Material Information

The Superintendence of Securities and Insurance was informed that in accordance to what is established in articles 9 and the second subparagraph of article 10 from Law 18.045, as well as General Rule N° 30 of that superintendence, it is communicated as a material fact relative to the company, its businesses, its securities or of the offer of them, the following: that the Company’s Board, in a regular session held on this same date, agreed, unanimously, to distribute the sum of Ch$19.467.400.000, in account of the profits for 2014 as an interim dividend.

Based on the above, the company’s interim dividend number 23, rises to Ch$19,4674 per share and is enforceable starting January 16th 2015.

The Superintendence of Securities and Insurance was informed that according to what is stated on Article 10 of D.F.L. MOP N° 70/1988, Sanitary Rate Law and Article 6 of D.S. MINECON N°453/1989, Regulation for the Sanitary Rate Law, the Superintendence of Sanitary Services (“SISS”) and its subsidiary, Aguas Andinas S.A. (“Aguas Andinas”) reached an agreement within the sixth rate adjustment process for public sanitary services for which said company has a concession, for the five year period between 2015 and 2020 (the “Agreement”).

According to the agreement, the rate level agreed upon to December 31st, 2013 (reference date established in the rate bases fixed by the SISS), rises to a Total Long-Term Net Cost (TLTNC) of Ch$311.117.000.000.-, which does not represent a variation when compared to the rates agreed upon for the 2010-2015 period for standard current services. The agreement contemplates additional investment for a TLTNC of $3.663.000.000.- applicable with the entry into operation of new security construction to increase the continuity and quality of its services in the event of extreme turbidity and power outages and for a TLTNC of Ch$4.343.000.000.-, with the entry into operations of works aimed to improve the quality of treated sewage. These additional works shall be included in Aguas Andinas’s updated Development Plan, and be approved by the SISS.

To better understand the rate regimen agreed upon, Article 4 of the Law of Rates for Sanitary Services defines the TLTNC as the constant annual value required to cover the costs of efficient exploitation and those of investment for an optimized replenishment project from the concessionary, designed to satisfy demand, that is consistent with an updated net value for said project equal to zero, in a horizon that is not below 35 years. Ultimately, this concept corresponds to the income (under theoretical demand) of a sanitary company, for which the value of networks and installations corresponding to third parties has been discounted from the replenishment value for the concessionary’s investment project. The aforementioned values correspond to the income for current services (TLTNC) obtained by applying the updated annual demand for the years 2015-2020, to the new rates agreed upon and indexed to December 31st 2013. In the agreement it was expressly noted that the indexation polynomials are current.

The referred agreement establishes a discount of the rates for the concept of providing a non-regulated service for the Alto Maipo Project. For the 2015-2020 rate period, and once this project enters into operation, an annual discount will be applied to the TLTNC, equal to $3.680.000.000.-, corresponding to 80.17 of the yearly investment (reservoir + water rights) determined by Aguas Andinas in its study, which will represent approximately 1.2% of its tariffed incomes.

It is worth noting that it is not possible to determine the exact magnitude of the impact in the results the new rates will have in Aguas Andinas’s financial statements, given that this rate regimen is just one of the many elements that contribute in determining the results of each term, also counting factors like the consumption of drinking water, costs, expenses, the applicable indexation polynomial among others.

Lastly, the rate formulas agreed upon will be fixed through a decree from the Ministry of Economy, Development and Tourism, which will have to be published in the Official Journal before the date it begins to be enforced, this is, March 2015.

The Superintendence of Securities and Insurance was informed that on October 9th, the company notified the estimated effect on its consolidated financial statements as a Material Fact, because of the entry of Law N° 20.780, in virtue of the increase in net liabilities for differed taxes, all considering the International Standards for Financial Information (IFRS).

However, this Superintendence, through the issued circular N° 856 dictated on October 17th, ordered that in spite of what is stated in the IFRS standards, the differences in assets and liabilities by differed taxes as a consequence of the increase in the income tax shall be included in the respective term in equity.

This way, we inform that, in accordance to the instruction given in the mentioned issued circular, the effect of differed taxes produced by the increase in the First Category Tax rate, will no impact the company’s results, being included directly against a decrease in equity attributable to the parent owners the sum of approximately Ch$2.600 million. This will be reflected in the company’s trimestral financial statements to September 30th, 2014.

Lastly, it was made present that said impact has been calculated accounting for the fact that the company is subject, by default, to the partially integrated tax system while the Extraordinary Shareholders Meeting doesn’t agree to submit to the alternative attributed income system, in which case, the corresponding financial adjustments will be undertaken.

The Superintendence of Securities and Insurance was informed that it is of public domain that Law N° 20.780, which modifies the income taxation system (the “Law”), established a progressive increase of the First Category Tax from 2014 onwards, according to the tax system chosen by taxpayers (partially integrated or attributed income), decision which shall be adopted in accordance to the Law.

The company is subject, by default, to the partially integrated tax system, while the Extraordinary Shareholders Meeting does not agree to submit to the alternative attributed income system. In consequence, and, according to the International Standards for Financial Information (IFRS) must immediately recognize, in its financial statements, the impact that the progressive increase in the First Category Tax will generate in its results.

Considering the latter, to this date is it was estimated that the effect, on the company’s consolidated financial statements, will result in an increase of net liabilities by deferred taxes, charged to a greater income tax expense, for an amount of Ch$8.800 million, approximately, which, together with the increase of the First Category Tax for 2014, will reduce the net profit attributable to the owners of the parent for nearly Ch$3.100 million to September, 2014.

Lastly, it was informed that the accounting effects mentioned here will be reflected in the company’s trimestral financial statements to September 30th.

The Superintendence of Securities and Insurance was informed that on this date, the company held its ninth Shareholders Meeting in which the Board was renewed, with the following people being elected:

It was left on record that director Alberto Muchnick and his substitute Giorgianna Cúneo were elected as independent directors. Later, the company Board had a meeting in which it was agreed to designate Josep Bagué as Board President and company President, and Alberto Muchnick as Vice-president. During the mentioned session, it was also agreed that Alberto Muchnick, Xavier Amorós and Ignacio Guerrero as well as their respective substitutes would become parts of the Audit Committee. The Audit Committee later had a meeting where Alberto Muchnick was designated as its President.

The Superintendence of Securities and Insurance was informed on this date that Juan Antonio Guijarro presented his resignation to the company’s Board, as well as his substitute, Marta Colet. In conformity to this, and according to what is established by article 32 of Law N° 18,046 about stock corporations, there was a vacancy in the position, proceeding, in consequence, to the renewal of the Board in the next Shareholders meeting, programmed for April 30th 2014.

The Superintendence of Securities and Insurance was informed that, in an ordinary session celebrated that same day, the company’s Board unanimously agreed to call a Shareholder Meeting on April 30th, 2014, at 9:30 am in Av. Presidente Balmaceda N° 1398 , tenth floor, Santiago, to hear and decide over matters specific to a shareholders meeting.