taxpayer ID number: 93.767.000-1. _ Legal Address: Avda. Vicuña Mackenna 585, Santiago. _ Telephone: 56-2-2221122. _ Fax: 56-2-6619410. _ Website: www.farmaciasahumada.cl; www.fasacorp.cl _ Type of entity: Open Stock Company, registered in the Securities Registrar under N° 629. _ Registration in Commercial Registrar: Sheet 310, N° 167 of the Commercial Registrar of the Santiago Real Estate Registrar, 1978, _ Stock Exchange symbol: FASA. _ Quantity of shares of stock subscribed and paid: 150.000.000 _ Registration N° of the first issue (1997): N° 629 of the Securities Registrar. _ Registration N° of the capital increase (1999): N° 584 of the Securities Registrar. _ Main banks: Bice, BCI, CorpBanca, CitiBank N.A., Banco de Chile, Santiago, Santander. _ External Auditors: Deloitte & Touche. _ Risk Ratings: Fitch Chile – 8 Humphreys – _ Shares - First Class, level 3. Bonds Nº 309 – Category AShares - First Class, level 3. Bonds N° 309 – Category A Main legal counsels: Vial y Palma Legal Counsel - Chile Agüero, Aitken, Frías & Henríquez Legal Counsel. [ I D E N T I F I C A T I O N O F T H E C O M P A N Y ] Incorpor ation Bac kground Incorporation Background The Company was legally incorporated under the business name of Farmacias Ahumada S.A., as recorded in public deed dated November 28, 1977, granted by the Santiago Public Notary, Mr. Alvaro Bianchi Rosas. On October 15, 1997, Farmacias Ahumada S.A. was registered in the Securities Registrar of the Superintendence for Securities and Insurance Companies under Nº 629; thus, it is fiscalized by the referred superintendence. Business Bac kground Background The history of FASA –throughout its 34-year old trajectory– is the result of work committed and oriented toward meeting the needs of its Clients, enabling it to evolve from the traditional Pharmacy that it once was to Latin America’s largest and most modern Pharmacy Chain today. Its source of business is the sale of medications as well as health, hygiene and personal care products –among others– to the public through its Pharmacy Chains in the 4 countries where it presently operates: Chile, Mexico, Brazil, and Peru. Its main objective is giving access to medications and good health and, thus contributing to improving the quality of life of the community. In order to achieve this objective, Farmacias Ahumada S.A. has oriented its efforts toward offering a broad array of products and services providing more economical and higher quality alternatives to consumers. com m it m The various product categories that FASA has managed to offer its customers a broad mix representing some 22,600 products; notable among them: its own private label products, Recetario Magistral (compounding) customized prescription drugs, GNC and others; efforts that will be continuously boosted in order to increase brand name differentiation, customer retention and purchasing value. The foregoing has permitted expanding the total number of customers served, thus serving over 169 million Clients last year, which represents a 140% increase with respect to the e nt previous year, an increment that is mostly attributable to the incorporation of the Mexican pharmaceutical market. Business Objecti ve Objectiv The business objective of Farmacias Ahumada S.A. is to manufacture toiletries, chemical and pharmaceutical products; to import, export, distribute and market products of the industry or of similar products of other industries, both domestically and abroad; the organization, management and development of retail commercial establishments for the sale of foodstuffs, such as mini-markets, selfservice convenience stores, supermarkets and others and to represent national and foreign companies within the scope and range of the Company’s business objective. 9 t r u s t t r u s t i n d i c a t o r s o f i n t e r e s t [ I N D I C A T O R S O F I N T E R E S T ] A. NET EARNINGS. In billion pesos as of December 2002 Consolidated Profits for the year 2002 amounted to Ch$ 1,738 million, representing 0.6% of sales. 6.8 4.4 3.4 3.7 1.7 12 1998 1999 2000 2001 2002 Does not consolidate with Mexico in 2002 [ I N D I C A T O R S O F I N T E R E S T ] B. EBITDA .(Earnings before Interest, Tax Depreciation and Amortization) In billion pesos as of December 2002 The EBITDA amounted to Ch$8,667 million –2.8% of sales– while that of the year 2001 amounted to Ch$13,059 13.1 million. 8.7 8.6 5.5 1998 6.4 1999 2000 2001 2002 Does not consolidate with Mexico in 2002 C. SALES. In billion pesos as of December 2002. The Chain’s consolidated sales increased by 7.4% with respect to the previous year, amounting to Ch$ 313,418 313.4 million, demonstrating FASA’s solid leadership in the region. 298.5 241.1 173.1 137.5 1998 1999 2000 2001 2002 Does not consolidate with Mexico in 2002 13 [ I N D I C A T O R S O F I N T E R E S T ] D. CAPITAL INVESTMENTS. In billion pesos as of December 2002. Following a planned strategy, materialized investments totaled Ch$ 12,652 million, mainly aimed at operational improvements to enable increased sales and reduced costs. 12.7 10.5 8.7 6.5 1998 5.8 1999 2000 2001 2002 14 Does not consolidate with Mexico in 2002 E. NUMBER OF PHARMACIES. Continuing our expansion and internationalization plan, the number of Pharmacies increased by 161% with respect to the previous year, which is mainly attributable to 523 new outlets in Mexico and to the opening of 71 Pharmacies in Chile, Brazil and Peru, all of 963 which meant concluding the year with 963 Pharmacies. Chile Brazil Peru Mexico 369 315 167 195 1998 1999 2000 2001 2002 [ I N D I C A T O R S O F I N T E R E S T ] F. SALES ROOM FLOOR AREA. IN THOUSAND SQUARE METERS. Sale room square meters increased by 248% with respect to the previous year, amounting to 197,000 square meters, which enabled serving and meeting the needs of over 169 million Clients. The foregoing is mainly attributable to the addition of 136,000 square meters in Mexico. 196.9 Chile Brazil Peru Mexico 56.5 46.4 22.3 16.6 1998 1999 2000 2001 2002 15 G. NUMBER OF CUSTOMERS SERVED. Thousand clients served. During the year 2002, the number of Clients served increased by 140%, as compared to the previous year, totaling 169 million. This increment was mainly owed to the addition of Farmacias Benavides in Mexico, which served more that 94 million customers. The foregoing implies a huge challenge for the Company, as it continues to apply high standards of commitment, efficiency and service to the community. 168.5 Chile 70.3 Brazil Peru Mexico 59.2 38.0 45.6 1998 1999 2000 2001 2002 [ I N D I C A T O R S O F I N T E R E S T ] H. NUMBER OF EMPLOYEES. Thousand people. The Company continues to be an important source of work in those countries in which it operates. Thus, in 2002, contract personnel increased by 115% -as compared with the previous year- representing a fully committed and well trained labor force of over 13,000 13.0 colaborators; of which, over 6,000 of them work in FASA Mexico. Chile Brazil Peru Mexico 5.5 3.1 1998 6.1 3.5 1999 2000 2001 2002 16 I. PHARMACEUTICAL MARKET SHARE (SALES), BY COUNTRY (%) Chile FASA is the Number One in all the markets in which it operates, its market share is: 33.1 Brazil (Southern Zone *) 5.2 66.9 Peru 8.1 Mexico 3.1 94.8 91.9 (*)Drogamed has operations in the states of Parana, Santa Catalina and Rio Grande di Sul. 96.9 [ I N D I C A T O R S O F I N T E R E S T ] “W e are pleased with our progress to date, but we are mindful “We that our job is far from be concluded. The cchallenge hallenge in the yyears ears ahead is to have the foundations that we have laid out these last years translate into greater yields”. 17 s t r u t p a r e n c y y s c n n a e r r t t r a n s p a p r o p e r t y o w n e r s h i p b o a r d a n d c o n t r o l o f d i r e c t o r s o r g a n i z a t i o n a l s t r u c t u r e b u s i n e s s c o r p o r a t e a c t i v i t i e s s t r u c t u r e [ P RR OO PP E I R E T DY A DO W Y N E CR OS H N IT P R O A LN ] D C O N T R O L ] OWNERSHIP STRUCTURE. As of December 31, 2002, there were 150,000,000 registered shares subscribed and paid, whose ownership is distributed among 446 shareholders as follows: Shareholders Nº of Shares Number of Members % de Shareholding Codner Family y and Executives 71,396,454 109 47.6% Falabella 30,000,000 1 20.0% Institutional 17,138,061 56 11.4% AIG 11,087,339 4 7.4% LHF 11,000,010 1 7.3% 9,378,136 275 6.3% 150,000,000 446 100% Minority Shareholders Total Shares 20 6.3 % 7.3 % Codner Family and Executives 7.4 % Minority Shareholders 47.6 % LHF AIG Institutional 11.4 % Falabella 20.0 % [ P RR OO PP E I R E T DY A DO W Y N E CR OS H N IT P R O A LN ] D C O N T R O L ] CONTROLLER IDENTIFICATION. The following table depicts the members that comprise the group that controls the company: Controling Group Company RUT Natural Person Natural Person RUT % shareholding % shareholding of of the natural person in the Controling Company Farmacias Ahumada S.A. Inversiones Galia S.A. 79.799.330-1 José Codner Chijner 4.255.530-4 50.00% 21.6% Inversiones Zermatt Dos Limitada 77.690.510-0 Jaime Sinay Assael 6.377.768-4 60.00% 0.5% Inversiones Zermatt Limitada 78.482.780-1 Jaime Sinay Assael 6.377.768-4 60.00% 3.5% Inversiones Los Alpes S.A. 96.508.010-4 José Codner Chijner 4.255.530-4 99.99% Inversiones Positano S.A. 96.947.530-8 Denise Codner Dujovne 6.377.789-7 96.63% 4.1% 2.6% Inversiones La Golondrina S.A. Inversiones Tomalex S.A. 96.947.550-2 96.947.510-3 Ethel Codner Dujovne 6.377.788-9 Karen Codner Dujovne 7.629.503-4 96.63% 96.63% Inversiones Tulum Limitada 78.482.810-7 Bernardo Bendov Codner 6.584.450-8 90.00% 2.6% 2.6% 0.7% The agreements executed by the Controlling Shareholders, are recorded under the respective Shareholder Agreements duly registered in the Company’s Shareholder Registrar. The company S.A.C.I. Falabella - RUT Taxpayer identification number 90.749.000-9 - represents 20% of the property ownership of Farmacias Ahumada S.A. and is not a member of the controlling group. LIST OF THE COMPANY’S TWELVE PRINCIPAL SHAREHOLDERS The Company’s 12 largest shareholders represent 74.4% of the property ownership of the Company. SHAREHOLDER'S NAME Shareholding as of December 2002 Percent Property Ownership 1 INVERSIONES GALIA S.A. 32,326,273 21.6% 2 S.A.C.I. FALABELLA 30,000,000 11,000,010 6,179,018 5,596,998 5,295,944 4,445,155 20.0% 7.3% 4.1% 3.7% 3 LATIN HEALTH CARE CHILE LIMITADA 4 INVERSIONES LOS ALPES S.A. 5 FICE DE RIESGO AIG LATIN AM.EQUITY P.LD. 6 INVERSIONES ZERMATT LTDA. 7 AFP PROVIDA S.A. PARA FONDO DE PENSIONES 3.5% 3.0% 2.6% 8 INVERSIONES LA GOLONDRINA S.A. 3,969,728 9 INVERSIONES POSITANO S.A. 3,969,728 3,969,728 2.6% 10 INVERSIONES TOMALEX S.A. 11 AFP CUPRUM S.A. PARA FONDO DE PENSIONES 3,079,939 2.1% 12 LARRAIN VIAL S.A.CORREDORES DE BOLSA 1,892,926 1.3% 25.6% 13 OTHERS 434 SHAREHOLDER'S Total 38,274,553 150,000,000 2.6% 100% 21 [ P RR OO PP E I R E T DY A CHANGES IN DO W Y N E CR OS H N IT P R PROPERTY O A LN ] D C O N T R O L ] OWNERSHIP. The most important changes in FASA’s property ownership occurring during 2002 were: Rut Shareholder 22 Number of 2002 Shares Number of 2001 Shares Change % INVERSIONES GALIA S.A. 79.799.330-1 28,762,026 32,326,273 12.4 AFP PROVIDA S.A. PARA FONDO DE PENSIONES 98.000.400-7 2,563,582 4,445,155 73.4 AFP HABITAT S.A. PAR 98.000.100-8 0 1,788,303 100.0 LARRAIN VIAL S.A.CORREDORES DE BOLSA 80.537.000-9 692,321 1,892,926 173.4 CNA CHILE, COMPAÑIA DE SEGUROS DE VIDA 96.579.280-5 743,315 0 (100.0) CITICORP CHILE FDO DE INV.MOBILIARIA 96.613.580-8 1,150,932 305,598 (73.4) MONEDA S.A. AFI PARA PIONERO FIM 96.684.990-8 4,505,241 1,815,000 (59.7) INVERSIONES ZERMATT LTDA. 77.690.510-0 8,815,575 5,295,944 (39.9) SHARES PURCHASED/SOLD. The stock traded among FASA’s board members and senior executives was the following : Shareholder Rut Number of shares traded Unit Price Transaction Relationship with the Company Shareholder Inversiones Galia S.A. 79.799.330-1 3,564,247 851 Inversiones Zermatt Ltda. 78.482.780-1 3,519,631 22.8 Inversiones Zermatt Dos Ltda. 78.690.510-0 3,519,631 22.8 Inversiones Zermatt Dos Ltda. 78.690.510-0 2,815,575 811 Sale Via board members 96.508.010-4 373,672 1.030 Sale Via board members 7.770.224-5 500,000 900 José Ferrer F. 14.657.095-K 350,000 740 Marcelo Weisselberger 10.032.623-K 200,000 900 Acquisition Executive Eduardo Trénova 7.550.572-8 100,000 900 Acquisition Executive Fernando Marín 9.991.512-9 75,000 900 Acquisition Executive Cristián Troncoso 6.974.142-8 75,000 900 Acquisition Executive Stephan Jarpa 9.028.072-4 50,000 900 Acquisition Executive Jorge Vidal 9.747.239-4 75,000 900 Acquisition Executive 78.482.780-1 31,000 900 Acquisition Executive Inversiones Los Alpes S.A. Alejandro Rosemblatt K. Rodrigo Nieto Acquisition Sale Acquisition Acquisition Sale Via board members Via board members Executive Executive [ P RR OO PP E I R E T DY A DO W Y N E CR OS H N IT P R O A LN ] D C O N T R O L ] DIVIDEND POLICY. The Company’s by laws establish that the minimum dividends to be distributed – unless unanimous agreement of the shareholders must be the equivalent of 30% of each year’s profit. Notwithstanding the foregoing, the Board may agree to distribute higher dividends, when the Company’s economic and financial condition, as well as that of the countries in which it operates, may so warrant. Next, there is a list of the last 14 dividends paid out by the Company: Payment Date Fiscal Year Condition 01-11-96 1995 1996 Final Temporary 3.500 58,660,509 7.670 58,660,509 04-28-97 1997 Temporary Temporary 04-29-98 1997 1997 1.100 6.000 58,660,509 01-23-98 01-12-99 1998 05-10-99 12-13-96 Ch$/Share (Histórical) Nº Shares Final Temporary 1.026 97,947,521 97,947,521 7.000 97,947,521 1998 Final 2.217 97,947,521 01-20-00 1999 Temporary 5.000 148,479,719 05-11-00 1999 Final 2.935 150,000,000 09-20-00 2000 Temporary 4.000 150,000,000 05-10-01 2000 Final 5.928 150,000,000 09-20-01 2001 Temporary 9.000 150,000,000 05-07-02 2001 Final 7.000 150,000,000 2002 Temporary 8.000 150,000,000 09-24-02 23 [ P R O P E R T Y O W N E R S H I P A N D C O N T R O L ] SHARE PRICE PERFORMANCE. Fasa IPSA FASA vs IPSA 2002 250 200 150 100 dec-02 sep-02 jun-02 mar-02 dec-01 sep-01 jun-01 mar-01 dec-00 sep-00 jun-00 mar-00 dec-99 sep-99 jun-99 mar-99 dec-98 sep-98 jun-98 mar-98 dec-97 50 The trend shows the excellent performance of the Company as reflected in FASA’s price per share performance, which grew by 15.8% during 2002, while the IPSA index of selected stock prices was -15.5%. 24 SUMMARY OF SHAREHOLDERS’ COMMENTS AND PROPOSALS. Pursuant to the provisions established by article 74 of Law N° 18,046 about Publicly Traded Corporations, we hereby report that no comments were received about the Company’s business operations between January 1 and December 31, 2002 from majority shareholders or from groups of shareholders adding up to 10% of more of the Company’s issued shares with right to vote. t r a n s p a r e n c y “THE MARKET CO TINUES T O VALUE AND COTINUES TRUST OUR WORK. THIS IS REFLECTED IN THE FACT THA T WE HA VE BECOME ONE OF CHILE’S THAT HAVE T OP PERFORMING SHARES OF THE YEAR 2002. 2002.”” [ B O A R D O F D I R E C T O R S ] BOARD OF DIRECTORS. Farmacias Ahumada S.A. is managed by a Board of Directors comprised of 9 board members and 9 alternate board members elected to serve for a 3-year term of office, subject to reelection. The Board of Directors is integrated by the following members: Name Position Profession R.U.T. José Codner Chijner Chairman Pharmacist 4.255.530-4 Eduardo Bellinghausen Pizarro Vice Chairman Lawyer Gabriel Berczely Apor Juan Cúneo Solari Board Member Lic. Degree in Management Board Member Comercial Engineer Alexander Fernández Montenegro Board Member Business Administrator 9.604.686-3 Carlos Heller Solari Board Member Agronomist 8.717.000-4 Raymond Joseph Dunn IV Board Member Business Administrator Jaime Sinay Assael Board Member Industrial Civil Engineer 6.377.768-4 Mario Valdivia Bernstein Board Member Industrial Civil Engineer 6.987.378-2 Manuel José Vial Vial Secretary off the board of directors Lawyer 5.894.819-5 3.515.184-2 12.084.477-6 3.066.418-3 Foreigner This Annual Report was unanimously subscribed by the Company’s Board of Directors. 25 DIRECTORS’ FEES The fees paid out during the year 2002 and 2001 – in local currency – to Farmacias Ahumada S.A.’s Board members, were the following: 2002 Board Directors' of Directors Committee Ch$ th. Jose Codner Ch. 13,339 Ch$ th. 3,806 Dividend Part. Ch$ th. 2001 Professional Services Ch$ th. Total Ch$ th. 19,699 2,554 Total Directors' Committee Ch$ th. Ch$ th. Ch$ th. 4,785 1,559 19,674 8,254 13,330 Dividend Part. Professional Services Board of Directors Ch$ th. Ch$ th. Eduardo Bellinghausen P. 7,022 2,554 9,576 6,695 1,559 Gabriel Berzely A. 5,269 2,554 7,823 4,601 1,559 6,160 Juan Cúneo S. 6,436 2,554 8,990 6,665 1,559 8,224 Alexander Fernández M. 7,019 17,475 7,252 1,559 13,596 Carlos Heller 4,093 5,109 2,554 2,793 1,355 5,448 Raymond Joseph D. Jaime Sinay A. 6,434 7,022 2,554 5,109 Manuel José Vial V. 2,314 20,010 5,351 2,554 11,022 14,685 6,665 1,542 1,542 4,910 1,199 3,513 8,813 Julio Urrutia E. Karen Codner Totals 1,060 1,060 Mario Valdivia B. Bernardo Fontaine T. 4,785 4,785 1,559 1,500 8,410 1,559 6,170 19,179 4,910 1,559 502 586 586 59,534 10,874 586 586 14,024 21,974 13,815 109,347 65,928 14,355 12,472 8,172 100,927 [ B O A R D O F D I R E C T O R S ] DIRECTORS’ EXPENSES During the year 2002, the expenses incurred by the Board of Directors of Farmacias Ahumada S.A. totaled Ch$ 109,347,000, corresponding to Director’s fees, dividend participation and professional services. The remuneration perceived by board members from Affiliates is only that which was paid out by ABF S.A. to Mrs. Eduardo Bellinghausen P. and Winston Chinchón totaling Ch$ 4,017 thousand. DIRECTORS’ COMMITTEE Farmacias Ahumada S.A.’s Directors’ Committee is comprised by the following board members: Name 26 Pharmacist 4.255.530-4 Alex Fernández Montenegro Business Administrator 9.604.686-3 Mario Valdivia Bernstein Industrial Civil Engineer 6.987.378-2 s n a r R.U.T. José Codner Chijner p t Profession a r e n c y [ B O A R D O F D I R E C T O R S ] COMMITTEE ACTIVITIES. The activities developed by the Directors’ Committee are framed within the provisions established pursuant to article 50 bis and Law N° 18,046; namely: to examine and approve the financial statements, to propose the external auditing firm and the risk rating firm, to examine the background information regarding operations as well as the remuneration systems and benefit plans for Managers and senior executives. COMMITTEE EXPENSES. Total expenses incurred by the Directors’ Committee amounted to Ch$ 14,024 thousand. “T he history of FFASA ASA -throughout its 34-y ear old tr ajectory– “The 34-year trajectory– is the result of work committed and oriented toward meeting the needs of its Clients, enabling it to evolve from the tr aditional Pharmac y that it once w as to Latin America’ traditional Pharmacy was America’ss y Chain toda y.”. largest and most modern Pharmac today Pharmacy 27 [ O R G A N I Z A T I O N A L S T R U C T U R E ] FARMACIAS AHUMADA S.A.’S MANAGEMENT. BOARD OF DIRECTORS Enrique Cibié Corporate Chief Executive Officer C Alejandro Rosemblatt Corporate Chief Finance Officer Marcelo Salinas Corporate p Chief Development p Officer Cristián Troncoso Corporate p Chief ffor Strategic g Products Officer Elmer Torres Director for Pharmaceutical & Regulatory Affairs Felipe Hurtado Corporate General Secretaryy Liliana Ramírez Corporate Auditing Officer Rafael Vicuña General Counsel 28 Bernardo Ben-D Dov Fasa Chile Chief Execut ut utive Officer Ricardo Terrazas Fasa Brasil Chief Executive Officer Ricardo Palominos Fasa Peru Chief Executive Officer Alvaro Rodr R íguez g Fasa Mexi xico Chief Executive xic Officer [ O R G A N I Z A T I O N A L S T R U C T U R E ] UPPER MANAGEMENT. Name Position Profession R.U.T. Nationality y Enrique Cibié B. Corporate Chief Executive Officer Comercial Engineer 6.027.149-6 Chilean Alejandro Rosemblatt K. Corporate Chief Finance Officer Comercial Engineer 7.770.224-5 Chilean Elmer Torres C. Director for Pharmaceutical & Regulatory Affairs Pharmacist 4.839.517-1 Chilean Felipe Hurtado P. Corporate General Secretary Lawyer 7.010.347-8 Chilean Marcelo Salinas P. Corporate Chief Development Officer Industrial Civil Engineer 8.531.787-3 Chilean Cristian Troncoso J. Corporate Chief for Strategic Products Officer Comercial Engineer 6.974.142-8 Chilean Liliana Ramírez M. Bernardo Ben - Dov C. Corporate Auditing Officer Fasa Chile Chief Executive Officer Accountant Auditor Comercial Engineer 9.405.149-9 6.584.450-8 Chilean Chilean Álvaro Rodríguez A. Fasa Mexico Chief Executive Officer Lic. Degree in Economics Ricardo Terrazas M. Fasa Brazil Chief Executive Officer Naval Engineer 8.586.797-0 Chilean Ricardo Palominos R. Fasa Peru Chief Executive Officer Medical Technologist 6.513.025-4 Chilean Foreigner Mexican Managers’ Compensation Gross compensation paid out to Company’s Managers during the year 2002 amounted to Ch$ 2,485,962 thousand. Incenti v es Plan Incentiv Company executives participate in an Incentives Plan that compensates them as a function of the results obtained by Management, in addition to a Company’s Share Options program. Sev er ance P ay Sever erance Pa During the year 2002, the Company paid out Ch$ 140,468 thousand on account of severance pay for years of service to those managers who ceased their employment with the Company. Management of Subsidiaries: The Company is organized in a manner such as to clearly separate corporate management & direction, from the tasks related to distribution & sales through Pharmacy Chains operating in the four markets. 29 [ O R G A N I Z A T I O N A L S T R U C T U R E ] 1. Senior Management Chile. Name Position Profession R.U.T. Nationality y Chief Executive Officer Comercial Engineer 6.584.450-8 Chilean Chief Comercial Officer Comercial Engineer 7.550.572-8 Chilean Chief Operation Officer Industrial Civil Engineer Marcelo Weisselberger A. Chief Admin. and Finance Officer Comercial Engineer 8.069.997-2 10.032.623-K Chilean Chilean Hernán Ramadanovich C. Chief Real Estate Property Officer Business Administrator 5.065.612-8 Chilean Rodrigo Picas O. Chief Information Systems Officer Industrial Civil Engineer 7.981.229-3 Chilean Patricio Lira K. Chief Logistics Officer Industrial Civil Engineer 8.494.420-3 Chilean Bernardo Ben-Dov C. Eduardo Trenova C. Jorge Cañas A. 2. Senior Management Mexico. Name 30 Position Profession R.U.T. Nationality y Foreigner Mexican Alvaro Rodríguez A. Chief Executive Officer Lic. Degree in Economics Jaime Poblete S. Chief Admin. and Finance Officer Industrial Civil Engineer 8.285.435-5 Chilean Enrique Mendoza D. Chief Operation Officer 14.637.209-0 Spanish Alberto Herane H. Chief Comercial Officer Lawyer Comercial Engineer Fernando Benavides S. Chief Information Systems Officer Industrial Civil Engineer 6.374.695-9 Foreigner Chilean Mexican 3. Senior Management Brazil. Name Position Profession R.U.T. Nationality y Ricardo Terrazas M. Chief Executive Officer Naval Engineer 8.586.797-0 Chilean Paulo Camargo S. Chief Operation Officer Business Administrator Foreigner Gilson Coelho N. Franc Correa R. Chief Commercial Officer Business Administrator Foreigner Brazilian Brazilian Chief Admin. and Finance Officer Accountant Foreigner Brazilian [ O R G A N I Z A T I O N A L S T R U C T U R E ] 4. Senior Management - Peru. Name Profession Position R.U.T. Nationality y Ricardo Palominos R. Chief Executive Officer Medical Technologist 6.513.025-4 Chilean Maryse Verano R. Chief Operation Officer Business Administrator Foreigner Peruvian Luis Díaz U. Chief Commercial Officer Comercial Engineer 8.518.061-4 Chilean José Antonio Vargas G. Chief Admin. and Finance Officer Industrial Civil Engineer Foreigner Peruvian Distribution of Human Resources Following is a list of employees working at Farmacias Ahumada S.A. and its related companies - as of December 31, 2002 - hired under indefinite term contracts: FASA Corp p FASA Brazil FASA Chile FASA Peru FASA Mexico (*) Total Principal Managers and Executives 5 34 4 4 31 78 Pharmacists. 0 574 253 226 0 1,053 7 3,096 1,620 828 6,346 12,897 11 3,704 1,877 1,058 6,377 13,028 Workers Totals (*) FFASA ASA Mexico considers the oper ation of FFarmacias armacias Bena vides, Cafeterias and Photo Shops. operation Benavides, The success of FASA along its existence is based on a solid Human Resources Policy whose aim is to meet the aspirations of its collaborators by maintaining and developing a healthy and safe working environment enabling them to develop personally and professionally. This policy includes, primarily, continuous training at all levels of the organization and a strong support to extra curricular activities like sports, cultural or social events that tend to strengthen their sense of belonging and permit enjoying direct and positive interpersonal relationships. Its continuous commitment to generating an open and respectful communication with its employees, guided by the objective of satisfactorily aligning their individual interests with the goals and objectives of the Company has helped develop the entrepreneurial qualities that have distinguished FASA in the domestic market bolstering its international growth perspectives. 31 [ B U S I N E S S A C T I V I T I E S ] Review of Historical Expansion. The origins of Farmacias Ahumada S.A. can be traced diversifying its income sources by providing medications back to 1968, the year in which Mr. José Codner Chijner acquired Farmacia York, located on Compañía Street, in coverage to various regular companies and insurance companies. Santiago. Subsequently, in 1969, a second Pharmacy was opened up on the corner of Ahumada and Huérfanos In the year 2000, an association was established with streets, thereby originating the name of today’s Chain. AIG Capital Partners Inc. (AIG), by virtue of the incorporation of Fasint Ltda., in which FASA has a 65% During the decade of the 1970’s, a gradual expansion plan was launched totaling 10 sale outlets. Likewise, stake and AIG 35%, with the purpose of making inroads into the Brazilian market. In May of that same year, it during that same period, the Company exhibited an innovative management style that has remained over time. acquired 77% of Drogamed in US$ 25 million (historical figure), which is the main Pharmacy Chain in the South of Brazil. In the beginning of the decade of the 1990’s, the 32 Company launched a business area growth and expansion plan. In 1992, Farmacias Ahumada had 44 Also in the year 2000, FASA acquired 50% of the property ownership of Compañía de Nutrición General Pharmacies in the Santiago Metropolitan Region and opened its first Pharmacy in the Fifth Region. S.A. (CNG), representative of the world’s main nutritional products company, GNC. This operation enabled the The Company’s international expansion plan began Company to distribute in Chile products of natural origin, nutritional supplements, and vitamins. in the 1996 with the incorporation of Boticas FASA S.A. in Peru. That same year, the Company inaugurated a Farmacias Ahumada S.A. has implemented an expansion new DLI Distribution Center that significantly enhanced its logistical operations. strategy in Latin America, with development plans oriented mainly to the detection and evaluation of In December 1997, the Company launched its initial markets that exhibit high development potential. With this purpose, during the same year 2000, the Company public offering, and began trading its shares at the Santiago Stock Exchange carrying out a US$ 21 million (historical reorganized into three divisions for the operation of its Pharmacies in figure) capital increase. Two years afterwards, in 1999, it carried out a second capital increase; this time for US$ Chile, Brazil and Peru, respectively, 47 million. and created a corporate area In 1998, the Company incorporated its affiliate ABF, Administradora de Beneficios Farmacéuticos S.A. whose task is the overall coordination (pharmacy benefits manager), with the purpose of of FASA. “During the decade of the 1970’ s, a gr adual 1970’s, gradual expansion plan was launched totaling 10 sale outlets. Likewise, during that same period, the Company exhibited an innovative management style that has remained over time”. [ B U S I N E S S A C T I V I T I E S ] During the first half of the year 2001, the Company increased its shareholding in CNG to 67% and obtained Financing 100% control of its business ventures in Peru and Brazil; in the latter country, jointly with AIG, by virtue of the On December 5, 2002, Farmacias Ahumada S.A. issued de-materialized Bonds to the order of the Bearer acquisition of the remaining 15% and 23% stake in Boticas FASA and Drogamed, respectively. Also during in the Chilean market for 2 million UF, registered under N°309 of October 17, 2002 in the Securities Registrar of that same year, the Company incorporated its affiliate Administradora de Beneficios Farmacéuticos do Brasil S.A. the Superintendence for Securities and Insurance Companies at the nominal rate of 5.25% per year. The In October 2001, the Company launched its SAP maturity of these bonds is 7 years, with 2 years of grace, and it may be prepaid totally or partially as of the second project, whose objective was to implant in all the FASA operations in Chile and Brazil an overall solution that year. The first amortization installment was set for April 15, 2005. would provide a common Business Model for all the Subsidiaries. These bonds were classified as A- by Fitch and as A by Humphreys. During the first half of the year 2002, the Company executed a Master-type licensing contract with GNC, for the Peruvian territory. Additionally, it launched its own Among the individual and consolidated financial safeguards FASA must maintain a level of indebtedness website: www.farmaciasahumada.cl, thus becoming the first Chilean website to make available to users wide information about medications and pharmaceutical not higher that 0.8 times and maintain in its individual financial statement a coverage ratio for net financial services through the web. On December 23, 2002, Farmacias Ahumada S.A., through its affiliates Fasa Investment S.A. and Inverex S.A., took over the stock control of the Mexican company, Far-Ben S.A. de C.V., by virtue of subscribing and paying a capital increase in Far-Ben of US$ 45 million. Throughout its over 34 years, Farmacias Ahumada S.A. has managed to consolidate strong competitive advantages that s ustain its current leadership in the Retail Pharmaceutical industry. The size of the Company, its knowledge of the business, the solid positioning of its brand names, the privileged location of its Pharmacies, its strategic alliances and scope of the differents products and services that it delivers, are now an integral part of its business strategy. expenses not below 2.5 times, at the closing of each quarter up to the quarter ending on December 31, 2003, and not below 3.0 times at the closing of each subsequent quarter. In addition to the financial clauses it also establishes that the issuer may not divest itself of essential assets, such as its trademarks Farmacias Ahumada and FASA. The funds raised by the referred Bond Issue shall be allocated to the stock control takeover of the Mexican company Far-Ben S.A. de C.V. The Bond issue was placed in the Santiago Stock Exchange at the average rate of 5.79%, which was equivalent to a 257-point spread over equivalent bonds issued by the Central Bank of Chile. The conditions that the Company was able to secure for such bond placement are a reflection of the good perception enjoyed by Farmacias Ahumada S.A. in the market as well as by its risk rating. The bonds were mostly acquired by institutional investors, among them pension funds, life insurance companies, mutual funds, banks, stock brokers and managed portfolios. 33 [ B U S I N E S S A C T I V Company Activities. Clients The Clients of Farmacias Ahumada S.A. add up to over 169 million custumer who visit our Pharmacies yearly in Chile, Mexico, Brazil and Peru. Additionally, the Client portfolio is comprised of insurance companies and private companies, which - through the ABF affiliates subsidiaries in Chile and Brazil - provide medication benefits to its affiliate members and employees. Contracts Most of the Company’s contracts currently in effect, relate to the rental of sale outlets for the installation of Pharmacies. 34 I T I E S ] Suppliers The Company maintains relationships with all pharmaceutical manufacturers in those countries in which it operates and other suppliers - both domestic and foreign - to procure its products for sale. Insur ance P olicies Insurance Policies The insurance program established by Farmacias Ahumada S.A. and its affiliates includes coverage for the most diverse risks, including among them, insurance over stocks, fires, remittal of securities, theft, civil responsability, equipment and damages for stoppage. [ B U S I N E S S A C T I V “ We ha ve continued to expand our hav Drugstore ® type Pharmacy format, in tandem with the new habits of Chilean consumers that favors this type of convenience store format. “ I T I E S ] Investment and Financing Policies. In v estment P olic y Inv Polic olicy FASA will continue its investment program in order to meet its expansion plan. To that effect, the Company’s Management shall be empowered to materialize investments in the business on the basis of the plans previously approved by the Board as well as in profitable projects, according to technical and economic criteria. F inancing P olic y Polic olicy FASA has a financing policy that favors maintaining a low level of debt. To that effect, the Company has used its own resources from its profit flow and/or capital increases, and it is the intention of its shareholders to stick to such policy in the long run. Main Consolidated Figures of the Year 2002 (*) Net Profits totaled over US$ 2.4 million. Sales grew by 7.4%, reaching US$ 436.1 million. The consolidated EBITDA amounted to US$12.1 million. Continuing with the Expansion Plan, investments totaled US$ 17.6 million. Upon ending the year 2002, there were 963 Pharmacies in operation; of which, 234 were in Chile, 115 in Brazil and 523 in Mexico. There were 71 new Pharmacy openings during the year. The company’s Sales room floor area grew by 248%, totaling 196,000 square meters. More than 169 million customers were served. The Company’s total labor force now exceeds 13,000 employees (*) Operating indicators include Fasa Mexico operation. The exchange rate was $/US$ = 718.61. 35 [ B U S I N E S S A C T I V I T I E S ] RISK FACTORS. The Compan y’ ces are: Company’ y’ss main risk sour sources Risk of increased competition from alternative channels. The incorporation of alternative distribution channels for pharmaceutical products, such as supermarkets, could translate into lower market shares and/or a greater pressure over price margins. Risk associated to the increasing importance of institutional Clients in the health industry industry.. The effort displayed by Insurance Companies, ISAPRE health care insurance companies and other Institutional Clients to control health expenses, could lead such entities to acquire a greater weight in their beneficiaries’ medication purchase decisions, thus applying a greater pressure over price margins or via direct agreements with the drug manufacturers. In anticipation of such trend, FASA created its ABF, Administradora de Beneficios Farmacéuticos S.A. affiliate, which is geared precisely to look after the needs and requirements of Institutional Clients. Risk associated to the internationalization process. The Company has developed an international expansion program covering Mexico, Brazil and Peru. In the 36 future, it may well wish to consider expanding into other Latin American countries. The outcome of this process will greatly depend on the Company’s management capacity to adapt its business model to the particular and specific conditions of those markets that it wishes to penetrate. Political, regulatory and economic risk of countries. A negative change in the political, regulatory or economic conditions of the countries could negatively impact the results of the Company. RISK CLASSIFICATION Farmacias Ahumada S.A.’s risk rating as of December 31, 2002 is as follows: Fitch Humphreys Shares First class, level 3 First class, level 3 Bonds AA [ C O R CORPORATE P O R A T E S T R U C T U R E ] STRUCTURE. GROUP FASA 100 % Farmacias Ahumada S.A Chile Brazil Peru Mexico 100 % ABF 100 % 100 % Lab. FASA CNG 100 % DLI 37 100 % FASAMED 100 % ABF do Brasil * This structure represent a simplified ilustration of our subsidiaries. 67,95 % Farmacias Benavides 100 % Boticas FASA 100 % Drogueria La Victoria p e a c e o f m i n d p e a c e o f m i n d I n d i v i d u a l B a c k g r o u n d i d e n t i f i c a t i o n r e l a t e d o f o t h e r I n f o r m a t i o n a f f i l i a t e d ( c o - l i n k e d ) a n d c o m p a n i e s pe a ce of mind 40 [ I I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] CHILE / FARMACIAS AHUMADA Farmacias Ahumada S.A, is Chile’s largest Pharmacy Chain in terms of sales, totaling Ch$ 233,685 million. It grew by 6.7% with respect to the year 2001 and it ended the year with a market share of 33.1%. As of the month of December there were 234 Pharmacies operating in 36 different cities –from Arica to Punta Arenas– totaling 35,000 square meters of sale space serving 51.3 million Clients. Name Position Profession R.U.T. Nationality y Bernardo Ben-Dov C. Chief Executive Officer Comercial Engineer 6.584.450-8 Chilean Eduardo Trenova C. Chief Comercial Officer Comercial Engineer 7.550.572-8 Chilean Jorge Cañas A. Chief Operation Officer Industrial Civil Engineer Marcelo Weisselberger A. Chief Admin. and Finance Officer Comercial Engineer 8.069.997-2 10.032.623-K Chilean Chilean Hernán Ramadanovich C. Chief Real Estate Property Officer Business Administrator 5.065.612-8 Chilean Rodrigo Picas O. Chief Information Systems Officer Industrial Civil Engineer 7.981.229-3 Chilean Patricio Lira K. Chief Logistics Officer Industrial Civil Engineer 8.494.420-3 Chilean 41 Main Figures of the Year 2002 (In million of chilean pesos as of December 2002) Sales: M$233,685 Sales growth: 6.7% Market Share: 33.1% Number of Pharmacies: 234 Openings: 48 Closures: 3 Square meters: 34,930 Coverage: Arica to Punta Arenas Number of cities: 36 Clients served: 51 million Personnel: 3,704 Investments during the period: $10,204 million [ I N D I V I D U A L B A C K G R O U N D The pharmaceutical retail market grew by 8.1% with respect to 2001, generating sales amounting to Ch$ 474,000 million, i.e. approximately US$ 665 million. However, in terms of units, the pharmaceutical market shrunk by –1.6%, with a approximately 165 million units. total of I N F O R M A T I O N ] “T he number of Pharmacies of the Chain grew “The by 45 net sale outlets, while other 6 outlets were refurbished, which means having inaugurated or remodeled a Pharmacy every 7 days”. The number of Pharmacies of the Chain grew by 45 net sale outlets, while other 6 outlets were refurbished, which means having inaugurated or remodeled one This positioning was strengthened by the investment made in Pharmacy every 7 days. This growth added 6,000 square meters of sale room space to the operations. professionals and equipment toward the development and Sales totaled Ch$ 233,685 million, thus reflecting a decrease in comparable stores of merely 0.12% (SSS) with respect to the year 2001, which was principally due to 42 of its excellent price/quality ratio. control in the quality of products. In order to boost and the high number of Pharmacies inaugurated by various Chains throughout the year and the adverse domestic recognize its most important Clients, the Company consumption scenario affecting the country. EBITDA (Earnings Before Interest, Taxes, Depreciation and launched its FasaClub Fidelization Program, Amortization) was 3.1% of sales, which compares unfavorably with the 5.3% achieved in the year 2001. which recognizes that the strategic focus to The total investment –of FASA and its subsidiaries in maintain the trade name leadership rests in Chile– during 2002, amounted to Ch$ 10,204 million, mostly allocated to continue the Pharmacy expansion generating a longterm relationship with such and remodeling program and certain technological projects, noteworthy among which is the start-up of an Clients. As of December, FasaClub has registered ERP (SAP) system. 1,543,918 card holders with a use rate of over 50%. ABF, Administradora de Beneficios Farmacéuticos S.A. -an affiliate of Farmacias Ahumada S.A., whose mission consists in designing and managing pharmaceutical benefits that would facilitate individual’s access to medications– grew by 4% through Farmacias Ahumada S.A., as compared to the year 2001, representing about 7% of Farmacias Ahumada S.A.’s total sales, maintaining over 2 million beneficiaries by the closing of the year 2002 and a 12% growth of approved transactions. Private label products shared of total revenues was 6.3%, which means that each day consumers have greater confidence in FASA products (the “house brand”) because “T he total “The investment –of FASA and its affiliates in Chile– during 2002, amounted to Ch$ 10,204 million, mostly allocated to continue the Pharmacy expansion and remodeling program and certain technological projects, notew orth y noteworth orthy among which is the start-up of an ERP (SAP) system”. [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] Compañía de Nutrición General S.A. -an affiliate of Farmacias Ahumada S.A. oriented to market GNC products– experienced a revenue growth of 62.2%, when compared with the previous year. Its product lines: Vitamins, Minerals, Natural Products, among others, are available to consumers throughout the entire Chain of Farmacias Ahumada. By the date of closing of the year 2002, there were 4 free standing outlets and 40 such outlets placed inside the Pharmacies under the denomination of “ Store Within Store ” and “Assisted Corner“. The functions of distribution and logistics are carried out through our own Distribution Center (DLI Distribuidora Logística Integral), whose objective is to optimize the supply Chain from the reception of products on the part of suppliers up to its delivery to the Pharmacies, for which purpose it runs facilities using up to 16,000 square meters in the city of Santiago. Its current technology standards place this Distribution Center at the level of international logistics standards. The pharmaceutical services has incorpored 5 new Nursery Services, now totaling 33 units from Arica to Punta Farmacias Ahumada S.A. and the University of Chile. On the other hand, the programs given by the University of Valparaiso, the Catholic University and the University of Concepción had very good results on the part of the students and over 120 of them carried out academic activities in the company. Additionally, the III Pharmaceutical Convention of Farmacias Ahumada was held in the year with the participation of over 400 professionals from Chile, Brazil and Peru, which undoubtedly constituted a significant contribution to pharmaceutical development and collaboration within the Company. Also, we held the First School of Service, in which professionals from all areas of the Company attended courses about various topics such as leadership, teamwork, negotiation techniques and customer service culture. As of the closing of the year, the Company employed 3,704 colaborators; 3,100 of which work in Pharmacies, 470 in the Headquarters and 134 in the Distribution Center. Arenas. These nursery services provided 322,000 services and increased sales by 216% as compared with the year 2001. The Center for Toxicological and Medication Information resolved more than 193,000 inqueries received over the telephone or via our website, thereby becoming the most heavily demanded center in this ambit of the country. Within the realm of training activities, 100 Pharmacists obtained a Pharmacy Management Diploma issued by the School of Physical Sciences and Mathematics of the University of Chile; other 60 Pharmacists took the e-Farm remote education program, in technical topics given by the School of Chemical and Pharmaceutical Sciences of the same university, within the framework of the standing agreements between 43 p e a c e o f m i n d [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] MEXICO / FARMACIAS BENAVIDES. Far-Ben, S.A. de C.V. is Mexico’s largest Pharmacy Chain in number of branch stores and sales. It operates under the business name of Farmacias Benavides and its main activity is the retail marketing of products related to the health, welfare and quality of life of its customers. Included among the variety of products offered, those that stand out are the medications, toiletries, cosmetic products, personal hygiene products, photography and miscellaneous. During the year 2002, the sale of medications represented 51.6% of total sales. In 2002, Farmacias Benavides completed an 85year old history, during which time it has achieved broad 44 Main Figures of the Year 2002* (In million of Mexican pesos as of December 2002) Sales: $4,435 Sales growth: -5.7% Market Share: 3.1% Number of Pharmacies: 523 Openings: 8 Closures: 69 Realocations: 2 Photo Shops: 20 Cafeterias: 7 Square meters: 135,911 Coverage: Northern and Western Mexico, including 17 of the 32 states. Number of cities: 108 Customers served: 94 million Personnel: 6,377 Investments during the period: $31,1 (*) It does not include Farmacias El Fénix Upper Management Name Alvaro Rodríguez A. Position Chief Executive Officer Profession Lic. Degree in Economics R.U.T. Nationalityy Foreigner Mexican Chilean Jaime Poblete S. Chief Admin. and Finance Officer Industrial Civil Engineer 8.285.435-5 Enrique Mendoza D. Chief Operation Officer Spanish Chief Comercial Officer Lawyer Comercial Engineer 14.637.209-0 Alberto Herane H. Fernando Benavides S. Chief Information Systems Officer Industrial Civil Engineer 6.374.695-9 Foreigner Chilean Mexican m p e a c e o f d i n [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] coverage over 108 cities along Mexico’s Northern and Western regions. Currently, it operates 523 Pharmacies, 20 Photographic Stores and 7 Cafeterias including 136,000 square meters of overall sales floor pace. Farmacias Benavides’ 2002 sales totaled M$ 4,435 million (Mexican pesos), a drop of 5.7% as compared with 2001 sales. Its nationwide share of the pharmaceutical market –according to IMS– Health is 3.1%. The company served more than 94.4 million customers during the year; a rate of 259,000 per day. Far-Ben S.A. de C.V. has a 50% stake in Droguería y Farmacias El Fénix S.A. de C.V., a Chain that operates 65 Pharmacies under the business name of Farmacias El Fénix, concentrated around the Gulf of Mexico. During the year 2002, its revenues were M$ 487 million, representing an 11.5% drop with respect to the year 2001. Beginning with the ending of fiscal year 2002, it is shown Mexico’s private pharmaceutical market experienced a nominal growth of 12.3%, as compared to the year under non-operating results. 2001, generating sales in the order of M$ 69 billion (Mexican pesos), i.e. approximately US$ 7.2 billion at The shares of Farmacias Benavides are traded in the Mexican Stock Exchange, under the acronym of prices to the public. In terms of units, sales increased by 1.4%, totaling about 979 million units. “BEVIDESB”. Toward the end of the year 2001, as a part of a detailed profitability and contribution analysis, it was “T he goal is to create a management team, as well as to “The strengthen controls in terms of human resources, expenses, working capital and investments, while overhauling the compan y’ company’ y’ss organizational culture”. decided to launch a selective store closure program. As a result of that, 67 branches were closed during the year, ending the year 2002 with 523 Pharmacies in 3 different formats: 487 of them in the traditional Drugstore® format; 13 in clinics and hospitals, and 23 in supermarkets. 45 [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] Sales totaled M$4,435 million, which marked a 5.7% drop with respect to 2001. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) amounted to implied a real drop of 4.9% when compared to those of the year 2001, while it was strongly impacted by ceasing sales to ISSTESON (Health Institution of the State of Sonora) because of its low level of profitability. “In 2002, FFarmacias armacias Bena vides completed an 85-y ear Benavides 85-year old history hic h time it has ac hiev ed broad achiev hieved history,, during w whic hich co ver age o ver 108 cities along Mexico’ cov erage ov Mexico’ss Northern and Western regions”. M$63.4 million, representing a 24.0% drop, as compared to 2001. Those Clients with the greatest increase were PEMEX (15.6%), Private Companies (13.4%) and Banks (2.7%). During the year 2002, the Vecino Consentido (Pampered Neighbor) and Tratamientos Prolongados (Extended Treatment) programs were continued. On the other hand, the Tratamientos Prolongados program focused on those persons with chronic illnesses and granted preferential discounts to its members. On the other hand, the sale of medications represented 46 51.6% of total sales; thus, similar and generic medications represented 5.9% of total sales, as compared to 4.8% in 2001. As of the closing of the year, the company employed 6,377 persons; of which, 5,466 work in the Pharmacies, 245 in the Regional Offices, 353 at the Main Headquarters, 54 in Logistics, and 259 in Photo Shops and Cafeterias. Credit sales represented 9.7% of total sales, amounting to M$ 428 million. This During the year 2002, Farmacias Benavides concentrated in its process of financial and capital restructuring. In August of the same year, a letter of intention was signed with Farmacias Ahumada S.A. that contained the general terms and conditions of the financial restructuring. In September, the Assembly of Bondholders (Asamblea de Obligacionistas) proposed –and it was so accepted– to extend the expiration date of the company’s Obligations (US$ 70 million) for another 7 years, raising the rate of interest to 6% in UDIS. Additionally, for those bondholders who would so decide for reasons or liquidity or equity, they would be eligible –at their own discretion– to opt in favor of receiving their capital in advance, with a discount of 25%, or to convert their obligations in BEVIDES shares. The US$ 45 million capitalization process on the part of Farmacias Ahumada S.A. was completed on December 23, 2002, whereas on December 30 the information was publicly released that 42.3% of the BEVIDES 97U bond [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] issue would continue until its date of expiration. FASA Farmacias Benavides’ main projects are: retained 67.95% of property ownership. · To renew its systems infrastructure In this manner, Farmacias Benavides maintained –as of the end of the year 2002– a total debt of US$ 29.1 · To introduce a pricing policy consistent with the market million, plus cash and time deposits totaling US$ 26.3 million. · To develop commercial projects: Recetario Magistral (Compounding) and own private label products. Upon completion of the financial restructuring, a new chapter opens up in the history of Farmacias Benavides. A portion of its cash and time deposit investments will be · To adapt the best Logistics practices. · To remodel 276 branch stores · To develop a project of professional services to customers. allocated to put the house in order and to establish the basis to recover profitability and leadership. The goal is to create a management team, as well as to strengthen controls in terms of human resources, expenses, working capital and investments, while overhauling the company’s culture. “Upon completion of the financial restructuring, a new chapter opens up in the history of FFa armacias Bena vides. A portion of its Benavides. cash and time deposit investments will be allocated to put the house in order and to establish the basis to recover profitability and leadership”. organizational 47 [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] BRASIL / DROGAMED. Drogamed is present in the States of Parana, Santa Catarina and Rio Grande do Sul; it recorded sales of R$ 185 million and grew by 15.4% with respect to 2001, while reaching a market share in southern Brazil of 5.2%. As of December there were 115 Pharmacies operating in 23 different cities of southern Brazil, managing through 18,000 square meters achievieng the attention of over 13 million customers. Brazil is the sixth largest pharmaceutical Main figures of 2002 (In millon Brazilian reales of December 2002) Sales: R$ 185 million Sales growth: 15.4% Market share: 5.2% Number of Pharmacies: 115 Openings: 11 Closures: 4 Square meters: 18,167 Coverage: Southern Brazil Number of cities: 23 Clients served: 12,9 million Total personnel: 1,877 Fiscal year investments: R$ 2,8 million market in the world and the second in Latin America, with medication sales of approximately US$ 6.3 billion per year at retail prices made through some 52,000 Pharmacies. The States of Parana, Santa Catarina and Rio 48 Upper Management. Name Position Profession R.U.T. Nationalityy Ricardo Terrazas M. Chief Executive Officer Naval Engineer 8.586.797-0 Chilean Paulo Camargo S. Chief Operation Officer Business Administrator Foreigner Gilson Coelho N. Franc Correa R. Chief Commercial Officer Business Administrator Foreigner Brazilian Brazilian Chief Admin. and Finance Officer Accountant Foreigner Brazilian [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] Grande do Sul represent almost 15% of the total market, During the year 2002, the number of Pharmacies grew with sales in the range of US$ 945 million at retail prices and a population bordering the 25 million inhabitants. by 6.5% closing the year with a total of 114 Pharmacies. This growth added 1,000 square meters to sales room operations The industry’s high degree of fragmentation represents an attractive opportunity for Pharmacy Chains, which are in a position to increase their market share by taking advantage of cost benefits associated to a larger business volume, the implementation of technological and logistical improvements, and marketing campaigns. “Drogamed, continuing with its policy of adding value to the Client / Pharmacist relationship, launched a program aimed at developing the modern Pharmacy creating the specialized area of Pharmaceutical Services“. The regulations being promoted by the Government of Brazil have been aimed, principally, at reducing the With now almost three years of operation following its acquisition, Drogamed is the main Chain in the State cost of medications for the population, especially through the promotion of generic brands, thereby weakening the of Parana. Its sales increased to R$ 185 million, growing by 15.4% as compared to 2001. EBITDA (Earnings position of independent Pharmacies with respect to the Chains which, by virtue of a rationalized operation Before Interest, Taxes, Depreciation and Amortization) increased by 46.2% with respect to 2001 marking 3.0% focused on obtaining economies of scale, are able to operate with lower priced products. of sales, as compared with 2.3% for the previous year; the latter because of improved operational efficiency. As part of the company’s expansion plan, investments were made in the order of R$ 2.8 million allocated to opening and remodeling Pharmacies, modernizing the Distribution Center, developing several technological -type The main Chains now operating in the states of Parana, Santa Catarina and Río Grande do Sul are: STATE Santa Catarina Parana Rio Grande do Sul DRUG CHAIN SALES 2002 ( (MMUS$) $) ((*)) products, noteworthy among which is the installation of an SAP enterprise management system, adapting the point-of-sale software developed in Chile to the local conditions, connecting the Pharmacies in real time with central servers and expanding the operations of Recetario Magistral (compounding) customized SESI Farmacias 34 Drogaria Catarinense 23 Farma & Farma 21 Masterfarma 38 Drogamed (*) 45 Nissei 17 experienced by this service during Panvel 63 2002. Panvel Franquias 11 Sesi 35 Capile 13 Assoc. Agafarma 35 (*) The Exchange Rate was R$/US$=3,5 prescription drugs, all of which required building a new laboratory to meet the increasing demand 49 [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] ABF do Brasil is the business unit affiliate created after personal development, motivation and overall business the one existing in Chile, with the objective of managing the pharmaceutical benefits both of regular companies vision. Within this sphere, the creation of Drogamed University stands out which -through four different training and insurance companies. ABF offers on-line services at the time of purchase, granting immediate allowances for modules (i.e., Understanding the Pharmacy; 101% Manager; Sales Techniques Certification; and Passion for medication coverage to the beneficiaries of the Companies and Institutions. Additionally, it manages agreements with Sales)- has managed to train 100% of the company’s employees. companies enabling employees to acquire products on line with the Pharmacy and pay afterwards via employee As of the date of closing, the Company employed 1,877 payroll deductions. For the year 2002 it consolidated its operations; noteworthy among which was the commercial persons; of which 1,509 work in the Pharmacies, while 255 do so at the company’s Main Headquarters and 113 agreement executed with Unimed-Londrina, that city’s main health plan. in the Distribution Center. Our own private label products have began to be successfully marketed and consumers are now beginning to appreciate the benefits of this type of Drogamed, continuing with its policy of adding value to the Client / Pharmacist relationship, launched a program aimed at developing the modern Pharmacy crea-ting the specialized area of Pharmaceutical Services. To that effect, it makes available exclusive floor space within five pilot Pharmacies to provide professional advice to Clients in a personalized manner, while m offering the possibility of maintaining a confidential pharmacological file per Client, keeping records of o c a e a Pharmaceutical Services Program, fully in line with the overall objectives of the WHO World Health Organization. e prescriptions, illnesses and allergic reactions, while attempting –in the near future– to engulf this activity within p 50 products, which have reached a 0.8% share of total Chain sales. In accordance with its own corporate Human Resources Policy, Drogamed focused on training its collaborators providing new management tools so as to create a solid base enabling them to face the new challenges that lie ahead. In this sense, training was oriented to Pharmacy personnel giving them specific management know-how, such as sales techniques, merchandising, computer use, hygiene and administration, among others. Similarly, Pharmacy managers received continuous training related to leadership abilities, f d i n [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] PERU / BOTICAS FASA. Boticas Fasa -present in the cities of Lima, Trujillo, Chiclayo, Piura, Talara, Chincha, Arequipa and Huancayo– is now Peru’s leading Pharmacy Chain, with sales totaling S$ 160 million (Peruvian soles), it experienced a 25.8% growth and achieved a 15.2% market share in the City of Lima; it has 91 Pharmacies, spreading over 7,675 square meters of sales room floor space, serving over 9.8 million Clients. Main Figures for 2002 (In million Peruvian soles of December 2002) Sales: S$ 160 million Sales growth: 25.8% Market share: 8.1% Number of Pharmacies: 91 Openings: 22 Closures: 4 Square Meters: 7,675 Coverage: Lima and Provinces (North, Center and South Peru) Number of cities: 8 Clients served: 9.8 million Total personnel: 1,058 Fiscal year investments: S$ 6 million Upper Management. 51 Name Position Profession R.U.T. Nationality y Ricardo Palominos R. Chief Executive Officer Medical Technologist 6.513.025-4 Chilean Maryse Verano R. Chief Operation Officer Business Administrator Foreigner Peruvian Luis Díaz U. Chief Commercial Officer Comercial Engineer 8.518.061-4 Chilean José Antonio Vargas G. Chief Admin. and Finance Officer Industrial Engineer Foreigner Peruvian “Las vventas entas crecieron 53% con respecto al 2000, alcanzando los US$37 millones, que permitieron aumentar la participación de mer cado a 12,5% en mercado Lima. Lima.”” [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] Peru’s pharmaceutical market dropped by 0.1% in competition is represented by 6 Chains, the second terms of value, as compared with the 2001 period, with total invoicing amounting to US$ 334,5 million (US$ 445 largest of which has only 40 stores. million at retail prices). The unit volume increased by 3.4%, amounting to 61 million units per year. The Company’s expansion plan called for a S$ 6 million (Peruvian soles) investment, is to be mostly allocated to opening new Pharmacies, to cutting edge systems and to The Chain’s number of stores increased by 26%, with 22 new points of sale, covering the most important areas of the country. In order to expand its coverage, Boticas Fasa entered into strategic alliances with leading companies in the industry, including the Santa Hipermercado Tottus (Falabella) in the North Cone of Lima. c e them in the Department of Arequipa and the other in Mega a simultaneously; and finally, Falabella, which houses 2 Pharmacies, one of p 52 f e houses 10 and Blockbuster ended the year with 4 new points opening up d o Isabel Supermarket Chain, which houses 15 Pharmacies, Plaza Vea, which houses 4, Shell m i n EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is S$ 2 million. The Company competes in a highly fragmented market, where the total number of Pharmacies existing in the country is approximately 11,000. In terms of sales, it is estimated that the Pharmacy Chains represent anywhere between 35-40% of Peru’s total private market sales. Pharmacy Chains have experienced a significant growth during these last years in Peru and this trend is expected to continue in the future. Our main “P eru’ y “Peru’ eru’ss pharmaceutical market dropped b by 0.1% in terms of value, as compared with the 2001 period, with total invoicing amounting to US$ 334,5 million (US$ 445 million at retail prices). The unit vvolume olume increased by 3.4%, amounting to 61 million units per year”. [ I N D I V I D U A L B A C K G R O U N D I N F O R M A T I O N ] the Recetario Magistral (compounding prescription operation). Some of the most significant investments made were in the area of technology, basically computer platform changes, migrating to a relational Database, in addition to incorporating the new Financing & Accounting System Pharmacists, which seeks to develop individual skills and expertise so that pharmaceutical professionals may assume greater responsibilities and challenges in the future. (Oracle Financial) and merchandising systems, mainly aimed at enhancing efficiency and information retrieval speed. These investments enable us to meet new demands from our Clients and to develop systems that serve as basis to grow and differentiate ourselves even further from our competitors. “Boticas FFasa, asa, in line with its Human Resour ces P olic y, Resources Polic olicy has made it a priority within its objectives to train its personnel by means of a continuous training program through various means”. The commercial effort of Boticas Fasa is aimed at positioning its private label products, one of whose main attributes is its good priceto-quality ratio. Its share of total sales during the period represented 2.2%. For newly drafted employees, we developed staff induction programs aimed at boosting their individual capacities, focusing them on serving and looking after the needs of the Client. Similarly, during the present year the company incorporated GNC –a world renowned brand name – to the line of brands managed by FASA in the market. In a complementary manner –and with the purpose of identifying its brand name and strengthening its image of service to the community– Boticas Fasa has launched several gratuitous public health campaigns offering medical consultations by specialty and medical samples, with successful results in all the social segments where these campaigns have been launched. FONOFASA continued to develop the concept of Pharmaceutical Services through information and dispensation provided to our chronic Clients via special programs. Boticas Fasa, in line with its Human Resources Policy, has made it a priority within its objectives to train its personnel by means of a continuous training program through various means. Noteworthy among them are the agreements executed with Instituto Técnico Carrión institute, for Pharmaceutical Technicians; and with Universidad Nacional Mayor de San Marco university, in order to develop the Pharmaceutical Service Program for By the closing of the year, the Company employed 1,058 colaborators; 847 of which work in the pharmacies, 168 in Headquarters; and 43 in the Distribution Center. 53 STATEMENT OF LIABILITY. The undersigned board members of Farmacias Ahumada S.A. and its general manager, who execute this statement of liability, hereby assume responsibility -under oath- about the veracity of all the information provided in the present Annual Report, pursuant to general regulation N° 30, issued by the Superintendence for Securities and Insurance Companies. Name 54 Position R.U.T. José Codner Chijner Chairman 4.255.530-4 Eduardo Bellinghausen Pizarro Vice Chairman 3.515.184-2 Gabriel Berczely Apor Board Member 12.084.477-6 Juan Cúneo Solari Board Member 3.066.418-3 Alexander Fernández Montenegro Board Member 9.604.686-3 Carlos Heller Solari Board Member 8.717.000-4 Jaime Sinay Assael Board Member 6.377.768-4 Mario Valdivia Bernstein Board Member 6.987.378-2 Raymond Joseph Dunn IV Board Member Foreigner Enrique Cibié Bluth Corporate Chief Executive Officer 6.027.149-6 [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: ABF, Administradora de Beneficios Farmacéuticos S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Chilean). (Taxpa axpay RUT (T axpa y er identification number): 96.863.980-3 Address: Vicuña Mackenna 585, Santiago, Chile. elephone-Fax: Telephone-F ax: 631.30.40 - 222.22.58 External A uditors: Deloitte & Touche. Legal Counsel: Vial y Palma Abogados. Subscribed and P aid Capital as of 31.12.02: CH $1,533,613 thousand Paid % direct and indirect shareholding as of 31.12.02: 100.00 % of In v estment o v er P arent Compan y Assets: 0,4 Inv ov Parent Company v e: To organize, manage and develop health care systems, particularly systems Company’ y’ss Business Objecti Objectiv Compan y’ related to the intermediation, marketing, distribution and consumption of medications. Chairman of the Board of Directors: Bernardo Ben-Dov Codner. Members of the Board of Directors: Alejandro Rosemblatt Kiblisky, Enrique Cibié Bluth, Marcelo Weisselberger Araujo, Eduardo Trénova Celedón. General Manager: Ricardo Bahamondes Lorca. Name: Laboratorios FASA S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Chilean). (Taxpa axpay RUT (T axpa y er identification number): 79.663.290-9 Address: Vicuña Mackenna 585, Santiago, Chile. elephone-Fax: Telephone-F ax: 631.36.37 - 665.32.24 External A uditors: Deloitte & Touche. Legal Counsel: Vial y Palma Abogados. Subscribed and P aid Capital as of 31.12.02: CH $531,240 thousand Paid % direct and indirect shareholding as of 31.12.02: 100.00 % of In v estment o v er P arent Compan y Assets: 0.5 Inv ov Parent Company v e: To manufacture, buy, sell, distribute and, in general, to market pharmaceutical Company’ y’ss Business Objecti Objectiv Compan y’ products, cosmetics and toiletries, by itself or on behalf of third parties. Chairman of the Board of Directors: Enrique Cibié Bluth. Members of the Board of Directors: Alejandro Rosemblatt Kiblisky, Bernardo Ben-Dov Codner. General Gener al Manager: Cristián Troncoso Jorquera. 55 [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Compañía de Nutrición General S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Chilean). axpay RUT Taxpa y er identification number: 96.792.260-9 Address: Vicuña Mackenna 585, Santiago, Chile. Telephone - FFax: ax: 366.02.56 External A uditors: Deloitte & Touche. Legal Counsel: Vial y Palma Abogados. Subscribed and P Paid aid Capital as of 31.12.02: CH $ 941,482 thousand % direct and indirect shareholding as of 31.12.02: 100.00 y Assets: 0.2 Inv ov Parent Company % of In v estment o v er P arent Compan Company’ y’ss Business Objecti Objectiv Compan y’ v e: To manufacture, elaborate, import, export, buy, sell, distribute and, in general, to market, in any way, all kinds of pharmaceutical, dietetic, nutritional, homeopathic and organic products, whether of mineral, animal or vegetal origin; vitamins, cosmetics, beauty products and others. Chairman of the Board of Directors: Bernardo Ben-Dov Codner. Members of the Board of Directors: Marcelo Weisselberger Araujo, Eduardo Trénova Celedón, Jaime Sinay Assael, Cristián Troncoso Jorquiera. General Gener al Manager: Ricardo Leiva Vilarnau. 56 Name: Distribuidora y Logística Integral S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Chilean). axpay RUT Taxpa y er identification number: 96.860.090-7 Address: Marathon 3830, Macul, Santiago, Chile. Telephone - FFax: ax: 631.33.78 – 631.33.52 External A uditors: Deloitte & Touche. Legal Counsel: Vial y Palma Abogados. aid Capital as of 31.12.02: CH$ 268,932 thousand Paid Subscribed and P % direct and indirect shareholding as of 31.12.02: 100.00 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To manufacture, buy, sell, distribute and, in general, to market pharmaceutical products, cosmetics and toiletries, by itself or on behalf of third parties. Chairman of the Board of Directors: Enrique Cibié Bluth Members of the Board of Directors: Alejandro Rosemblatt Kiblisky, Bernardo Ben-Dov Codner General Gener al Manager: Patricio Lira Kappes. [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Fasa Investment S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Chilean). axpay RUT Taxpa y er identification number: 96.969.830-7 Address: Alonso de Córdova 2600, oficina 22, Vitacura, Santiago, Chile. Telephone - FFax: ax: 207.01.01 External A uditors: Deloitte & Touche. Legal Counsel: Vial y Palma Abogados. Paid Subscribed and P aid Capital as of 31.12.02: CH$ 48,055,235 thousand % direct and indirect shareholding as of 31.12.02: 100.00 Inv ov Parent Company % of In v estment o v er P arent Compan y Assets: 30.8 Compan y’ v e: To make all kinds of domestic or foreign investments in real estate property, personal Company’ y’ss Business Objecti Objectiv and movable property, tangible and intangible, and to manage and develop landed property, movable property, commercial establishments, on account of itself or of third parties; to buy or sell securities and shares of stock on any account and, likewise, to acquire stock or rights in all kinds of companies incorporated or under incorporation, and to perform all kinds of domestic or foreign trade operations. Chairman of the Board of Directors: José Codner Chijner. Members of the Board of Directors: Eduardo Bellinghausen Pizarro, Mario Valdivia Bernstein, Enrique Cibié Bluth. General Gener al Manager: Alejandro Rosemblatt Kiblisky. Name: Inverex S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Chilean). axpay RUT Taxpa y er identification number: 99.506.180-5 Address: Vicuña Mackenna 585, Santiago, Chile. ax: 631 36 50 – 661 94 10 Telephone - FFax: External A uditors: Deloitte & Touche. Legal Counsel: Vial y Palma Abogados. Subscribed and P Paid aid Capital as of 31.12.01: CH$ 5,030,989 thousand % direct and indirect shareholding as of 31.12.01: 100.00 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To make all kinds of domestic or foreign investments in real estate property, personal and movable property, tangible and intangible, and to manage and develop landed property, movable property, commercial establishments, on account of itself or of third parties; to buy or sell securities and shares of stock on any account and, likewise, to acquire stock or rights in all kinds of companies incorporated or under incorporation, and to perform all kinds of domestic or foreign trade operations. Chairman of the Board of Directors: José Codner Chijner Members of the Board of Directors: Eduardo Bellinghausen Pizarro, Enrique Cibié Bluth, Mario Valdivia Bernstein. General Gener al Manager: Alejandro Rosemblatt Kiblisky. 57 [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Far-Ben, S.A. de C.V. Type of Entity: Public Corporation - Mexican Stock Exchange (Mexican). R.F.C.: R.F .C.: FBE 911021 CN8 Address: Ave. Pino Suárez #602 Zona Centro Int.502 C.P.64000 Telephone: (52) 8150-7700 External A uditors: Deloitte & Touche. Legal Counsel: Creel, García-Cuellar y Müggenburg Subscribed and P aid Capital as of 31.12.02: CH$81,830,800 thousand Paid % of direct and indirect shareholding as of 31.12.02: 67.93 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To acquire and develop commercial business operations in the area of medications and Pharmacy; to establish and develop any kinds of industrial business that might be beneficial to the company; to buy and sell medications wholesale or retail as well as products and services in the areas of photography, perfumes and toiletries, cosmetics, foodstuffs, personal hygiene, candies, toys, among others, the import and export of all kinds of foreign or domestic products; to operate in the area of commissions and accept and carry out representations for industries and negotiations of any nature. Chairman of the Board of Directors: Jaime Benavides Pompa. Members of the Board of Directors: José Codner Chijner, Juan Cúneo Solari, Enrique Cibié Bluth, Bernardo 58 Ben-Dov Codner, Alejandro Rosemblatt Kiblisky, Jaime Sinay Assael, Miguel Albuerne Wendorf, Sergio Autrey Maza, Armando Garza Sada, Jorge Fernández Guajardo. General Manager: Álvaro Rodríguez Arregui Name: Droguería Benavides S.A. de C.V. Type of Entity: Private Corporation – Fully Owned Subsidiary of Far-Ben S.A. de C.V (Mexican). R.F.C.: R.F .C.: DBE-831010-RR9 Address: Ave. Pino Suárez #602 Zona Centro Int.502 C.P.64000 Telephone: (52) 8150-7700 External A uditors: Deloitte & Touche. Legal Counsel: Creel, García-Cuellar y Müggenburg Subscribed and P aid Capital as of 31.12.02: CH$108,469,008 thousand Paid % of direct and indirect shareholding as of 31.12.02: 67.93 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To acquire, dispose, operate, distribute, commission, consign and represent all kinds of real estate properties and articles of commerce, especially those related to medications, Pharmacies, toiletries, photography, gifts, toys, magazines, cafeteria and restaurant. Chairman of the Board of Directors: Álvaro Rodríguez Arregui Members of the Board of Directors: Jaime Poblete Stambuk, Enrique Mendoza Díaz. General Manager: Álvaro Rodríguez Arregui [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Benavides de Monterrey S.A. de C.V. Type of Entity: Private Corporation – Fully Owned Subsidiary of Far-Ben S.A. de C.V (Mexican). R.F.C.: R.F .C.: BMO-831012-ADA Address: Ave. Pino Suárez #602 Zona Centro Int.502 C.P.64000 Telephone: (52) 8150-7700 External A uditors: Deloitte & Touche. Legal Counsel: Creel, García-Cuellar y Müggenburg aid Capital as of 31.12.02: CH$ 6,847,774 thousand Paid Subscribed and P % of direct and indirect shareholding as of 31.12.02: 67.93 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To provide all kinds of technical, administrative or supervision services to industrial and/or commercial companies, whether in the Republic of Mexico or abroad. Chairman of the Board of Directors: Álvaro Rodríguez Arregui Members of the Board of Directors: Jaime Poblete Stambuk, Enrique Mendoza Díaz General Manager: Álvaro Rodríguez Arregui Name: Benavides de Reynosa S.A. de C.V. Type of Entity: Private Corporation – Fully Owned Subsidiary of Far-Ben S.A. de C.V (Mexican). R.F.C.: R.F .C.: BRE-831013-QC1 Address: Ave. Pino Suárez #602 Zona Centro Int.502 C.P.64000 Telephone: (52) 8150-7700 External A uditors: Deloitte & Touche. Legal Counsel: Creel, García-Cuellar y Müggenburg Paid Subscribed and P aid Capital as of 31.12.02: CH$ 1,751,500 thousand % of direct and indirect shareholding as of 31.12.02: 67.93 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To import and export all kinds of domestic or foreign products. Chairman of the Board of Directors: Álvaro Rodríguez Arregui Members of the Board of Directors: Jaime Poblete Stambuk, Enrique Mendoza Díaz General Manager: Álvaro Rodríguez Arregui Name: Benavides del Pacífico S.A. de C.V. Type of Entity: Private Corporation – Fully Owned Subsidiary of Far-Ben S.A. de C.V (Mexican). R.F .C.: BPA-831011-CM8 R.F.C.: Address: Ave. Pino Suárez #602 Zona Centro Int.502 C.P.64000 Telephone: (52) 8150-7700 External A uditors: Deloitte & Touche. Legal Counsel: Creel, García-Cuellar y Müggenburg Subscribed and P aid Capital as of 31.12.02: CH$ 632,174 thousand Paid % direct and indirect shareholding as of 31.12.02: 67.93 Compan y’ v e: To acquire, dispose, operate, distribute, commission, consign and represent all Company’ y’ss Business Objecti Objectiv kinds of real estate properties and articles of commerce, especially those related to medications, Pharmacies, toiletries, photography, gifts, toys, magazines, cafeteria and restaurant. Chairman of the Board of Directors: Álvaro Rodríguez Arregui Members of the Board of Directors: Jaime Poblete Stambuk, Enrique Mendoza Díaz General Manager: Álvaro Rodríguez Arregui. 59 [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Droguería y Farmacias El Fénix S.A. de C.V. Type of Entity: Private Corporation (Mexican). R.F.C.: R.F .C.: DFF 840319 JS2 Address: Ayuntamiento No. 101 Col. Volantin Tampico Tamps. C.P. 89199 Telephone: External A uditors: Deloitte & Touche. Legal Counsel: Creel, García-Cuellar y Müggenburg Subscribed and P aid Capital as of 31.12.02: CH$ 12,859,305 thousand Paid % direct and indirect shareholding as of 31.12.02: 50.00 Compan y’ v e: To buy, sell, distribute, transform, commission, represent, consign, import and Company’ y’ss Business Objecti Objectiv export all kinds of commercial goods and effects, especially pharmaceutical products and medicinal in general. Chairman of the Board of Directors: Sergio Govela Elizondo Members of the Board of Directors: Gustavo González García, Valentín Holguera Altamirano, Fernando Benavides Sauceda, Guillermo Benavides Arredondo , Diego Suárez González , Gustavo C. González Valenzuela, Emilio Pozo Pier y Daniel Estrada Arellano. General Manager: Gustavo González García 60 Name: Fasa do Brasil Limitada (Brazilian). Type of Entity: Limited Liability Company. RUT Taxpa y er identification number: Foreign. axpay Address: Rua Anne Frank N° 1.919, Vila Hauer, Curitiba, Brazil. Telephone - FFax: ax: (041) 217.17.00 - (041) 217.17.86 External A uditors: Deloitte & Touche Tohmatsu. Legal Counsel: Miguel Neto Abogados. aid Capital as of 31.12.02: CH$ 9,677,330 thousand Paid Subscribed and P % of direct and indirect shareholding as of 31.12.02: 99.99 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To participate in other companies as: partner, shareholder or member of a consortium, to manage its own or third-party’s assets and to acquire or invest in properties of any kind and manage the profits obtained from such investments. Gener al Manager: Ricardo Tomás Terrazas Michell. General [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Fasint Limitada (Brazilian). Type of Entity: Limited Liability Company. axpay RUT Taxpa y er identification number: Foreign Address: Rua Engenheiro Luiz Carlos Berrini 550, São Paulo, Brazil. Telephone - FFax: ax: (011) 5506.47.72 - (011) 5503.03.13 External A uditors: Deloitte & Touche Tohmatsu. Legal Counsel: Miguel Neto Abogados. Subscribed and P aid Capital as of 31.12.02: CH$ 14,871,242 thousand Paid % direct and indirect shareholding as of 31.12.02: 64.99 Compan y’ v e: Preferably to participate as majority shareholder in companies whose main Company’ y’ss Business Objecti Objectiv business objective and activities are related to the pharmaceutical sector, in wholesale or retail sales. Chairman of the Board of Directors: Enrique Cibié Bluth. Members of the Board of Directors: Mario Valdivia Bernstein, Raymond Joseph Dunn IV, Ana Vigon Tabar, Marcos Rechtman. General Manager: Franc Ribeiro Correa. Name: Fasamed Comercio Farmacéutico S.A. (Brazilian) Type of Entity: Private Corporation (Brazilian). axpay RUT Taxpa y er identification number: Foreign. Address: Rua Anne Frank 1.919, Vila Hauer, Curitiba, Brazil. Telephone - FFax: ax: (041) 217.17.00 - (041) 217.17.86 External A uditors: Deloitte & Touche Tohmatsu. Legal Counsel: Miguel Neto Abogados. Subscribed and P aid Capital as of 31.12.02: CH$ 22,245,471 thousand Paid % direct and indirect shareholding as of 31.12.02: 64.99 Compan y’ v e: To develop activities related with trading and services of Pharmacy and drugstore Company’ y’ss Business Objecti Objectiv products that will function in all the establishments of the Company, aimed at retail medication trade, pharmaceutical factors of production and related products. Chairman of the Board of Directors: Enrique Cibié Bluth. Members of the Board of Directors: Mario Valdivia Bernstein, Alejandro Rosemblatt Kiblisky, Marcos Rechtman, Paulo Remy Gillet Neto. General Gener al Manager: Ricardo Tomás Terrazas Michell. 61 [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Name: Administradora de Beneficios Farmacéuticos do Brasil S.A. (Brazilian). Type of Entity: Private Corporation (Brazilian) axpay RUT Taxpa y er identification number: Foreign. Address: Rua Anne Frank 1.919, Vila Hauer, Curitiba, Brazil. ax: (041) 217.13.00 Telephone - FFax: External A uditors: Deloitte Touche Tohmatsu. Legal Counsel: Miguel Neto Abogados. Subscribed and P aid Capital as of 31.12.02: CH$ 360,941 thousand Paid % direct and indirect shareholding as of 31.12.02: 64.98 Compan y’ v e: To develop activities related with commerce and providing consulting services in Company’ y’ss Business Objecti Objectiv the health area with emphasis in the intermediation and management of medical assitance and/or agreements. Chairman of the Board of Directors: Enrique Cibié Bluth. Members of the Board of Directors: Mario Valdivia Bernstein, Alejandro Rosemblatt Kiblisky, Marcos Rechtman, Paulo Remy Gillet Neto. General Manager: Franc Ribeiro Correa. 62 Name: Boticas Fasa S.A. Type of Entity: Private Corporation – Fully Owned Subsidiary (Peruvian). axpay RUT Taxpa y er identification number: Foreign. Address: Av. Canadá 1125, La Victoria, Lima, Peru. Telephone - FFax: ax: 619.90.00 (Anexo 104). External A uditors: Deloitte & Touche. Legal Counsel: Estudio Sparrow. Paid Subscribed and P aid Capital as of 31.12.02: CH$ 6,258,172 thousand % direct and indirect shareholding as of 31.12.02: 100.00 Company’ y’ss Business Objecti Objectiv Compan y’ v e: To provide services in marketing, distributing, importing, exporting, buying and selling all kinds of products including pharmaceutical, medicinal, medical, veterinarian, hygienic, dressing room, toiletries and/or beauty products. Chairman of the Board of Directors: Enrique Cibié Bluth. Members of the Board of Directors: Jaime Sinay Assael, Juan Ricardo Palominos Ramos, Ricardo Hepp de los Ríos, Alejandro Rosemblatt Kiblisky. Gener al Manager: Ricardo Palominos Ramos. General Name: Droguería La Victoria S.A.C. Type of Entity: Private Corporation – Fully Owned Subsidiary (Peruvian). axpay RUT Taxpa y er identification number: Foreign Address: Av. Canadá 1125, La Victoria, Lima, Peru. Telephone - FFax: ax: 619.90.28. External A uditors: Deloitte & Touche. Legal Counsel: Estudio Sparrow. aid Capital as of 31.12.02: CH$ 126,630 thousand. Paid Subscribed and P % direct and indirect shareholding as of 31.12.02: 100.00 [IDENTIFICATION OF OTHER AFFILIATED AND RELATED (CO-LINKED) COMPANIES ] Compan y’ v e: To import and distribute medications, cosmetics and in general all kinds of Company’ y’ss Business Objecti Objectiv pharmaceutical, medicinal, medical, veterinarian, hygienic, dressing room, toiletries and/or beauty products. General Gener al Manager: Ruth Patricia Medina Aguilar. Name: Farmacias Ahumada Internacional S.A. Type of entity: Private Corporation – Fully Owned Subsidiary. axpay RUT Taxpa y er identification number: Foreign Address: Montevideo, Uruguay ax: (59 82) 916.06.67 Telephone - FFax: External auditors: Deloitte & Touche Legal Counsel: Vial y Palma Abogados Subscribed and P aid Capital as of 31.12.02: CH$ 3,593 thousand Paid % direct and indirect shareholding as of 31.12.02: 100.00 Business Objecti v e: To invest in certificates of title, bonds, shares, government bonds, debentures, promissory Objectiv notes,analog documents; imports, exports, commissions, representations, agencies, financial operations. Chairman of the Board: Manon Lecueder de San Vicente. Member of the Board of Directors: Juan Pedro Malinow. Name: Nutritional Labs. Inc. Type of Entity: Private Corporation – Fully Owned Subsidiary. axpay RUT Taxpa y er identification number: Foreign. Address: 7976 NW 14 Street Miami, Florida. Telephone - FFax: ax: 1-786-2654817 Legal Counsel: Vial y Palma Abogados. Paid Subscribed and P aid Capital as of 31.12.02: CH$ 719 thousand % direct and indirect shareholding as of 31.12.02: 100.00 Compan y’ v e: To market and distribute wholesale all kinds of goods. Company’ y’ss Business Objecti Objectiv Member of the Board of Directors: Ricardo Leiva Vilarnau. Name: Fasa International Corp (British Virgin Islands) Type of Entity: Private Corporation – Fully Owned Subsidiary RUT Taxpa y er identification number: Foreign axpay Address: Trident Trust Company (B.U.I.) Limited, Trident Chambers, P.O. Box, 146, Road Town, Tortola British Virgin Islands. Legal Counsel: Vial y Palma Abogados. aid Capital as of 31.12.02: CH$72 thousand Paid Subscribed and P % direct and indirect shareholding as of 31.12.02: 99.99 Compan y’ v e: To perform any activity that is not forbidden by the Laws of the British Virgin Islands. Company’ y’ss Business Objecti Objectiv Members of the Board of Directors: José Codner Chijner, Enrique Cibié Bluth, Alejandro Rosemblatt Kiblisky. 63 d e d i c a t i o n d e d i c a t n i o f i n a n c i a l s t a t e m e n t s C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. AND SUBSIDIARIES CONSOLID ATED B ALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 CONSOLIDA BALANCE Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ ACTIVO ASSETS CIRCULANTE: CURRENT: Cash Disponible Time deposits Depósitos a plazo Marketable securities Valores negociables Account Deudoresreceivables, por ventas net Notes Receivables, net Documentos por cobrar Sundry debtors Deudores varios Amounts due from related Documentos y cuentas porcompanies cobrar a empresas relacionadas Inventories Existencias Income Taxes Impuestos por recoverable recuperar Prepaid expensespor anticipado Gastos pagados Deferred taxes ImpuestosIcome diferidos Other Otros current activos assets circulantes 68 10,452,111 19,837,148 4,711,688 20,376,056 132,937 2,119,128 4,828,555 85,722,805 4,438,932 473,102 969,980 579,437 7,287,881 7,651,932 2,397,068 10,002,770 616,167 2,096,349 3,925,693 42,780,046 235,710 197,967 431,987 - Total assets Total current activo circulante 154.641.879 77.623.570 FIJO: FIXED: Terrenos Land Construcciones obras de infraestructura Constructions & yinfrastructure works Máquinas y&equipos Machinery equipment Otros fixed activos fijos Other assets 20,591,160 16,371,459 21,561,398 149,397,703 3,928,315 6,136,872 36,785,398 207,921,720 (100,348,854) 46,850,585 (14,664,246) 107,572,866 32,186,339 OTROS ACTIVOS: OTHER: Inversión eninempresa Investments related relacionada companies Inversiones in en other otras companies sociedades Investments Menor valor Goodwill, netde inversiones Mayor Valor de inversiones Negative Goowill, net Deudores largo plazo Long-term debtors Intangibles Intangibles Amortización Less: Acomulated Amortization Otros assets activos Other 2,963,915 605,163 14,814,467 (8,422,160) 5,733,183 2,913,364 (704,371) 5,390,211 15,028,777 (871,348) 5,306,522 1,805,386 (224,633) 3,144,797 Total Total other otros assets activos 23,293,772 24,189,501 285,508,517 133,999,410 Depreciacióndepreciation acumulada Accumulated Net fixed Activo fijoassets neto TOTAL ASSETS DEL ACTIVO TOTAL The attached Notes N°1 thorugh N°21 are an integral part of these consolidated financial statements. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. AND SUBSIDIARIES CONSOLID ATED B ALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 CONSOLIDA BALANCE Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ LIABILITIES PASIVO CIRCULANTE: CURRENT: Obligaciones Short-term debt con duebancos to bankse and instituciones financial institutions financieras a corto plazo Obligaciones Current portioncon of bancos Long-term e instituciones debt due banks financieras and - largo plazo financial porción institutions corto plazo short-term portion Obligaciones Current portion con of el bonds público payables - porción corto plazo (bonos) Obligaciones Current portion a largo of long plazo term-term con vencimiento notes payables dentro de un año Dividendos Dividends payable por pagar Cuentas pagar Accountspor payable Documentos Short term notes por payables pagar Acreedores Sundry creditors varios Documentos Amounts payable y cuentas to related por pagar companies a empresas relacionadas Provisiones Accrued Expenses Retenciones Withholdings Impuesto Income taxes a la renta payables Otros Other pasivos current circulantes assets 3,032,384 6,668,121 76,952 367,155 700,935 25,482 101,046,435 11,069,649 2,874,709 235,101 14,807,469 3,351,295 408,615 544,133 119,168 530,701 14,798 48,085,608 1,502,552 606,307 52,830 4,356,342 2,146,303 593,453 Total current assets Total pasivo circulante 138,540,314 64,676,183 69 LARGO PLAZO: LONG TERM: Due to banks con and bancos financiale institutions Obligaciones instituciones financieras Bonds payablecon el público largo plazo (bonos) Obligaciones Long-term notes Documentos por payable pagar largo plazo Sundry creditors Acreedores varios Accrued Expenses long-term Provisiones - largo -plazo Deferred Income taxes Impuestos diferidos a largo plazo Other pasivos Income a- largo long-term Otros plazo 262,548 54,683,157 158,545 2,788,114 1,360,400 1,771,468 4,986,594 337,691 2,453,334 2,110,749 1,180,810 1,315,697 Total pasivo a largo plazo long-term liabilities 66,010,826 7,398,281 MINORITY INTEREST INTERES MINORITARIO 24,127,695 5,100,383 PATRIMONIO: SHAREHOLDERS’ EQUITY Capital Paid-in pagado capital Otras Other reservas reserves Déficit acumulado de desarrollo - filiales Accumulated deficitperíodo subsidiaries development period Utilidades acumuladas Retained earnings Utilidad del net ejercicio Year’s profit income for the year Dividendos provisorios Interim dividends 46,280,989 2,344,478 (439,245) 8,129,272 1,738,188 (1,224,000) 46,280,989 1,623,859 (288,113) 3,848,497 6,777,874 (1,418,543) Total shareholders’ equity patrimonio 56,829,682 56,824,563 285,508,517 133,999,410 LIABILITIES SHAREHOLDERS’ EQUITY TOTAL DEL PASIVO & Y PATRIMONIO [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. AND SUBSIDIARIES CONSOLID ATED INCOME ST ATEMENTS FOR THE YEARS ENDING AS OF DECEMBER 31, 2002 AND 2001 CONSOLIDA STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) INGRESOS DEINCOME EXPLOTACIÓN OPERATING 2001 Th. Ch$ Th. Ch$ 313,417,767 291,861,032 COSTOS DE EXPLOTACIÓN OPERATING COST (235,901,632) (217,240,049) OPERATING MARGIN MARGEN DE EXPLOTACIÓN 77,516,135 74,620,983 (74,292,769) (65,550,008) 3,223,366 9,070,975 RESULTADO NO OPERACIONAL: NON-OPERATING INCOME AND EXPENSES: Interest income Ingresos financieros Otheringresos non-operating income Otros fuera de la explotación Equity participation inen loss of related company Pérdida por inversión empresa relacionada Amortization of goodwill Amortización menor de valor inversión Interestfinancieros expenses Gastos Otheregresos non-operating Otros fuera deexpenses la explotación Price level monetaria restatement, net Corrección Foreing Currency translation, Net Diferencias de cambio 1,015,792 669,414 (12,718) (1,948,435) (2,162,091) (784,158) (332,005) 1,452,805 1,004,988 193,687 (1,763,804) (972,924) (468,529) (492,059) 508,759 PÉRDIDA NO OPERACIONAL NON-OPERATING EXPENSES, NET (2,101,396) (1,989,882) 1,121,970 7,081,093 119,756 (1,130,189) 1,241,726 5,950,904 369,567 826,970 1,611,293 6,777,874 126,895 - 1,738,188 6,777,874 GASTOS DE ADMINISTRACION Y VENTAS ADMINISTRATION & SALES EXPENSES UTILIDAD OPERACIONAL OPERATING PROFIT 70 2002 UTILIDAD ANTES DE IMPUESTO A LA RENTA INCOME BEFORE INCOME TAXES MINORITY INTEREST E AND INTERES MINORITARIO INCOME TAX IMPUESTO A LA RENTA CONSOLIDATED INCOME UTILIDAD CONSOLIDADA INTERES MINORITARIO MINORITY INTEREST NET INCOME UTILIDAD LIQUIDA AMORTIZATIONMAYOR OF NEGATIVE GOODWILL AMORTIZACION VALOR DE INVERSIONES UTILIDAD DEL FOR EJERCICIO NET INCOME THE YEAR The attached Notes N°1 thorugh N°21 are an integral part of these consolidate financial statements. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. AND SUBSIDIARIES CONSOLID ATED C ASH FLO W ST ATEMENTS FOR THE YEARS ENDING AS OF DECEMBER 31, 2002 AND 2001 CONSOLIDA CASH FLOW STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ FLUJO ORIGINADO ACTIVIDADES DE LA OPERACIÓN: CASH FLOW FROM POR OPERATING ACTIVITIES Collection of sales debt Recaudación de deudores por ventas Financial income received Ingresos financieros percibidos Other income percibidos received Otros ingresos Payment to suppliers & personnel Pagos a proveedores y personal Interest Interesespaid pagados Paid income Impuesto a latax renta pagado Other expenses paid Otros gastos pagados Paid IVA value added taxes and other similar pagados Impuesto al valor agregado y otros similares 383,573,502 503,707 1,286,421 (349,270,185) (968,580) (1,320,297) (5,029,976) (11,023,553) 343,842,216 778,564 1,301,269 (325,703,669) (813,740) (982,363) (416,800) (12,635,758) Positive cash flow generated from operational activities Flujo netonet positivo originado por actividades de la operación 17,751,039 5,369,719 14,157,537 33,010,801 (2,284,989) (17,447,336) (201,672) (330,639) 31,371,904 781,798 (2,337,208) (26,551,697) (22,841) 26,903,702 3,241,956 FLUJO CASH FLOW ORIGINADO FROMPOR INVESTMENT ACTIVIDADES ACTIVITIES DE INVERSIÓN: Sale of de fixed assetsfijos Ventas activos Incorporation of assets Incorporación defixed activos fijos Payment of capitalized interest Pago de intereses capitalizados Other ingresos investment income Otros de inversión Permanent investments Inversiones permanentes Other desembolsos investment disbursements Otros de inversión 457,098 (12,651,466) 308,608 (32,246,426) (1,797,962) 12,318 (10,520,889) (22,668) (288,400) Negative cash originado flow generated from investment activities Flujo neto net negativo por actividades de inversión (45,930,148) (10,819,639) (1,275,407) (2,207,964) 444,172 (280,349) (831,235) (2,488,313) INITIAL AND CASH EQUIVALENTS AT THE BEGINING OF THE YEAR SALDOBALANCE INICIAL OF DECASH EFECTIVO Y EFECTIVO EQUIVALENTE 17,336,881 19,825,194 FINAL OFEFECTIVO CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR SALDOBALANCE FINAL DE Y EFECTIVO EQUIVALENTE 16,505,646 17,336,881 FLUJO FLOW ORIGINADO ACTIVIDADES DE FINANCIAMIENTO: CASH FROM POR FINANCING ACTIVITIES Loans obtained Obtención de préstamos Debt with the con public [bonds] Obligaciones el público Other sources de of financiamiento financing Otras fuentes Payment of dividends Pago de dividendos Loan de services Pago préstamos Payment of issuance & placement expenses debt with the [bonds] Pago de gastos por emisión y colocación deof obligaciones conpublic el público Other desembolsos financing disbursements Otros por financiamiento Positive flow generated by financing Flujo netonet positivo originado por actividadesactivities de financiamiento TOTAL NEGATIVE NET CASH FLOW OF THE YEAR FLUJO NETO TOTAL NEGATIVO DEL AÑO IMPACT OF INFLATION OVER CASH AND CASHINFLACIÓN EQUIVALENT EFECTO SOBRE EL EFECTIVO Y EFECTIVO EQUIVALENTE NET CHANGE OF CASH AND CASH EQUIVALENT DURING THE VARIACIÓN NETAYEAR DE EFECTIVO Y EFECTIVO EQUIVALENTE DURANTE EL AÑO The attached Notes N°1 thorugh N°21 are an integral part of these consolidated financial statements. 71 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. Y FILIALES CONSOLID ATED C ASH FLO W ST ATEMENTS FOR THE YEARS ENDING AS OF DECEMBER 31, 2002 AND 2001 CONSOLIDA CASH FLOW STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ 1,738,188 6,777,874 48,739 (28,950) Charges(abonos) (credits)a to incomeque which do not represent cash flows Cargos resultado no representan flujo de efectivo: Depreciation Depreciación del ejercicio Amortization intangibles Amortizaciónofde intangibles Write-offs accrued expenses Castigos y and provisiones Equity participation in losses of related companies Pérdida devengada en inversiones en empresas relacionadas Amortization badwill Amortizaciónofmayor valor de inversiones Amortization goodwill Amortizaciónofmenor valor de inversiones Price level restatement, net Corrección monetaria neta Foreing currency translation, Diferencia de cambio neta net Other which do representan not representflujo cashdeflow Otros credits abonostoa income resultado que no efectivo Other income which not represent cash flow Otros charges cargos atoresultado que nodo representan flujo de efectivo 4,987,554 455,623 201,349 12,718 (126,895) 1,948,435 332,005 (1,452,805) (1,367,355) 585,826 3,802,279 186,115 79,246 1,763,804 492,059 (508,759) (561,551) 65,416 Changes indeassets which cash Variación activos queaffect afectan al flows flujo de efectivo: Increase receivables Aumentoindetrade deudores por ventas Increase Aumentoindeinventory existencias Decrease (increase) of other assetsactivos Disminución (aumento) de otros (3,631,865) (1,048,602) 1,378 (3,168,129) (9,087,309) (2,258,609) 16,260,773 127,733 (955,871) 7,357,058 4,594 110,738 141,556 (137,878) 32,466 1,138,347 (369,567) (826,970) 17,751,039 5,369,719 CONCILIACIÓN EL FLUJO NETO ORIGINADO POR ACTIVIDADES CONCILIATION ENTRE BETWEEN THE NET FLOW GENERATED BY OPERATIONAL ACTIVITIES AND THE YEAR’S RESULTS: DE LA OPERACIÓN Y EL RESULTADO DEL EJERCICIO Net income the year Utilidad del for ejercicio Resultado en venta de activos: Loss (Profit)(utilidad) from sales assets Pérdida enof venta de activos fijos 72 Changes in which affect cash de flows Variación deliabilities pasivos que afectan al flujo efectivo: Increase withcon el Aumentoin deaccount cuentas payable por pagarassociated relacionadas operating resultado results de la explotación Increase payable Aumentoofdeinterest intereses por pagar Increase in income tax payable (Disminución) aumento neto de impuesto a la renta por pagar Increase related to Aumentoindeother otrasaccounts cuentas payable por pagar relacionadas non results con operating el resultado fuera de explotación Net (decrease) increase value tax al and other similar ytaxes (Disminución) aumento inneto de added impuesto valor agregado otrospayable similares Loss of minority interest Pérdida del interés minoritario Positive netpositivo flow generated operational de activities Flujo neto originado from por actividades la operación The attached Notes N°1 thorugh N°21 are an integral part of these consolidated financial statements. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] REPOR T OF INDEPENDENT ACCOUNT ANTS REPORT CCOUNTANTS To the Shareholders of Farmacias Ahumada S.A.: We have audited the accompanying consolidated balance sheets of Farmacias Ahumada S.A. and Subsidiaries (the “Company”) as of December 31, 2001 and 2002, and the related consolidated statements of income, shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards 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 financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. The notes for the consolidated financial statements provide sufficient, but less detailed information than that contained in the notes, which form part of the financial statements submitted to the SVS, where they are available to shareholders and the general public, with which we have released our report on the same date and that includes additional information required by the Superintendency which are not essential for an adequate interpretation. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Farmacias Ahumada S.A. and Subsidiaries as of December 31, 2001 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in Chile. March 14th, 2003. 73 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. NO TES TO THE CONSOLID ATED FIN ANCIAL ST ATEMENTS NOTES CONSOLIDA FINANCIAL STA Translation of financial statements originally issued in spanish (IN THOUSAND PESOS) These disclosure notes present, in the opinion of Management, sufficient information, albeit with less detail than the information contained in the disclosure notes that are an integral part of the consolidated financial statements submitted to the Superintendence for Securities and Insurance Companies [Superintendencia de Valores y Seguros ], to the Stock Exchanges where they remain available to shareholders, and to the public at large. Such information may also be consulted at the Company’s headquarters during the 15 days prior to the Extraordinary Shareholders’ Meeting. 1. REGISTRA TION OF THE COMP ANY IN THE SECURITIES REGISTRAR, COMP ANY IDENTIFIC ATION REGISTRATION COMPANY COMPANY IDENTIFICA AND ACTIVITIES. Farmacias Ahumada S.A. was incorporated by virtue of a public deed dated November 28, 1997 and its line of business consists in manufacturing toiletries, cosmetics, as well as chemical and pharmaceutical products; distributing, importing, exporting and marketing similar products of other industries, both domestically and abroad, and representing national and foreign firms in this line of business. Additionally, through its indirect affiliates Far – Ben S.A. de C.V. (Mexico), Boticas Fasa S.A. (Peru) and Fasa do Brasil Ltda., it markets products of the above-mentioned line of business in Mexico, Peru and Brazil, respectively. 74 On October 15, 1997, the Company was registered in the Securities Registrar of the Superintendence for Securities and Insurance Companies under N°629; thus, it is supervised and controlled by that Superintendence. Debt resc heduling of FFilial ilial FFar ar - Ben S.A. de C.V rescheduling C.V.. (Mexico) – The company’s stock capital was increased during the present fiscal year derived from shareholder contributions and from the rescheduling of the debt corresponding to the bond issue denominated “Bond Issue Convertible at the Option of the Holder into Series “B” Shares of Stock of FARBEN, S.A. de C.V.” (BEVIDES 97U) denominated in UDIS Investment Units. 2. ACCOUNTING POLICIES a. Accounting Period – The current consolidated financial statements correspond to the period comprised between January 1 and December 31 of the year 2002. The previous period to which comparisons are made is comprised between January 1 and December 31 of the year 2001. b. Preparation Bases – TThe consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Chile and the regulations issued by the SVS (Superintendence for Securities and Insurance Companies.) , except for investments in subsidiaries, which have been entered under a single line item of the General Balance Sheet at their proportional equity value and, therefore, they have not been consolidated. This accounting treatment alters neither the net result (profit/loss) nor the shareholders’ equity. In case of discrepancy, the regulations issued by the Superintendence for Securities and Insurance Companies shall have precedence over the accounting principles issued by the Chilean Union of Accountants [ Colegio de Contadores de Chile A.G.]. c. Consolidation bases – The consolidated financial statements eliminate any significant balances and transactions made between the consolidated companies and recognize the minority shareholding interest. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] The consolidated group is comprised of Farmacias Ahumada S.A. (the Parent Company) and the subsidiaries, according to the following breakdown: Shareholding Percentage RUT Taxpayer Id. Company Name Direct % 2002 Indirect % 79.663.290-9 96.809.530-7 96.863.980-3 99.99 99.99 0.01 - 99.99 - 0.01 100.00 64.99 100.00 100.00 64.99 99.99 99.99 64.99 - 64.98 64.98 64.98 99.97 98.00 99.97 99.99 - 64.98 100.00 0.03 2.00 100.00 99.99 0.03 100.00 67.95 67.95 67.95 67.95 67.95 100.00 64.98 100.00 100.00 100.00 100.00 99.99 100.00 100.00 67.95 67.95 67.95 67.95 67.95 99.99 100.00 64.98 99.99 67.00 98.00 99.99 99.99 99.99 67.00 96.860.090-7 Foreign Foreign Foreign Foreign 96.792.260-9 Foreign Foreign Foreign Foreign Foreign 96.969.830-7 99.506.180-5 Foreign Foreign Foreign Foreign Foreign Foreign Foreign Laboratorios Fasa S.A. Fasa-Card S.A. ABF, Administradora de Beneficios Farmacéuticos S.A. Distribuidora y Logística Integral S.A. Fasint Ltda. (Brazil) Fasamed Comércio Farmacêutico S.A. (Brazil) (ex-Drogamed Comércio de Medicamentos e Perfumaria S.A.) Administradora de Beneficios Farmacéuticos do Brasil S.A. Droguería La Victoria S.A.C. (Peru) Compañía de Nutrición General S.A. Farmacias Ahumada Internacional S.A. (Uruguay) Lagrynd Corp S.A. (Uruguay) Inversiones San Silvestre S.A.C. (Peru) Boticas Fasa S.A. (Peru) Fasa do Brasil Ltda. Fasa Investment S.A. Inverex S.A. Far-Ben S.A. de C.V. (Mexico) Droguería Benavides S.A. de C.V. (Mexico) Benavides de Monterrey S.A. de C.V. (Mexico) Benavides de Reynosa S.A. de C.V. (Mexico) Benavides del Pacifico S.A. de C.V. (Mexico) Fasa International Corp. (British virgin islands) Nutritional Labs. Inc. (USA) Total % 2001 Total % 100.00 100.00 99.99 99.99 The affiliate Far-Ben S.A. de C.V. (Mexico) has only consolidated its asset and liability balances, because the initial registration of the proportional equity value of such affiliate was made on the basis of the general balance sheet as of December 31, 2002. d. Presentation Bases – For comparative purposes the consolidated financial statements as of December 31, 2001 are shown restated out-of-accounting at 3.0%. Certain minor reclassifications have been made in the financial statements of 2001 that do not affect the result for the purposes of comparison with the year 2002. e. Monetary Correction – The consolidated financial statements have been corrected monetarily in order to reflect the impact of changes in the currency’s purchasing power. To that effect, the main input were the changes experienced by the consumer price index (3.0% and 3.1% as of December 31 of 2002 and 2001, respectively). 75 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] f. Conversion – Assets and liabilities stated in foreign currency and in UF inflation index units are shown at closing prices, as follows: Item 2002 $ US dollars Brazilian Real Peruvian Nuevo Sol Mexican Peso UF Inflation index 718,61 203,38 204,44 68,84 16.744,12 2001 $ 654,79 282,18 190,01 16.262,66 The corresponding conversion differences are accounted for in the year’s results (profit/loss), except for conversion differences generated by net investments in foreign indirect affiliates, which are accounted for under other reserves. g. Conversion of financial statements of affiliates – The indirect foreign affiliates Boticas Fasa S.A.C. (Peru) and Droguería La Victoria S.A.C. (Peru) carry their accounting records in Peruvian soles; the indirect subsidiary Fasa do Brasil Ltda. carries its own records in Brazilian reales, and the indirect subsidiary Far-Ben S.A. de C.V. (Mexico) carries its accounting records in Mexican pesos since those are the local currencies of their respective countries of operation, pursuant to the rules and regulations established by Technical Bulletin N° 64 of the Chilean Union of Accountants. The conversion of the financial statements of such affiliates into Chilean pesos has been made with the purpose of consolidating them with the financial 76 statements of their Chilean parent company, Farmacias Ahumada S.A. h. Time Deposits - Include the capital plus the restatements and interests accrued by the closing of the year. i. Marketable Securities – Correspond to investments in mutual fund shares, which are shown at the year’s closing prices. j. Buyback agreement operations – The acquisition of financial instruments with buyback agreements are recorded as a fixed-income security deposit. k.Inventories – Are shown at their monetarily corrected cost and they do not exceed their net sale value. The obsolescence provision corresponds to low-turnover merchandise for sale. l. Bad Debt Estimates – The provision for debt unlikely to be recovered was calculated on the basis of their antiquity, according to criteria adopted by the Company at the year’s closing. The parameters applied to non-collectibles from sales debtors and protested documents are the following: Days Sales debtors % Protested documents % 0-30 31-60 61-90 91-120 121-150 151-180 50 2 75 10 100 15 100 20 100 40 100 +180 100 100 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] m. Fixed assets – Are shown valued at their cost of purchase corrected monetarily. n. Fixed asset depreciation – Was determined according to the lineal method, according to the estimated useful life of the respective assets. The depreciation of fixtures installed on leased real estate property was determined according to the term of the respective leasing contracts. ñ. Leased assets – Leasing contracts for movable (personal) and immovable (real estate) property that meet the standards of financial leasing contracts are accounted as fixed asset purchases, recognizing the total obligation and the interests on an accrual basis. Such assets are not the legal property of the Company; consequently, for as long as the purchase option is not exercised, the Company cannot freely dispose of them. o. Fixed asset sales with financial leaseback agreement – The profits obtained from the sale of fixed assets with a financial leaseback agreement are deferred throughout the residual useful life of the asset and are amortized in proportion to their amortization. p. Intangibles – Municipal patents [derechos de llave] are shown at cost and are amortized throughout the term of the lease contract. Commercial trade marks and sanitary registrations are amortized lineally within a period of 5 and 20 years, respectively, depending on the use periods estimated by the Company, according to the provisions established under N°35 of the Technical Bulleting issued by the Chilean Union of Accountants. q. Investments in related companies – Are shown at their proportional shareholding equity value. The indirect subsidiaries abroad carry their accounting records in the currency of their respective country. According to the provisions established in Technical Bulletin N°64 of the Chilean Union of Accountants, indirect foreign affiliates incorporated as an extension of the Parent Company or as an investment vehicle are controlled in Chilean pesos, and the indirect operative affiliate is controlled in United States dollars. r. Lower investment value – Lower investment values are amortized within their respective estimated investment return period. The latter is calculated from the difference resulting when comparing the total value paid for the investment with its proportional equity value. The amortization term has been mainly determined through calculations made by the Company regarding the investment return period. s. Debt with the public (Bonds) – This debt is shown at par value as of the year’s closing. The lesser value in the placement of the bonds with respect to their par value as of the date of placement is shown under the item Other assets and is deferred and amortized on the basis of the real interest. 77 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] t. Income tax and deferred taxes – The income tax is calculated on the basis of the taxable net income pursuant to the tax provisions in effect as of each year’s closing. The Company accounts for all deferred taxes by the time differences, tax losses and other events that generate differences between the accounting & tax base of assets and liabilities, according to the provisions established in Technical Bulletin N°60 of the Chilean Union of Accountants and its complementary provisions, and according to Circular 1,466 of the Superintendence for Securities and Insurance Companies. In accordance with Technical Bulletin N° 71 of the Chilean Union of Accountants, as of the year 2001, all deferred taxes are accounted by applying the income tax rate for the year that will reverse the corresponding time difference that originated it. u. Severance pay for years of service – The Company has no contractual obligation to its personnel on this concept. The subsidiary company Boticas Fasa S.A. (Peru) accounts for the compensation of the years of service that must be paid to workers – with charge to results as they accrue –according to Peru’s current labor legislation. v. Labor obligations upon retirement – Far-Ben S.A. de C.V. (Mexico) has established a personnel pension and retirement plan that complements the services offered by the Social Security Service for the payment of retirement and death benefits. The obligations and costs of such plan, as well as those related to the seniority allowance to which the personnel is entitled upon terminating a 15-year labor relationship with the company, are reflected according to actuarial calculations prepared by independent experts using the projected unit credit method with real rates of interest. Such indemnification is charged to results when the decision to pay them is adopted. w. Operating income - Operating income is recognized on an accrual basis. The income is credited when the merchandise is delivered. 78 x. Computer software – The Company has acquired computer software that has been accounted for under the item Other Fixed Assets. Software development expenses that do not meet the criteria established by current norms are debited to results when they are actually incurred; such expenses, however, have not been significant during the last five years. y. Research & Development expenses – The expenses incurred under this item are debited to results when they are actually incurred. Such expenses, however, have not been significant during the last five years. z. Cash flow statement – The concept of cash flow statement includes time deposits, investments in fixed-income mutual funds, and the purchase of financial instruments with buyback agreements of up to 90 days. The positive net cash flow originated by operational activities represents the net cash income of the year as a result of activities that affect the profit & loss statement, other than investment and financing activities. The cash and cash equivalent of Far-Ben S.A. de C.V. (Mexico) amounts to Ch$ 18,890,191 and is not included in the consolidated cash flow statement since only assets and liabilities are consolidated, because the initial registration of that affiliate’s proportional equity value was calculated on the basis of the general balance sheet as of December 31, 2002. a.a. Stock & Bond floatation costs – Stock floating costs have been absorbed by the goodwill generated from the stock placement, when such goodwill has occurred. Bond floating and underwriting costs have been accounted for under the item Other Assets and are amortized lineally throughout the term of the documents. b.b. Vacation – The cost is registered as an expense in the year when such benefit accrues. 3. ACCOUNTING CHANGES During the period comprised between January 1 and December 31 of the year 2002 there have been no accounting changes that could significantly affect the consolidated financial statements. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 4. AVAILABLE The breakdown is the following: 2002 2001 Concept Th. Ch$ Th. Ch$ Cash in banks Securities to be deposited Cash & fixed fund 5,229,096 5,223,015 - 2,216,888 4,872,007 198,986 10,452,111 7,287,881 Totals The sums included under securities to be deposited correspond mainly to funds collected during the last days of the month of December of 2002 and 2001 from the different stores, which are deposited beginning on the next working day. 5. SHORT AND LONG-TERM DEBTORS Current Up to 90 days 2002 2001 Item Th. Ch$ Sales debtors Bad debt estimate Receivables Bad debt estimate Sundry debtors Bad debt estimate 20,41,320 222,799 2,134,704 - Over 90 days up to 1 year 2002 2001 Th. Ch$ Th. Ch$ 9,989,385 536,901 2,018,488 - 324,367 3,089 4,480 - Subtotal Th. Ch$ 13,385 79,266 77,861 - Th. Ch$ 20,565,687 189,631 225,888 92,951 2,139,184 20,056 Current total (net) 2002 2001 Th. Ch$ Long Term 2002 2001 Th. Ch$ Th. Ch$ Th. Ch$ 10,002,770 616,167 2,096,349 5,733,183 5,306,522 - - - - a. Short-term sundry debtors: The breakdown of short-term sundry debtors is the following: 2002 Th. Ch$ 2001 % Th. Ch$ % Personnel current accounts 444,516 Fund to be rendered 426,137 Advance to suppliers 197,250 Sundry current accounts 140,667 Accounts receivable shareholders 96,372 Other advances 218,991 Other debtors 595,195 20.98 20.11 9.31 6.64 4.55 10.33 28.08 570,342 89,091 255,484 393,194 116,726 301,485 370,027 27.21 4.25 12.19 18.76 5.57 14.38 17.64 Totals 100.0 2,096,349 100.0 2,119,128 79 20,376,056 132,937 2,119,128 b. Long-term sundry debtors: The balance of the item long-term sundry debtors corresponds to loans granted to Company workers in order to acquire shares of stock, approved according to the board meetings of December 2, 1997 and December 14, 1999. Such loans were granted in UF and they accrue an annual interest of 6% and 5%, respectively. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] As a manner to establish guarantees over the above-indicated loans, the shares were pledged in favor of the Company. Finally, as agreed between the parties, each worker shall be entitled to exercise the option right, whose final deadline is December 2004. During the period, as a result of the reallocation of some loans, an income was generated in the amount of Ch$ 315,320 thousand which is shown under Other non-operating income. The loans that expired in December 2002 shall be liquidated and/or reallocated during the year 2003. 6. B ALANCES AND TRANSA CTIONS WITH RELA TED ENTITIES BALANCES TRANSACTIONS RELATED a. Main companies related to the Company: During 2002 and 2001 the Company had transactions and balances with the following related companies: Shareholders Inversiones Galia S.A. RUT Taxpayer Id. 79.799.330-1 Indirect subsidiary Droguería y Farmacias El Fenix S.A. de C.V. ( México) 80 Foreign Related via shareholders Promotora C.M.R. Falabella S.A. Falabella S.A.C.I. Distribuidora y Comercial Edeka S.A. Administradora CMR Falabella Ltda. Viajes Falabella Ltda. La Interamericana S.A. Cía. de Seguros de Vida Jaime Ben-Dov Codner Ltda. La Interamericana S.A. Cía. de Seguros Generales Banco Falabella 90.743.000-6 90.749.000-9 85.703.300-0 79.598.260-4 78.997.060-2 99.289.000-2 78.345.300-2 99.288.000-7 96.509.660-4 Related via board members and executives Inversiones K y V Ltda. G y B Asesorías e Inversiones S.A. Vial y Palma Ltda. Inversiones Zermatt Ltda. Iron Mountain Chile S.A. Abogados Vial y Palma Bellmar S.A. Servicios e Inversiones Asefin Ltda. Asesorías e Inversiones La Grulla Ltda. Asesorías Latri Ltda. Omega Inversiones y Asesorías Ltda. Jaime Sinay Mario Valdivia Bernstein Alexander Fernandez Pablo Lamarca Claro 78.743.430-4 96.577.790-3 84.257.600-8 78.482.780-1 96.756.680-2 78.741.580-6 96.712.590-3 77.565.530-5 78.588.910-K 77.153.300-0 79.765.310-1 6.377.768-4 6.987.378-2 9.604.686-3 5.319.489-3 b. Short-term receivables and payables: The short and long-term balances receivable and the short and long-term balances payable originate mainly from routine business operations under normal market conditions, which are stated in non-restatable dollars and pesos not accruing interest, and the balance is kept in a running account. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] c. Transactions: The main transactions performed with related companies are the following: 2002 2001 Impact on Impact on results Description of transaction Arriendos pagados Leases paid Arriendos espacios Leasing of de (floor) space Gastos de publicidad Advertising expenses Otros Other Ingresos income Servicios pagados Services paid Ventas con tarjetas Credit card sales de crédito neto comisiones net ofdecommissions Recaudaciones CMR collection CMR Comisiones Commissionspagadas paid Servicios asesorías recibidas Services &y consulting received Servicios asesorías prestadas Services &y consulting rendered Seguros de vida Life insurance policies Seguros generales Other general insurance policies Contratos de arriendo leasing Leasing rental contracts Mejoras en locales Store improvements results Amount (charge) credit Amount (charge) creditLeases paid Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ 1,082,722 40,067 5,900 134,812 301,947 (1,059,697) 40,067 (5,000) 114,247 (301,947) 1,091,598 40,100 80,216 39,116 191,311 (1,068,327) 40,100 (67,980) 33,150 (191,311) 41,360,194 2,215,417 301,268 102,202 143,122 41,041 87,904 184,380 943,946 (255,312) (102,202) (143,122) (34,781) (82,913) (101,328) (2,032) 35,802,765 326,875 230,183 29,503 29,590 144,620 193,401 1,030,709 (277,012) (230,183) (29,503) (25,076) (122,560) (873,482) 81 7. INVENTORIES The breakdown of the inventories is the following: Detalle Item 2002 2001 Th. Ch$ Th. Ch$ Mercaderías for para la venta Merchandise sale Mercaderías en tránsito Goods in transit Materias primas recetario service Basic products for de prescription Otrasminor existencias menores Other inventories Provisión obsolescencia Obsolescence provision 84,811,496 116,799 632,790 241,720 (80,000) 41,628,705 438,343 442,552 353,284 (82,838) Totales Totals 85,722,805 42,780,046 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 8. DEFERRED TAXES AND INCOME TAXES a. Income tax – As of December 31, 2002, the taxable net income of the affiliates Filiales Fasamed Comércio Farmacêutico S.A. (former Drogamed Comércio de Medicamentos e Perfumaria S.A. Brazil) and Laboratorios Fasa S.A., calculated for tax purposes, amounted to approximately Ch$217,928 thousand (Ch$6,879,618 thousand as of December 2001) for the Parent Company and its subsidiary Fasamed Comércio Farmacêutico S.A. (former Drogamed Comércio de Medicamentos e Perfumaria S.A. Brasil). The breakdown of the taxes to be recovered is the following: 82 , 2002 2001 Th. Ch$ Th. Ch$ Impuesto a la renta de primera categoría First Category Income Tax Pagos provisionales mensuales Monthly social security payments Créditos donaciones y créditos Sence Credits por for donations and SENCE credits Impuesto extraordinario activo fijo Additional tax fixed assets Pagos a cuenta de impuesto la renta 3income categoría Payments on account of 3rda category tax Pagos provisionales por for impuestos de primera Provisional payments First Category Taxescategoría de 31 3) N° 3) forutilidades absorbed absorbidas profits (Art.(Art. 31 N° Otros recuperar Othercréditos credits por recoverable (36,480) 1,214,288 225,405 149,804 12,380 (1,032,106) 907,820 129,657 - 43,014 314,935 230,339 Subtotal Subtotal 1,923,346 235,710 IVA fiscal tax - fiscal credit IVAcrédito value added 2,515,586 - Impuesto por recuperar Taxes recoverable 4,438,932 235,710 b. Accumulated tax profit – The balance of the tax profits withheld with the 15% credit amounted to approximately Ch$ 12,763,054 thousand (Ch$ 13,791,700 as of December 31, 2001) and the corresponding credit for the profits recorded in the F.U.T. to be allocated to shareholders when dividends are distributed, amounted to CH $1,914,458 thousand approximately (Ch$2,068,755 thousand as of December 31, 2001). The affiliates, with the exception of Fasa do Brasil Ltda. and Laboratorios Fasa S.A., have tax losses totaling Ch$4,684,560 thousand, when added individually. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] DEFERRED TAXES The balances of assets and liabilities for taxes deferred because of the legal incorporation of Far-Ben S.A. de C.V. (Mexico) correspond to Ch$23,604,498 thousand and Ch $23,526,844 thousand, respectively, since only the balances of the assets and liabilities have been consolidated from such affiliate. (Note 2c). Deferred Taxes 2002 Assets Short term Th. Ch$ Concepts Diferenciasdifferences temporarias Temporary Provisión cuentas incobrables Bad debt provision Ingresos anticipados Advanced income Provisión provision de vacaciones Vacation Amortización intangibles intangibles Amortization Activos en leasing Leasing assets Depreciación ofactivo Depreciation fixed fijo assets Indemnización años de Severance pay (years of servicio service) Otros events eventos Other Pérdidas Tax lossestributarias Provisión obsolescence de obsolescencia de inventario Inventory provision Provisión for de unrealized utilidades no realizadas Provision profits Obligaciones por leasing Leasing obligations Otras provisions provisiones Other Cuentas por cobrar Receivables Prepagoprepayment leaing Leasing Plan de plan pensiones Pension Mejoras en inmuebles Improvements to leasedarrendados real estate Existencias Inventories Otros Other Cuentas complementarias-neto deamortization amortización Complementary accounts - net of Provisión de valuación Valuation provision Totales Totals 2001 Liabilities Long term Th. Ch$ Short term Th. Ch$ Assets Long term Th. Ch$ Short term Th. Ch$ Liabilities Long term Th. Ch$ Short term Th. Ch$ Long term Th. Ch$ 236,735 176,907 420,803 13,200 40,082 100,207 7,153 - 98,429 123,992 2,676,821 20,869,507 430,257 252,465 119,910 1,012,302 5,228,179 - 19,800 - 1,033,338 11,935,652 22,500 1,166,950 14,477,551 153,149 178,792 23,287 84,912 23,346 - 48,478 57,633 396,219 1,596,442 410,405 215,200 - 19,776 - 1,037,253 1,242,965 874,224 - 5,307 - 5,557,403 189.091 - 1,799,155 - 11,723 - 452,059 334,704 - 36,468 - 989,780 25,065,368 19,800 26,836,836 451,763 1.937,164 19,776 3,117,974 INCOME TAXES 2002 2001 Th. Ch$ Th. Ch$ Current tax expenses (tax provisions) Gasto tributario corriente (provisión impuesto) (36,480) Tax expense (previousanterior) fiscal year) Ajuste gasto restatement tributario (ejercicio Tax benefits for tax olosses Efecto por activos pasivos por impuesto diferido del ejercicio (325,697) Impact on assets or liabilities for the year’s deferred taxes Beneficio tributario por pérdidas tributarias 43,014 Impact asset accounts Efecto for por amortization amortizaciónofdecomplementary cuentas complementarias de activos and deferred liabilities y pasivos diferidos 55,070 Impact assets oro liabilities for impuesto taxes deferred because Efecto on en activos pasivos por diferido por cambios ofenchanges in thedevaluation provision la provisión valuación 140,306 Other debits en on la thecuenta account Otros charges cargos oorabonos 243,543 (1,032,106) (169,479) 375,731 - Totals Totales (1,130,189) 119,756 (12,141) (292,194) - 83 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 9. FIXED ASSETS The breakdown of the fixed assets is the following: Gross fixed assets 2002 Accumulated depreciation Th. Ch$ Terrenos Land Instalaciones Facilities Maquinarias y equipos Machinery & equipment Otrosfixed activos fijos: Other assets: Equipamiento computacional Computer equipment Muebles&y supplies útiles Furniture Vehículos Vehicles Activosassets en leasing Leased Instalaciones en inmuebles arrendados Facilitites on leased real estate Otros Other Totalfixed activo fijo Total assets Th. Ch$ Gross fixed assets 2001 Accumulated depreciation Th. Ch$ Th. Ch$ 20,591,160 16,371,459 21,561,398 6,136,929 14,437,802 3,928,315 6,136,872 - 2,196,115 - 34,369,462 57,429,171 4,175,879 5,298,542 45,285,086 2,776,563 26,014,012 30,525,860 2,871,769 1,280,785 18,991,046 90,651 10,288,812 7,589,563 359,921 5,437,866 12,500,619 608,617 4,451,176 2,872,996 204,856 1,106,279 3,798,737 34,087 207,921,720 100,348,854 46,850,585 14,664,246 Depreciation is included under administration and sales expenses and amounts to Ch$ 4,987,554 thousand in 2002 and Ch$ 3,802,279 thousand in 2001. 84 Leased fixed assets correspond mainly to computer equipment and to the installation of business premises. During January 2001 the Company prepaid goods acquired through financial leasing for a total amount of Ch$ 1,428,834 thousand(historical). In the Parent Company, leased assets include computer equipment for business premises, sold with financial leaseback agreement. The total value of the contracts that include these assets is Ch$ 1,853,809 thousand(historical). The sale price was Ch$ 823,368 thousand (historical) and generated a profit of Ch$ 214,682 thousand that is amortized in 48 months. The non-amortized balance as of December 31, 2002 amounted to Ch$ 80,508 thousand (Ch$ 138,201 thousand in 2001) and is shown deducting other fixed assets. The average rate of interest of these contracts is of 9.39%. The management of Far-Ben S.A. de C.V. (Mexico) estimated an overvaluation of its fixed assets by approximately Ch$ 3,442,000 thousand, thus registering a provision for the valuation of fixed assets. 10. INVESTMENTS IN RELA TED COMP ANIES RELATED COMPANIES As of December 31, 2002, the investment balance in related companies corresponds to the investment in Droguería y Farmacias El Fénix S.A. de C.V. (Mexico). The effect on results for the accrued loss of Ch$65,877 thousand was not included in the income statement, since it only considers assets and liabilities of Far-Ben S.A. de C.V. (Mexico). [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 11. GOODWILL AND BADWILL Goodwill was generated by the acquisition of shares of stock of the affiliates Boticas Fasa S.A. (Peru) in 1998 and 2001; and of Compañía de Nutrición General S.A. in 2002, 2001 and 2000; Droguería la Victoria S.A.C. (Peru) in 2001, Fasamed Comércio Farmacêutico S.A. (former Drogamed Comercio de Medicamentos e Perfumaría S.A. Brazil) and Fasint Ltda. (Brazil) in June of the year 2000. Goodwill in Droguería y Farmacias El Fénix S.A. de C.V. (Mexico) was incorporated by way of the consolidation of the general balance sheet of Far-Ben S.A. de C.V. (Mexico), as indicated in Note 2. Because of the foregoing, the amortization of goodwill in Droguería and Farmacias El Fénix S.A. de C.V. (México) amounted to Ch$28,901 thousand and it is not included in the consolidated income statement because it only considers assets and liabilities of Far-Ben S.A. de C.V. (Mexico). Goodwill will be amortized in 15 years in the case of Boticas Fasa S.A. (Peru), 10 years in the case of Droguería La Victoria S.A.C. (Peru), Compañía de Nutrición General S.A., Fasamed Comércio Farmacêutico S.A. (former Drogamed Comercio de Medicamentos e Perfumaría S.A. Brazil) and Fasint Ltda. (Brazil), and 20 years in the case of Droguería y Farmacias El Fénix S.A. de C.V. (Mexico). These time periods have been determined considering the respective estimated return-on-investments periods. RUT Taxpayer Id. Foreign 96.792.260-9 Foreign Foreign Foreign Foreign Totals Company name 2002 Amount amortized Balance in period goddwill Th. Ch$ Th. Ch$ Boticas Fasa S.A. (Peru) 96,989 Compañía de Nutrición General S.A. 112,904 Fasamed Comércio Farmacêutico S.A. (Brazil) (ex-Drogamed Comércio de Medicamentos e Perfumaria S.A.) 1,430,169 Fasint Ltda. (Brazil) 250,219 Droguería La Victoria S.A.C.(Peru) 58,154 Droguería y Farmacias El Fenix S.A. de C.V. (Mexico) 1,948,435 2001 Amount amortized Balance in period goddwill Th. Ch$ Th. Ch$ 978,160 775,100 76,192 84,100 1,009,055 342,213 10,726,265 1,944,570 - 1,342,250 253,851 7,412 11,662,971 1,940,688 73,850 390,372 - - 14,814,467 1,763,804 15,028,777 Badwill of Ch$ 8,422,160 thousand was generated because the acquisition of the shares of stock of the subsidiary Fasamed Comércio Farmacêutico S.A. (Brazil) during 2001 and of Far-Ben S.A. de C.V. (Mexico) during 2002, which are amortized in 10 and 5 years, respectively. 85 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 12. SHOR T-TERM DEBT WITH B ANKS AND FIN ANCIAL INSTITUTIONS SHORT BANKS FINANCIAL They correspond to debt in UF, in non-restatable pesos, and in other currencies: 2002 Short Long term term Th. Ch$ Th. Ch$ 2001 Short Long term term Th. Ch$ Th. Ch$ Banco Interbanc 64,889 Banco BCN 59,498 Banco de Crédito 5,562 Banco Santander 654,632 Banco HSBC S/A Finame 1,636,799 Banco HSBC S/A Capital de Giro 41,305 Banco Safra S/A 569,699 Corpbanca Banco Cidade Banco de Chile Factoring Banco Chile Banco Santiago - 76,952 - 1,277,467 523,261 650,091 587,105 1,478,953 2,080,948 61,051 9,245 119,168 - Totals 76,952 6,668,121 119,168 3,032,384 As of December 31, 2002, long-term liabilities reflected long-term debt with maturities within 1 year and totaling 86 Ch$ 76,952 thousand (Ch$ 119,168 thousand in 2001). Such debt accrues an average rate of interest of 6.9% per year. 13. SHOR T AND LONG-TERM CORPORA TE BONDS SHORT CORPORATE On December 5, 2002 the Company placed UF 2,000,000 in Bonds Series A-1 and A-2 in the local market. Such placement generated resources totaling Ch$ 33,010,801 thousand. The non-amortized balance of the discount made at the time of the auction amounted to Ch$ 690,081 thousand; of which, Ch$ 151,876 thousand are shown under Other current assets, and Ch$ 538,205 thousand under Other long-term assets. The funds raised from such Bond placement were mostly allocated to taking control over the company denominated Sociedad Mexicana Farmacias Benavides S.A. de C.V. through the companies Fasa Investment S.A. and Inverex S.A. for a total amount of US$ 37,290,321.68 y US$ 7,000,000, respectively. The balance is shown in the Short-Term as Ch$ 367,155 thousand corresponding to interest accrued as of December 31, 2002 and payable on April 15, 2003. The capital will be amortized semi-annually as of April 15, 2005. On May 22, 1997, the Company issued the “Bond Issue Convertible at the Option of the Holder into Series “B” Shares of Stock of FARBEN, S.A. de C.V.” (BEVIDES 97U) issuing 2,250,000 nominal bonds at a face value of 100 UDIS each, consequently, representing a total value of 225,000,000 UDIS. These are unsecured bonds with not specific guarantee, except for certain limitations in the Company’s financial and corporate structure. The funds raised from such bond issue were allocated to the consolidation of liabilities. [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] By virtue of the public deed dated September 3, 2002, modifications were introduced into the minutes of the respective bond issue, thereby agreeing that the amortization of such bonds will be carried out in three (3) equal installments on the following dates: July 5, 2007, August 28, 2008 and September 4, 2009, and that the rate of interest will be of 6% in UDIS. 14. ACCOUNTS P AYABLE PA The breakdown of accounts payable as of December 31, 2002 and 2001 is the following: 2002 Th. Ch$ 2001 Th. Ch$ Domestic suppliers Accounts assigned by suppliers 100,973,610 72,825 42,326,928 5,758,680 Totals 101,046,435 48,085,608 The balance payable to domestic suppliers corresponds mainly to purchases of inventories, in the currencies of the respective countries. The accounts assigned by suppliers correspond to accounts owed to certain suppliers that assigned a portion of their receivable portfolio to Servicios Financieros Citibank (Chile) S.A. 87 15. LONG-TERM LIABILITIES Closing Date Current Period Institution Corpbanca Sundry Creditors (1) Sundry Creditors (1) Sundry Creditors (1) Others Years of Maturity Restatement currency Over 1 Over 2 Over 3 index up to 2 up to 3 up to 5 Th. Ch$ Th. Ch$ Th. Ch$ UF UF $R Soles UF 75,014 564,156 74,546 8,682 3,007 75,014 112,520 308,614 122,147 32,392 15,960 112,978 - Over 5 up to 10 Th. Ch$ Total L-T as of closing of financial statements Th. Ch$ Average annual rate of interest 1,545,632 - 262,548 2,540,549 106,938 137,620 3,007 3.90% 9.48% 22.00% 10.00% - Closing Date Previous Period Total L-T as of closing of financial statements Th. Ch$ 337,691 2,453,334 - (1) These liabilities correspond to leasing contract installments of computer equipment purchases, installations and equipment provisions for business premises. Additionally, long-term liabilities include Ch$ 54,683,157 thousand in bonds held by the public, Ch$ 158,545 thousand in documents payable, Ch$ 1,771468 thousand (Ch$ 1,180,810 thousand in 2001) in deferred taxes, and other liabilities totaling Ch$ 4,986,594 thousand (Ch$ 1,315,697 thousand). [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 16. EQUITY CHANGES The Equity Account changes occurring in 2002 and 2001, in historical figures, were the following: Interim dividends Th. Ch$ Deficit development period Th. Ch$ 938,483 2,664,590 10,800 122,532 - (600,000) 1,500,000 (889,200) (10,800) (27,226) (1,350,000) (122,804) (153,110) (3,807) - 4,164,590 (4,164,590) 6,580,460 - 48,363,467 (889,200) (153,110) 1,576,562 (413,678) 1,454,978 6,580,460 (1,350,000) 1,576,562 47,297 3,736,405 112,092 (1,377,226) (41,317) (279,721) (8,392) 6,580,460 197,414 55,169,479 1,655,084 46,280,989 1,623,859 3,848,497 (1,418,543) (288,113) 6,777,874 56,824,563 2002: Balance at 1st, 2002 Retained earnings previous year Final Dividend previous year Accomulated deficit during developing period Foreign investments valuation Transfers Price level restatement of equity Net Income Provisional dividends 44,932,999 1,347,990 - 1,576,562 720,619 47,297 - 3,736,405 4,168,310 (15,076) 239,633 - (1,377,226) 2,412,150 (1,050,000) 15,076 (24,000) (1,200,000) (279,721) (151,132) (8,392) - 6,580,460 (6,580,460) 1,738,188 - 55,169,479 (1,050,000) (151,132) 720,619 1,602,528 1,738,188 (1,200,000) End Balance at 31 of december of 2002 46,280,989 2,344,478 8,129,272 (1,224,000) (439,245) 1,738,188 56,829,682 Paid-in capital Th. Ch$ Other reserves Th. Ch$ 2001: Balance at 1st, 2001 Retained earnings previous year Final Dividend previous year Accomulated deficit during developing period Foreign investments valuation Transfers Price level restatement of equity Net Income Provisional dividends 43,581,958 1,351,041 - 401,240 1,576,562 (413,678) 12,438 - End Balance at 31 of december of 2001 Extraordinary Actualization 44,932,999 1347,990 Price Level restatement of ending balance Item 88 Accumulated results Th. Ch$ NUMBER OF SHARES Number of Number of Number of subscribed paid voting right shares shares shares 150,000,000 150,000,000 150,000,000 Series Single series CAPIT AL (AMOUNT – CH$ THOUSAND) CAPITAL Series Single series Subscribed Paid capital capital 46,280,989 46,280,989 Year's result Th. Ch$ Total Th. Ch$ [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] DEFICIT ACCUMULA TED DURING THE AFFILIA TE DEVELOPMENT PERIOD CCUMULATED AFFILIATE Amount RUT Taxpayer's Id. 96.863.980-3 Foreing Company ABF, Administradora de Beneficios Farmaceuticos S.A. Administradora de Beneficios Farmaceuticos do Brasil S.A. Of the year Accumulated Th. Ch$ Th. Ch$ Observations - (130,408) Previous year balance (151,132) (308,837) Previous year balance Year's deficit a. Accumulated deficit development period – as of December 31, 2002 and 2001 Farmacias Ahumada S.A., the parent company, recorded an equity decrease originated by the expenses of the development period of the indirect affiliate company Administradora de Beneficios Farmacéuticos do Brasil S.A. incurred as of that date; showing such equity decrease in the account labeled Accumulated deficit affiliate development period, under the item Shareholders’ equity. As of December 31, 2001, Farmacias Ahumada S.A., the Parent Company, recognized an equity reduction originated by the expenses incurred during the period of development of the indirect affiliate ABF, Administradora de Beneficios Farmacéuticos S.A., incurred as of that date, showing such equity decrease in the account denominated Accumulated deficit – affiliate development period, under the Shareholders’ Equity item. 89 b. Profit distribution – According to current legislation, at least 30% of the profits must be distributed as cash dividends, unless resolved otherwise by the Shareholders’ Meeting by the unanimous vote of all shares issued. In 2001 the dividend policy agreed by the shareholders was to distribute at least 30% of the year’s profits, which corresponds to the minimum mandatory dividend. The Ordinary Shareholders’ Meeting of April 18, 2002, adopted the following resolutions with respect to the allocation of the profits of the year 2001: to pay a minimum mandatory dividend, equivalent to 36.66% of the year’s net profits, that is the sum of Ch$ 2,412,150 thousand (historical), and the balance of such profits, that is the sum of Ch$ 4,168,310 thousand (historical), to be credited to the accumulated profits account. An interim dividend in the amount of Ch$ 1,350,000 thousand (historical) was distributed in September of the year 2001 and charged to the minimum mandatory dividend of 36.66%, namely, Ch$ 2,412,150 thousand. As a result of the foregoing, the new balance of dividends to be distributed amounted to Ch$ 1,050,000 thousand, which was paid in cash. c.Payment of dividends – The Shareholders’ Meeting agreed to distribute the following dividends during the years 2002 and 2001: Dividends Interim Final Interim Final Year Charged 2002 2001 2001 2000 Agreement Date Date Made Available to Shareholders 08/29/2002 04/18/2002 08/30/2001 04/25/2001 09/24/2002 05/07/2002 09/20/2001 05/10/2001 Amount Ch$ 1,200,000 1,050,000 1,350,000 889,200 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] d. Other reserves – This reserve originates from equity changes in the investments made in related companies abroad. (1) Balances as of 31/12/2001 Th. Ch$ Company Investment conversion Th. Ch$ Balances as of 31/12/2002 Th. Ch$ Fasa Investment S.A. Compañía de Nutrición General S.A. Farmacias Ahumada Internacional S.A. Laboratorios Fasa S.A. ABF, Administradora de Beneficios Farmacéuticos S.A. 1,623,816 43 - 720,809 (415) 143 41 2,344,625 (372) 143 41 - 41 41 Totals 1,623,859 720,619 2,344,478 (1) Corresponds to balances updated as of December 31, 2001. The reserves for Fasa Investment S.A., Laboratorios Fasa S.A., ABF and Administradora de Beneficios Farmacéuticos S.A. originate mainly because of their investments in their affiliates Fasa do Brasil Ltda. and Boticas Fasa S.A. (Peru), while those for Compañía de Nutrición General S.A. originate because of its investment in its affiliate Nutrilabs (U.S.A.). 17. MONET AR Y CORRECTION MONETAR ARY 90 Item Restatement index (Charges) credits: Assets, expenses and costs IPC UF Total credits Liabilities, income IPC UF Total charges Monetary correction loss Amount 2002 Th. Ch$ 2001 Th. Ch$ 6,263,525 217,220 4,499,764 248,657 6,480,745 4,748,421 (6,698,078) (114,672) (5,010,934) (229,547) (6,812,750) (5,240,480) (332,005) (492,059) 18. EXCHANGE DIFFERENCES Item (charges)/ credits Assets Liabilities Profit for exchange difference Currency Ame. Dollars brasilian real Ame. Dollars Amount 2002 2001 Th. Ch$ Th. Ch$ 395,065 11 (1,057,729) 968,547 146 (459,934) 1,452,805 508,759 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] 19. CONTINGENCIES AND RESTRICTIONS Lawsuits and other legal actions There are five small-amount civil lawsuits for indemnification of damages against the Company. In the opinion of the Company’s legal counsels, there is no possibility that these lawsuits could derive into significant losses for the Company. Contingencies As of December 31, 2002, the Company is not exposed to contingencies that are not provisioned for. Commitments The Company agreed with the employees who executed loan contracts to acquire shares, that the Company would absorb the eventual lesser value caused in case that the proceeds of the sale of the shares was less that the debt owed by each worker to the Company for that concept. As of December 31, 2002, there are no liabilities for such concept. Restrictions By virtue of a public deed dated September 2, 2002 granted by the Santiago Public Notary’s Office of Mr. Patricio Raby Benavente, the Company executed a bond issue contract through which the Company commits to maintaining certain financial indicators (covenants) calculated over its individual and consolidated financial statements, as fo-llows: Bonds Series A1 and A2: Restrictions related to Bond Issues (A) A level of indebtedness, measured over figures of its consolidated and individual balance sheets, defined as the ratio between (i) Financial Liabilities (account 5.21.10.10 plus account 5.21.10.20 plus account 5.21.10.30 plus account 5.21.10.40 plus account 5.21.10.50 plus account 5.22.10.00 plus account 5.22.20.00 plus account 5.22.40.00 of the FECU) and, (ii) Shareholders’ Equity (account 5.23.00.00 plus account 5.24.00.00 of the FECU), (hereinafter the “Level of Indebtedness”), not higher than zero point eighty times. In order to determine the Level of Indebtedness in the consolidated FECU, the following shall be regarded as financial liabilities of the ISSUER: the amounts of all endorsed guarantees, simple or joint-and-several surety bonds, joint and several debt or other guarantees, personal or collateral, which the Issuer or its affiliates would have given to secure third-party liabilities, with the exception of: (i) those given by the ISSUER or its affiliates on account of liabilities of other affiliate companies of the ISSUER; and (ii) those given by ISSUER affiliate companies on account of liabilities of the ISSUER. In turn, in order to determine the Level of Indebtedness in the individual FECU, the following shall be regarded as financial liabilities of the ISSUER: the sum total of all endorsed guarantees, simple or joint-andseveral surety bonds, joint and several debt or other guarantees, personal or collateral, given by the ISSUER to guarantee third-party liabilities, even if they belong to its affiliates. (B) A Financial Expense Hedging Ratio, measured over figures of its individual balance sheets, defined as the ratio between: (i) the Operating Result (account 5.31.11.00 of the FECU) plus Depreciation(Account 5.50.30.05 of the FECU) and (ii) Net Financial Expenses (Account 5.31.12.60 minus Account 5.31.12.10 of the FECU), not less than two point fifty times as of the closing of each quarter until that which ends on December 31 of the year 2003; and no less that three point zero times as of the closing of each subsequent quarter. The Financial Expense Hedging Ratio must be calculated over the 91 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] last 12-month period concluded as of the date of the corresponding FECU. All values must be stated in the currency of their respective FECU. These indicators, for the year ending on December 31, 2002, were the following: Consolidated level of indebtedness Individual level of indebtedness 0.76 0.66 Financial Expense Hedging Ratio 7.20 Benavides’ Bonds The long-term debt includes several restrictions that limit the Company to obtain and guarantee additional debt, as well as abiding by certain financial restrictions. Additionally, they include financial restrictions that must be maintained on the basis of the Company’s consolidated financial statements. The Company’s ability to pay dividends is, consequently, restricted by the referred consolidated financial restrictions. The financial ratios for the consolidated and for the affiliates include the following: (i) The current-assets-to-current-liabilities ratio, (ii) the total-liabilities-to-networth ratio, (iii) the current-debt-to-net-worth ratio and, (iv) the ratio of operating profit plus depreciation, plus virtual items that do not represent cash outflows to net financial expenses. The consolidated financial ratios that they must maintain are: (i) not less than 1.0 (ii) not more than 1.2 (iii) not more than 0.80, and (iv) not less than 1.5, respectively Direct guarantees 92 Supplier-related Invoices and Guarantee Bills [Boletas y Letras de Garantía] – which do not commit assets as of December 31, 2002 – amount to Ch$ 123,424 thousand (Ch$ 123,045 thousand in 2001). 20. NATION AL AND FOREIGN CURRENCY TIONAL ASSETS Types of Currency (2002) Item Current liabilities Fixed assets Other assets Totals Non-restatable pesos Restatable pesos US Dollars 55,231,167 31,000,482 3,271,744 63,027 7,540,384 7,610,388 (3,691,124) Totals Other Currencies 91,737,297 76,572,384 16,172,768 2002 Th. Ch$ 2001 Th. Ch$ 154,641,879 107,572,866 23,293,772 77,623,570 32,186,339 24,189,501 285,508,517 133,999,410 [ C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ] CURRENT LIABILITIES Up to 90 days 2002 Item Average annual rate of Amount interest Th. Ch$ % Currency Current liabilities Ch Pesos US Dollars UF Other currencies 53,600,492 1,676,240 1,002,199 81,744,676 90 days to 1 year 2001 7.68 Amount Th. Ch$ 44,656,233 1622,220 411,065 17,475,103 2002 Average annual rate of interest % Amount Th. Ch$ 38,937 477,770 - 8.15 2001 Average annual rate of interest % Amount Th. Ch$ 511,562 - 7.68 Average annual rate of interest % 8.15 Totals 2002 Th. Ch$ Total 2001 Th. Ch$ 53,639,429 1,676,240 1,479,969 81,744,676 44,656,233 1,622,220 922,627 17,475,103 138,540,314 64,676,183 LONG-TERM LIABILITIES 2002 1 to 3 years Item Currency Amount Th. Ch$ Long-term liabilities UF Ch. Pesos Other currencies 3 to 5 years Average annual rate of interest % 7,779,047 237,355 6,750,055 7.62 Amount Th. Ch$ 13,571,404 1,537,120 7,064,972 Average annual rate of interest % 7.62 5 to 10 years Amount Th. Ch$ Average annual rate of interest % 14,940,928 14,129,945 Over 10 years Amount Th. Ch$ 8.34 Average annual rate of interest % - Total Th. Ch$ 36,291,379 1,774,475 27,944,972 Totals 66,010,826 2001 1 to 3 years Item Long-term liabilities Curency UF Ch. Pesos Other currencies Total 3 to 5 years Average annual rate of Amount interest Th. Ch$ % 998,510 1,233,185 3,386,088 8.2 Amount Th. Ch$ 234,758 - Average annual rate of interest % 8.2 5 a 10 años Amount Th. Ch$ 409,516 - Más de 10 años Average annual rate of interest % 9.39 Amount Th. Ch$ 1,136,224 - Average annual rate of interest % 9.39 Total Th. Ch$ 2,779,008 1,233,185 3,386,088 7,398,281 21 ACTS 21.. SUBSEQUENT FFA On January 6, 2003, the Company notified the Superintendence for Securities and Insurance Companies that Mr. Felipe Hurtado Parot joined as Corporate General Secretary of Farmacias Ahumada S.A. as of January 2, 2003. On February 28, 2003, the Company notified the Superintendence for Securities and Insurance Companies that Mr. Marcelo Salinas Plandiura joined as Corporate Studies & Planning Manager of Farmacias Ahumada S.A. as of February 1, 2003. 93 I n d i v i d u a l F i n a n c i a l S t a t e m e n t s [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. GENERAL BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ ACTIVO ASSETS 96 CIRCULANTE: CURRENT Disponible Cash Depósitos a plazo Time deposits Valores negociables Marketable securities Deudoresreceivables, por ventas net Account Documentos por cobrar Receivables Deudores varios Sundry debtors Documentos cuentas porcompanies cobrar a empresas relacionadas Amounts due yfrom related Existencias Inventories Impuestos por Recoverable recuperar Income taxes Gastos pagados Prepaid expensespor anticipado ImpuestosIncome diferidostaxes Deferred Otros activos Other current circulantes assets 6,315,456 2,021,247 4.686.495 7,108,081 105,426 875,542 7,687,979 31,843,574 1,432,400 99,289 523,480 575,928 4,819,975 7,649,383 2,136,719 7,123,081 408,488 1,219,404 5,458,721 31,512,977 76,063 416,363 - Total assets Total current activo circulante 63,274,897 60,821,174 FIXED FIJO: Land Terrenos Constructions & infrastructure works Construcciones y obras de infraestructura Other assets Otros fixed activos fijos 1,922,682 3,968,295 37,879,946 2,454,814 3,339,750 28,159,704 43,770,923 (14,203,427) 33,954,268 (10,912,896) Net fixed Activo fijoassets neto 29,567,496 23,041,372 OTHER ASSETS OTROS ACTIVOS: Investments in related companies Inversiones en empresas relacionadas Goodwill, netde inversiones Menor valor Long-term debtors Deudores largo plazo Amounts due yfrom related Documentos cuentas porcompanies cobrar empresas relacionadas largo plazo Intangibles Less: Acumulated Amortization Amortización Other assets Otros activos 48,521,202 775,100 5,733,183 28,924 2,244,232 (521,758) 2,135,893 16,134,791 342,213 5,301,721 39,823 1,447,037 (298,474) 1,201,148 Total Total other otros assets activos 58,916,776 24,168,259 151,759,169 108,030,805 Accumulated Depreciacióndepreciatioin acumulada DEL ACTIVO TOTAL ASSETS The attached Notes N°1 through N°20 are an integral part of these financial statements. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. GENERAL BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ LIABILITIES PASIVO CIRCULANTE: CURRENT Obligaciones instituciones financieras a corto plazo Short-term debt con duebancos to bankse and financial institutions Obligaciones e instituciones financieras - largoinstitutions plazo Current portioncon of bancos Long-term debt due banks and financial porción portion corto plazo short-term Obligaciones con público - porción corto plazo (bonos) Current portion of el bonds payables Obligaciones plazo con vencimiento dentro de un año Current portiona largo of long term-term notes payables Dividendospayable por pagar Dividends Cuentas por pagar Accounts payable Documentos por payables pagar Short term notes Acreedores varios Sundry creditors Documentos y cuentas por pagar a empresas relacionadas Amounts payable to related companies Provisiones Accrued Expenses Retenciones Withholdings Impuestotaxes a la renta Income payables - 2,665,187 76,952 367,155 589,451 23,579 45,586,559 975,390 796,095 2,706,478 3,82,663 1,081,665 - 119,168 530,701 14,798 35,163,395 1,476,703 457,229 1,939,654 2,674,428 1,287,570 109,048 Total liabilities Total current pasivo circulante 55,985,987 46,437,881 Other long-term liabilities Otros pasivos a largo plazo 262,548 33,488,240 2,530,926 2,591,459 70,327 337,691 2,422,222 1,968,090 40,358 Total liabilities Total long-term pasivo a largo plazo 38,943,500 4,768,361 SHAREHOLDERS’ PATRIMONIO: EQUITY: Paid-in Capital capital pagado Other reserves Otras reservas Accumulated deficitperíodo subsidiaries development period Déficit acumulado de desarrollo - filiales Retained Utilidadesearnings acumuladas Year’s profit income for the year Utilidad del net ejercicio Interim dividends Dividendos provisorios 46,280,989 2,344,478 (439,245) 8,129,272 1,738,188 (1,224,000) 46,280,989 1,623,859 (288,113) 3,848,497 6,777,874 (1,418,543) patrimonio Total shareholders’ equity 56,829,682 56,824,563 151,759,169 108,030,805 LONG LARGOTERM: PLAZO: Due to banks con and bancos financiale institutions Obligaciones instituciones financieras Bonds payable Obligaciones con el público largo plazo (bonos) Sundry creditors Acreedores varios Deferred taxes ImpuestosIncome diferidos a largo plazo TOTAL DEL PASIVO & Y PATRIMONIO TOTAL LIABILITIES SHAREHOLDERS’ EQUITY 97 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. INCOME ST ATEMENT FOR THE YEARS ENDED AS OF DECEMBER 31, 2002 AND 2001 STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) INGRESOS DE INCOME EXPLOTACION OPERATING 2001 Th. Ch$ Th. Ch$ 233,685,394 219,074,072 COSTOS DE EXPLOTACION OPERATING COST (175,741,808) (161,634,457) OPERATING MARGIN MARGEN DE EXPLOTACION 57,943,586 57,439,615 (54,268,868) (48,813,281) 3,674,718 8,626,334 446,622 4,862 487,565 (786,769) (112,405) (565,460) (824,421) (411,104) 355,996 788,082 535,975 92,025 (1,336,630) (156,037) (497,125) (408,852) (445,752) 967,373 (1,405,114) (460,941) 2,269,604 8,165,393 (531,416) (1,387,519) 1,738,188 6,777,874 ADMINISTRATION & SALES EXPENSES GASTOS DE ADMINISTRACION Y VENTAS OPERATING PROFIT UTILIDAD OPERACIONAL 98 2002 RESULTADO NO OPERACIONAL: NON-OPERATING INCOME AND EXPENSES: Interestfinancieros income Ingresos Utilidad por inversiones en empresas relacionadas Equity participation in income of related companies Otros ingresos fuera de la explotación Other non-operating income Pérdida inversiones Equity por participation in en lossempresas of relatedrelacionadas company Amortización menor de valor inversión Amortization of goodwill Gastos financieros Interest expenses Otros egresos fuera de expenses la explotación Other non-operating Corrección monetaria Price level restatement, net Diferencias de cambio Foreing Currency translation, Net PÉRDIDA NO OPERACIONAL NON-OPERATING EXPENSES, NET UTILIDAD DE INCOME IMPUESTOTAXES A LA RENTA INCOMEANTES BEFORE IMPUESTO A LA RENTA INCOME TAXES UTILIDAD DEL EJERCICIO NET INCOME FOR THE YEAR The attached Notes N°1 through N°20 are an integral part of these financial statements. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. CASH FLO W ST ATEMENTS FOR THE YEARS ENDED AS OF DECEMBER 31, 2002 AND 2001 FLOW STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) FLUJO ORIGINADO POR ACTIVIDADES DE LA OPERACION: NET CASH FLOW FROM OPERATING ACTIVITIES Recaudación deudores Collection of de sales debtors por ventas Ingresos percibidos Financialfinancieros income received Otros Other ingresos income percibidos received Pagos a proveedores y personal Payments to personnel & suppliers Intereses pagados Interest paid Impuesto a la renta pagado Income tax paid Otros pagados Other gastos expenses paid Impuesto valortax agregado otros similares pagados IVA Valuealadded & othery similar paid 2002 2001 Th. Ch$ Th. Ch$ 279,164,812 446,302 188,497 (258,073,990) (414,088) (1,320,110) (264,637) (5,140,489) 259,054,433 476,427 110,612 (245,651,291) (404,058) (835,186) (235,363) (5,936,135) Flujo netoflow positivo originado por actividades de la operación Net cash provided by operating activities 14,586,297 6,579,439 FLUJO ORIGINADO POR ACTIVIDADES DE FINANCIAMIENTO: NET CASH FLOW FROM FINANCING ACTIVITIES Obtención de préstamos Loans obtained Obligaciones el público Debt with thecon public (bonds) Pago de dividendos Payment of dividends Pago préstamos Loan de payments Pago de gastos porissue emisión colocación de obligaciones con el público Payment of bond and yplacement expenses 33,010,801 (2,284,989) (2,702,229) (201,672) 23,424,795 (2,337,208) (20,913,282) - Flujo netoflow positivo originado por actividades de financiamiento Net cash provided by financing activities 27,821,911 174,305 FLUJO ORIGINADO POR ACTIVIDADES INVERSION: NET CASH FLOW FROM INVESTMENTDE ACTIVITIES Ventas activos fijos Sale of de fixed assets Incorporación de fixed activos fijos Incorporation of assets Inversiones permanentes Permanent investments Otros a empresas relacionadas Other préstamos loans to related companies Otros de inversión Other desembolsos investment disbursements 485,700 (10,204,418) (32,631,096) (515,056) (1,081,137) 848 (7,314,410) (682,910) (157,127) - Flujo netoflow negativo originado por actividades de inversión Net cash provided by investment activities (43,946,007) (8,153,599) 1,537,799) (1,399,855) 349,810 (214,128) VARIACION NETAIN DECASH EFECTIVO NET VARIATION AND Y EFECTIVO EQUIVALENTEDURANTE EL AÑO CASH EQUIVALENT DURING THE YEAR (1,187,989) (1,613,983) SALDO INICIAL DE EQUIVALENTS EFECTIVO Y EFECTIVO CASH AND CASH AT THE EQUIVAENTE BEGINNING OF THE YEAR 14,606,077 16,220,060 SALDO FINALCASH DE EFECTIVO Y EFECTIVO CASH AND EQUIVALENTS AT THEEQUIVALENTE END OF THE YEAR 13,418,088 14,606,077 TOTAL NETO NEGATIVE NET CASH FLOW FLUJO TOTAL NEGATIVO DEL FOR AÑO THE YEAR EFECTO INFLACION SOBRE EL EFECTIVOON Y EFECTIVO QUIVALENTE EFFECT OF PRICE LEVEL RESTATEMENT CASH AND CASH EQUIVALENT The attached Notes N°1 through N°20 are an integral part of these financial statements. 99 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. CASH FLO W ST ATEMENTS FOR THE YEARS ENDED AS OF DECEMBER 31, 2002 AND 2001 FLOW STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) 2002 2001 Th. Ch$ Th. Ch$ 1,738,188 6,777,874 48,758 (7,029) 3,378,868 223,284 201,349 (4,862) 786,769 112,405 411,104 (355,996) (307,392) 527,895 2,732,393 143,298 143,439 (535,975) 1,336,630 156,037 445,752 (967,373) 8,784 (1,495,444) (1,410,585) 109,255 (2,042,727) (5,843,450) (1,173,772) 11,526,935 127,733 (955,871) 4,218,988 4,594 110,738 63,340 (139,436) 381,506 689,732 14,586,297 6,579,439 CONCILIACION ENTRE EL FLUJO NETO ORIGINADO POR ACTIVIDADES CONCILIATION BETWEEN THE NET FLOW GENERATED BY DE LA OPERACION Y EL RESULTADO DEL EJERCICIO OPERATING ACTIVITIES AND THE YEAR’S RESULTS : Net income the year Utilidad del for ejercicio Resultado en venta de activos: Loss (Profit)(utilidad) from salesenofventa assetsde activos fijos Pérdida Charges(abonos) (credits)a to incomeque which do not represent flows Cargos resultado no representan flujo decash efectivo: Depreciation Depreciación del ejercicio Amortization Amortizaciónofdeintangibles intangibles Write-offs accrued expenses Castigos y and provisiones Equity participation of related companies Utilidad devengadainenincome inversiones en empresas relacionadas Equity participation of related companiesrelacionadas Pérdida devengada in enlosses inversiones en empresas Amortization goodwill Amortizaciónofmenor valor de inversiones Price level restatement, net Corrección monetaria neta Foreing currency translation, Diferencia de cambio neta net Other which do representan not representflujo cashdeflow Otros credits abonostoa income resultado que no efectivo Other income which not represent cash flow Otros charges cargos atoresultado que nodo representan flujo de efectivo 100 Changes indeasset which affect in cash flows Variación activos que afectan al flujo de efectivo: Increase receivables Aumentoindetrade deudores por ventas Increase Aumentoindeinventory existencias Decrease (increase) of other assets Disminución (aumento) de otros activos Changes in which affect cash de flows Variación deliabilities pasivos que afectan al flujo efectivo: Increase with Aumentoin deaccount cuentas payable por pagarassociated relacionadas con el operating resultado results de la explotación Increase of interest payable Aumento de intereses por pagar Increase in income tax payable (Disminución) aumento neto de impuesto a la renta por pagar Increase Aumentoindeother otrasaccounts cuentas payable por pagar relacionadas associated with non-operating results con el resultado fuera de explotación Net (decrease) aumento increase inneto value tax al and other similar ytaxes (Disminución) de added impuesto valor agregado otrospayable similares Flujo neto flows positivo originado por actividades de la operación Net cash provided by operational activities The attached Notes N°1 thorugh N°21 are an integral part of these consolidated financial statements. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] REPOR T OF INDEPENDENT ACCOUNT ANTS CCOUNTANTS To the Shareholders of Farmacias Ahumada S.A.: We have audited the accompanying balance sheets of Farmacias Ahumada S.A. (the “Company”) as of December 31, 2001 and 2002, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards 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 financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. For adequate interpretation, these financial statements should be read and analyzed in conjunction with the consolidated financial statements of Farmacias Ahumada S.A. and its subsidiaries which are required by generally accepted accounting principles in Chile. This report is presented only for the information and use of the Board of Directors, the Company’s management and the Superintendency of Securities and Insurance. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Farmacias Ahumada S.A. as of December 31, 2001 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in Chile. March 14, 2003 101 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] FARMACIAS AHUMADA S.A. NO TES TO THE FIN ANCIAL ST ATEMENTS NOTES FINANCIAL STA Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) These disclosure notes present, in the opinion of Management, sufficient information, albeit with less detail than the information contained in the disclosure notes that are an integral part of the individual financial statements submitted to the Superintendence for Securities and Insurance Companies [ Superintendencia de Valores y Seguros], to the Stock Exchanges where they remain available to shareholders, and to the public at large. Such information may also be consulted at the Company’s headquarters during the 15 days prior to the Extraordinary Shareholders’ Meeting. 1. REGISTRA TION OFTHE COMP ANY INTHE SECURITIES REGISTRAR, COMP ANY IDENTIFIC ATIONAND ACTIVITIES. REGISTRATION COMPANY COMPANY IDENTIFICA Farmacias Ahumada S.A. was incorporated by virtue of a public deed dated November 28, 1997 and its line of business consists in manufacturing toiletries, cosmetics, as well as chemical and pharmaceutical products; distributing, importing, exporting and marketing similar products of other industries, both domestically and abroad, and representing national and foreign firms in this line of business. Additionally, through its indirect affiliates Far – Ben S.A. de C.V. (Mexico), Boticas Fasa S.A. (Peru) and Fasa do Brasil Ltda., it markets products of the above-mentioned line of business in Mexico, Peru and Brazil, respectively. On October 15, 1997, the Company was registered in the Securities Registrar of the Superintendence for Securities and Insurance Companies under N°629; thus, it is supervised and controlled by that Superintendence. 102 2. ACCOUNTING POLICIES a. Accounting P Period eriod – The current financial statements correspond to the period comprised between January 1 and December 31 of the year 2002. The previous period to which comparisons are made is comprised between January 1 and December 31 of the year 2001. b. Prepar ation Bases – The current financial statements have been prepared in accordance with accounting Preparation principles generally accepted in Chile and the regulations issued by the SVS Superintendence for Securities and Insurance Companies, except for investments in affiliates, which have been entered under a single line item of the General Balance Sheet at their proportional equity value and, therefore, they have not been consolidated. This accounting treatment alters neither the net result (profit/loss) nor the shareholders’ equity. In case of discrepancy, the regulations issued by the Superintendence for Securities and Insurance Companies shall have precedence over the accounting principles issued by the Chilean Union of Accountants [ Colegio de Contadores de Chile A.G.]. These financial statements have been issued solely to facilitate the individual analysis of the Company; consequently, they must be read jointly with the consolidated financial statements, which are required by Chile’s generally accepted accounting principles. c. Presentation Bases – For comparative purposes the financial statements as of December 31, 2001 are shown restated out-of-accounting at 3.0%. d. Monetary Correction – The financial statements have been price level prestated in order to reflect the impact of changes in the currency’s purchasing power. To that effect, the main input were the changes experienced by the consumer price index (3.0% and 3.1% as of December 31 of 2002 and 2001, respectively). e. Conversion – Assets and liabilities stated in foreign currency and in UF inflation index units [Unidades de Fomento] are shown at closing prices, as follows: Item US dollars UF inflation index units 2002 2001 $ $ 718,61 16,744,12 654,79 16,262,66 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] The corresponding conversion differences are accounted for in the year’s results (profit/loss), except for conversion differences generated by net investments in foreign indirect affiliates, which are accounted for under other reserves. f. Time Deposits - Include the capital plus the restatements and interests accrued by the closing of the year. g. Marketable Securities – Correspond to investments in mutual fund shares, which are shown at the year’s closing prices. h. In v entories – Are shown at their monetarily corrected cost and they do not exceed their net sale value. The Inv obsolescence provision corresponds to low-turnover merchandise for sale. i. Bad Debt Estimates – The provision for debt unlikely to be recovered was calculated on the basis of their antiquity, according to criteria adopted by the Company at the year’s closing. The parameters applied to non-collectibles from sales debtors and protested documents are the following: Da ys Days Sales debtors % Protested documents % 0-30 50 31-60 2 75 61-90 10 100 91-120 15 100 121-150 20 100 151-180 181 + 40 100 100 100 j. FFixed ixed assets – Are shown valued at their cost of purchase corrected monetarily. k. Fixed asset depreciation – Was determined according to the lineal method, according to the estimated useful life of the respective assets. The depreciation of fixtures installed on leased real estate property was determined according to the term of the respective leasing contracts. l. Leased assets – Leasing contracts for movable (personal) and immovable (real estate) property that meet the standards of financial leasing contracts are accounted as fixed asset purchases, recognizing the total obligation and the interests on an accrual basis. Such assets are not the legal property of the Company; consequently, for as long as the purchase option is not exercised, the Company cannot freely dispose of them. m. FFixed ixed asset sales with financial leasebac k agreement – The profits obtained from the sale of fixed assets with leaseback a financial leaseback agreement are deferred throughout the residual useful life of the asset and are amortized in proportion to their amortization. n. Intangibles – Municipal patents [derechos de llave] are shown at cost and are amortized throughout the term of the lease contract. Commercial trade marks and sanitary registrations are amortized lineally within a period of 5 and 20 years, respectively, depending on the use periods estimated by the Company, according to the provisions established under N°35 of the Technical Bulleting issued by the Chilean Union of Accountants. o. Investments in related companies – Are shown at their proportional shareholding equity value. The indirect affiliates abroad carry their accounting records in the currency of their respective country. According to the provisions established in Technical Bulletin N°64 of the Chilean Union of Accountants, indirect foreign affiliates incorporated as an extension of the Parent Company or as an investment vehicle are controlled in Chilean pesos, and indirect operative affiliates are controlled in United States dollars. 103 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] p.Good will – Goodwill are amortized within their respective estimated investment return period. The latter is p.Goodwill calculated from the difference resulting when comparing the total value paid for the investment with its proportional equity value. The amortization term has been mainly determined through calculations made by the Company regarding the investment return period. q. Income tax and deferred incometaxes – The income tax is calculated on the basis of the taxable net income pursuant to the tax provisions in effect as of each year’s closing. The Company accounts for all deferred taxes by the time differences, tax losses and other events that generate differences between the accounting & tax base of assets and liabilities, according to the provisions established in Technical Bulletin N°60 of the Chilean Union of Accountants and its complementary provisions, and according to Circular 1,466 of the Superintendence for Securities and Insurance Companies. In accordance with Technical Bulletin N° 71 of the Chilean Union of Accountants, as of the year 2001, all deferred taxes are accounted by applying the income tax rate for the year that will reverse the corresponding time difference that originated it. ate bonds – These bonds are usually shown valued at their par value as of the year’s closing. The lesser r. Corpor Corporate value in the placement of the bonds with respect to their par value as of the date of placement is shown under the item Other Assets and is deferred and amortized on the basis of the real interest. 104 s. Oper ating income – Income is credited on an accrual basis. The income is credited when the merchandise is Operating delivered. t. Computer softw are – The Company has acquired computer software that has been accounted for under the software item Other Fixed Assets. Software development expenses that do not meet the criteria established by current norms are debited to results when they are actually incurred; such expenses, however, have not been significant during the last five years. u. Resear c h and Dev elopment expenses – The expenses incurred under this item are debited to results when Researc Development they are actually incurred. Such expenses, however, have not been significant during the last five years. v. Oper ations with buybac k agreement – The purchase of financial instruments with buyback agreements are Operations buyback registered as fixed-rate lending. w. Statements of Cash flo w – The concept of cash flow statements includes time deposits, investments in flow fixed-income mutual funds, and the purchase of financial instruments with leaseback agreements of up to 90 days. The positive net flow originated by operational activities represents the net cash income of the year as a result of activities that affect the profit and loss statement, other than investment and financing activities. x. Stock and Bond floatation costs – Stock floating costs have been absorbed by the goodwill generated from the stock placement, when such goodwill has occurred. Bond floating and underwriting costs have been accounted for under the item Other Assets and are amortized lineally throughout the term of the documents. y. Vacation – The cost is registered as an expense in the year when such benefit accrues. z. Sev er ance pa y for yyears ears of service – The Company has no contractual obligation to its personnel on this Sever erance pay concept. 3. ACCOUNTING CHANGES During the period comprised between January 1 and December 31 of the year 2002 there have been no accounting changes that could significantly affect the financial statements. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 4. AVAILABLE The breakdown is the following: 2002 Th. Ch$ 2001 Th. Ch.$ Cash in banks Securities to be deposited 1,301,828 5,013,628 484,185 4,335,790 Totals 6,315,456 4,819,975 The sums included under securities to be deposited correspond mainly to funds collected during the last days of the month of December of 2002 and 2001 from the different stores, which are deposited beginning on the next working day. 5. SHORT AND LONG-TERM DEBTORS Cash Over 90 up to 1 year 2002 2001 Up to 90 days 2002 2001 Item Rubro Th. Ch.$ Sales debtors Deudores por ventas Bad debt estimate Estimación deudores incobrables Receivables por cobrar Documentos Bad debt estimate Estimación deudores incobrables Sundry debtors Deudores varios Bad debt estimate Estimación deudores incobrables 7,256,090 197,589 895,598 - Th. Ch.$ Th. Ch.$ 7,305,369 377,910 1,243,067 - - Subtotal Th. Ch.$ 79,266 - Total cash (net) 2002 2001 Th. Ch.$ Th. Ch.$ 7,256,090 148,009 197,589 92,163 895,598 20,056 Long term 2002 2001 Th. Ch.$ Th. Ch.$ Th. Ch.$ 7,108,081 105,426 875,542 7,123,081 408,488 1,219,404 5,733,183 5,301.721 - - - - a. Short-term sundry debtors: The breakdown of short-term sundry debtors is the following: 2002 2001 Th. Ch$ % Th. Ch$ % Personnel current accounts Cuentas corrientes del personal Fund to berendir rendered Fondo por Various corrientes current accounts Cuentas varias Otheranticipos advances Otros 344,806 190,478 140,667 199,591 39,4 21,8 16,0 22,8 476,502 82,150 393,466 267,286 39.1 6.7 32.3 21.9 Totales Totals 875,542 100,0 1,219,404 100.0 b. Long-term sundry debtors: The balance of the item long-term sundry debtors corresponds to loans granted to Company workers in order to acquire shares of stock, approved according to the board meetings of December 2, 1997 and December 14, 1999. Such loans were granted in UF and they accrue an annual interest of 6% and 5%, respectively. As a manner to establish guarantees over the above-indicated loans, the shares were pledged in favor of the Company. Finally, as agreed between the parties, each worker shall be entitled to exercise the option right, whose final deadline is December 2004. During the period, as a result of the reallocation of some loans, an income was generated in the amount of Ch$ 315,320 thousand which is shown under Other non-operating income. The loans that expired in December 2002 shall be liquidated and/or reallocated during the year 2003. 105 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 6. BALANCES AND TRANSA CTIONS WITH RELA TED ENTITIES TRANSACTIONS RELATED a) Main companies related to the Company: During 2002 and 2001 the Company had transactions and balances with the following related companies: Accionistas Shareholders 106 RUT Taxpayer Id. Inversiones GaliaGalia S.A. S.A. Inversiones 79.799.330-1 Affiliates Filiales Fasa Fasa Investment S.A. S.A. Investment Laboratorios Fasa Fasa S.A. S.A. Laboratorios Fasa-Card S.A. S.A. Fasa-Card ABF, ABF, Administradora de Beneficios Farmacéuticos S.A. S.A. Administradora de Beneficios Farmacéuticos Compañía de Nutrición General S.A. S.A. Compañía de Nutrición General Lagrynd Corp Corp S.A. (Uruguay) Lagrynd S.A. (Uruguay) (año 2001) Farmacias Ahumada Internacional S.A. (Uruguay) Farmacias Ahumada Internacional S.A. (Uruguay) 96.969.830-7 79.663.290-9 96.809.530-7 96.863.980-3 96.792.260-9 Foreign Foreign Indirect Affiliates Filiales indirectas Distribuidora y Logística Integral S.A. Distribuidora y Logística Integral S.A. FasintFasint Ltda.Ltda. (Brasil) (Brasil) Fasamed Comércio Farmacêutico S.A. S.A. (Brasil), Fasamed Comércio Farmacêutico (Brasil) Boticas Fasa Fasa S.A. S.A. (Perú) Boticas (Perú) Inverex Inverex S.A S.A. 96.860.090-7 Foreign Foreign Foreign 99.506.180-5 Relacionadas a través de accionistas Related via shareholders Promotora C.M.R. Falabella S.A.S.A. Promotora C.M.R. Falabella Administradora C.M.R. Falabella Ltda. Administradora C.M.R. Falabella Ltda. Viajes Falabella Ltda. Viajes Falabella Ltda. Falabella S.A.C.I. Falabella S.A.C.I. La Interamericana S.A.S.A. Cía.Cía. de de Seguros dede Vida La Interamericana Seguros Vida La Interamericana S.A.S.A. Cía.Cía. dede Seguros La Interamericana SegurosGenerales Generales JaimeJaime Ben-Dov Codner Ltda. Ben-Dov Codner Ltda. Banco Falabella Banco Falabella Distribuidora y Comercial Edeka S.A. Distribuidora y Comercial Edeka S.A. 90.743.000-6 79.598.260-4 78.997.060-2 90.749.000-9 99.289.000-2 99.288.000-7 78.345.300-2 96.509.660-4 85.703.300-0 Relacionadas través de or directores o ejecutivos Related via boarda members executives Inversiones K yLtda. V Ltda. Inversiones K yV y B. Asesorías e Inversiones G y G. B Asesorías e Inversiones S.A. S.A. Inversiones Zermatt Ltda. Inversiones Zermatt Ltda. Bellmar Bellmar S.A.S.A. Mountain Chile Iron Iron Mountain Chile S.A.S.A. Asesorías e Inversiones La Grulla Ltda. Asesorías e Inversiones La Grulla Ltda. Asesorías Ltda. Asesorías LatriLatri Ltda. Omega Inversiones y Asesorías Ltda. Omega Inversiones y Asesorías Ltda. Servicios e Inversiones Asefin Ltda. Servicios e Inversiones Asefin Ltda. y Palma Vial Vial y Palma Ltda.Ltda. Abogados y Palma Abogados Vial Vial y Palma Sinay JaimeJaime Sinay Alexander Fernández Alexander Fernández Lamarca Claro PabloPablo Lamarca Claro Mario Valdivia Bernstein Mario Valdivia Bernstein 78.743.430-4 96.577.790-3 78.482.780-1 96.712.590-3 96.756.680-2 78.588.910-K 77.153.300-0 79.765.310-1 77.565.530-5 84.257.600-8 78.741.580-6 6.377.768-4 9.604.686-3 5.319.489-3 6.987.378-2 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] b) Receivable and payable: The short and long-term balances receivable and the short and long-term balances payable originate mainly from routine business operations under normal market conditions, which are stated in non-restatable dollars and pesos not accruing interest, and the balance is kept in a running account. c) Transactions: The main transactions performed with related companies are the following: 2002 Descripción de la transacción Description of transaction Arriendo de espacio Space (floor) leasing Arriendo Leasingy&bodegaje storage Arriendos pagados Leases paid Asesorías pagadas Consulting services paid Comisiones pagadas Commissions paid Compra de existencias Inventory purchases Contrato arriendo leasing Leasingde rental contract Gastos de publicidad Advertising expenses Mejoras en locales Store improvements Mutuo Loanotorgado granted Otros egresos Other expenses Otros ingresos Other income Pago de acreedores Creditor payments Recaudación por su cuenta Own collection Recuperación de gastos Expense recovery Seguros de vida policies Life insurance Seguros generales General insurance policies Servicios bodegaje Storage de services Servicios logísticos Logistical services Servicios Servicespagados paid Servicios prestadas Servicesy &asesorías consulting rendered Servicios recibidas Servicesy &asesorías consulting received Traspaso de Fondos Funds transferred Venta deasset activo fijo Fixed sales Venta de existencias Inventory sales Ventas ABF Salescon withtarjeta ABF card Ventas CMR Salescon withtarjeta CMR card Ventas Fasacard Salescon withtarjeta Fasacard 2001 Impact on Impact on results results Amount (charge) credit Amount (charge) credit Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ 505,722 21,162 1,073,445 107,504 2,774,791 10,291,897 184,380 5,900 943,946 5,448 890 298,313 201,690 3,048,429 1,770,947 41,041 87,904 4,258,288 482,995 302,221 247,989 154,501 219,204 8,765 14,680,357 41,360,194 637,165 434,690 (12,704) (1,051,835) (107,504) (2,351,518) (101,328) (5,000) (2,032) 5,448 (754) 255,957 13,142 (34,781) (82,913) (3,608,718) (409,317) (302,179) (122,937) (231,992) 8,256 - 107,211 15,963 1,082,243 99,213 2,475,121 7,176,381 193,401 80,216 1,030,709 214,849 21,917 77,940 265,870 1,349,478 165,628 29,590 144,620 3,839,644 358,989 191,311 206,881 160,473 51,763 9,338 10,155,834 35,802,765 1,010,682 96,974 (13,528) (1,060,399) (99,213) (2,097,560) (454,601) (67,980) (873,482) 9,085 (18,574) 66,051 163,250 (25,076) (122,560) (3,253,936) (304,228) (191,311) (203,188) (160,473) 277 - 107 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 7. INVENTORIES The breakdown of the inventories is the following: Detalle Item 108 2002 2001 Th. Ch$ Th. Ch$ Mercaderíasforpara Merchandise sale la venta Mercaderías Goods in transiten tránsito Materias primas de recetarioservice Basic products for prescription Otrasminor existencias menores Other inventories Provisión obsolescencia Obsolescence provision 31,207,351 523,355 192,868 (80,000) 30,760,957 138,238 386,930 309,252 (82,400) Totales Totals 31,843,574 31,512,977 8. DEFERRED TAXES AND INCOME TAXES a. Income tax – The taxable net income calculated for tax purposes for fiscal year 2002 generated a loss of approximately Ch$ 287,000 thousand. In 2001 the taxable net income calculated for tax purposes amounted to approximately Ch$ 6,811,000 thousand. The breakdown of (receivable) payable income is the following: 2002 2001 Th. Ch$ Th. Ch$ Impuesto a la renta de primera categoría First Category Income Tax PagosMonthly provisionales mensuales social security payments Créditos porfor donaciones y créditos Credits donations and SENCE Sence credits PagosProvisional provisionales por impuesto de Primera payments for First Category Taxes Categoría de utilidades absorbidas for absorbed profits (Art. 31 N° 3)(Art. 31 N° 3) (1,183,207) (206,179) 1,021,730 (784,398) (128,284) (43,014) - Totales Totals (1,432,400) 109,048 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] b. Accumulated tax profit – The balance of the tax profits withheld with the 15% credit amounts to approximately Ch$ 12,763,054 thousand and the corresponding credit for the profits recorded in the F.U.T. to be allocated to shareholders when dividends are distributed amounts to Ch$ 1,914,458 thousand, approximately. DEFERRED INCOME TAXES Deferred Taxes 2002 Assets Short term Concepts Conceptos Diferencias temporarias Temporary differences Provisión cuentas incobrables Bad debt provision Ingresos anticipados Advanced income Provisión deprovision vacaciones Vacation Amortización intangibles Amortization of intangibles Activos en assets leasing Leased Depreciación activo fijo assets Depreciation of fixed Provisión de obsolescence obsolescenciaprovision de inventario Inventory Provisión de utilidades no realizadas Unrealized profit provision Obligaciones por leasing Leasing obligations Instalaciones inmuebles arrendados Facilities inenleased real estate Prepago Leasing Prepaid leasing Otros Other Cuentas complementarias-neto de of amortización Complementary accounts - net amortization Provisión de valuación Valuation provision Totales Totals 2001 Liabilities Assets Liabilities Long term Short term Long term Short plazo Long term Short term Long term Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ 234,555 155,236 13,200 40,082 100,207 - 98,429 430,257 119,910 19,800 - 708,656 1,364,449 1,166,950 - 152,181 162,575 13,184 23,287 84,912 - 48,478 57,633 410,405 215,200 19,776 - 704,663 1,177,332 817,811 - - - - - - - - - 543,280 648,596 19,800 3,240,055 436,139 731,716 19,776 2,699,806 INCOME TAX 2002 2001 Th. Ch$ Th. Ch$ Gasto corriente (provisión impuesto) Currenttributario tax expenses (tax provisions) Ajuste gasto restatement tributario (ejercicio Tax expense (previous anterior) fiscal year) Efecto activos pasivos for porthe impuesto diferidotaxes del ejercicio Impactpor of assets or o liabilities year’s deferred Beneficio tributario por pérdidas tributarias Tax benefits for tax losses (58,178) (516,252) 43,014 (1,021,730) (162,338) (203,451) - Totales Totals (531,416) (1,387,519) 109 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 9. FIXED ASSETS The breakdown of the fixed assets is the following: 2002 110 2001 Net Fixed Assets Th. Ch$ Accumulated Depreciation Th. Ch$ Net Fixed Assets Th. Ch$ Accumulated Depreciation Th. Ch$ Land Terrenos Facilities Instalaciones Other assets Otrosfixed activos fijos: Computer equipment Equipamiento computacional Furniture Muebles& yoffice útilessupplies Vehicles Vehículos Leased assets Activos en leasing Facilities on leased estate arrendados Instalaciones en real inmuebles Other Otros 1,922,682 3,968,295 1,588,676 2,454,814 3,339,750 1,314,024 10,211,058 5,573,587 122,451 4,984,411 15,044,048 1,944,391 4,805,000 2,527,236 58,642 815,844 4,332,590 75,439 7,347,646 4,573,171 115.535 5,343,651 10,451,315 328,386 3,283,660 1,857,608 50,111 1,096,118 3,311,375 - Total Assets TotalFixed activo fijo 43,770,923 14,203,427 33,954,268 10,912,896 Depreciation is included under administration and sales expenses and amounts to Ch$ 3,378,868 thousand in 2002 and Ch$ 2,732,393 thousand in 2001. Leased fixed assets correspond mainly to computer equipment and to the installation of business premises. During January 2001 the Company prepaid goods acquired through financial leasing for a total amount of Ch$ 1,428,834 thousand (historical). Leased assets include computer equipment for business premises, sold with financial leaseback agreement. The sale price was Ch$ 823,368 thousand (historical) and generated a profit of Ch$ 214,682 thousand that is amortized in 48 months. The non-amortized balance as of December 31, 2002 amounted to Ch$ 80,508 thousand (Ch$ 138,201 thousand in 2001) and is shown deducting other fixed assets. The average rate of interest of these contracts is of 9.39%. 10. INVESTMENTS IN RELA TED COMP ANIES RELATED COMPANIES · On December 23, 2002, Farmacias Ahumada S.A., through its affiliates Fasa Investment S.A. and Inverex S.A., acquired stock capital of Farmacias Benavides by virtue of a capital contribution of US$ 44,290,321.68; which enabled it to acquire up to 67.95% of the registered shares of stock of Far-Ben S.A. de C.V., thereby assuming the management and operative control of such pharmacy chain and its subsidiaries. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] · On October 25, 2002, The Extraordinary Shareholders’ Meeting of Fasa Investment S.A. agreed to increase that company’s stock capital from US$ 27,041,995 subdivided into 27,041,995 nominal shares of equal value and without face value, to US$ 73,041,995 subdivided into 73,041,995 nominal shares of equal value and without face value. This capital increase was fully subscribed and paid by Farmacias Ahumada S.A. · On October 11, 2002, Farmacias Ahumada S.A., incorporated the company denominated Sociedad Fasa International Corp. in the British Virgin Islands, with an initial capital contribution of US$ 100. · On April 2002, Farmacias Ahumada S.A. paid Ch$ 416,000 thousand toward a capital increase of its affiliate Compañía de Nutrición General S.A., remaining with a total shareholding of 7.59%. · On November 4, 2002, Farmacias Ahumada S.A. paid the sum of Ch$ 540,000 thousand corresponding to the shareholding of the minority shareholders of the affiliate Compañía de Nutrición General S.A., to that date, thus retaining a total shareholding of 99.9%. · In September 2002, the company denominated Sociedad Inversiones San Silvestre S.A.C. (Peru), a direct affiliate of Fasa Investment S.A., was disbanded. This operation generated an effect on the results of our affiliate Fasa Investment S.A. in the amount of Ch$ 3,809 thousand, which is shown under other non-operating income. · The loss accrued because of the permanence of this investment in Fasa Investment S.A. is shown under the item loss of investment in related companies and it amounted to Ch$ 12,718 thousand · On September 3, 2002, 100% of the shareholding of Fasint Ltda. (Brazil) in ABF, Administradora de Beneficios Farmacéuticos do Brazil S.A. – equivalent to 99.9721% - was assigned to Fasamed Comercio Farmacéutico S.A. (Brazil) corresponding to indirect affiliates of our direct affiliate Fasa Investment S.A. This operation did not generate any effect on results. · In June 2002, the affiliate Fasa Investment S.A. acquired 99.9998% of the stock capital of Droguería La Victoria S.A.C. for the total sum of Ch$ $113,402 thousand (historical), thereby generating a lesser value of Ch$ 55,681 thousand. · During the year 2002, Farmacias Ahumada S.A., incorporated in Uruguay the company Farmacias Ahumada Internacional S.A., with a capital contribution of US$ 4,900, equivalent to 98% of the stock capital. · On June 18, 2002, the company Lagrynd Corp S.A. (Uruguay) was disbanded, assigning the related accounts to the company Farmacia Ahumada Internacional S.A. The investment in the company Fasacard S.A. and in Farmacias Ahumada Internacional S.A. as of December 31, 2002 are shown as valued in Ch$ 1, and a provision was made for the equity deficit that they presented as of that date, for Ch$ 68,227 thousand and Ch$ 2,100 thousand, respectively, and which are shown under other long-term liabilities. · The General Shareholders’ Meeting of May 22, 2002 approved the dissolution of Inversiones San Silvestre S.A., according to the provisions of Peru’s General Law on Corporations (Ley General de Sociedades), considering that it 111 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] was convenient for the Company not to keep the company in effect. As a result of such agreement, and having initiated the dissolution process, the company as of July 1, 2002 changed the base on which it prepared its financial statements from an operative company to one undergoing dissolution. · Unrealized results correspond to the sale of the inventories of its affiliates Laboratorios Fasa S.A. and Compañía de Nutrición General S.A. to the Company during the fiscal year. This profit shall be realized when the inventories acquired from such affiliates are sold by the Company to third parties. · On November 15, 2001, Farmacias Ahumada S.A. restructured its overseas investments and incorporated in Chile the company Fasa Investment S.A. with the objective of placing its foreign investments through such investment vehicle. By way of initial contribution, the Company subscribed and paid 8,441,820 shares of stock by contributing 18,318,338 shares of the Peruvian company denominated Boticas Fasa S.A. pursuant to certificate or share title N°19 for US$ 8,441,820, to which effect their tax cost was taken into consideration, calculated as of December 31, 2000, thus generating a greater investment value of Ch$ 1,388,844 thousand (historical), which had been fully amortized by the closing of fiscal year 2001. · 112 On November 29, 2001, the stock capital of Fasa Investment S.A. was increased by 18,591,995 nominal shares of equal value without any face value, which were subscribed and paid as follows: With 3,232,638 shares of the Peruvian company Boticas Fasa S.A. valued in US$ 1,599,995, corresponding to the tax cost as of June 22, 2001, with 4,819 shares of the Peruvian company Inversiones San Silvestre S.A.C., valued in US$ 2,000, corresponding to the tax cost as of December 31, 2000, and with 99.99% the property ownership of the Brazilian company Fasa do Brasil Ltda., valued in US$ 16,990,000, corresponding to the tax cost as of December 31, 2000, thus generating a greater investment value of Ch$ 1,069,312 thousand (historical), which had been fully amortized by the closing of fiscal year 2001. · The Company’s investment in Fasacard S.A. as of December 31, 2001 is shown as valued in Ch$ 1, and a provision was made for the equity loss presented as of that date for Ch$ $40.358 thousand. · During the 2001 period, Fasint Ltda. – an affiliate of Fasa do Brasil Ltda. – acquired the additional 22.68% shareholding of Fasamed Comercio Farmacéutico S.A. for Ch$ 2,585,129 thousand (historical). This same company, Fasint Ltda., incorporated in the year 2001; the company Administradora de Beneficios Farmacéuticos do Brasil S.A. with a capital contribution of Ch$ 102,578 thousand, equivalent to 99.98% of the stock capital. · By virtue of the public deed dated December 11, 2000, as of January 9, 2001 Farmacias Ahumada (Peru) S.A. changed its business name to that of Inversiones San Silvestre S.A.C. In January of 2001, Inversiones San Silvestre S.A.C. (Peru) received 5,799 shares of stock of the company Droguería La Victoria S.A.C. (Peru) – equivalent to 99.99% of that company’s stock capital – from Alberto Sparrow. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] BREAKDOWN OF INVESTMENTS RUT Taxpayer Id. Foreing Company Country Investment Control Number Of Origin Currency Of Shares Fasa do Brasil Ltda. Shareholding Percentage 2002 Th. Ch$ 2001 Th. Ch$ Companies' Shareholder Equities 2002 Th. Ch$ Fiscal Year Results 2001 Th. Ch$ 2002 Th. Ch$ Accrued Resuslts 2001 Th. Ch$ 2002 Th. Ch$ Results Not Realized VPP 2001 Th. Ch$ 2002 Th. Ch$ - (947,295) - 2001 Th. Ch$ 2002 Th. Ch$ - Accounting value of investment 2001 Th. Ch$ 2002 Th. Ch$ 2001 Th. Ch$ Brazil Ch.$ - 0.00 0.00 - - - - - - - - Foreing Boticas Fasa S.A. Peru 79.663.290-9 Laboratorios Fasa S.A. Chile US $ Ch.$ 421,341 0.00 99.99 0.00 99.99 931,628 764,251 167,345 79,889 167,344 161,800 79,889 931,627 764,250 (183,227) (125,810) 748,400 638,440 Ch.$ 1,346,000 99.99 99.99 613,262 608,371 4,861 371,044 4,861 371,044 613,253 608,368 - - 613,253 608,368 (97,256) 339,575 68,897 (59,696) (19,737) 279,879 49,160 (73,530) - - - - - - 3,131 14,839,970 (521,081) (2,685,598) (520,833) (152,891)46,879,598 14,835,518 - - 96.863.980-3 ABF, Administradora de Beneficios Farmacéuticos S.A. Chile 96.792.260-9 Compañía de Nutrición Chile Ch.$ 38,772 99.97 67.00 339,663 102,831 (190,403) 96.809.530-7 Fasa-Card S.A. Foreing Inversiones San General S.A. Chile Ch.$ 146,300 99.99 99.99 (68,227) (40,360) Silvestre S.A.C. 96.969.830-7 Fasa Investment S.A. Peru Chile Ch.$ Ch.$ 73,033,815 0.00 99.99 0.00 99.97 46,884,849 Uruguay US $ 4,900 98.00 00.00 (2,101) - (5,694) - (5,693) - - - - - - - US $ US $ 4,900 100 0.00 100.00 98.00 0.00 72 3,372 - - - - - 72 3,305 - - - 72 3,305 - 16,280,338 (242,923) (145,547) Foreing Farmacias Ahumada Internacional S.A. Foreing Foreing Lagrynd Corp S.A. Uruguay Fasa International Corp. British Virgin (157,234) (156,796) (27,868) (73,531) (27,868) 46,879,598 14,835,518 Island Totals 48,764,125 113 11. SHOR T-TERM DEBT WITH B ANKS AND FIN ANCIAL INSTITUTIONS SHORT BANKS FINANCIAL They correspond to debt stated in UF and in non-restatable pesos, as follows: 2002 Short Long term term Th. Ch$ Th. Ch$ 2001 Short Long term term Th. Ch$ Th. Ch$ Banco de Chile Corpbanca - 76,952 2,078,082 587,105 119,168 Totals - 76,952 2,665,187 119,168 12. ACCOUNTS P AYABLE PA The breakdown of accounts payable as of December 31, 2002 and 2001 is the following: 2002 Th. Ch$ 48,521,202 16,134,791 2001 Th. Ch$ Domestic suppliers Proveedores nacionales Accounts by suppliers Cuentas assigned cedidas por proveedores Foreign suppliers Proveedores extranjeros 37,902,820 7,610,914 72,825 29,279,676 5,758,680 125,039 Totals Totales 45,586,559 35,163,395 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] The outstanding balance payable to domestic suppliers corresponds mainly to inventory purchases, stated in non-restatable pesos. The accounts assigned by suppliers correspond to accounts owed to certain suppliers who assigned a portion of their receivable portfolio to Servicios Financieros Citibank (Chile) S.A. 13. LONG-TERM LIABILITIES Closing Date Current Fiscal Year Years of Maturity Institution 114 Corpbanca Sundry credidtors (1) Restatement Over 1 Currency Up to 2 Index Th. Ch$ UF UF Over 2 Up to 3 Th. Ch$ Over 3 Up to 5 Th. Ch$ Over 5 Up to 10 Th. Ch$ 75,014 75,014 112,520 555,728 307,419 122,147 1,545,632 Closing Date Previous Period Total Long- Average Term at closing of Financial St. Th. Ch$ Interest Rate Per Year Term at closing of Financial St. Th. Ch$ 3.90% 9.39% 337,691 2,422,222 262,548 2,530,926 Total Long- (1)These liabilities correspond to leasing contract installments of computer equipment purchases, installations and equipment provisions for business premises. Additionally, long-term liabilities include Ch$ 2,591,459 thousand (Ch$ 1,968,090 thousand in 2001) in non-restatable pesos, which correspond to Deferred taxes and Ch$ 70,327 thousand (Ch$ 40,358 thousand) to deficit provisions of affiliates. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 14. SHOR T AND LONG-TERM CORPORA TE BONDS SHORT CORPORATE On December 5, 2002 the Company placed UF 2,000,000 in Bonds Series A-1 and A-2 in the local market. Such placement generated resources totaling Ch$ 33,010,801 thousand. The non-amortized balance of the discount made at the time of the auction amounted to Ch$ 690,081 thousand; of which, Ch$ 151,876 thousand are shown under Other current assets, and Ch$ 538,205 thousand under Other long-term assets. The funds raised from such Bond placement were mostly allocated to taking control over the company denominated Sociedad Mexicana Farmacias Benavides S.A. de C.V. through the companies Fasa Investment S.A. and Inverex S.A. for a total amount of US$ 37,290,321.68 y US$ 7,000,000, respectively. The balance is shown in the Short-Term as Ch$ 367,155 thousand corresponding to interest accrued as of December 31, 2002 and payable on April 15, 2003. The capital will be amortized semi-annually as of April 15, 2005: Current Registration N° or Instrument Identification N° Series Nominal Amount In Effect Bond Restatem. Unit Rate of Interest Final Deadline Periodicity Interest Amortization Payments Payments % Par Value 2002 2001 Th. Ch$ Th. Ch$ Placement in Chile or Abroad Long-term bonds - short-term portion 309 A-1 - U.F. 5.25% 10/15/2009 Semi-annually Semestral 275,366 - National 309 A-2 - U.F. 5.25% 10/15/2009 Semi-annually Semestral 91,789 - National 367,155 - 25,116,180 8,372,060 - 33,488,240 - Total - short-term portion Long-term bonds 309 309 Total Long-term A-1 A-2 1,500,000 500,000 U.F. U.F. 5.25% 5.25% 10/15/2009 10/15/2009 Semi-annually Semi-annually Semestral Semestral National National 115 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 15. EQUITY CHANGES The Equity Account changes occurring in 2002 and 2001, in historical figures, were the following: Paid-in Capital Th. Ch$ Other Reserves Th. Ch$ Accumulated Results Th. Ch$ Interim Dividends Th. Ch$ Deficit of Develop. Period Th. Ch$ Year's Results Th. Ch$ Total Th. Ch$ of January 1, 2001 SaldoBalance al 1° deasenero de 2001 Distribution of results previous fiscal year Distribución resultado ejercicio anterior Final dividend fiscal year Dividendo definitivoprevious ejercicio anterior Accumulated of de development Déficit acumulado deficit período desarrollo period Assessment foreign investments Valorizacion de of inversiones en el exterior Transfers Traspasos Reassessment of own capital Revalorización capital propio Year’s del results Resultado ejercicio Interim provisorios dividends Dividendos 43,581,958 1,351,041 - 401,240 1,576,562 (413,678) 12,438 - 938,483 2,664,590 10,800 122,532 - (600,000) 1,500,000 (889,200) (10,800) (27,226) (1,350,000) (122,804) (153,110) (3,807) - 4,164,590 (4,164,590) 6,580,460 - 48,363,467 (889,200) (153,110) 1,576,562 (413,678) 1,454,978 6,580,460 (1,350,000) of December 31, 2001 SaldoBalance al 31 deasdiciembre de 2001 Non-accounting update Actualización extracontable 44,932,999 1,347,990 1,576,562 47,297 3,736,405 112,092 (1,377,226) (41,317) (279,721) (8,392) 6,580,460 197,414 55,169,479 1,655,084 as ofdeDecember 31, 2001 SaldoUpdated al 31 debalance diciembre 2001, actualizados 46,280,989 1,623,859 3,848,497 (1,418,543) (288,113) 6,777,874 56,824,563 of January 1, 2002 SaldoBalance al 1° deasenero de 2002 Distribution of results previous fiscal year Distribución resultado ejercicio anterior Final dividend fiscal year Dividendo definitivoprevious ejercicio anterior Accumulated of de development Déficit acumulado deficit período desarrollo period Assessment foreign investments Valorizacion de of inversiones en el exterior Transfers Traspasos Reassessment of own capital Revalorización capital propio Year’s del results Resultado ejercicio Interim provisorios dividends Dividendos 44,932,999 1,347,990 - 1,576,562 720,619 47,297 - 3,736,405 4,168,310 (15,076) 239,633 - (1,377,226) 2,412,150 (1,050,000) 15,076 (24,000) (1,200,000) (279,721) (151,132) (8,392) - 6,580,460 (6,580,460) 1,738,188 - 55,169,479 (1,050,000) (151,132) 720,619 1,602,528 1,738,188 (1,200,000) of December 31, 2002 SaldoBalance al 31 deasdiciembre de 2002 46,280,989 2,344,478 8,129,272 (1,224,000) (439,245) 1,738,188 56,829,682 Item 116 NUMBER OF SHARES Number of Number of Shares Shares Shares With Subscribed Paid Voting Rights Series Single series 150,000,000 Number of 150,000,000 150,000,000 CAPIT AL (AMOUNT – CH$ THOUSAND) CAPITAL Series Single series Subscribed Paid Capital Capital 46,280,989 46,280,989 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] DEFICIT ACCUMULA TED DURING THE AFFILIA TE DEVELOPMENT PERIOD CCUMULATED AFFILIATE Amount RUT Taxpayer Id. 96.863.980-3 Foreing Company ABF, Administradora de Beneficios Farmaceuticos S.A. Administradora de Beneficios Farmaceuticos do Brasil S.A. Fiscal Year M$ Accumulated M$ - 130,408 151,132 308,837 Observations Balance carried forward from previous year Balance carried forward from previous year and fiscal year deficit a. Accumulated deficit dev elopment period – as of December 31, 2002 and 2001 Farmacias Ahumada S.A., the development parent company, recorded an equity decrease originated by the expenses of the development period of the indirect affiliate company Administradora de Beneficios Farmacéuticos do Brasil S.A. incurred as of that date; showing such equity decrease in the account labeled Accumulated deficit affiliate development period, under the item Shareholders’ equity. b. Profit distribution – According to current legislation, at least 30% of the profits must be distributed as cash dividends, unless resolved otherwise by the Shareholders’ Meeting by the unanimous vote of all shares issued. In 2001 the dividend policy agreed by the shareholders was to distribute at least 30% of the year’s profits, which corresponds to the minimum mandatory dividend. The Ordinary Shareholders’ Meeting of April 18, 2002, adopted the following resolutions respect to the allocation of the 2001 profits, to pay a minimum mandatory dividend, equivalent to 36.66% of the year’s net profits, that is the sum of Ch$ 2,412,150 thousand (historical), and the balance of such profits, that is the sum of Ch$ 4,168,310 thousand (historical), to be credited to the accumulated profits account. An interim dividend in the amount of Ch$ 1,350,000 thousand (historical) was distributed in September of the year 2001 and charged to the minimum mandatory dividend of 36.66%, namely, Ch$ 2,412,150 thousand. As a result of the foregoing, the new balance of dividends to be distributed amounted to Ch$ 1,050,000 thousand, which was paid in cash. 117 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] c. P vidends – The Shareholders’ Meeting agreed to distribute the following dividends during the Pa dividends ayment of di years 2002 and 2001: Dividends Interim Final Interim Final Year Charged 2002 2001 2001 2000 Agreement Date Date Made Available to Shareholders 08/29/2002 04/18/2002 08/30/2001 04/25/2001 09/24/2002 05/07/2002 09/20/2001 05/10/2001 Amount Ch$ thousand 1,200,000 1,050,000 1,350,000 889,200 d. Other reserv es – This reserve originates from equity changes in the investments made in related companies reserves abroad. (1) Balances as of 31/12/2001 Th. Ch$ Investment Conversion Th. Ch$ Fasa Investment S.A. S.A. Fasa Investment Compañía de Nutrición NutriciónGeneral GeneralS.A. S.A. Compañía de Farmacias AhumadaInternacional InternacionalS.A. S.A. Farmacias Ahumada Laboratorios Fasa S.A. S.A. Laboratorios Fasa ABF, Administradora de de ABF, Administradora BeneficiosFarmacéuticos FarmacéuticosS.A. S.A. Beneficios 1,623,816 43 - 720,809 (415) 143 41 2,344,625 (372) 143 41 - 41 41 Totales Totals 1,623,859 720,619 2,344,478 Item Balances as of 31/12/2002 Th. Ch$ 118 (1) Corresponds to balances updated as of December 31, 2001. The reserves for Fasa Investment S.A., Laboratorios Fasa S.A., ABF and Administradora de Beneficios Farmacéuticos S.A. originate mainly because of their investments in their affiliates Fasa do Brasil Ltda. and Boticas Fasa S.A. (Peru), while those for Compañía de Nutrición General S.A. originate because of its investment in its affiliate Nutrilabs (U.S.A.). [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 16. MONET AR Y CORRECTION MONETAR ARY Item (charges) / credits: Assets, Expenses & Costs Restatement Index IPC UF Total Credits Liabilities, income IPC UF Total Charges Monetary Correction Loss Amount 2002 Th. Ch$ 2001 Th. Ch$ 5,883,319 203,874 4,277,111 243,216 6,087,193 4,520,327 (6,388,457) (109,840) (4,740,463) (225,616) (6,498,297) (4,966,079) (411,104) (445,752) 119 17. EXCHANGE DIFFERENCES Item Currency (charges) / credits: Assets Liabilities US Dollars US Dollars Profit for Exchange Differences Amount 2002 2001 Th. Ch$ Th. Ch$ 486,525 1,025,668 (130,529) (58,295) 355,996 967,373 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] 18. CONTINGENCIES AND RESTRICTIONS Lawsuits and other legal actions There are five small-amount civil lawsuits for indemnification of damages against the Company. In the opinion of the Company’s legal counsels, there is no possibility that these lawsuits could derive into significant losses for the Company. Contingencies As of December 31, 2002, the Company is not exposed to contingencies that are not provisioned for. Commitments The Company agreed with the employees who executed loan contracts to acquire shares, that the Company would absorb the eventual lesser value caused in case that the proceeds of the sale of the shares was less that the debt 120 owed by each worker to the Company for that concept. As of December 31, 2002, there are no liabilities for such concept. Restrictions By virtue of a public deed dated September 2, 2002 granted by the Santiago Public Notary’s Office of Mr. Patricio Raby Benavente, the Company executed a bond issue contract through which the Company commits to maintaining certain financial indicators (covenants) calculated over its individual and consolidated financial statements, as follows: Bonds Series A1 and A2: Restrictions related to Bond Issues: (A) A level of indebtedness, measured over figures of its consolidated and individual balance sheets, defined as the ratio between (i) Financial Liabilities (account 5.21.10.10 plus account 5.21.10.20 plus account 5.21.10.30 plus account 5.21.10.40 plus account 5.21.10.50 plus account 5.22.10.00 plus account 5.22.20.00 plus account 5.22.40.00 of the FECU) and, (ii) Shareholders’ Equity (account 5.23.00.00 plus account 5.24.00.00 of the FECU), (hereinafter the “Level of Indebtedness”), not higher than zero point eighty times. In order to determine the Level of Indebtedness in the consolidated FECU, the following shall be regarded as financial liabilities of the ISSUER: the amounts of all endorsed guarantees, simple or joint-and-several surety bonds, joint and several debt or other guarantees, personal or collateral, which the Issuer or its affiliates would have given to secure third-party liabilities, with the exception of: (i) those given by the ISSUER or its affiliates on account of liabilities of other affiliate companies of the ISSUER; and (ii) those given by ISSUER affiliate companies on account of liabilities of the ISSUER. In turn, in order to determine the Level of Indebtedness in the individual FECU, the following shall be regarded as financial liabilities of the ISSUER: the sum total of all endorsed guarantees, simple or joint-and-several surety bonds, joint and several debt or other guarantees, personal or collateral, given by the ISSUER to guarantee third-party liabilities, even if they belong to its affiliates. [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] (B) A Financial Expense Hedging Ratio, measured over figures of its individual balance sheets, defined as the ratio between: (i) the Operating Result (account 5.31.11.00 of the FECU) plus Depreciation(Account 5.50.30.05 of the FECU) and (ii) Net Financial Expenses (Account 5.31.12.60 minus Account 5.31.12.10 of the FECU), not less than two point fifty times as of the closing of each quarter until that which ends on December 31 of the year 2003; and no less that three point zero times as of the closing of each subsequent quarter. The Financial Expense Hedging Ratio must be calculated over the last 12-month period concluded as of the date of the corresponding FECU. All values must be stated in the currency of their respective FECU. These indicators, for the year ending on December 31, 2002, were the following: Consolidated level of indebtedness 0.76 Individual level of indebtedness Financial Expense Hedging Ratio 0.66 7.20 As of December 31, 2002, Farmacias Ahumada S.A. met the established covenants. Direct guarantees Supplier-related Invoices and Guarantee Bills [Boletas y Letras de Garantía] – which do not commit assets as of December 31, 2002 – amount to Ch$ 123,424 thousand (Ch$ 123,045 thousand in 2001). 19. NATION AL AND FOREIGN CURRENCY TIONAL ASSETS Types of Currency Item Current Assets Fixed Assets Other Assets Totals Ch. Pesos US Dollars UF 61,943,264 29,567,496 51,347,468 1,692,078 - 89,555 7,569,308 2002 Th. Ch$ Totals 2001 Th. Ch$ 63,274,897 29,567,496 58,916,776 60,821,174 23,041,372 24,168,259 151,759,169 108,030,805 CURRENT ASSETS Up to 90 Days 2002 Item Currenc y Currency Amount Th. Ch$ Current Liabilities Ch. Pesos US Dollars UF 53,880,876 1,074,518 552,823 Totals 55,508,217 90 Days to 1 Year 2001 Average Rate of Int. Per year % 5.25 7.90 Amount Th. Ch$ 45,033,287 683,200 279,332 45,995, 819 2002 Average Rate of Int. Per year % 8.90 Amount Th. Ch$ 477,770 477,770 2001 Average Rate of Int. Per year % 7.80 Amount Th. Ch$ Average Rate of Int. Per year % 442,062 8.90 442,062 Totals 2002 Th. Ch$ 2001 Th. Ch$ 53,880,876 1,074,518 1,030,593 45,033,287 683,200 721,394 55,985,987 46,437,881 121 [ I N D I V I D U A L F I N A N C I A L S T A T E M E N T S ] LONG-TERM LIABILITIES 2002 1 to 3 Years Item Currenc y Currency Amount Th. Ch$ Long-term Liabilities UF Ch. Pesos 3 to 5 Years Average Rate of Int. Per year % 7,769,382 1,124,666 6.2 5.6 5 to 10 Years Average Rate of Int. Per year % Amount Th. Ch$ 13,571,404 1,537,120 6.2 5.3 Amount Th. Ch$ 14,940,928 - Over 10 Years Average Rate of Int. Per year % Amount Th. Ch$ 6.2 5.6 - Average Rate of Int. Per year % Total Th. Ch$ 36,281,714 2,661,786 Total 38,943,500 2001 1 to 3 Years Item Currenc y Currency Amount Th. Ch$ 122 Long-term Liabilities UF Ch. Pesos 979,415 827,594 Total 3 to 5 Years Average Rate of Int. Per year % 8.80 Amount Th. Ch$ 234,758 1,180,854 5 to 10 Years Average Rate of Int. Per year % 8.20 Amount Th. Ch$ 409,516 - Average Rate of Int. Per year % 9.39 Over 10 Years Amount Th. Ch$ 1,136,224 - Average Rate of Int. Per year % 9.39 Total Th. Ch$ 2,759,913 2,008,448 4,768,361 20. SUBSEQUENT FFA ACTS On January 6, 2003, the Company notified the Superintendence for Securities and Insurance Companies that Mr. Felipe Hurtado Parot joined as Corporate General Secretary of Farmacias Ahumada S.A. as of January 2, 2003. On February 28, 2003, the Company notified the Superintendence for Securities and Insurance Companies that Mr. Marcelo Salinas Plandiura joined as Corporate Studies & Planning Manager of Farmacias Ahumada S.A. as of February 1, 2003. F i n a n c i a l S t a t e m e n t s o f S u b s i d i a r i e s [ F I N A N C I A L S T A T E M E N T S O F S U B S I D I A R I E S ] SUMMARIZED BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) Laboratorios Fasa S.A. and Subsidiary 2002 2001 Th. Ch.$ Th. Ch.$ ABF, Administradora de Beneficios Farmacéuticos S.A. 2002 2001 Th. Ch.$ Th. Ch.$ Fasa - Card S.A. 2002 2001 Th. Ch.$ Th. Ch.$ Cía. de Nutrición General S.A. and Subsidiary 2002 2001 Th. Ch.$ Th. Ch.$ Farmacias Ahumada Internacional S.A. 2002 2001 Th. Ch.$ Th. Ch.$ Lagrynd Corp S.A. 2002 2001 Th. Ch.$ Th. Ch.$ ASSETS ACTIV OS CTIVOS 126 CURRENT CIRCULANTE: Cash Disponible Debtors Deudores Amounts due from Documentos y cuentas por cobrar related companies a empresas relacionadas inventories Existencias Other current assets Otros activos circulantes 303,502 224,363 41,225 67,271 80,045 102,359 274,692 249,837 44,021 6,083 28,199 64,881 142,872 156,694 6,875 106,676 9,278 - - - 180,031 2,710 1,479,400 49,408 34,866 1,348,578 168,688 57,877 500,960 38,871 141,932 11,597 25,615 56,279 28,405 50,866 626,775 18,838 101,388 602,368 16,221 - - - - Total current Total activoassets circulante 2,091,539 1,683,639 722,235 678,058 131,998 172,351 945,179 833,528 9,278 - - 182,741 FIXED ASSETS ACTIVO FIJO Fixed Assets Activo fijo Accumulated depreciation Depreciación acumulada 1,639,369 (557,064) 1,494,342 (365,590) 302,242 (139,001) 184,597 (102,454) 28,850 (26,699) 28,850 (22,009) 351,868 (166,579) 257,545 (106,271) 1,581 (316) - - - NET FIXED ASSETS ACTIVO FIJO NETO 1,082,305 1,128,752 163,241 82,143 2,151 6,841 185,289 151,274 1,265 - - - OTHER ASSETS OTROS ACTIVOS 114,989 65,798 7,596 12,628 1,215 2,049 392,739 326,537 - - - - 3,288,833 2,878,189 893,072 772,829 135,364 181,241 1,523,207 1,311,339 10,543 - - 182,741 1,686,474 1,461,876 128 178,950 253 59,980 19,373 11,306 934,795 73,163 753,614 - - - 179,369 456,560 194,199 - 510,163 121,033 - 25,615 75,075 - 28,405 75,821 - 149,689 34,530 - 142,995 67,300 - 134,750 82,068 - 197,070 131,715 1,106 12,644 - - - - 2,337,233 2,093,072 279,768 164,459 203,592 221,601 1,151,613 1,156,668 12,644 - - 179,369 LONG-TERM: LARGO PLAZO: Docs. & accts. payable Documentos y cuentas por pagar to related companies a empresas relacionadas Other Otros 19,703 20,597 42 - - - 28,924 3,007 39,823 12,017 - Total Long-term Total pasivo aliabilities largo plazo 19,703 20, 597 42 - - - 31,931 51,840 - - - - MINORITY INTERES INTEREST MINORITARIO 269 269 - - - - - - - - - - SHAREHOLDERS’ PATRIMONIO EQUITY 931,628 764,251 613,262 (68,228) 102,831 (2,101) - - 3,372 2,878,189 893,072 (40,360) 181,241 339,663 3,288,833 608,370 772,829 1,523,207 1,311,339 10,543 - - 182,741 TOTAL ASSETS TOTAL ACTIVOS LIABILITIES PASIV OS ASIVOS CURRENT CIRCULANTE: Banks and efinancial institutions Bancos instituciones financieras Notes and accounts payable Documentos y cuentas por pagar Amounts due to yrelated Documentos cuentas por pagar companies a empresas relacionadas Accrued expenses and withholdings Provisiones y retenciones Other Otros Total current liabilities Total pasivo circulante TOTAL PASIVOS TOTAL LIABILITIES 135,364 [ F I N A N C I A L Fasa International Corp 2002 2001 Th. Ch.$ Th. Ch.$ Fasa Investment S.A. and Subsidiaries 2002 2001 Th. Ch.$ Th. Ch.$ S T A T E M E N T S Inverex S.A 2002 2001 Th. Ch.$ Th. Ch.$ Fasa do Brasil Ltda. 2002 2001 Th. Ch.$ Th. Ch.$ O F S U B S I D I A R I E S ] Inversiones San Silvestre Drogueria La Victoria S.A.C. S.A.C. 2002 2001 2002 2001 Th. Ch.$ Th. Ch.$ Th. Ch.$ Th. Ch.$ Boticas Fasa S.A. 2002 2001 Th. Ch.$ Th. Ch.$ Far-Ben S.A. de C.V. 2002 2001 Th. Ch.$ Th. Ch.$ 72 - - 3,556,866 14,022,564 2,197,233 3,472,936 719 - - 243,256 2,584,999 579,879 2,060,109 1,767,283 1,883,935 1,209,591 802,446 1,164 13,763 - - 404,610 972 18,890,191 9,539,867 - - - 1,151,650 53,445,971 21,549,603 368,870 10,641,557 348,809 - - 5,098,276 242,690 6,762,942 886,219 1,401,665 5,725,355 184,805 729,466 3,830,901 57,636 1,043,152 50,140 - - 53,699 47,714 11,274 72 - 93,726,654 17,029,405 719 - 8,169,221 10,289,149 10,963,044 6,630,040 1,108,219 - - 518,269 555,132 42,581,031 2,851,379 74,417,600 - - - 161,828,468 (85,256,084) 10,930,982 (3,155,026) - - 7,175,364 (3,164,497) 5,851,377 (2,263,924) 6,518,660 (1,509,038) 4,933,556 (890,932) 1,751 (290) - - 958 (171) 147,439,541 (80,522,296) - - 76,572,384 7,775,956 - - 4,010,867 3,587,453 5,009,622 4,042,624 1,461 - - - - 13,245,688 16,582,077 5,030,270 - 14,718,507 15,474,437 231,131 168,564 38,805 - - 787 73,850 66,917,245 29,116,701 - 72 - 183,544,726 41,387,438 5,030,989 - 26,898,595 29,351,039 16,203,797 10,841,228 1,148,485 - - 592,906 170,451,546 - - - 3,145,643 64,813,156 3,929,518 10,810,363 - - 3,134,108 5,072,552 2,652,051 5,901,703 4,070 9,850,262 1,277,467 4,812,699 5,562 - - - 25,863 49,719,579 - - - 2,046,869 13,317,179 544,302 231,213 2,174,091 586,599 - - 1,331,092 543,291 1,972,252 468,239 1,079,466 503,004 - 27,200 299,954 7,869 889,352 174,697 - - 415,442 1,217 15,064 11,481,053 - - - - 83,867,149 17,731,784 - - 10,081,043 10,994,245 11,436,802 6,425,189 1,069,611 - - 457,586 61,200,632 - - - 720,060 27,944,974 - - 720,060 2,144,525 - - - 49,106,548 - 28,665,034 - - 2,864,585 220,745 118,359 118,359 - - 3,749,574 3,749,574 220,745 - 363,486 3,386,088 3,749,574 - - - - 49,106,548 - - - 24,127,695 5,066,110 - - 4,846,210 5,065,126 - - - - - - 6,767 - 72 - 46,884,848 14,839,970 5,030,989 - 9,106,757 9,542,094 4,546,250 4,297,680 78,874 - - 135,320 60,137,599 - 72 - 183,544,726 41,387,438 5,030,989 - 26,898,595 29,351,039 16,203,797 10,841,228 1,148,485 - - 592,906 170,451,546 - 127 [ F I N A N C I A L S T A T E M E N T S O F S U B S I D I A R I E S ] SUMMARIZED INCOME STATEMENTS AS OF DECEMBER 31, 2002 AND 2001 Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) ABF, Administradora de Beneficios Farmacéuticos S.A. 2002 2001 Laboratorios Fasa S.A. and Subsidiary 2002 2001 Th. Ch$ Cía. de Nutrición Farmacias Ahumada and Subsidiary 2002 2001 General S.A. Fasa - Card S.A. 2002 2001 Th. Ch$ Th. Ch$ Th. Ch$ 11,863,583 9,063,613 1,419,924 1,664,027 60,023 (10,724,572) (8,219,171) (398,488) (314,389) MARGEN DE EXPLOTACION OPERATING MARGIN 1,139,011 844,442 1,021,436 GASTOS DE ADMINISTRACION Y VENTAS ADMINISTRATION AND SALES EXPENSES (869,865) (706,090) 92,141 3,427,725 2,118,836 - - - - (68,092) (92,151) (1,817,341) (1,212,841) - - - - 1,349,638 (8,069) (10) 1,610,384 905,995 - - - - (1,013,801) (994,548) (52,930) (74,825) (1,765,920) (1,038,595) (5,694) - - - 269,146 138,352 7,635 355,090 (60,999) (74,835) (155,536) (132,600) (5,694) - - - Otros ingresos Other income Otros egresos Other expenses 10,960 (76,356) 13,721 (72,241) 15,617 (13,576) 27,276 (15,187) 63,940 (30,809) 2,476 (1,172) 12,100 (76,903) 28,391 (80,344) - - - - RESULTADO ANTES INCOME DE IMPUESTO RESULT BEFORE TAXESA LA RENTA 203,750 79,832 9,676 367,179 (27,868) (73,531) (220,339) (184,553) (5,694) - - - IMPUESTO LA RENTA INCOMEATAXES (36,405) 57 (4,815) 3,865 - - 29,936 27,319 - - - - - - - - - - - - - - - - 167,345 79,889 4,861 371,044 (27,868) (73,531) (190,403) (157,234) (5,694) - - - - - - - - - - - - - - - 167,345 79,889 4,861 371,044 (27,868) (73,531) (190,403) (157,234) (5,694) - - - RESULTADO OPERACIONAL OPERATING INCOME Th. Ch$ Lagrynd Corp S.A. 2002 2001 Th. Ch$ COSTO DE EXPLOTACION OPERATING COST Th. Ch$ Internacional S.A. 2002 2001 Th. Ch$ INGRESOS DE EXPL OTACION OPERATING INCOME Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ RESULTADO NO OPERACIONAL: NON-OPERATING RESULT 128 INTERES MINORITARIO MINORITY INTEREST RESULTADO LIQUIDO NET RESULT AMORTIZACION DEL MAYOR VALOR DE AMORTIZATION OF NEGATIVE INVERSIONES GOODWILL YEAR’S PROFIT (LOSS) UTILIDAD (PERDIDA) DEL AÑO (1) Corresponds to the consolidated income statement for the 47-day period ending as of December 31, 2001. (2) These results include those results obtained during the 47-day period ending as of December 31, 2001, which were included in the consolidation of Fasa Investment S.A. and Affiliates. [ F I N A N C I A L Fasa International Corp 2002 2001 Th. Ch$ Th. Ch$ Fasa Investment S.A. and Subsidiaries 2002 2001 Th. Ch$ S T A T E M E N T S Inverex S.A. 2002 2001 Th. Ch$ Fasa do Brasil Ltda. 2002 2001 Th. Ch$ Th. Ch$ Th. Ch$ (1) O F S U B S I D I A R I E S ] Boticas Fasa S.A. 2002 2001 Th. Ch$ Th. Ch$ Drogueria La Victoria S.A.C. 2002 2001 Th. Ch$ (2) Th. Ch$ Th. Ch$ Inversiones San Silvestre S.A.C. 2002 2001 Th. Ch$ (2) Th. Ch$ Far-Ben S.A. de C.V. 2002 2001 Th. Ch$ Th. Ch$ (2) - - 79,807,829 7,105,762 - - 46,469,980 46,819,868 33,306,082 24,878,701 866,846 - - 242,782 - - - - (58,406,440) (5,241,292) - - (32,963,143) (33,497,301) (25,490,255) (19,091,536) (774,831) - - (168,428) - - - - - - 21,401.389 1,864,470 - - 13,506,837 13,322,567 7,815,827 5,787,165 92,015 - - 74,354 - - - - (21,505,819) (1,997,023) - - (13,858,507) (13,198,241) (7,487,155) (5,061,606) (74,616) - - (55,627) - - - - (104,430) (132,553) - - (351,670) 124,326 328,672 725,559 17,399 - - 18,727 - - 2,056,028 (3,470,780) 131,515 (2,794,683) - - 1,871,491 (2,876,655) 21,922 (2,208,232) 104,803 (466,409) 154,995 (733,340) 10,915 (9,724) - - 20,026 (20,931) - - - - (1,519,182) (2,795,721) - - (1,356,834) (2,061,984) (32,934) 147,214 18,590 - - 17,822 - - - - 662,141 43,568 - - 241,338 224,822 - - - - - - - - - - 335,960 66,556 - - 335,960 766,984 - - - - - - - - - - (521,081) (2,685,597) - - (779,536) (1,070,178) (32,934) 147,214 18,590 - - 17,822 - - - - - - - - 126,896 - - - - - - (7,412) - - - - (521,081) (2,685,597) - - (652,640) (1,070,178) (32,934) 147,214 18,590 - - 10,410 - - 129 [ F I N A N C I A L S T A T E M E N T S O F S U B S I D I A R I E S ] SUMMARIZED CASH FLOWS AS OF DECEMBER 31, 2002 AND 2001 Translation of financial statements originally issued in spanish (IN THOUSAND CHILEAN PESOS) Laboratorios Fasa S.A. and Subsidiary 2002 2001 ABF, Administradora de Beneficios Farmacéuticos S.A. 2002 2001 Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ Cía. de Nutrición General S.A. and Subsidiary 2002 2001 Fasa - Card S.A. 2002 2001 Th. Ch$ Th. Ch$ Th. Ch$ Farmacias Ahumada Internacional S.A. Lagrynd Corp S.A. 2002 2001 2002 2001 Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ Th. Ch$ CASH FLOW FROM OPERATING ACTIVITIES FLUJO ORIGINADO POR ACTIVIDADES DE OPERACION: Year’s profit(pérdida) (loss) del año Utilidad 167,345 79,889 4,861 371,044 (27,868) (73,531) (190,403) (157,234) (5,694) - - - 204,509 (190,079) 307,177 158,923 (590,132) 413,343 47,392 (238,775) 114,842 34,435 107,808 (210,213) 1,779 56,165 (18,001) 4,328 31,064 (21,364) 90,604 (28,533) 230,251 65,961 (361,928) 338,606 316 - - - (2,710) - 488,952 62,023 (71,680) 303,074 12,075 (59,503) 101,919 (114,595) (5,378) - - (2,710) Income obtained through financing activities Ingresos obtenidos por actividades de financiamiento Other loans obtained Obtención de otros préstamos Other disbursements Otros desembolsos - - - - - - 420,992 158,820 (376,052) 221,525 (22,841) 16,237 - - - 3,372 179,369 - Positive net cash floworiginado provided por by financing activities Flujo neto positivo actividades de financiamiento - - - - - - 203,760 198,684 16,237 - - 182,741 Permanent investments Inversiones permanentes Incorporation of fixed assetsfijos Incorporación de activos Sale of fixed assets fijos Venta de activos Other investment disbursements Otros desembolsos de inversion (609) (173,620) 28,621 (73,782) (2,629) (255,418) (11,250) (117,645) (704) (2,629) (47,848) (156) - - (94,334) (76,719) (49,543) (77,221) (1,581) - - - Positive (negative) net cash floworiginado provided por by investment Flujo neto (negativo) positivo actividadesactivities de inversión (219,390) (269,297) (118,349) (50,633) - - (171,053) (126,764) (1,581) - - - 269,562 (207,274) (190,029) 252,441 12,075 (59,503) 134,626 (42,675) 9,278 - - 180,031 (7,285) (8,569) (4,618) (5,926) 3,747 1,982 1,371 6,189 - - - 262,277 (215,843) (194,647) 246,515 15,822 (57,521) 135,997 (36,486) 9,278 - - 180,031 41,225 257,068 274,692 28,177 28,199 85,720 6,875 43,361 - - - - 303,502 41,225 80,045 274,692 44,021 28,199 142,872 6,875 9,278 - - 180,031 Charges toaresults that do cash flow Cargos(credits) (abonos) resultados quenot norepresent representan flujo de efectivo: Net asset changes that affectque the cash flow Variación neta de activos afectan al flujo de efectivo Net liability changes that affect cash flow Variación neta de pasivos quethe afectan al flujo de efectivo Positive (negative) net cash flow provided byactividades operating de activities Flujo neto positivo (negativo) originado por la operación CASH FLOW FROM FINANCING ACTIVITIES FLUJO ORIGINADO POR ACTIVIDADES DE FINANCIAMIENTO: 130 CASH FLOW FROM INVESTMENT ACTIVITIES FLUJO ORIGINADO POR ACTIVIDADES DE INVERSION: TOTAL POSITIVE (NEGATIVE) NET(NEGATIVO) CASH FLOWDEL OF THE YEAR FLUJO NETO TOTAL POSITIVO AÑO EFFECT OF DE PRICE RESTATEMENT CASH AND EFECTO LA LEVEL INFLACION SOBRE ELON EFECTIVO Y EFECTIVO CASH EQUIVALENT EQUIVALENTE - NET CASH ANDNETA CASHDEL EQUIVALENT VARIACION EFECTIVO Y EFECTIVO EQUIVALENTE DURING THE DURANTE ELYEAR AÑO CASH ANDINICIAL CASH EQUIVALENT YEAR SALDO DE EFECTIVO BEGINING Y EFECTIVOOF EQUIVALENTE CASH ANDFINAL CASHDE EQUIVALENT OF YEAR SALDO EFECTIVO Y END EFECTIVO EQUIVALENTE (1) Corresponds to the consolidated income statement for the 47-day period ending as of December 31, 2001. (2) These results include those results obtained during the 47-day period ending as of December 31, 2001, which were included in the consolidation of Fasa Investment S.A. and Affiliates. [ F I N A N C I A L Fasa International Corp 2002 2001 Th. Ch$ Th. Ch$ Fasa Investment S.A. and Subsidiaries 2002 2001 Th. Ch$ Th. Ch$ S T A T E M E N T S Inverex S.A. 2002 2001 Th. Ch$ Th. Ch$ Fasa do Brasil Ltda. 2002 2001 Th. Ch$ Th. Ch$ (1) O F S U B S I D I A R I E S ] Inversiones San Droguería La Victoria S.A.C. Silvestre S.A.C. 2002 2001 2002 2001 Boticas Fasa S.A. 2002 2001 Th. Ch$ Th. Ch$ (2) Th. Ch$ Th. Ch$ Th. Ch$ (2) Th. Ch$ Far-Ben S.A. de C.V. 2002 2001 Th. Ch$ Th. Ch$ (2) - - - - (652,641) (1,070,178) (32,934) 147,214 18,590 - - 10,410 - - - (521,081) 703,701 (1,724,016) 4,180,248 (2,685,597) - 2,511,502 (1,534,417) 1,349,942 - - 389,218 2,063,586 (2,006,387) 1,207,606 (3,678,863) 2,034,208 548,742 (2,800,174) 5,940,497 369,529 (1,319,075) 883,974 4,419 (987,431) 160,599 - - (13,458) (25,795) (112,737) - - - - 2,638,852 (358,571) - - (206,224) (1,507,227) 3,656,131 81,642 (803,823) - - (141,580) - - 72 - - 31,996,220 14,863,769 (14,745,107) 1,691,427 1,756,066 (605,361) 5,030,989 - - 14,332,904 (13,383,964) 1,734,007 (8,176) 10,247 (1,364,057) 1,277,467 876,262 (814,967) 719,485 (150,908) - - 541,892 - - - 72 - 32,114,882 2,842,132 5,030,989 - 948,940 1,725,831 (1,353,810) 1,338,762 568,577 - - 541,892 - - - - (32,035,598) (2,061,703) (449,593) (261,577) (22,202) (5,030,270) - - 308,607 (940,713) (447,233) 88,940 (1,986,557) (155,804) (1,120,260) (703,598) (866,156) (60,870) (730) (43,117) - - (146) 4,676 - - - - - - (34,546,894) (283,779) (5,030,270) - (1,079,339) (2,053,421) (1,823,858) (927,026) (43,847) - - 4,530 - - 72 - 206,840 2,199,782 719 - (336,623) (1,834,817) 478,463 493,378 (279,093) - - 404,842 - - - - (101,147) - - - - (94,765) - - 1 - - (232) - - 72 - 307,987 2,199,782 719 - (336,623) (1,929,582) 478,463 493,378 (279,092) - - 404,610 - - - - 2,199,782 - - 579,879 2,509,461 1,288,820 716,213 280,256 - - - - - 72 - 2,507,769 719 - 243,256 579,879 1,767,283 1,209,591 1,164 - - 404,610 - - 2,199,782 131 - [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 I. AN AL YSIS OF THE FIN ANCIAL ST ATEMENTS ANAL ALYSIS FINANCIAL STA 1. AN AL YSIS OF THE INCOME ST ATEMENTS ANAL ALYSIS STA The results for the years ended as of December 31, 2002 and 2001 –which do not include the results generated by the operations in Mexico– show the following changes: INCOME STATEMENT (In Th. Ch$) Operating Income Operating Cost Operating Margin Administration and sales expenses Dec-2001 313,417,767 291,861,032 (235,901,632) (217,240,049) Dec 02-01 %Change 02-01 21,556,735 (18,661,583) 7.39% 8.59% 77,516,135 74,620,983 2,895,152 3.88% (74,292,769) (65,550,008) (8,742,761) 13.34% 3,223,366 9,070,975 (5,847,609) (64.47%) Interest income 1,015,792 Other non operating income 669,414 Equity participation in loss of related companies (12,718) Interest expenses (2,162,091) Other non operating expenses (784,158) Amortization of goodwill (1,948,435) Price level restatement, net ( 332,005) Foreing currency translation, net 1,452,805 1,004,988 193,687 (972,924) (468,529) (1,763,804) (492,059) 508,759 10,804 475,727 (12,718) (1,189,167) (315,629) (184,631) 160,054 944,046 1.08% 245.62% 100.00% 122.23% 67.37% 10.47% (32.53%) 185.56% Non Operating Loss - Expenses, net (2,101,396) (1,989,882) (111,514) 5.60% INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 1,121,970 7,081,093 (5,959,123) (84.16%) INCOME TAXES 119,756 (1,130,189) MINORITY INTEREST 369,567 826,970 (457,403) (55.31%) 1,611,293 6,777,874 (5,166,581) (76.23%) 126,895 - 126,895 100.00% NET INCOME 1,738,188 6,777,874 (5,039,686) (74.35%) R.B .T .I.D .A.E.I(*) R.B.T .T.I.D .I.D.A.E.I(*) 8,666,542 13,059,369 (4,392,827) (33.64%) 11,59 45,19 (33,60) (74.35%) OPERA TING INCOME OPERATING 132 Dec-2002 NON OPERA TING INCOME AND EXPENSE: OPERATING NET INCOME Amortization of negative goodwill EARNINGS PER SHARES $ (*) Result before taxes, interest, depreciation, amortization and extraordinary items. 1,249,945 (110.60%) [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 a. Operating Result: The Operating result of fiscal year 2003 amounted to Ch$ 3,223,366 thousand, which represents a 64.47% negative change (Ch$ 5,847,609 thousand) with respect to the same period of the previous year. This is mainly explained by an increment in Administration & sales expenses of Ch$ 8,742,791 thousand (13.34%) that was partially offset by a better Operating margin of Ch$ 2,895,152 thousand (3.88%). Administration & sales expenses increased mostly because of the inauguration of 81 new stores during the fiscal year; thus representing an increase of 22%, reaching up to 440 pharmacies – in consolidated terms, except for Mexico – as of December 31, 2002, versus 369 pharmacies as of December 31, 2001. b. Non-operating result: The Non-operating result as of December 31, 2002 reflected a loss of Ch$ 2,101,396 thousand, compared with a loss of Ch$ 1,989,882 thousand during the same period of the year 2001, thus representing a negative change of Ch$ 111,514 thousand (5.6%). This net change is mostly attributable to the following factors: An increase in Other income by Ch$ 475,727 thousand (245.62%), mainly generated because of the sale of Fixed assets; increased Financial expenses of Ch$ 1,189,167 thousand (122.23%) generated from debt servicing obligations with banks and financial institutions, mainly of the Brazilian affiliate; and, an increase in Exchange differences of Ch$ 944,046 thousand (185.56%) mostly originated from the Brazilian affiliate. 2. BALANCE SHEET AN AL YSIS ANAL ALYSIS The main financial indicators have performed as follows: ASSETS (In Th. Ch$) Dec-2002 Dec-2001 Dec 02-01 % Change 02-01 Current Assets 154,641,879 77,623,570 77,018,309 99.22% Fixed Assets 107,572,866 32,186,339 75,386,527 234.22% Other Assets 23,293,772 24,189,501 (895,729) ( 3.70%) Total Assets 285,508,517 133,999,410 152,509,107 113.07% 133 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 Current Assets: The 99.22% positive change in Current assets – corresponding to a net increase of Ch$ 77,018,309 thousand – is mostly explained by a variation in the following items: a) An increase in Time deposits totaling Ch$ 12,185,216 thousand (159.24%), generated mostly by the balance of the affiliate Far-Ben S.A. de C.V. (México). b) An increase in Inventories totaling Ch$ 42,942,759 thousand (100.38%), generated mostly by the consolidation of inventories of the affiliate Far-Ben S.A de C.V. (México) as of December 31, 2002. c) An increase of Sales debtors by Ch$ 10,373,286 thousand (103.70%) attributable, on the one hand, by the consolidation of Far-Ben S.A. de C.V. and, on the other hand, by an increase of sales income in Chile, Brazil and Peru. (Net) Fixed Assets: 134 The 234.22% change in Fixed assets corresponds to a net increase of Ch$ 75,386,527 thousand, which is mostly explained by: a) Installing and equipping new stores by the Parent Company as well as by the affiliates Boticas Fasa (Perú) and Fasamed Comércio de Medicamentos e Perfumaria S.A. (Brasil), and also by the remodeling of stores that are currently operating. b) Consolidating the balances of Far-Ben S.A. de C.V. (México) as of December 31, 2002 that incorporated Fixed assets totaling Ch$ 66,917,245 thousand. Other Assets: The 3.70% drop – amounting to Ch$ 895,729 thousand – is mainly explained by the following changes: a) An increase of Intangibles totaling Ch$ 1,107,978 thousand, generated by greater payments on account of Municipal patents (derechos de llave), since there were more stores operating as of December of the year 2002. b) An increase in Investments in related companies and Investments in other companies totaling Ch$ 3,569,078 thousand from the affiliate Far-Ben S.A. de C.V.(México) . c) An increase in Others by Ch$ 2,245,414 thousand generated mainly by consolidating the balances of the affiliate Far-Ben S.A. de C.V.(México), an increase in rental guarantees (81 new stores during the year 2002), and a bond placement discount. d) An increase of Ch$ 7,550,812 thousand (866.57%) in the account denominated Greater Value of Investments, originated by the investment made in the affiliate Far-Ben S.A. de C.V. (México) by the affiliates Fasa Investment S.A. and Inverex S.A.. [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 LIABILITITES (InTh. Ch$) Dec-2002 Current Liabilities Dec-2001 Dec 02-01 %Change 02-01 138,540,314 64,676,183 73,864,131 114.21% Long-term Liabilities 66,010,826 7,398,281 58,612,545 792.25% Minority Interest 24,127,695 5,100,383 19,027,312 373.10% Shareholders’ Equity 56,829,682 56,824,563 5,119 0.01% 285,508,517 133,999,410 151,509,107 113.07% Total Liabilities Current Liabilities: The change of Ch$ 73,864,131 thousand occurring in this item corresponds mostly to the net impact of: a) A Ch$ 3,635,737 thousand drop (54.52%) in the Obligations with banks and financial institutions caused by the payments made by the Parent Company and the Brazilian affiliate. b) Increased provisions amounting to Ch$ 10,451,127 thousand (239.91%) generated by the consolidation of the provisions of Far-Ben S.A. de C.V. (México). c) A Ch$ 52,960,827 thousand increase (110.14%) caused by the consolidation of Accounts payable to domestic suppliers coming from Far-Ben S.A. de C.V. (México) Long-term liabilities: This item shows an increase of Ch$ 58,612,545 thousand with respect to the previous year. This change originates mainly from the account Corporate bonds (obligations to the public) which experienced an increase of Ch$ 54,683,157 thousand (100%), for Bonds placed in Chile to finance the takeover of the affiliate Far-Ben S.A. de C.V (México) and the balance of the Corporate bonds (obligations to the public) that were consolidated with this affiliate as of December 31, 2002. Shareholders’ Equity: The increase of Ch$ 5,119 thousand in the Shareholders’ Equity corresponds to a 0.001% variation that is mostly attributed to a Ch$ 715,000 thousand reduction of Retained earnings offset by an increase of Other reserves by Ch$ 720,619 thousand. The year’s result amounted to Ch$ 1,738,188 thousand. 135 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 LIABILITITES (InTh. Ch$) Dec-2002 Current Liabilities Dec-2001 Dec 02-01 %Change 02-01 138,540,314 64,676,183 73,864,131 114.21% Long-term Liabilities 66,010,826 7,398,281 58,612,545 792.25% Minority Interest 24,127,695 5,100,383 19,027,312 373.10% Shareholders’ Equity 56,829,682 56,824,563 5,119 0.01% 285,508,517 133,999,410 151,509,107 113.07% Total Liabilities Current Liabilities: The change of Ch$ 73,864,131 thousand occurring in this item corresponds mostly to the net impact of: a) A Ch$ 3,635,737 thousand drop (54.52%) in the Obligations with banks and financial institutions caused by the payments made by the Parent Company and the Brazilian affiliate. b) Increased provisions amounting to Ch$ 10,451,127 thousand (239.91%) generated by the consolidation of the provisions of Far-Ben S.A. de C.V. (México). c) A Ch$ 52,960,827 thousand increase (110.14%) caused by the consolidation of Accounts payable to domestic suppliers coming from Far-Ben S.A. de C.V. (México) Long-term liabilities: This item shows an increase of Ch$ 58,612,545 thousand with respect to the previous year. This change originates mainly from the account Corporate bonds (obligations to the public) which experienced an increase of Ch$ 54,683,157 thousand (100%), for Bonds placed in Chile to finance the takeover of the affiliate Far-Ben S.A. de C.V (México) and the balance of the Corporate bonds (obligations to the public) that were consolidated with this affiliate as of December 31, 2002. Shareholders’ Equity: The increase of Ch$ 5,119 thousand in the Shareholders’ Equity corresponds to a 0.001% variation that is mostly attributed to a Ch$ 715,000 thousand reduction of Retained earnings offset by an increase of Other reserves by Ch$ 720,619 thousand. The year’s result amounted to Ch$ 1,738,188 thousand. 135 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 20022 Activity The inventory turnover index dropped by 2.3 times and that of inventory permanence increased in 61 days; these changes are explained by the increased inventories as a result of the opening of new stores - during the last period – in Chile, Brazil and Peru and by the consolidation of the inventories of Far-Ben S.A. de C.V. (México). The fixed asset turnover index dropped by 6.15 times as of December 2002, caused mostly by an increase in fixed assets by 234.22% -because of the consolidation of the affiliate Far-Ben S.A de C.V. (México)– an increase greater than that of income, which grew by 7.39% and was caused by not consolidating the results of the Mexican affiliate. Restrictions associated to the Bond Issue. (A) A level of indebtedness, measured over figures of its consolidated and individual balance sheets, defined as the ratio between (i) Financial Liabilities (account 5.21.10.10 plus account 5.21.10.20 plus account 5.21.10.30 plus account 5.21.10.40 plus account 5.21.10.50 plus account 5.22.10.00 plus account 5.22.20.00 plus account 5.22.40.00 of the FECU) and, (ii) Shareholders’ Equity (account 5.23.00.00 plus account 5.24.00.00 of the FECU), (hereinafter the “Level of Indebtedness”), not higher than zero point eighty times. In order to determine the Level of Indebtedness in the consolidated FECU, the following shall be regarded as financial liabilities of the ISSUER: the amounts of all endorsed guarantees, simple or joint-and-several surety bonds, joint and several debt or other guarantees, personal or collateral, which the Issuer or its affiliates would have given to secure third-party liabilities, with the exception of: (i) those given by the ISSUER or its affiliates on account of liabilities of other affiliate companies of the ISSUER; and (ii) those given by ISSUER affiliate companies on account of liabilities of the ISSUER. In turn, in order to determine the Level of Indebtedness in the individual FECU, the following shall be regarded as financial liabilities of the ISSUER: the sum total of all endorsed guarantees, simple or joint-and-several surety bonds, joint and several debt or other guarantees, personal or collateral, given by the ISSUER to guarantee third-party liabilities, even if they belong to its affiliates. (B) A Financial Expense Hedging Ratio, measured over figures of its individual balance sheets, defined as the ratio between: (i) the Operating Result (account 5.31.11.00 of the FECU) plus Depreciation(Account 5.50.30.05 of the FECU) and (ii) Net Financial Expenses (Account 5.31.12.60 minus Account 5.31.12.10 of the FECU), not less than two point fifty times as of the closing of each quarter until that which ends on December 31 of the year 2003; and no less that three point zero times as of the closing of each subsequent quarter. The Financial Expense Hedging Ratio must be calculated over the last 12-month period concluded as of the date of the corresponding FECU. All values must be stated in the currency of their respective FECU. For the year ended December 31, 2002, these indicators were as follows: Level of consolidated indebtedness Level of individual indebtedness 0,76 0,66 Financial Expense Hedging Ratio 7,20 137 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 II. NET WOR TH AND ECONOMIC VALUE OF ASSETS ORTH The assets were valued according to generally accepted accounting principles and norms and according to the instructions issued to that effect by the Superintendence for Securities and Insurance Companies, set forth under Note 2 of the Financial Statements. Depreciation was calculated on the basis of a restated value of the goods and according to the remaining years of useful life of each article. The values of intangibles were monetarily corrected and are amortized according to the norm indicated under Technical Bulletin N° 55 of the Chilean Union of Accountants. Those assets shown in foreign currency are presented at the exchange rate in effect as of the closing of the exercise. With respect to those assets of greater importance, the following should be noted: - Inventories that include pharmaceutical and chemical products, as well as toiletries and cosmetics. - Fixed asset goods comprised mainly of leased assets, computer equipment, facilities in leased real estate property, and land. - Long-term deposits and other assets such as municipal patents and trademarks 138 III. SIGNIFIC ANT CHANGES III.SIGNIFIC SIGNIFICANT The Company currently operates in the markets of Chile, Peru, Brazil, and - as of the end of the year 2002 – in Mexico. The most important changes occurring in the various markets where it operates, as well as the competition that it faces and the market share, can be visualized in the following tables: CHILE Total market share Number of pharmacies in operation Dec 02 33.1% 234 Dec 01 33.8% 189 Dec 02-01 (0.7%) 45 Competition Mainly the pharmaceutical chains of S&B and Cruz Verde. MEXICO Total market share Number of pharmacies in operation Dec 02 3.1% 523 Dec 01 - Dec 02-01 - Dec 02 1% 115 Dec 01 1% 108 Dec 02-01 7 Dec 02 8.1% 91 Dec 01 7.1% 72 Dec 02-01 0.9% 19 BRASIL Total market share Number of pharmacies in operation Competition Mainly Ultramed and Multi Farma PERU Total market share Number of pharmacies in operation Competition Mainly BTL, Incafarma, Superfarma. [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 IV W AN AL YSIS IV.. CASH FLO FLOW ANAL ALYSIS The operational activities show a positive net flow of Ch$ 17,751,039 thousand, Ch$ 12,381,320 thousand greater than that generated as of December of the year 2001. The most significant changes occurred because of an increase of Ch$ 39,731,286 thousand in the collection of sales debtors, increased payments to suppliers and personnel totaling Ch$ 23,566,516 thousand, and increased other prepaid expenses by Ch$ 4,613,176. On the other hand, financing activities show a positive net flow of Ch$ 26,903,702 thousand, thereby reflecting an increase of Ch$ 23,661,746 thousand with respect to the same period of the year 2001. The main causes for such variation come from an increment in obligations with the public because of the placement of corporate bonds totaling Ch$ 33,010,801 thousand, a drop of Loans obtained by Ch$ (17,214,367 thousand), and lower loan payments of Ch$ (9,104,361thousand). On the other hand, investment activities generated a negative net flow totaling Ch$ 45,930,148 thousand, which meant an increase of Ch$ 35,110,509 with respect to the flow experienced as of December of the year 2001. The most significant changes correspond to the Incorporation of fixed assets amounting to Ch$ 2,130,577 thousand and, Permanent investment amounting to Ch$ 32,246,426 thousand, mostly related to the takeover of the affiliate Far-Ben S.A. de C.V. (México). V. MARKET RISK AN AL YSIS ANAL ALYSIS 1. Rate of interest risk: 139 Most Company obligations are the result of Leasing operations, which have contractually established installments that include the applicable rate of interest. The Company manages its rate of interest risk by orienting its long-term debt structure towards an appropiate combination linked to the cash flows generated by the operation. 2. Rate of exchange risk: The Company maintains dollar operations in Time deposits and Other current assets, as a function of its short-term obligations. The liabilities include only short-term dollar operations that are not significant with respect to total liabilities. Although the effective rate of exchange risk to which we are exposed depends from the fluctuation of the rates of exchange in which the Company’s assets and liabilities are maintained, for accounting purposes our results are also affected considering the provisions of Technical Bulletin N° 64. With respect to our investments abroad, they face a rate of exchange risk that corresponds to the fluctuation of the Mexican peso, the Brazilian real and the new Peruvian sol regarding the net value -on a given date- of the monetary assets and liabilities of our indirect operative affiliates in Mexico, Brazil and Peru, respectively. 3. Risk hedging policies: The Company’s policy consists in matching the currency in which it performs its financial operations (of both assets and liabilities) with the flows generated from its operations. Because of this, the Company has not had to incorporate new hedging operations. [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 1. AN AL YSIS OF THE INCOME ST ATEMENT ANAL ALYSIS STA The results for the years ended as of December 31, 2002 and 2001 show the following changes: INCOME ST ATEMENT (In Th. Ch$) STA D ec -2002 ec-2002 Operating Income Operating Cost Operating Margin Administration and sales expenses D ec -2001 ec-2001 233,685,394 219,074,072 (175,741,808) (161,634,457) D ec 02-01 % Change 02-01 14,611,322 (14,107,351) 6.7% 8.7% 57,943,586 57,439,615 503,971 0.9% (54,268,868) (48,813,281) (5,455,587) 11.2% 3,674,718 8,626,334 (4,951,616) (57.4%) 446,622 788,082 (341,460) (43.3%) 4,862 487,565 535,975 92,025 (531,113) 395,540 (99.1%) 429.8% (786,769) (556,460) (824,421) (112,405) ( 411,104) 335,996 (1,336,630) (497,125) (408,852) (156,037) (445,752) 967,373 549,861 (68,335) (415,569) 43,632 34,648 (611,377) (41.1%) 13.7% 101.6% (28.0%) (7.8%) (63.2%) (1,405,114) (460,941) (944,173) 204.8% PROFIT BEFORE INCOME TAX 2,269,604 8,165,393 (5,895,789) (72.2%) INCOME TAX (531,416) (1,387,519) 856,103 (61.7%) NET INCOME 1,738,188 6,777,874 (5,039,686) (74.45%) R.B .T .I.D .A.E.I(*) R.B.T .T.I.D .I.D.A.E.I(*) 7,276,870 11,502,025 (4,225,155) (36.7%) 11,59 45,19 (33,60) (74.4%) OPERA TING INCOME OPERATING NON OPERA TING INCOME AND EXPENSE: OPERATING 140 Interest income Profit for investment in related companies Other non-operating income Equity participation in loss of related companies Interest expenses Other non-operating expenses Amortization of goodwill Price level restatement, net Foreing currency translation, net Non-operating profit (loss) EARNINGS PER SHARES $ (*) Result before taxes, interest, depreciation, amortization and extraordinary items. ] [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 a. Operating Result: The Operating result reached Ch$ 3,674,718 thousand, which represents a 57.4% negative change of (Ch$ 4,951,616 thousand) with respect to the same period of the previous year. This is mainly explained by an increment in operating expenses of 8.7% greater than the increment in operating income of 6.7% and to an 11.2% increase in overhead expenses. Administration and sale expenses correspond mainly to personnel compensation expenses, third-party payments and normal operating expenses. These expenses increased -as compared to the previous year- from 22.3% in December 2001 to 23.2% in December 2002. b. Non-Operacional result: The non-operating result generated a loss of Ch$ 1,405,114 thousand, which represents a negative change of 204.8%. This is partly explained by the drop in the profits generated by related companies, from Ch$ 535,975 thousand as of December 2001- to Ch$ 4,862 thousand in this period; which is offset by a drop in related company losses from Ch$ 1,336,630 -as of December 2001- to Ch$ 786,769 thousand as of December 2002. On the other hand, although the dollar exchange rate experienced an increase in relation to the same period of last year, this impact was softened by lower foreign exchange investments, thereby generating a lesser positive impact on results of Ch$ 611,377 thousand, on account of exchange differences. Likewise, our financial income dropped by Ch$ 341,460 thousand as a result of lower amounts invested in time deposits and mutual funds. 2. B ALANCE SHEET AN AL YSIS BALANCE ANAL ALYSIS The main financial indicators have performed as follows: ASSETS (In Th. Ch$) Dec-2002 Dec-2001 Dec 02-01 % Change 02-01 Current Assets 63,274,897 60,821,174 2,453,723 4.0% Fixed Assets 29,567,496 23,041,372 6,526,124 28.3% Other Assets 58,916,776 24,168,259 34,748,517 143.8% Total Assets 151,759,169 108,030,805 43,728,364 40.5% 141 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 Current Assets: The positive change in Current assets corresponding to a net increase of Ch$ 2,453,723 thousand, is mostly explained by the following: a) Increased inventories by Ch$ 330,597 thousand, attributable to 45 new stores during the year 2002. b) Increased taxes recoverable of Ch$ 1,432,400 thousand. c) Increased other current assets amounting to Ch$ 575,928 thousand. Fixed Assets: The 28.3% change in Fixed assets corresponds to an increase of Ch$ 6,526,124 thousand, which is mostly explained by: 142 a) Installing and equipping new stores and also by the remodeling of stores that are currently operating. b) Computer equipment for the stores and the main company headquarters carried out within an effort to modernize the company’s information systems, POS and communication equipment. Other Assets: The increase in other assets by Ch$ 34,748,517 thousand is mostly explained as follows: a) An increase in the participation of net investments by Ch$ 32,386,411 thousand in related companies, mainly in the direct affiliate Fasa Investment S.A. and the affiliate Compañía de Nutrición General S.A. b) An increment in Lower Value of Investments amounting to Ch$ 432,887 thousand, generated by the investment made in the affiliate Compañía de Nutrición General S.A. c) A Ch$ 431,462 thousand increase in long-term debt. d) An increase in intangibles and others by Ch$ 1,508,656 thousand, generated by increased municipal patents and guarantees required to lease new stores. [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 LIABILITIES (In Th. Ch$) Dec-2002 Dec-2001 Current Liabilities 55,985,987 46,437,881 9,548,106 20.6% Long-term Liabilities 38,943,500 4,768,361 34,175,139 716.7% Shareholders’ Equity 56,829,682 56,824,563 5,119 0.0% 151,759,169 108,030,805 43,728,364 40.5% Total Liabilities Dec 02-01 %Change 02-01 Current Liabilities: This item’s change by Ch$ 9,643,106 thousand, corresponds mainly to: a) Increased suppliers by Ch$ 10,423,164 thousand, as a result of the continuous growth of the company and the expansion of new stores; b) Increased accounts payable to related companies by Ch$ 766,824 thousand; c) A drop in documents payable by Ch$ 501,313 thousand; d) A drop in bank loans by Ch$ 2,707,403 thousand; e) Increased provisions by Ch$ 1,108,235 thousand; and the drop in Taxes payable by Ch$ 109,048 thousand. Long-term Liabilities: Under this item, we show an increase of Ch$ 34,175,139 thousand which corresponds to a positive change of 716.7%, which is mostly explained by the issue of bonds and deferred taxes. Shareholder’s Equity: The increase in the Shareholders’ Equity account by Ch$ 5,119 thousand represents a 0.0% variation that is mostly explained by an increase of other reserves by Ch$ 720,619 thousand, an increase in the accumulated deficit during the period allocated toward developing the affiliates by Ch$ 151,132 thousand, a drop caused by the payment of dividends by Ch$ 2,250,000 thousand, and an increase in the year’s results by Ch$ 1,738,188 thousand. 143 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 INDICATOR UNIT Dec-2002 Dec-2001 Change 02-01 LIQUIDITY Current Liquidity Acid Test Working Capital Times Times Th. Ch$ 1,13 0,56 7, 288,910 1,31 (0,18) 0,63 (0,07) 14,383,293 (7,094,383) Level of indebtedness Short-term liabilities Long-term liabilities Fin. Exp. Hedging Ratio Times % % Times 0,65 59.0% 41.0% 59,4 0,11 90.7% 9.3% (39,0) 0,54 (31.7%) 31.7% 98,40 PROFITABILITY Return on Equity Return on Assets Return on Operating Assets Return on Dividends % % % Times 3.1% 1.3% 4.2% 2,285 12.5% 6.7% 10.8% 2,686 (9.4%) ( 5.4%) ( 6.6%) ( 401 ) ACTIVITY Turnover of Inventory Turnover of Fixed Assets Turnover of Total Assets Permanence of Inventory Time Times Times Days 5,5 7,9 1,5 65 5,1 9,5 2,0 70 (0,4) (1,6) (0,5) ( 5) INDEBTEDNESS 144 Financial Indicators Liquidity The drop experienced by current liquidity indices - (0.18), the acid test ratio, (0,07) times the Working Capital (Ch$ 7,094,383 thousand) – are mostly explained by an increase in current liabilities of 20.6%, with respect to current assets of 4.0%. Indebtedness The Debt/Equity ratio during fiscal year 2002 was greater with respect to fiscal year 2001,, because of a proportionally greater increase in long-term liabilities by 716.7%, as compared to the increase in short-term liabilities by 20.8% and of shareholder’s equity by 0.0%. Return on Equity The 3.1% return on equity, dropped with respect to that of the year 2001 because of lower profits in 2002. [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 Activity The inventory turnover was 5.1 times in 2001 and 5.5 times in 2002, because of the relative inventory increase required for the new stores during the last period. The asset turnover index was 9.5 times in 2001 and 7.9 times in 2002, caused by a 28.7% increase in fixed assets, whereas income only increased by 6.7%. The total asset turnover index changed 2.0 times in 2001 and 1.5 times in 2002. II. NET WOR TH AND ECONOMIC VALUE OF ASSETS ORTH The assets were valued according to generally accepted accounting principles and norms and according to the instructions issued to that effect by the Superintendence for Securities and Insurance Companies, set forth under Note 2 of the Financial Statements. Depreciation was calculated on the basis of a restated value of the goods and according to the remaining years of useful life of each article. The values of intangibles were monetarily corrected and are amortized according to the norm indicated under Technical Bulletin N° 55 of the Chilean Union of Accountants. Those assets shown in foreign currency are presented at the exchange rate in effect as of the closing of the exercise. The accounts & documents receivable from related companies are classified according to their date of maturity, into short and long-term. The operations are carried out in conditions of fairness similar to those that normally prevail in the marketplace. With respect to those assets of greater importance, it is worth mentioning the following: - Inventories include pharmaceutical and chemical products, toiletries and cosmetics. - Fixed assets include leasing assets, computer equipment, facilities in leased real estate property, and land mostly. - Time deposits, other assets such as municipal patents and trademarks. - The investments abroad, mainly those in Brazil in the indirect affiliate Fasa Do Brasil Ltda., and in Peru with the indirect affiliate Boticas Fasa S.A. 145 [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 - The investments in related companies are valued at their proportional equity value. In the case of foreign companies, they have been valued according to the norms established in Technical Bulletin N° 64 of the Chilean Union of Accountants. III. SIGNIFIC ANT CHANGES SIGNIFICANT The Company currently operates in the markets of Chile, Peru, Brazil, and -as of the end of the year 2002– in Mexico. The most important changes occurring in the various markets where it operates, as well as the competition that it faces and the market share, can be visualized in the following tables: CHILE Total market share Number of pharmacies in operation Dec 02 34.7% Dec 01 34.8% Dec 02-01 ( 0.1% ) 234 189 45 Competition Mainly the pharmaceutical chains of S&B and Cruz Verde. 146 (1) This considers the participation both in pharmaceutical products as well as in mass consumer products. IV ASH FLO W AN AL YSIS IV.. C CASH FLOW ANAL ALYSIS The period covered between the months of January-December of the year 2002 shows a negative net flow of Ch$ 1,538 million, which was generated by negative investment flows. Operating activities show a positive net cash flow of Ch$ 14,586 million, higher than the flow of Ch$ 6,579 million recorded in 2001. Insofar as investment activities are concerned, they generated a negative flow totaling Ch$ 43,946 million, which resulted from the net incorporation of fixed assets, permanent investments and other investment disbursements. Financing activities –on the other hand– show a positive net flow of Ch$ 27,822 million, principally, as a result of the Bond Issue. V. MARKET RISK AN AL YSIS ANAL ALYSIS 1. Rate of interest risk: Most Company obligations are the result of Leasing operations, which have contractually established installments that include the applicable rate of interest. [ A N A L Y S I S O F T H E F I N A N C I A L S T A T E M E N T S ] ANALYSIS OF THE INDIVIDUAL FINANCIAL STATEMENT AS OF DECEMBER 31, 2002 The Company manages its rate of interest risk by orienting its long-term debt structure towards an appropriate combination linked to the cash flows generated by the operation. 2. Rate of exchange risk: The Company maintains dollar operations in Time deposits and Other current assets, as a function of its short-term obligations. The liabilities include only short-term dollar operations that are not significant with respect to total liabilities. Although the effective rate of exchange risk to which we are exposed depends from the fluctuation of the rates of exchange in which the Company’s assets and liabilities are maintained, for accounting purposes our results are also affected considering the provisions of Technical Bulletin N° 64. With respect to our investments abroad, they face a rate of exchange risk that corresponds to the fluctuation of the Mexican peso, the Brazilian real and the new Peruvian sol regarding the net value -on a given date- of the monetary assets and liabilities of our indirect operative affiliates in Mexico, Brazil and Peru, respectively. 3. Risk hedging policies: 147 The Company’s policy consists in matching the currency in which it performs its financial operations (of both assets and liabilities) with the flows generated from its operations. Because of this, the Company has not had to incorporate new hedging operations. [ R E L E V A N T E V E N T S ] On January 17, 2002 we reported to the Superintendence for Securities and Insurance Companies that Mr. Jaime Poblete Stambuk –then Corporate Planning & Development Manager– was appointed Corporate Studies Manager. We also reported that Mr. Alejandro Rosemblatt Kiblisky was appointed to replace Mr. Poblete as Corporate Planning & Development Manager. On March 20, 2002, we reported to the Superintendence for Securities and Insurance Companies that Mr. José Ferrer Fernández –then Corporate Finance Manager– is no longer employed by the Company. On April 2, 2002, we reported to the Superintendence for Securities and Insurance Companies that the Company’s Ordinary Shareholders’ Meeting had been summoned to meet on April 18, 2002 at the Company’s headquarters located in Avenida Vicuña Mackenna N° 585. The subject matters submitted for the consideration of the Shareholders’ Meeting were the following: - To issue an opinion about the Annual Report, Balance Sheet, Financial Statements and External Auditor’s Report corresponding to the fiscal year ending as of December 31, 2001. - To distribute the year’s profit and ratify the payment of interim dividends. - To review the Board of Directors’ 2001 Expense Report. - To elect the Board of Directors and set their compensation. 148 - To report about the activities and expenses of the Director’s Committee during the year 2001 and set their 2002 compensation and budget. - To appoint External Auditors for fiscal year 2002. - To appoint a Risk Classification Firm for fiscal year 2002. - To account for the operations carried out by the company pursuant to article 44 of Law 18,046 on Stock Companies. - To designate the newspaper that will be used for the purpose of notifying about Shareholders’ Meetings. - Any other subject matter of general interest, other than those incumbent upon the Extraordinary Shareholders’ Meeting. Likewise, a copy was attached of the first summons that had been published on that same date in the El Mercurio newspaper, indicating that the two remaining summons would be published on April 2 and 9, respectively. On April 19, 2002, we handed over to the Superintendence for Securities and Insurance Companies Form N°1 of Circular N°660 regarding the dividend distribution agreed by the Company’s Extraordinary Shareholders’ Meeting held on April 18, 2002. [ R E L E V A N T E V E N T S ] On April 23, 2002, we delivered to the Superintendence for Securities and Insurance Companies a copy of the Minutes of the General Ordinary Shareholders’ Meeting of Farmacias Ahumada S.A., which resolved –among other matters– the following: a. To elect the following persons to serve as Company board members and alternate board members: Board Members Alternate Board Members José Codner Chijner Karen Codner Dujovne Eduardo Bellinghausen Pizarro Gabriel Berczely Apor Perla Dujovne Codriansky Denise Codner Dujovne Juan Cuneo Solari Raymond Jay Dunn IV Pablo Turner González Carlos Williamson Benaprés Alexander Fernández Montenegro Carlos Heller Solari Ricardo García Holtz Juan Benavides Feliú Jaime Sinay Assael Mario Valdivia Bernstein Ethel Codner Dujovne Fernando José Tisné Maritano b. With respect to the allocation of the year 2001 profits, the Shareholders’ Meeting agreed the following: - To distribute –as minimum mandatory final dividend– the sum of Ch$ 2,412,150,000, equivalent to 36.66% of the net profit of the year 2001 totaling Ch$ 6,580,460,000. - To deduct from the above-indicated sum to be distributed, the interim dividend of Ch$ 1,350,000,000 that was paid in September 2001; an amount that when restated as of December 31, 2001, represents the sum of Ch$ 1,362,150,000. - The balance of Ch$ 1,050,000,000 will be paid as minimum mandatory final dividend in cash, thereby representing a distribution of Ch$ 7.0 per share. - The profit balance –amounting to Ch$ 4,168,310,000– was allocated to the accumulated profit account. The other resolutions adopted by the General Ordinary Shareholders’ Meeting were consigned for the record in the attached Minutes. On May 31, 2002, we communicated to the Superintendence for Securities and Insurance Companies and to the Stock Exchanges –as an essential event– the appointment of Mr. Marcelo Weisselberger Araujo, the current Planning Manager, as Fasa Retail Chile’s new Administration & Finance Manager and the appointment of Ms. María Liliana Ramírez Mellado, the current Administration & Finance Manager of Fasa Retail Chile, as Corporate Comptroller. On May 31, 2002, we notified the Superintendence for Securities and Insurance Companies -as an essential event– the execution of a number of acts provided under article 44 of the Law on Stock Companies. On August 9, 2002, we notified the Superintendence for Securities and Insurance Companies –as an essential event– that the Board of Directors of Farmacias Ahumada S.A. had unanimously agreed to subscribe a non-mandatory Letter of Intention that would include an exclusivity and confidentiality clause to enable the Company –following the 149 [ R E L E V A N T E V E N T S ] pertinent audits– to take over the stock control and management of the Mexican pharmaceutical chain denominated Farmacias Benavides. On August 21, 2002, we replied to Official Memorandum N°6070, dated August 14, 2002, forwarded by the Superintendence for Securities and Insurance Companies. On August 22, 2002, Farmacias Ahumada S.A. reported the following essential event: Farmacias Ahumada S.A., in its answer to Official Memorandum N°6070, dated August 14, 2002, forwarded by the Superintendence for Securities and Insurance Companies by virtue of which we were asked to provide a progress report about the negotiations and the financial impact to the Company to be derived from the eventual acquisition of the Mexican pharmaceutical chain “Farmacias Benavides”, replied in its letter dated August 21, 2002 and communicated the following: As reported in the Essential Event submitted to the Superintendence for Securities and Insurance Companies on August 9, 2002, the Board of Directors of Farmacias Ahumada S.A. unanimously agreed to subscribe a non-mandatory Letter of Intention with the controlling shareholders of Farmacias Benavides. The objective of the referred Letter of Intention was to begin negotiations between the parties toward having Farmacias Ahumada S.A. become a shareholder of Farmacias Benavides by way of a capital contribution of approximately 150 US$ 45,000,000 enabling it to acquire, at least, 51% of all the equity stock of Far-Ben S.A. de C.V. (FarBen), the property owners of Farmacias Benavides, thereby taking over the management and operative control of the entire Pharmacy Chain and it subsidiaries. The Letter of Intention provides a 30-day period of exclusivity for Farmacias Ahumada S.A., by virtue of which the controlling shareholders of Farmacias Benavides commit not to negotiate or seek third-party bids in relation to an eventual capitalization, financing, sale or investment in Farmacias Benavides, its assets or business activities, during such period. During those 30 days following the date of execution of the executed document already reported to the S.V.S., Farmacias Ahumada S.A. will have the exclusivity in order to resolve the issue of Far-Ben’s capitalization; thus, the current majority shareholders of Far-Ben –grouped in the Fideicomiso de Control Benavides (FCB) trust and Far-Ben– committed not to negotiate or seek third-party bids in relation to an eventual capitalization, financing, sale or investment in Farmacias Benavides, its assets or business activities, during such period. Such period of exclusivity will be extended for another 60 days, should a Preliminary Agreement or Memorandum of Understanding be executed. In parallel with the execution of a Preliminary Agreement or Memorandum of Understanding, the respective Due Diligence process should be initiated. Given the early stages of these negotiations, it is yet premature to project the financial impact that such investment could represent to Farmacias Ahumada S.A. Finally, prior to the execution of a Preliminary Agreement or Memorandum of Understanding –whose negotiation is now being completed by a senior team of Company managers in the city of Monterrey, State of Nuevo León, Mexico– and should an agreement be struck regarding the various financial aspects involved, the Board of Directors of Farmacias Ahumada S.A. would be summoned to ultimately resolve about the execution of such instrument. [ R E L E V A N T E V E N T S ] On August 22, 2002, we reported to the Superintendence for Securities and Insurance Companies -as an essential event– that the Company’s Board of Directors had agreed to execute a Memorandum of Understanding with the Controlling Shareholders of the Mexican company, Far-Ben S.A. de C.V. (Far-Ben), operator of Farmacias Benavides. On August 30, 2002, we notified the Superintendence for Securities and Insurance Companies -as an essential event– that the Company’s Board of Directors, in its meeting held on August 29 of this year, had agreed by the unanimous vote of its attending board members, to distribute an interim cash dividend equivalent to Ch$ 8.- per share; namely, the total sum of Ch$ 1,200,000,000. On September 13, 2002, we replied the Reserved Memorandum N°075, dated September 9, 2002, issued by the Superintendence for Securities and Insurance Companies. On October 16, 2002, we communicated to the Superintendence for Securities and Insurance Companies -as an essential event– that the Company’s Board of Directors, in its meeting held on October 15, 2002, had agreed to continue to pursue the takeover of the Mexican company, Far-Ben S.A. de C.V. (Far-Ben) and to execute on October 2, 2002 a share subscription contract that would be mandatory and subject to condition with the controlling trust, Fideicomiso de Control Benavides. On October 22, 2002, we reported to the Superintendence for Securities and Insurance Companies –as an essential event– about the execution of the share subscription agreement communicated on October 16, 2002, thereby fully abiding by the resolutions adopted by the Company’s Board of Directors. On December 4, 2002, 23 we notified the Superintendence for Securities and Insurance Companies –as an essential event– the appointment of Mr. Eduardo Trénova Celedón, as Commercial Director and that of Mr. Jorge Cañas Apablaza, as Operations Director of Fasa Retail Chile. On December 23, 2002, we reported to the Superintendence for Securities and Insurance Companies –as an essential event– the takeover of the Mexican company Far-Ben S.A. de C.V.; thus, as previously communicated in our letters dated August 9 and 13, September 13 and October 16 and 22, respectively, Farmacias Ahumada S.A., through its affiliates Fasa Investment S.A. and Inverex S.A., paid $ 450,000,000 Mexican pesos toward meting Far-Ben’s capital increase, thereby enabling it to acquire, approximately, 67% of Far-Ben’s equity stock. 151 Design: Imedia
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