Letter to Shareholders

Dear Shareholders:

2018 was a year in which we continued to respond to our passion, simplify the lives of our clients transforming their shopping experiences. Our goal is to serve them in all the ways in which they wish to purchase, operating with responsibility, cooperating with the communities in which we are present and watching over all the people that interact with our company, employees as well as shareholders and suppliers. This is the north of our actions.

2018 was especially important for Falabella. We made relevant progress aimed at consolidating the necessary capabilities to automate, digitalize and scale-up our company to generate a digital ecosystem, and in this way maintain our commercial leadership in the region. To develop and accelerate this plan we undertook a US$ 581 million capital increase that strengthens our balance sheet, giving us flexibility and setting us in a privileged position within the current Latin American commerce. In addition, we incorporated new investors to our shareholder base, which gives us diversification and sustainability in the long-term.

The digitalization of the company in all of its formats, the investments that we are undertaking in logistics, the acquisition of Linio, our network of stores and shopping centers, added to our knowledge about our customers from their visits and transactions with us, differentiate us and deliver the strength to lead in the markets in which we are present. We believe that these advantages will invigorate our competitive position in the physical world, and will allow us to lead the digital market.

Our progresses in logistics materialized, among other investments, with the beginning of operations of the omnichannel distribution center located in Santiago de Chile. This automated center, the most modern in the region, seeks to satisfy a consumer that requires quick and precise answers in all formats, in the physical as well as in the digital. In the short term, we will continue improving our logistics capabilities in all the countries in which we operate, in order to be the company that best supplies its stores and customers.

Moreover, we are developing the capability to scale up our company sustainably. This year electronic transactions increased over 70%, and we were able to accompany this growth with a better customer service. We had over 874 million visits to our web pages and more than 155 million visits to our financial services web sites, reflecting the satisfaction of our clients with our digital products. All these indicators show that, although we still have many challenges, we are moving in the right direction.

We seek to respond to clients in all channels, both through physical presence in stores, shopping centers and financial branches, as well as through the virtual presence. We will continue privileging the development of applications for mobile phones and developing with more strength our Digital Factories. Our efforts aim to serve clients in the most efficient and fastest way. We are working hard to adapt our organization to the new behavior of this omnichannel world.

Our investment program considers advancing in information technology including artificial intelligence and cybersecurity, strengthen logistics, consolidate the Linio marketplace, and expand the Click & Collect mode in all our formats. In our omnichannel proposal we consider an organic expansion in the markets in which we operate, covering mainly areas in which we are currently not present, and the remodeling of our stores and shopping centers to make the most of our valuable assets. In addition we will focus on the establishment of Ikea in Chile, Peru and Colombia and the opening of new Sodimac stores in Mexico together with the expansion of the Falabella Soriana credit card in that country.

All these investments are sustained in an organization that reacts with agility and transparency to all these challenges. An organization that we have simplified and will continue simplifying to streamline decision making even more. Within this simplification process, CMR integrated into Banco Falabellla. We will continue reviewing our processes and systems, to become efficient for the benefit of our clients which are the focus of all our decisions.

As well, in 2018 we maintained the emphasis on the permanent improvement of our corporate governance and having a sustainable operation, with special concern in cybersecurity challenges and transparent behavior. Another of our constant challenges was the attraction and development of local talent, respecting diversity and promoting gender equality together with internal meritocracy.

I can’t finish this letter without thanking all our employees, who with hard work and dedication allow us to satisfy our clients. I also want to thank the Board of Directors of Falabella and its subsidiaries as well as the management team for their support and commitment. Finally, thank the shareholders who trust us and want to be part of this trip that will allow us to increase our leadership in the Latin American commerce.

Thank you,
Carlo Solari Donaggio
Chairman of the Board

Governance Documents

Board of Directors

The Board of S.A.C.I. Falabella is composed of nine members, who hold office for three years from their appointment date and can be re-elected indefinitely. The Board does not have any alternate directors. The Annual General Shareholders Meeting held on April 25, 2017 appointed the current directors for a statutory period of 3 years.

The Board of S.A.C.I. Falabella as of December 31, 2017 was composed of the following members:

Carlo Solari Donaggio, Chairman

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Director since:

2011

Position:

Chairman

Other responsibilities in Empresas Falabella:

Chairman of the board of directors of Falabella Inversiones Financieras S.A., and member of the board of directors of de Falabella Retail S.A., Dinalsa SpA, Tottus S.A., Hipermercados Tottus S.A. and Plaza S.A.

Other responsibilities outside Empresas Falabella:

Mr. Solari has served as Managing Director of Megeve, a group that invests directly in private equity, stocks and bonds in Latin America, with a multi-sector focus including, among others, real estate, energy, water and mining. He previously worked at Booz Allen & Hamilton and Empresas Falabella.

Member of the executive counsel of the think tank “Centro de Estudios Públicos”, Vice President of the Fundación Paz Ciudadana and counselor of the foundation Aptus, which gives support to low-income students.

Education:

Civil Engineer from the Universidad Católica de Chile, where he graduated magna cum laude; MBA from the Wharton School at the University of Pennsylvania. He is currently an advisory member of the board of directors for Wharton Latin America.

Juan Carlos Cortes Solari, Vice-Chairman of the Board of Directors

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Director since:

2002

Position:

Vice-Chairman of the Board of Directors

Other responsibilities in Empresas Falabella:

Chairman of the board of directors of Tottus S.A. and member of the board of directors of Dinalsa SpA.

Other responsibilities outside Empresas Falabella:

Director of several companies, including Corinvest S.A., where he is also an active member of the investment committees of the FIP he manages. Serves on the board of non-profit entities, such as Fundación Caserta, which focuses on providing school education to students at social risk and Fundación Meri, which supports scientific research and methods of land conservation in Patagonia.

Founder and Chairman of Corso Inversiones, the family office of the Cortés Solari family.

Education:

Bachelor of Science in Business Administration with mention on economy from the University of Nevada, United States.

María Cecilia Karlezi Solari, Member of the Board of Directors

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Director since:

2003

Position:

Member of the Board of Directors

Other responsibilities in Empresas Falabella:

Member of the board of Sodimac S.A.

Other responsibilities outside Empresas Falabella:

Director of the family office Grupo Auguri.

Juan Pablo del Río Goudie, Member of the Board of Directors

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Director since:

2017

Main ocupation:

Member of the Board of Directors

Other responsibilities in Empresas Falabella:

Chairman of the Board of Sodimac S.A., a position held since 1981, and also of Imperial S.A..

Other responsibilities outside Empresas Falabella:

Chairman of the board of directors of Derco S.A., one of main companies in the automotive, machinery and spare parts market in Latin America, with presence in Chile, Peru, Colombia and Bolivia. He is also one of the three partners of Dercorp, company that invests in several businesses and industries, such as real estate and insurance. He is also a member of the board of directors of Cruzados SADP, a sports and social organisation.

Has lead important developments in real estate, founding Delsa and Constructora Santa María companies, which operate under the brand “Neohaus”.

Education:

Degree in Architecture from the Pontificia Universidad Católica de Chile.

Paola Cuneo Queirolo, Member of the Board of Directors

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Director since:

2014

Position:

Member of the Board of Directors

Other responsibilities in Empresas Falabella:

Member of the Board of Directors of Sodimac S.A.

Other responsibilities outside Empresas Falabella:

Executive Director of Sociedad de Inversiones y Rentas Liguria Ltda.

Education:

Degree in the Science of Management from Universidad de Chile and an MBA from Adolfo Ibañez University and Deusto University (Bilbao, Spain).

Sergio Cardone Solari, Member of the Board of Directors

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Director since:

1986

Position:

Member of the Board of Directors

Other responsibilities in Empresas Falabella:

Chairman of the board of directors of Plaza S.A, member of the board of directors of Falabella S.A. and Falabella Inversiones Financieras S.A.

Other responsibilities outside Empresas Falabella:

Member of the board of directors of the real estate company Enaco, Haldeman Mining Co. and Parque del Recuerdo.

Education:

Bachelor of Business, Administration and Economy from the Pontificia Universidad Católica de Chile.

Jose Luis del Río Goudie, Member of the Board of Directors

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Director since:

2003

Position:

Member of the Board of Directors

Other responsibilities in Empresas Falabella:

Member of the board of directors of Sodimac S.A.

Other responsibilities outside Empresas Falabella:

Chairman and CEO of Empresas Dersa and Inder SpA., Founder and Chairman of Pesquera Friosur S.A. and Salmones Friosur S.A.. Member of the board of Tecnofast, Grupo Alto and Aza. Founder and member of the board of Austral Capital Partners S.A. (Ventura Capital Fund). Also participates in the board of several non-profit organisations and foundations such as Endeavor Foundation (Chile), Carmen Goudie Foundation (family foundation for developing education in Chile); member of the Economic Advisory Council to the President of Pontificia Universidad Católica de Chile, of the Advisory Board of the Engineering School of Pontificia Universidad Católica de Chile and of the Advisory Board the Magazine Mensaje.

Co-founder of different important corporations as Derco S.A., biggest vehicle distributor in Chile and Sodimac S.A. (which merged with Empresas Falabella in 2003).

Education:

Industrial Engineer from Pontificia Universidad Católica de Chile, and has an M.A. from Lancaster University, UK.

Hernan Büchi Buc, Independent Director of the Board of Directors

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Director since:

1996

Position:

Independent Director of the Board of Directors

Other responsibilities in Empresas Falabella:

Other responsibilities outside Empresas Falabella:

Counselor of “Libertad y Desarrollo”, a public policy think tank, he founded in 1990. Chairman of the Board of Trustees of Universidad del Desarrollo; and member of the Board of Directors of Quiñenco S.A., SQM S.A., among others.

During 1990, Mr. Büchi advised a number of different governments of Latin America, Eastern Europe and Asia on the design and implementation of economic policy. Mr. Büchi has served for the government of Chile in different positions including Undersecretary of Economy (1979 – 1980) and Minister of Finance (1985-1989).

Education:

Civil Engineer from the Universidad de Chile and holds an MBA from Columbia University in New York.

Carlos Heller Solari , Miembro del Directorio

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Director since:

2002

Position:

Member of the Board of Directors

Other responsibilities in Empresas Falabella:

Member of the Board of Directors of Falabella Retail S.A.

Other responsibilities outside Empresas Falabella:

Chairman of Bethia, Club Hípico S.A., Megavisión S.A. AND Betfam S.A, among others. Vicepresident of the board of directors of Latam S.A.

Together with his family, they founded the Bethia Group, focused on agriculture (Ancali S.A.), communications (Megavisión S.A.) and experience in transport (Sotraser S.A. and Blue Express).

Education:

Agricultural Engineer

Committee Composition

Falabella CEO

Management

Gaston Bottazzini

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, CEO

Gaston Bottazzini, born in Argentina in 1969, took over as CEO of Falabella on June 1st, 2018. He previously worked as CEO of Falabella Financiero for approximately 10 years, which afforded him deep knowledge of the businesses and markets in which Empresas Falabella operates, as well as its different subsidiaries. Bottazzini led the innovation and digitalization of Banco Falabella and CMR in Chile and the region, launching Banco Falabella in Colombia and leading the entry of Falabella into Mexico.

Before joining Falabella, he was a partner at McKinsey & Company, where he worked between 1996 and 2008, mainly in the financial sector of several countries in Latin America, the United States and Spain. He holds a Master of Business Administration from Harvard Business School and a Bachelor of Science degree from the University of California, Davis.

Alejandro Gonzalez Dale

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Alejandro Gonzalez Dale is Chief Financial Officer of Falabella since November 6th, 2006. He has a degree in Business Administration from the University of Chile, where he graduated with the highest honors and received the ICU (Alumni Association) award. He also holds an MBA from the University of California, Los Angeles, where he received the J. Fred Weston Award for Excellence in Finance. He joined Endesa Chile in 1996. From January 2002 to July 2003, he was their Financial Vice-President, and in August 2003 he became the Financial Director of Endesa Chile, a position he held until joining Falabella.

Jordi Gaju Nicolau

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Jordi Gaju Nicolau, has been the Chief Strategy Officer of Falabella since 2018, having previously worked as Chief Development Officer for 9 years. From 2002 to 2007, he worked in different positions within Grupo Penta, where he was Portfolio Manager and Head of Strategy. Jordi is a Commercial Engineer from the Pontificia Universidad Catolica de Chile and holds an MBA from the Wharton School of the University of Pennsylvania.

Helder Mao de Ferro

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Helder Mao de Ferro serves as Chief Information Officer of Falabella since February 1st, 2019, after more than 20 years of experience in areas of technology and operations in the banking industry and large consulting companies. Helder is a Business Administrator, holds a Master in Banking and Finance as well as an MBA from IESE. For six years at Falabella Financiero he led a deep digital transformation. He has driven key projects for the company such as the Omnichannel Platform and the development of the Digital Factory.

Francisca Prieto Arroyo

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Francisca Prieto Arroyo is the Chief People Officer since September 1st, 2018. Francisca graduated as a Commercial Engineer from the Pontificia Universidad Catolica de Chile (PUC) and holds an Executive Coaching Certification, as well as a Master in Strategic Human Resources Management from PUC. Within Falabella, Francisca worked since 2012 as Project Manager and on 2014 she assumed as Chief People Development Officer. She also served as the Human Resources Director for Papeles Industriales and served as the Lead Consultant for BBR e-Commerce & Retail.

Gonzalo Smith Ferrer

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Gonzalo Smith Ferrer is Legal Affairs and Governance Manager since December 16th, 2015. He is a lawyer in Chile and North Carolina (USA), a Law graduate from the Pontificia Universidad Católica de Chile, an LLM from Harvard Law School and an MBA from the University of Arkansas. Previously he was Vice-President and General Counsel of Walmart for all of Latin America; Legal Affairs Manager of Walmart Chile; Associate in Carey y Cía (Santiago), besides having worked in Cuatrecasas Abogados (Madrid) and Davis Polk & Wardwell (New York).

Jorge Joannon Errazuriz

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Jorge Joannon Errazuriz is Chief Controller since August 14th, 2014. He is an Industrial Civil Engineer from the University of Chile. Previously, he worked at Citibank N.A. for 17 years, holding positions in various departments, such as operations desk, customer relations, product development and administration. After that, he served as Manager of the Control Department for six years at Comercial Kauffman S.A. In addition, he was Controlling Manager of Laboratorios Andrómaco S.A. for three years.

Gonzalo Somoza Garcia

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Gonzalo Somoza Garcia is CEO of Falabella Retail since April 25th, 2014. Prior to that, he was Chief Merchandising Director for Falabella. Previously, he was Merchandising Manager in Argentina, Peru and Chile from 2000 to 2010. He is and Industrial Civil Engineer from the Technological Institute of Buenos Aires and holds an MBA from the Sloan School of Management at the Massachusetts Institute of Technology (MIT). Prior to joining Falabella, he worked at McKinsey Company as Senior Engagement Manager and before that worked with Siderar-Techint Group.

Enrique Gundermann Wylie

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Enrique Gundermann Wylie is CEO of Home Improvement since October 30th, 2012. He is an Industrial Civil Engineering graduate of the Pontificia Universidad Católica de Chile, from where he also holds an MBA. With extensive international experience, Enrique Gundermann has worked at Falabella for 18 years, where he began his Home Improvement journey as COO and then as CMO of this division. In 2006 he took the responsibility of starting the Sodimac operation in Argentina as CEO, and was later appointed to the same position in Colombia. Today he oversees the international growth strategy of the Home Improvement division for seven countries, ensuring an agile and efficient regional management.

Johann Ramberg

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Johann Ramberg Arnillas is CEO of the Supermarkets division since September 1st, 2018. He has Bachelor Degree in Economics from Universidad de Lima. Within Empresas Falabella, Johann held several positions: since 2003 he served as Buyer and Divisional Merchandise Manager in Falabella Retail, on 2009 assumed as General Merchandise Manager and on 2017 he became the General Manager of Supermarkets in Peru. He also worked as Asset manager in Citibank N.A. Lima branch.

Juan Manuel Matheu

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Juan Manuel Matheu is CEO of Falabella Financiero since June 1st, 2018. He studied business and administration at the Universidad Católica Argentina and holds an MBA from the University of California, Berkeley. He joined Banco Falabella Chile in 2009 as Channel Manager, before rising to General Manager three years later. During this period, he led the transformation of Banco Falabella into an integral people’s bank, owing to which it is now the fifth largest player in the use of debit, with present growth double that of the industry average.

Fernando De Peña Iver

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Fernando de Peña Iver is CEO of Mallplaza since April 16th, 2008. Before occupying his current position, he was the General Manager of Plaza Vespucio S.A. and then Aseger S.A., both Mallplaza Companies, where he spent 18 years. He has a degree in Industrial Civil Engineering from the Pontificia Universidad Catolica de Chile. He led from its origin Mallplaza to transform it into a company that in Chile, Peru and Colombia manages 23 regional malls.

Ricardo Hepp De Los Rios

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Ricardo Hepp is CEO of Falabella Inmobiliario since April 1st, 2009. He studied Business Administration at Adolfo Ibañez University and holds an MBA from the IESE Business School of the University of Navarra. Having been with Empresas Falabella since 1995, he has also served as Country Manager in Colombia and Peru. Before joining Falabella, Ricardo worked as a Project Engineer for the Chilean company CMPC.

Rodrigo Fajardo Zilleruelo

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Rodrigo Fajardo Zilleruelo is Country Manager of Colombia since February 9th, 2011. Previously he served as General Manager of Sodimac Peru and CFO of Falabella Retail Chile. He has been with the company for more than 18 years and has held various management positions at Falabella. He is a Commercial Engineering graduate of Adolfo Ibáñez University and holds an MBA from the University of Navarra, Spain.

Pablo Ardanaz

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Pablo Ardanaz is Country Manager of Argentina since August 1st, 2016 and the CEO of Sodimac Argentina since 2011. He is an Industrial Engineer from the Universidad Tecnológica Nacional and holds an MBA from the Universidad del CEMA, both from Argentina; besides having a joint MPA between ESADE (Barcelona) and Wharton (Philadelphia). He joined Falabella in 2007, first as Business Manager of Sodimac Argentina and then as Commercial Manager.

Juan Fernando Correa Malachowski

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Juan Fernando Correa Malachowski is Country Manager of Peru since January 1st, 2017. He is an Industrial Engineering graduate from the Pontifical Catholic University of Peru, holds a Master's Degree in Industrial Management (MSIA) from Purdue University, and has undertaken specialist studies at the Kellogg School of Management. He joined Falabella in 2004, as General Manager of Tottus Peru. He has more than 30 years of experience in multinational companies in the field of Mass Consumption, Telecommunications and Retail, both in Peru and in Argentina, having worked at Procter & Gamble and BellSouth, both in Peru.

OSM

Property & Control

The company is controlled by groups of shareholders as follows. As of December 31, 2017, the Controlling Group owns 74.37% of the company’s share capital. This Controlling Group has a coordination agreement, in accordance with the shareholders’ agreement signed on September 24, 2013. It contains limitations on freely disposing of shares.

Shareholders Agreement opens in a new window

Corporate Structure

S.A.C.I Falabella

99.8%
100%
Chile
Falabella 100%
Sodimac 100%
Imperial 60%
Tottus 88%
CMR 100%
Banco Falab. 100%
Rentas Falabella (Open Plaza) 100%
Mall Plaza 59.3%
Nuevos Desarollos 77.5%
Peru1
Saga Falab. 98%
Sodimac 100%
Maestro 100%
Tottus 100%
Banco Falab. 100%
Open Plaza 100%
Mall Plaza Peru 66.7%2
Argentina
Falabella 100%
Sodimac 100%
CMR. 100%
Colombia
Falabella 65%
Sodimac 49%3
Banco Falab. 65%
Mall Plaza
Brazil
Construdecor 100%
Uruguay
Sodimac 100%

1 Through Falabella Peru S.A.A.
2 New company created following the dissolution of Aventura Plaza JV
3 Unconsolidated subsidiary

As of July 2018

ESM