FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of April 2010

Commission File Number: 001-14554

Banco Santander Chile
Santander Chile Bank
(Translation of Registrant's Name into English)

Bandera 140
Santiago, Chile
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
 
Form 20-F
X
  
Form 40-F
  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
 
Yes
    
No
X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
 
Yes
    
No
X

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
 
Yes
    
No
X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 
 
 
 
Banco Santander Chile


TABLE OF CONTENTS


Item
  
   
1.
2009 Financial Statements (English translation)
   
2.
2009 Disclosure Update

 
 
 
 
 
 
 
 
 
 
Contents

 
Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
3
CONSOLIDATED STATEMENTS OF INCOME
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
6
CONSOLIDATED STATEMENTS OF CASH FLOW
7

Notes to the Consolidated Financial Statements

NOTE 01 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
9
NOTE 02 - ACCOUNTING CHANGES:
40
NOTE 03 - SIGNIFICANT EVENTS:
50
NOTE 04 - BUSINESS SEGMENTS:
53
NOTE 05 - CASH AND CASH EQUIVALENTS:
58
NOTE 06 - TRADING INVESTMENTS:
59
NOTE 07 - INVESTMENTS UNDER RESALE AGREEMENTS:
60
NOTE 08 - DERIVATIVE FINANCIAL INSTRUMENT AND HEDGE ACCOUNTING:
63
NOTE 09 - INTERBANK LOANS:
71
NOTE 10 - LOANS AND ACCOUNTS RECEIVABLES FROM CUSTOMERS:
72
NOTE 11 - LOAN PURCHASES, SALES AND SUBSTITUTIONS:
77
NOTE 12 - AVAILABLE FOR SALE INVESTMENTS:
78
NOTE 13 - INVESTMENTS IN OTHER COMPANIES:
84
NOTE 14 - INTANGIBLE ASSETS:
86
NOTE 15 - PROPERTY, PLANT AND EQUIPMENT:
88
NOTE 16 - CURRENT TAXES AND DEFERRED TAXES:
91
NOTE 17 - OTHER ASSETS:
94
NOTE 18 - DEPOSITS AND OTHER LIABILITIES:
95
NOTE 19 - INTERBANK BORROWINGS:
96
NOTE 20 - DEBT INSTRUMENTS ISSUED AND OTHER OBLIGATIONS
98
NOTE 21 - MATURITIES OF ASSETS AND LIABILITIES:
103
NOTE 22 - PROVISIONS:
106
NOTE 23 - OTHER LIABILITIES:
108
NOTE 24 - CONTINGENCIES AND COMMITMENTS:
109
NOTE 25 - SHAREHOLDERS’ EQUITY:
112
NOTE 26 - CAPITAL REQUIREMENTS (BASEL):
115
NOTE 27 - MINORITY INTERESTS:
117
NOTE 28 - INTEREST INCOME AND EXPENSE:
119
NOTE 29 - FEES AND COMMISSIONS:
121
NOTE 30 - INCOME FROM FINANCIAL OPERATIONS:
122
NOTE 31 - NET FOREIGN EXCHANGE INCOME:
122
NOTE 32 - ALLOWANCES FOR LOAN LOSSES:
123
NOTE 33 - PERSONNEL COMPENSATION AND EXPENSES:
124
NOTE 34 - ADMINISTRATIVE EXPENSES:
128
NOTE 35 - DEPRECIATION AND AMORTIZATION:
129
NOTE 36 - OTHER OPERATING INCOME AND EXPENSES:
130
NOTE 37 - TRANSACTIONS WITH RELATED PARTIES:
132
NOTE 38 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES:
141
NOTE 39 - RISK MANAGEMENT:
146
NOTE 40 - SUBSEQUENT EVENTS:
160

2
 
 
 
 
Deloitte
Auditores y Consultores Limitada
RUT: 80.276.200-3
Av. Providencia 1760
Pisos 6, 7, 8, 9, 13 y 18
Providencia, Santiago
Chile
Fono: (56-2) 729 7000
Fax: (56-2) 374 9177
e-mail: deloittechile@deloitte.com
www.deloitte.cl
 
INDEPENDENT AUDITORS’ REPORT
 
To the Shareholders of
Banco Santander Chile
 
We have audited the consolidated statements of financial position of Banco Santander Chile and affiliates as of December 31, 2009 and 2008 and the consolidated opening statements of financial position as of January 1, 2008, and the corresponding consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the years ending December 31, 2009 and 2008. The preparation of these financial statements (including the related notes) are  the responsibility of the Management of Banco Santander Chile. 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 statements presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banco Santander Chile and affiliates as of December 31, 2009 and 2008 and as of January 1, 2008, the results of their operations, the comprehensive income, and the changes in shareholders’ equity and cash flows for the years ending December 31, 2009 and 2008, in accordance with Accounting Principles issued  by the Superintendency of Banks and Financial Institutions.

As is indicated in Note 2 to the consolidated financial statements, on November 9, 2007 the Superintendency of Banks and Financial Institutions issued the new “Compendium of Accounting Standards,” which contains the accounting and reporting standards for Banks, which have been applied for these purposes since January 1, 2009. The financial statements for 2008 and the statement of opening consolidated financial position have been reformulated for comparative purposes.
 
/s/ Deloitte
January 25, 2010

/s/ Alberto Kulenkampff G.
Alberto Kulenkampff G.
 
 
2
 

 


BANCO SANTANDER CHILE AND AFFILIATES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
For the periods ending as of
         
December 31,
2009
    
December 31,
2009
    
December 31,
2008
    
January 1,
2008
  
   
NOTE
    
ThUS$
    
MCh$
    
MCh$
    
MCh$
  
                               
ASSETS
                              
Cash and deposits in banks
     5       4,028,503       2,043,458       855,411       1,108,637  
Unsettled transactions
     5       922,886       468,134       335,405       316,240  
Trading investments
     6       1,574,251       798,539       1,166,426       1,093,445  
Investments under resale agreements
     7       27,639       14,020       -       33,999  
Financial derivative contracts
     8       2,747,911       1,393,878       1,846,509       780,775  
Interbank loans
     9       46,072       23,370       95,499       45,961  
Loans and accounts receivables from customers
     10       26,374,330       13,378,379       14,311,349       12,022,275  
Available for sale investments
     12       3,607,866       1,830,090       1,580,240       779,635  
Held to maturity investments
     12               -       -       -  
Investments in other companies
     13       14,622       7,417       7,277       7,301  
Intangible assets
     14       152,311       77,260       68,232       56,224  
Property, plant and equipment
     15       362,981       184,122       200,389       202,489  
Current taxes
     16       8,952       4,541       18,715       2,499  
Deferred taxes
     16       187,736       95,229       88,825       80,989  
Other assets
     17       892,181       452,559       508,655       460,282  
TOTAL ASSETS
             40,948,241       20,770,996       21,082,932       16,990,751  
                                         
LIABILITIES
                                        
Deposits and other demand liabilities
     18       6,966,060       3,533,534       2,948,162       2,867,934  
Unsettled transactions
     5       543,073       275,474       142,552       135,219  
Investments under repurchase agreements
     7       2,197,348       1,114,605       562,223       307,630  
Time deposits and other time liabilities
     18       14,145,406       7,175,257       9,756,266       7,887,897  
Financial derivative contracts
     8       2,659,253       1,348,906       1,469,724       778,217  
Interbank borrowings
     19       4,035,071       2,046,790       1,425,067       1,099,457  
Issued debt instruments
     20       5,765,749       2,924,676       2,651,372       2,154,996  
Other financial liabilities
     20       289,622       146,911       131,318       175,667  
Current taxes
     16       125,837       63,831       791       16,067  
Deferred taxes
     16       6,663       3,380       19,437       11,084  
Provisions
     22       366,922       186,121       166,719       50,102  
Other liabilities
     23       519,263       263,396       293,733       118,549  
                                         
TOTAL LIABILITIES
             37,620,267       19,082,881       19,567,364       15,602,819  
                                         
SHAREHOLDERS’ EQUITY
                                        
                                         
Attributable to Bank shareholders:
             3,269,228       1,658,316       1,489,689       1,369,798  
Capital
     25       1,757,128       891,303       891,303       818,535  
Reserves
     25       101,605       51,539       51,539       47,330  
Valuation adjustments
     25       (52,842 )     (26,804 )     (7,552 )     (9,475 )
Retained earnings
     25       1,463,337       742,278       554,399       513,408  
Retained earnings of prior years
     25       868,213       440,401       237,788       513,408  
Income for the period
     25       850,178       431,253       415,055       -  
Minus: Provision for mandatory dividends
     25       (255,054 )     (129,376 )     (98,444 )     -  
Minority interest
     27       58,746       29,799       25,879       18,134  
                                         
TOTAL SHAREHOLDERS’ EQUITY
             3,327,974       1,688,115       1,515,568       1,387,932  
                                         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
             40,948,241       20,770,996       21,082,932       16,990,751  
 
 
3
 
 
BANCO SANTANDER CHILE AND AFFILIATES
CONSOLIDATED STATEMENTS OF INCOME
For the periods ending as of

         
December 31,
    
December 31,
  
         
2009
    
2009
    
2008
  
   
NOTE
    
ThUS$
    
MCh$
    
MCh$
  
                         
OPERATING INCOME
                        
                         
Interest income
     28       2,381,031       1,207,778       2,061,346  
Interest expense
     28       (692,483 )     (351,262 )     (1,169,280 )
                                 
Net interest income
             1,688,548       856,516       892,066  
                                 
Fee and commission income
     29       622,819       315,925       295,969  
Fee and commision expense
     29       (121,824 )     (61,795 )     (52,840 )
                                 
Net fee and commission income
             500,995       254,130       243,129  
                                 
Net income from financial operations (net trading income)
     30       7,663       3,887       273,477  
Foreign exchange profit (loss), net
     31       321,816       163,241       (187,042 )
Other operating income
     36       65,536       33,243       18,222  
                                 
Total operating income
             2,584,558       1,311,017       1,239,852  
                                 
Provision for loan losses
     32       (658,151 )     (333,847 )     (287,983 )
                                 
NET OPERATING PROFIT
             1,926,407       977,170       951,869  
                                 
Personnel salaries and expenses
     33       (442,551 )     (224,484 )     (246,775 )
Administrative expenses
     34       (269,516 )     (136,712 )     (133,682 )
Depreciation and amortization
     35       (91,913 )     (46,623 )     (47,627 )
Impairment
     15       (148 )     (75 )     (84 )
Other operating expenses
     36       (87,541 )     (44,405 )     (41,594 )
                                 
TOTAL OPERATING EXPENSES
             (891,669 )     (452,299 )     (469,762 )
                                 
OPERATING INCOME
             1,034,738       524,871       482,107  
                                 
Income from investments in other companies
     13       586       297       632  
                                 
Income before tax
             1,035,324       525,168       482,739  
                                 
Income tax expense
     16       (175,184 )     (88,862 )     (60,087 )
                                 
CONSOLIDATED INCOME FOR THE PERIOD
             860,140       436,306       422,652  
                                 
Attributable to:
                                
Bank shareholders (Equity holders of the Bank)
             850,178       431,253       415,055  
Minority interest
     27       9,962       5,053       7,597  
                                 
Earnings per share attributable to Bank shareholders:
                                
(expressed in pesos)
                                
Basic earning
     25       4.511       2.288       2.203  
Diluted earning
     25       4.511       2.288       2.203  

 
4
 

 
BANCO SANTANDER CHILE AND AFFILIATES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the periods ending as of

         
December 31,
    
December 31,
  
         
2009
    
2009
    
2008
  
   
NOTE
    
ThUS$
    
MCh$
    
MCh$
  
                         
CONSOLIDATED INCOME FOR THE PERIOD
           860,140       436,306       422,652  
                               
OTHER COMPREHENSIVE INCOME
                              
                               
Available for sale investments
     12       (18,305 )     (9,285 )     (14,471 )
Cash flow hedge
     8       (27,669 )     (14,035 )     16,740  
                                 
Other comprehensive income before income tax
             (45,974 )     (23,320 )     2,269  
                                 
Income tax related to other comprehensive income
     16       7,815       3,964       (385 )
                                 
Total other comprehensive income
             (38,159 )     (19,356 )     1,884  
                                 
                                 
CONSOLIDATED COMPREHENSIVE INCOME FOR THE YEAR
             821,981       416,950       424,536  
                                 
Attributable to:
                                
Bank shareholders
             812,225       412,001       416,978  
Minority interest
     27       9,756       4,949       7,558  

 
5
 


BANCO SANTANDER CHILE AND AFFILIATES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the periods ending as of December 31, 2009 and 2008 (in millions of pesos)
 
         
RESERVES
    
VALUATION ACCOUNTS
    
RETAINED EARNINGS
                    
   
Capital
    
Reserves and other retained earnings
    
Merger of companies under common control
    
Available for sale investments
    
Cash flow coverage
    
Income tax
    
Retained earnings from prior years
    
Income for the Period
    
Provision for mandatory
dividend
    
Total attributable to shareholders
    
Minority Interest
    
TOTAL SHAREHOLDERS’ EQUITY
  
                                                                         
Shareholders’ equity as of December 31, 2007
     818,535       49,372       (2,042 )     (5,548 )     (5,867 )     1,940       273,005       308,647       -       1,438,042       20,047       1,458,089  
Distribution of income from previous period
     -               -       -       -       -       308,647       (308,647 )     -       -       -       -  
Subtotals
     818,535       49,372       (2,042 )     (5,548 )     (5,867 )     1,940       581,652       -       -       1,438,042       20,047       1,458,089  
Effect of first application of IFRS
     -       -       -       -       -       -       (68,244 )     -       -       (68,244 )     (1,913 )     (70,157 )
Shareholders’ equity as of January 1, 2008
     818,535       49,372       (2,042 )     (5,548 )     (5,867 )     1,940       513,408       -       -       1,369,798       18,134       1,387,932  
Adjustment pursuant to Circular #3443, mandatory dividend 2008
     -       -       -       -       -       -       -       -       (92,594 )     (92,594 )     -       (92,594 )
Dividends distributions / Withdrawals made
     -       -       -       -       -       -       (200,619 )     -       92,594       (108,025 )     (33 )     (108,058 )
2008 price-level restatement restitution
     72,768       4,391       (182 )                             (75,001 )                     1,976       -       1,976  
Other changes in shareholders’ equity
     -       -       -       -       -       -       -       -       -       -       220       220  
Provision for mandatory dividends
     -       -       -       -       -       -       -       -       (98,444 )     (98,444 )     -       (98,444 )
Subtotals
     72,768       4,391       (182 )     -       -       -       (275,620 )     -       (98,444 )     (297,087 )     187       (296,900 )
Other comprehensive income
     -       -       -       (14,424 )     16,740       (393 )     -       -       -       1,923       (39 )     1,884  
Income for the period
     -       -       -       -       -       -       -       415,055       -       415,055       7,597       422,652  
Subtotals
     -       -       -       (14,424 )     16,740       (393 )     -       415,055       -       416,978       7,558       424,536  
Shareholders’ equity as of December 31, 2008
     891,303       53,763       (2,224 )     (19,972 )     10,873       1,547       237,788       415,055       (98,444 )     1,489,689       25,879       1,515,568  
                                                                                                 
Shareholders’ equity as of December 31, 2008
     891,303       53,763       (2,224 )     (19,972 )     10,873       1,547       237,788       415,055       (98,444 )     1,489,689       25,879       1,515,568  
Distribution of income from previous period
     -       -       -       -       -       -       415,055       (415,055 )     -       -       -       -  
Shareholders’ equity as of January 1, 2009
     891,303       53,763       (2,224 )     (19,972 )     10,873       1,547       652,843       -       (98,444 )     1,489,689       25,879       1,515,568  
Increase or decrease of capital and reserves
     -       -       -       -       -       -       -       -       -       -       5,600       5,600  
Dividends distributions / Withdrawals made
     -       -       -       -       -       -       (213,295 )     -       98,444       (114,851 )     (5,258 )     (120,109 )
Other changes in shareholders’ equity
     -       -       -               -       -       853       -       -       853       (1,371 )     (518 )
Provision for mandatory dividends 2008
     -       -       -       -       -       -       -       -       (129,376 )     (129,376 )     -       (129,376 )
Subtotals
     -       -       -       -       -       -       (212,442 )     -       (30,932 )     (243,374 )     (1,029 )     (244,403 )
Other comprehensive income
     -       -       -       (9,160 )     (14,035 )     3,943       -       -       -       (19,252 )     (104 )     (19,356 )
Income for the period
     -       -       -       -       -       -       -       431,253       -       431,253       5,053       436,306  
Subtotals
     -       -       -       (9,160 )     (14,035 )     3,943       -       431,253       -       412,001       4,949       416,950  
Shareholders’ equity as of December 31, 2009
     891,303       53,763       (2,224 )     (29,132 )     (3,162 )     5,490       440,401       431,253       (129,376 )     1,658,316       29,799       1,688,115  
 
 
Period 
  
Total attributable to shareholders
    
Allocated to reserves or retained earnings
    
Allocated to dividends
    
Percentage distributed
    
Number of Shares
    
Dividend per share
(in pesos)
  
                                     
- Year 2007 (Shareholder’s Meeting April 2008)
    
308,647
      
108,028
      
200,619
      
65%
       188,446,126,794      
1.065
  
                                                 
- Year 2009 (Shareholder’s Meeting April 2009)
    
328,146
      
114,851
      
213,295
      
65%
      
188,446,126,794
      
1.132
  
 
 
 
6
 

 
BANCO SANTANDER CHILE AND AFFILIATES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the periods ending

         
December 31,
    
December 31,
  
         
2009
    
2009
    
2008
  
   
NOTE
    
ThUS$
    
MCh$
    
MCh$
  
                         
A - CASH FLOWS FROM OPERATING ACTIVITIES:
                        
CONSOLIDATED INCOME BEFORE TAX
           1,035,324       525,168       482,739  
Debits (credits) to income that do not represent cash flows
           (1,475,048 )     (748,218 )     (771,815 )
Depreciation and amortization
     35       91,913       46,623       47,627  
Impairment of property, plant and equipment
     15       148       75       84  
Provision for loan losses
     32       735,576       373,121       325,877  
Mark to market of trading investments
             (58,997 )     (29,926 )     (1,121 )
Net Gain on investments in other companies
     13       (586 )     (297 )     (632 )
Net Gain on sale of assets received in lieu of payment
     36       (14,600 )     (7,406 )     (8,844 )
Net Gain on sale of investments in other companies
     36       (3,665 )     (1,859 )     (4,348 )
Net Gain on sale of property, plant and equipment
     36       (14,979 )     (7,598 )     (719 )
Write-off of assets received in lieu of payment
     36       16,150       8,192       5,324  
Net interest income
     28       (1,688,548 )     (856,516 )     (892,066 )
Net fee and commission income
     29       (500,995 )     (254,130 )     (243,129 )
Changes in assets and liabilities due to deferred taxes
     16       (36,465 )     (18,497 )     132  
Increase/decrease in operating assets and liabilities
             3,437,736       1,743,792       133,936  
Decrease (increase) of loans and accounts receivable from customers
             1,283,578       651,095       (1,947,234 )
Decrease (increase) of financial investments
             141,031       71,538       (909,242 )
Decrease (increase) due to resale agreements
             (26,965 )     (13,678 )     39,512  
Decrease (increase) of interbank loans
             142,196       72,129       (49,561 )
Decrease of assets received or awarded in lieu of payment
             15,426       7,825       (10,195 )
Increase of debits in checking accounts
             998,634       506,557       108,470  
Increase (decrease) of time deposits and other time liabilities
             (4,361,508 )     (2,212,375 )     1,547,972  
Increase of obligations with domestic banks
             54,017       27,400       1,786  
Increase (decrease) of other demand liabilities or time obligations
             230,484       116,913       (57,278 )
Increase of obligations with foreign banks
             1,177,311       597,191       321,580  
Decrease of obligations with Central Bank of Chile
             (1,199 )     (608 )     (959 )
Increase of repurchase agreements
             1,093,782       554,821       280,412  
Decrease of other short-term liabilities
             (18,752 )     (9,512 )     (58,173 )
Net increase of other assets and liabilities
             (87,353 )     (44,310 )     (210,160 )
Issuance of letters of credit
             8,883       4,506       -  
Redemption of letters of credit
             (206,957 )     (104,979 )     (161,664 )
Senior bond issuances
             1,477,378       749,400       303,722  
Redemption of senior bonds and payments of interest
             (505,668 )     (256,500 )     (24,771 )
Interest received
             3,113,755       1,579,452       1,604,287  
Interest paid
             (1,417,790 )     (719,174 )     (828,248 )
Dividends received from investments in other companies
     13       1,642       833       638  
Fees and commissions received
     29       622,819       315,925       295,969  
Fees and commissions paid
     29       (121,824 )     (61,795 )     (52,840 )
Income tax paid
     16       (175,184 )     (88,862 )     (60,087 )
Net cash from (used in) operating activities
             2,998,012       1,520,742       (155,140 )
                                 


7
 
 

BANCO SANTANDER CHILE AND AFFILIATES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the periods ending

         
December 31,
    
December 31,
  
         
2009
    
2009
    
2008
  
   
NOTE
    
ThUS$
    
MCh$
    
MCh$
  
                         
B - CASH FLOWS FROM INVESTMENT ACTIVITIES:
                        
Purchases of property, plant and equipment
     15       (23,176 )     (11,756 )     (19,562 )
Sales of property, plant and equipment
             34,322       17,410       12,014  
Purchases of investments in other companies
     13       (63 )     (32 )     -  
Sales of investments in other companies
     13       412       209       386  
Purchases of intangible assets
     14       (66,949 )     (33,960 )     (38,177 )
Net cash used in investment activities
             (55,454 )     (28,129 )     (45,339 )
                                 
C - CASH FLOW FROM FINANCING ACTIVITIES:
                                
From shareholders’ financing activities
             (601,481 )     (305,101 )     (40,882 )
Increase of other obligations
             80,607       40,888       27,044  
Subordinated bond issuances
             11,856       6,014       145,421  
Redemption of subordinated bonds and interest payments
             (273,451 )     (138,708 )     (12,728 )
Dividends paid
     25       (420,493 )     (213,295 )     (200,619 )
From minority shareholder financing activities
             674       342       (33 )
Increases of capital
             11,040       5,600       -  
Dividends and/or withdrawals paid
             (10,366 )     (5,258 )     (33 )
Net cash used in financing activities
             (600,807 )     (304,759 )     (40,915 )
                                 
D – NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE PERIOD
             2,341,751       1,187,854       (241,394 )
                                 
E - INITIAL BALANCE OF CASH AND CASH EQUIVALENTS
             2,066,563       1,048,264       1,289,658  
                                 
FINAL BALANCE OF CASH AND CASH EQUIVALENTS
     5       4,408,314       2,236,118       1,048,264  
 
 
 
8

 
 
 
BANCO SANTANDER CHILE AND AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009, 2008 AND JANUARY 1, 2008
 
 
NOTE 01 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:

Corporate Information
 
Banco Santander Chile (formerly Banco Santiago) is a corporation (sociedad anónima bancaria) organized under the laws of the Republic of Chile, that provides a broad range of general banking services to its customers, from individuals to major corporations. Banco Santander Chile and its affiliates (collectively referred to herein as the “Bank” or “Banco Santander Chile”) offer commercial and consumer banking services, and provide other services, including factoring, collection, leasing, securities and insurance brokerage, mutual and investment fund management, and investment banking.
 
A Special Meeting of Shareholders of Banco Santiago was held on July 18, 2002, the minutes of which were notarized as a public deed on July 19, 2002 at the Notarial Office of Santiago before Notary Nancy de la Fuente Hernández, and it was agreed to merge Banco Santander Chile with Banco Santiago by merging the former into the latter, which acquired the former’s assets and liabilities. It was likewise agreed to dissolve Banco Santander Chile in advance and change the name of Banco Santiago to Banco Santander Chile. This change was authorized by Resolution #79 of the Superintendency of Banks and Financial Institutions, adopted on July 26, 2002, published in the Official Journal on August 1, 2002 and registered on page 19,992 under number 16,346 for the year 2002 in the Registry of Commerce of the Curator of Real Estate of Santiago.

In addition to the amendments to the bylaws discussed above, the bylaws have been amended on multiple occasions, the last time at the Special Shareholders Meeting of April 24, 2007, the minutes of which were notarized as a public deed on May 24, 2007 at the Notarial Office of Nancy de la Fuente Hernández. This amendment was approved pursuant to Resolution #61 of June 6, 2007 of the Superintendency of Banks and Financial Institutions. An extract thereof and the resolution were published in the Official Journal of June 23, 2007 and registered in the Registry of Commerce for 2007 on page 24,064 under number 17,563 of the aforementioned Curator.

By means of this last amendment, Banco Santander Chile, pursuant to its bylaws and as approved by the Superintendency of Banks and Financial Institutions, may also use the names Banco Santander Santiago or Santander Santiago or Banco Santander or Santander.

a) Basis of preparation

These Consolidated Financial Statements have been prepared in accordance with the Compendium of Accounting Standards issued by the Superintendency of Banks and Financial Institutions (SBIF), a regulatory agency. Article 15 of the General Banking Law states that, in accordance with the laws, banks must use the accounting criteria issued by the Superintendence and that, in any situation not provided for therein, provided it is not contrary to its instructions, must abide by the generally accepted accounting principles, which correspond with the technical standards issued by the Colegio de Contadores de Chile AG (Association of Chilean Accountants) (approved by the National Council at its session held on December 21, 2009, issuing updates for Technical Bulletins #79 and #80), which coincide with the International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). In the event of discrepancies between the accounting principles and the accounting criteria issued by the SBIF (Compendium of Accounting Standards), the latter will prevail.

The financial statements for the period ending December 31, 2009 were the first prepared according to the Compendium of Accounting Standards. This legislation incorporates the following important aspects:

- Significant changes in accounting policies, valuation criteria, and forms of presentation of financial statements.
- A significant increase in the information included in the notes to the financial statements.
 
 
9
 

 
 
BANCO SANTANDER CHILE AND AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009, 2008 AND JANUARY 1, 2008
 
 
NOTE 01 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Note 02 “Accounting Changes” contains a reconciliation, pursuant to the new legislation, between the balances in the Consolidated Statements of Financial Position at the beginning and end of the period ended December 31, 2008 and the related Consolidated Statements of Income generated in that period and, accordingly, reflected in the Bank’s financial statements.

The notes to the financial statements contain information in addition to that presented in the Consolidated Statement of Financial Position, Statement of Income, Statement of Comprehensive Income, Statement of Changes in Shareholders’ Equity, and Statement of Cash Flow. They provide narrative descriptions or details of these statements in a clear, relevant, reliable, and comparable format.

b) Basis of consolidation for the Consolidated Financial Statements

The Consolidated Financial Statements include the preparation of separate (individual) financial statements of the Bank and the companies that participate in the consolidation as of December 31, 2009 and 2008 and January 1, 2008, and include the adjustments and reclassifications needed to make the accounting policies and valuation criteria applied by the Bank uniform, in accordance with the Compendium of Accounting Standards issued by the SBIF.

Affiliates

“Affiliates” are defined as entities over which the Bank has the ability to exercise control, which is generally but not exclusively reflected by the direct or indirect ownership of at least 50% of the investee’s voting rights, or even if this percentage is lower or zero when the Bank is granted control pursuant to agreements with the investee’s shareholders. Control is understood as the power to significantly influence the investee’s financial and operating policies, so as to profit from its activities.

The financial statements of the Affiliates are consolidated with those of the Bank through the global integration method (line by line). Accordingly, all the balances and transactions between the consolidated companies are eliminated through the consolidation process.

In addition, third parties’ shares in the Consolidated Bank’s equity are presented as “Minority interests” in the Consolidated Statement of Financial Position. Their shares in the year’s income are presented under “Income attributable to minority interests” in the Consolidated Statement of Income.

The following companies are considered “Associated entities” in which the Bank holds equity and accounts for it through the equity method:

   
Percentage Share
  
   
As of December 31,