1 ANNUAL REPORT 2 Commercial Offices

Valparaíso San Ignacio, 348 San Ignacio La Calera, 673 Latorre Av. San Felipe, 233 Freire Blanco, 738 Blanco , 338 Urmeneta , 670 Sarmiento Viña Del Mar, 275 1 Norte , 2025 Normandie Llay Llay, 139 San Francisco Concón, 25420 Borgoño Av. , 255 Uribe Los Andes, 572 Santa Rosa Quilpué, 625 Claudio Vicuña Cabildo, 748 Humeres Av. San Antonio, 2352 Ramón Barros Luco Av. , 654 , 535 Silva Cartagena, 390 Cartagena Av. Casablanca, 56 General Bonilla , 176 Miraflores Algarrobo, 700 Peñablanca Av. , 452 Chacabuco , 156 Diego Sutil Central Offices Valparaíso, Cochrane 751 ANNUAL REPORT Main Offices of Esval 3

General Management and Headquarters 751 Cochrane, Valparaíso, Telephone (32) 2209000, Fax (32) 2209502

Quillota Area ANNUAL REPORT 452 Chacabuco, Quillota Telephone (33) 291700, Fax (33) 310916 Mailing address: P.O. Box 66, Quillota

San Felipe - Los Andes Area 233 Freire, San Felipe Telephone (34) 494300, Fax (34) 494390

Southern Coast Area 2410 Barros Luco, San Antonio Telephone (35) 205500, Fax (35) 205520

Call Center 600 600 6060 www.esval.cl [email protected]

Annual Report 4 ANNUAL REPORT 5 ANNUAL REPORT

Table of Contents

Letter from the Chairman 7 Letter from the CEO 11 Company Information 14 Historical Account 17 Company’s Equity 20 Line of business and Activities 24 Board of Directors and Administration 26 Organizational chart 29 Management Report 31 Administration Report 55 Statement of Liability 67 Financial Statements 69 6 ANNUAL REPORT Letter from 7 the Chairman ANNUAL REPORT Dear Shareholders,

On behalf of the Board of Directors, I am pleased to submit the 2011 Annual Report.

Regarding the consolidated outcome at December 2011, it reached profits for $15 thousand 354 million 326 thousand, and shows a decrease of 11.2% compared to December 2010. The decrease of the outcome of 2011, compared to 2010, is of 1 thousand 938 million and 861 thousand Chilean pesos. Although the EBITDA was 3% higher than the previous year due to greater ordinary income, the significant drop of the global result is explained by a greater loss per adjustment unit (UF), when going from an UF variation of 2.45% in 2010 to 3.91% in 2011. This effect has caused a decrease in the outcome of the company for this item of -3 thousand 365 million and 363 thousand pesos.

It is important to mention that the company has continued to make substantial investments that reached $25 thousand 545 million pesos, out of which 8 thousand 257 million correspond to Aguas del Valle. Said investments have mainly been aimed at improving the current infrastructure and at increasing the water resources to mitigate the effects of a severe draught that has been affecting us for the last three years.

As you know, this financial year was affected by the persistence of this water shortage, which forced the company to double their human and material efforts to provide a normal supply of drinking water to the community.

Regarding this matter, there are some considerations I would like to express. First, I would like to thank you, in my name and on behalf of the Board of Directors, for the personnel’s effort and for the hard work that has meant to supply all the communities under very difficult conditions, which will probably continue in the future. Second, we are pleased to report that no franchise area had any problems due to the water shortage in 2011. In this respect, the company permanently performed in a preventive manner and developed strong alternatives, broadening and interconnection works. 8

Curauma, Placilla, and the high areas of Playa Ancha, are examples of the I also want to say that, in 2011 there were important changes in the success of these efforts that had to stop being fed from the plant located senior administration of the company, because the former Chairman of at Embalse Peñuelas, due to the dramatic decrease of its reserves, which the Board of Directors, Mr. Pedro Pablo Errázuriz Domínguez, and former were practically not used. CEO, Mr. Gustavo González Doorman, submitted their resignation to ANNUAL REPORT take on other positions. We thank both for their effort and for their In order to face this situation, we had worked in advance in the commitment to the growth of Esval. interconnection of the resources existing at Las Vegas Plant, 100 kilometers away; also, Concón Plant, more than 50 kilometers away, On last 1 October, Mr. Rodrigo Azócar took on as the company’s CEO. which became the new supply sources for said areas. Given his broad professional experience, I am sure he will boost the modernization the company requires now. The Board of Directors Simultaneously, the Productive System of Concón was increased in wishes him and his work team the greatest success. 250 liters per second and, by means of an agreement with national and regional authorities and the people who irrigate, it was possible As our shareholders know, once the construction of the great works was to reinforce Los Aromos level, with the contribution of 10 wells located over, we dedicated to the renewal and broadening of the networks. In in the surroundings of Llay Llay. As a result, the supply for Concón and this context, one of the main works we carried out was the renewal of the North Coast was guaranteed; also, some areas of Viña del Mar and the water main of Alemania Avenue, between Las Cañas and Mariposas Valparaíso, including the aforementioned areas of Curauma and Placilla. Hills, with an extension of 2,678 meters and with an investment of $1,741 million. Also, a decanter in the Productive System of Poza Azul (Quilpué) was built to increase the treatment capacity from 301/s to 801/s. Likewise, Additionally, and with an investment above 754 million Chilean pesos, the conduction system from Cachagua to Zapallar was reinforced, so, the strengthening of the drinking water San Antonio-Algarrobo net all the North Coast, including Papudo, from 2011, is supplied from the was carried out. A water main was renewed and enlarged in 1,247 lineal Concón plant, as mentioned in the previous paragraph. meters to increase the availability of drinking water in 15% for the South Coast. In total, during this financial year, as a result from the draught, Esval allocated more than 6 thousand 300 million Chilean pesos to expenses It is also worth highlighting that we advanced six years of investments and investment. above 500 million Chilean pesos to change the drinking water matrices and the waste water collectors of Concepción and Alegre hills. In order to do so we entered into an agreement with the Recovery and Urban 9 ANNUAL REPORT

Development Program of Valparaíso (PRDUV, in Spanish), the Honorable of Valparaíso and Serviu (Housing and Urbanism Service). We think it was a very good decision to join this urban remodeling project with the modernization of the sanitary infrastructure, because it will boost tourism and the services for these historical neighborhoods of our city.

Finally, I want to thank my Board of Directors’ colleagues, and the shareholders, who trusted me to chair this important company in the V Region and Aguas del Valle, of IV Region. Therefore, I will continue working to add value to the company and to contribute with the best of all the team to the development of the Valparaíso and Coquimbo regions.

Jorge Lesser García-Huidobro Chairman of the Board of Directors 10 ANNUAL REPORT Letter 11 from the CEO ANNUAL REPORT

Messrs Shareholders,

As CEO of Esval, I am pleased to inform you about the most relevant events occurred during financial year 2011, which, as the Chairman of the Board of Directors said, was marked by complex situations arising from the water shortage that is affecting the Valparaíso Region. In this situation, the company acted with diligence and precaution, without sparing any resources or efforts, and was able to comply with their usual customers and with the thousands of tourists that arrived to the region to enjoy the beaches, rivers, mountains and countryside.

It was not an easy task, as my arrival to the company coincided with the end of the winter, when the Aconcagua River flow had decreased 87% with respect to a normal year. For this reason, I would like to leave on record the dedication and responsibility of the company’s personnel, especially those who were on the front line of the draught; also, of the authorities and representatives of the private area, with whom I found, from the first moment, a commendable collaboration spirit to face an extremely complex situation. This allowed us to face summer 2011-2012 without any important stress and to make sure that every home and family of the V Region had a secure and continuous supply.

As from the last quarter of 2011, we have been working on the update of the Strategic Plan, focusing each and every worker on our clients, to be acknowledged for the service quality, closeness, empathy, credibility, regional leadership and care for the environment, closing relationships with the community and the authorities. This was made with a long- term perspective of increasing our operations level and margin, thus adding value to our shareholders.

Together with the aforementioned, in the different areas an administration analysis was carried out in order to detect the most important risks at an earlier stage to determine its possible impact and mitigation measures. 12

As part of the improvement and update of the company’s practices, in In this respect, I would like to highlight that in 2011 we made an the internal order we also work for the re-certification of our Integrated important effort to de-centralize the activities and so this is how the Management System, that includes ISO 9001: 2008 (Quality Management launching of the Campaign was carried out in Valparaíso, but also in System), OHSAS 18:2007 (Occupational Safety and Health Management Las Cruces, Algarrobo and San Antonio. We were also in San Felipe and ANNUAL REPORT System) and ISO 14001:2004 (Environmental Management System) for Los Andes for the official presentation of the III Sustainability Report. the next three years. Additionally, we prepared Training Seminars, to which 415 social leaders of , San Antonio and Valparaíso attended. In the labor aspect, within the deadlines established by the law and at the fullest satisfaction of the parties, in 2011 we signed the collective We carried out 45 Workshops with , neighbors, public bargaining contract that will be in force for the next two years. This entities and others, to deal with situations related with drinking water, shows the good understanding between the company’s administration draught and others. We also continued with the implementation of and their workers. program Al Día con Esval, and during this financial year we carried out a ceremony to acknowledge 100 new clients that satisfactorily complied As the shareholders know, Esval has a relationship policy with the with the commitments undertaken. community that is acknowledged everywhere. Campaign “Agua Sana Vida Sana” [Healthy Water, Healthy Life] and “Las Gotitas” [The Droplets] We supported new sport activities, stimulating the participants are known in countless cultural, educational, sport and social activities, and arranging the delivery of water in hydration points. We directly and, in 2011, the campaigns directly contacted more than 237 thousand participated in the sponsoring of two relevant ones: The Full Marathon people, in almost 1,250 activities. of Viña del Mar, which summoned thousands of runners; and the cycling event “A Pedalear por San Felipe” [Pedal for San Felipe] organized together with Instituto Nacional del Deporte, the Governorship and the Honorable Municipality. 13 ANNUAL REPORT

In the cultural scenario, we received more than 3 thousand 400 hundred papers from schools from all the corners of the Region for the Painting Contest, with which, year by year, we select the motifs that are later printed in the company’s Christmas cards. For the seventh year in a row, we made contributions for the realization of the Science and Technology Regional Congress, organized by Explora Conicyt and the Pontificia Universidad Católica de Valparaíso, among other activities.

Messrs shareholders, we are aware of the difficult times we are undergoing due to the draught that is affecting different human and economic activities. We hope to win through once more, with the support of the company’s Board of Directors, its workers, suppliers and contractors. I am clear of the commitment we have with the Valparaíso and Coquimbo Regions, and we will continue making our best efforts to contribute to the wellness and prosperity of their inhabitants.

Rodrigo Azócar Hidalgo CEO 14 Company Information •Corporate Name Esval S.A. •Fantasy Name Esval •Tax Card 89.900.400-0 •Type of Company Public Limited Company •Registry of Securities No. 0348 dated 24 October, 1989 •Address 751 Cochrane, Valparaíso, Chile •Telephone (56-32) 2209000 ANNUAL REPORT •Fax (56-32) 2209502 •Postal Code 2370020 •P.O. Box 616 Valparaíso •Internet http://www.esval.cl •E-mail address [email protected] Corporate Changes 15

Year Date Notary City Record in Registry of Business of Valparaíso Official Gazette ANNUAL REPORT Page 73 reverse page No. 76/1991 1 17/01/1991 Eduardo Bravo Ubilla Valparaíso Rectification of Summary 12/02/1991-20/02/1991 Page 902 reverse page 2 08/11/1995 Eduardo Bravo Ubilla Valparaíso No. 805/1995 06/12/1995 3 25/06/1996 Eduardo Bravo Ubilla Valparaíso Page 462 No. 434/1996 31/07/1996 4 03/06/1998 Eduardo Bravo Ubilla Valparaíso Page 395 reverse page No. 353/1998 12/06/1998 Page 835 reverse page 5 30/09/1998 Eduardo Bravo Ubilla Valparaíso No. 682/1998 14/11/1998 Page 73 reverse page No. 63/1999 6 03/02/1999 Eduardo Bravo Ubilla Valparaíso Page 180 No. 155/1999 06/02/1999-16/03/1999 7 11/11/1999 Eduardo Bravo Ubilla Valparaíso Page 449 reverse page No. 469/1991 06/02/1999-16/03/1999 8 27/03/2000 Eduardo Bravo Ubilla Valparaíso Page 449 reverse page No. 469/1991 (*) 9 08/05/2000 Eduardo Bravo Ubilla Valparaíso Page 364 No. 353/2000 (*) Page 496 No. 456/2000 10 04/08/2000 Eduardo Bravo Ubilla Valparaíso Page 599 No. 546/2000 10/08/2000-21/09/2000 (Complements Summary) Page 550 reverse page No. 473/2003 11 21/07/2003 Eduardo Bravo Ubilla Valparaíso Complement to Notary Certification 01/08/2003 12 08/09/2003 Eduardo Bravo Ubilla Valparaíso Page 878 reverse page Nº820/2003 19/12/2003 13 26/11/2003 Eduardo Bravo Ubilla Valparaíso Page 82 No. 71/2004 31/01/2004 14 26/01/2004 Eduardo Bravo Ubilla Valparaíso Page 1143 reverse page No. 977/2007 15/12/2007 15 26/08/2011 Alejandro Sepulveda Valenzuela Valparaíso Page 946 No. 888/2011 21/09/2011

Documents of Incorporation Comments and Proposals of Shareholders

INCORPORATION OF THE COMPANY Act of Incorporation granted The shareholders representing 10% or more of the shares issued, with on 12 June 1989, before the Notary of Santiago, Mr Raúl Undurraga right to vote have not made any comments or proposals regarding the Laso, summary of which was registered in the Register of Business of progress of the social businesses, so comments and proposals in said Valparaíso on page 449 reverse side, number 469 of 1989, and published respect are not included in this annual report. in the Official Gazette on 15 June of 1989. 16 ANNUAL REPORT 17 Historical Account ANNUAL REPORT The Chilean Development Agency and the Chilean Treasury constituted Esval S.A. (hereinafter “Esval” or the “Company”) in 1989 under law No 18.777.

In December 1998, Esval was the first sanitary company to open to the process of incorporating private capital, considered in law 19.459, by a bidding process. Aguas Puerto S.A., company formed, at that time, by Enersis Group (72%) and Anglian Water Chile Ltda. (28%), affiliate of Anglian Water Inc. (hereinafter “Anglian Water”) from UK, was awarded 40% of Esval’s property. The property transfer and take-over on the part of Aguas Puerto S.A. were carried out on 15 April 1999.

On 4 August 2000, Anglian Water bought their share in Aguas Puerto S.A. from Enersis Group, becoming the controller of the Company. By the end of 2000, a 25,063 million Chilean pesos capital increase was carried out, which consisted in the issuance of 541,559,555 shares, in order to finance the early termination of the Investment Management Agreeement between Esval and Aguas Quinta S.A. With the shares subscribed, Aguas Puerto S.A. remained with 49.82% of Esval’s property.

On 12 November 2003, Consorcio Financiero S.A. signed a share purchase agreement by means of which they bought from Aguas Puerto S.A. 1,484,000,000 Esval series A shares, accounting for 44.78% of their issued shares; therefore, the take-over by Consorcio Financiero S.A. materialized that same day.

On 14 November 2003, through public writ of Accountability and Release between Consorcio Financiero S.A. and Proyectos e Inversiones Longovilo S.A., BP S.A., Inversiones Teval S.A., Consorcio Inversiones Limitada and Compañía de Seguros Generales Consorcio Nacional de Seguros S.A., granted on the same day before notary of Santiago Mr Humberto Santelices Narducci, Consorcio Financiero S.A. transferred: 140,314,207 shares to Consorcio Inversiones Limitada and 240,000,000 shares to Compañía de Seguros Generales Consorcio Nacional de Seguros S.A., both companies completely controlled by Consorcio Financiero S.A., 30,915,792 shares to BP. S.A., company completely owned by the General Manager and the Chairman of Consorcio Financiero S.A., 320,583,321 shares to Inversiones Teval S.A., company controlled by the directors of Consorcio Financiero S.A. Mr Eduardo Fernández León and Mr José Antonio Garcés Silva, and member of the business group to which Banvida S.A. belongs which, in turn, is holder of 47.70% of Consorcio Financiero S.A., and 320,583,321 shares to Proyectos e Inversiones Longovilo S.A., company controlled by the directors of Consorcio Financiero S.A. Mr Juan Hurtado Vicuña and Mr Pedro Hurtado Vicuña, and his four 18

brothers, and member of the business group to which P&S S.A. belong, On 18 November 2007, Inversiones OTPPB Chile III Limitada and holder of 22.7% of Consorcio Financiero S.A. and Altas Cumbres S.A. Westwater Investments Limited published a notification establishing holder of 25% of Consorcio Financiero S.A. a Takeover bid (in Spanish Oferta Pública de Adquisición, OPA) for all Esval’s series “A” shares, including series B shares that may have been ANNUAL REPORT On 25 November 2003, Esval was awarded, for a 30 years period, the exchanged for series A shares, by virtue of what the social statutes states. right of exploitation of the water treatment concessions operated by In order to declare the takeover bid as successful, Esval shareholders Essco S.A., water treatment plant of the 4th Region, for UF 3,177,000 VAT had to agree, in an Extraordinary Shareholder Meeting, on a reform included, through their affiliate Aguas del Valle S.A. Thus, Esval achieved of their statutes, which consisted in modifying the denomination and a market share close to 17% of the customers of that area in the distribution of the shares in which the social capital is divided in, without country. In January 2004, share transfers subscribed by Cía. de Seguros increasing the latter, so that the capital is divided in three new share Generales Consorcio Nacional de Seguros S.A. by the end of 2003 were series, called Series A, B and C. recorded in the shareholder registry, in virtue of which, the company was completely clear of all their shares; Compañía de Seguros de Vida On 12 December 2007, Esval’s Extraordinary Shareholder Meeting was CN Life S.A. purchased 110,000,000 shares, and Compañía de Seguros de held, which was called to discuss all the modifications to the statutes of Vida Consorcio Nacional de Seguros S.A. 130,000,000 shares. These last incorporation, under the terms requested by the bidders. Among other two companies are controlled by Consorcio Financiero S.A. matters, they agreed to increase the number of shares in which the capital of the Company is divided, 3,740,569,084 to 14,962,276,336,000, In Extraordinary Meeting on 23 January 2004, it was agreed to increase without increasing the social capital, under the following terms: (i) the capital in $24,136 million, with the issuance of 462,372,090 payment Series A and B shares were withdrawn and new series A, B and C shares shares, to partly finance the payment of the contract price, by which were created; (ii) the new series A and B shares keep all the rights and Esval S.A. obtained the right to exploit the sanitary concessions held by privileges, respectively, that the old series A and B shares had; (iii) the Essco S.A. in the Region of Coquimbo. new series C shares do not have the right to chose directors, but they will have the privilege of calling an extraordinary shareholder meeting, The capital increase was signed in a 92.27%, with which Esval’s signed when they request it so, at least 5% of these shares. The aforementioned and paid capital is TH$162,384,714.- After the capital increase, Esval S.A.’s preference and limitation were established for a period of 5 years as controller was constituted by Consorcio Corredores de Bolsa (4.34%), CN from 12 December 2007, which were renewed for a new period of 5 Life Compañía de Seguros de Vida S.A. (9.91%), Compañía de Seguros de years as from 26 August 2011, according to what was established in the Vida Consorcio Nacional de Seguros S.A. (9.55%), Compañía de Seguros General Shareholder’s Meeting held that day. de Vida Vitalis S.A. (3.45%), Proyectos e Inversiones Longovilo S.A. (10.37%), BP S.A. (1.0%), and Inversiones Teval S.A. (10.37%), with 49.00% All the new shares, no matter the series they belong to, participate of Esval S.A.’s shares. in the profits and other economic rights on equal terms. In Esval’s Extraordinary Shareholder’s meeting held on 12 December 2007, the exchange between the old series A and B shares and the new series A, B and C shares was approved, according to which the shareholders received a new series A or B share for each series A or B they had, plus 19 ANNUAL REPORT

3,999 of the new series C shares. Also, they provided that the allocation In July 2011, Corporación de Fomento de la Producción (CORFO) sold of the new shares and their update in the Shareholder Registry had to be part of their share in ESVAL, where Inversiones OTPPB Chile III Ltda, carried out at the closing day of the publication of the result notification purchased 3,654,310,102,023 Series C shares and Mareco Holdings Corp, that states the takeover bid as successful. The record of the meeting was 913,805,977 Series A shares, both amounting to 94.2% of the total shares prepared as public writ of the same date in the notary of Valparaíso of issued by the Company. Mr. Eduardo Bravo Ubilla and a summary of said writ was published in the Official Gazette on 15 December 2007 and recorded in page 1143 Inversiones OTPPB Chile III Limitada is a Chilean limited liability company, reverse side, No. 977 of the Registrar of Real State and Commerce of which up to 31 December 2011 owned 1,122,170,725 series A shares, Valparaíso of 2007. and 14,092,092,951,289 series C shares of Esval. The direct controlling institution is Inversiones OTPPB Chile III Limitada, a company that is, On 21 December 2007, the notification that stated the takeover bid as in turn, controlled by Inversiones Southwater Ltda. (“ISL”), subsidiary of successful was published. This takeover bid was made by Inversiones AndesCan SpA., investment vehicle in Chile of the Canadian company OTPP Chile III Limitada and Westwater Investments Limited to have Ontario Teachers’ Pension Plan Board (OTPPB). Apart from Esval, they are the control of the Company. By virtue of the aforementioned, said related to Inversiones OTPPB Chile III Limitada, OTPPB Chile Inversiones companies became Esval’s controllers with 69.37% of the total of the S.A. (Tax Card No. 76.833.170-7), Castlefrank Investments Limited (Tax shares issued by the Company, which came into effect that same day. Card No. 59.141.730-4), Inversiones OTPPB Chile I Limitada (Tax Card No. 76.833.300-9), Inversiones OTPPB Chile II Limitada (Tax Card No. As in said takeover the bidders purchased more than two thirds of the 76.833.340-8), and Essbio S.A. (Tax Card No. 96.579.330-5). On the other shares issued with voting power of Esval, the new controllers made hand, Ontario Teachers Pension Plan Board has an indirect participation a new takeover tender for the total shares of the Company, under with 50% of Inversiones Los Lagos Limitada, holding company of the terms established by article 69 of Law 18.046 on Public Limited Sociedad Austral de Electricidad S.A. (SAESA) with 99.99% of the shares Companies. of said company.

Due to this second takeover bid, which finished on 18 February 2008, Mareco Holdings Corp. is a limited liability company incorporated said controllers obtained up to that date, 69.72% of the total of the according to the laws of the Ontario Province, Canada; as at 31 December shares issued by Esval. 2011 it owned 2,401,326,543 series A shares of Esval.

On 21 December 2009, Westwater Investments Limited sold the total of Morgan McCague is the final controller of Mareco Holdings Corp. There their shares of Esval to company Mareco Holdings Corp, which signed is a shareholder agreement between Inversiones OTPPB Chile III Limitada a shareholders’ agreement with Inversiones OTPPB Chile III Limitada. and Mareco Holdings Corp, by virtue of which certain limitations were By virtue of the aforementioned, these companies are currently Esval´s established for the free assignment and transfer of their shares in Esval, as controllers. well as certain preferential purchase/sale rights regarding shares. Some regulations regarding the exercise of voting power corresponding to Mareco Holdings Corp. in regard to the election and renewal of Esval’s board of directors were also established. 20

Company’s Equity

As at 31 December 2011, the main shareholders were: ANNUAL REPORT

Shares Corporate Name Total Percentage ESVAL-A ESVAL-B ESVAL-C

INVERSIONES OTPPB CHILE III LIMITADA 1,122,170,725 0 14,092,092,951,289 14,093,215,122,014 94.1917% CORPORACION DE FOMENTO DE LA PRODUCCION 0 187.028.455 747,926,791,545 748,113,820,000 5.0000% INVERSIONES GUALLATIRI LTDA 2,494,988 0 14,170,179,125 14,172,674,113 0.0947% SUC ZAMORA VILLALBA DAVID 1,734,690 0 6,937,025,310 6,938,760,000 0.0464% BANCO ESTADO SAC DE B 489,787 0 6,657,386,086 6,657,875,873 0.0445% BUSTILLOS MUNOZ MANUEL 1.390.000 0 6,598,610,000 6,600,000,000 0.0441% INVERSIONES TACORA LIMITADA 1.192.426 0 6,586,440,512 6,587,632,938 0.0440% LARRAIN VIAL S A CORREDORA DE BOLSA 368.952 0 4,477,996,878 4,478,365,830 0.0299% BANCHILE C DE B S A 706.939 7.877 4,133,799,800 4,134,514,616 0.0276% THE CHILEAN TREASURY 877.294 0 3,508,298,706 3,509,176,000 0.0235% GALLARDO BILBAO ANA MARIA 786.039 0 3,143,369,961 3,144,156,000 0.0210% ALIAGA PONCE TEODORO 750,000 0 2,999,250,000 3,000,000,000 0.0201% TOBAR LEIVA MANUEL 800,000 0 2,899,200,000 2,900,000,000 0.0194% INMOB E INVERS LUIGI MATTERA MAZZELLA S A 722,674 0 2,889,973,326 2,890,696,000 0.0193% MARECO HOLDINGS CORP 2,401,326,543 0 0 2,401,326,543 0.0160% Other shareholders 17,625,489 96,206 53,514,494,378 53,532,216,073 0.3578% Total 3,553,436,546 187,132,538 14,958,535,766,916 14,962,276,336,000 100.0000% The controller group is made up by the following members:

Shares Total Percentage 21 ESVAL-A ESVAL-B ESVAL-C

INVERSIONES OTPPB CHILE III LIMITADA 1,122,170,725 0 14,092,092,951,289 14,093,215,122,014 94.19% Participation in Share Series 31,58% 0.00% 94.21%

Participation in Series with Political Rights (A and B) 30.00% ANNUAL REPORT MARECO HOLDINGS CORP. 2,401,326,543 0 0 2,401,326,543 0.02% Participation in Share Series 67.58% 0.00% 0.00% Participation in Series with Political Rights (A and B) 64.20% TOTAL SHARES RELATED WITH OTPPB III CHILE LIMITADA 3,523,497,268 0 14,092,092,951,289 14,095,616,448,557 94.21% Participation in Share Series 99.16% 0.00% 94.21% Participation in Series with Political Rights (A and B) 94.20%

OTPPB and MARECO’s control is based on having 99.16% of series A shares, with which they own 94.20% of the political rights of the Company (30.00% owned by the former and 64.20% by the latter).

Summary of Share Transactions of the Company

Year Quarter No. of Sold/Purchased Shares Total Sold/Purchased Amount Average Price

2009 1 2,681,334,318 45,717,243 0.01705 2009 2 1,116,005,398 16,086,206 0.01441 2009 3 540,202,848 10,857,942 0.02010 2009 4 1,278,098,811 25,578,129 0.02000 2010 1 136,737,638 2,767,275 0.02024 2010 2 1,086,061,535 37,356,441 0.03440 2010 3 581,499,910 25,865,874 0.04448 2010 4 118,699,892 44,082,376 0.03941 2011 1 8,199,807,161 1,833,413,555 0.22359 2011 2 3,354,971,041 349,451,682 0.10416 2011 3 3,659,143,137,957 106,588,034,081 0.02913 2011 4 6,615,721,963 286,383,067 0.04329

* Including the Stock Exchange of Santiago, the Stock Exchange of Valparaíso and the electronic stock exchange 22

Dividend policy / Payment of dividends will depend on the profits actually obtained, as well as on the results indicated by the projections periodically made by the Company, or on In the Ordinary Shareholder Meeting, held on 29 April 2011, it was the existence of certain conditions that may make said policy vary. The dividends paid per share during the last three years are the following: ANNUAL REPORT agreed to distribute as definite dividends for the financial year 2010, $0.00115578584 per share, which corresponds approximately to 100% of the profit obtained in said financial year. Dividend Paid 2009 – 2011 In addition, the meeting agreed on distributing an additional dividend of $0.00033943157 per share obtained from the profits accumulated in Financial former financial years. Year Type of Dividend Payment Date $ Per Share

2011 Dividend Policy 2008 PROVISIONAL 23-02-2009 0.000250000 2008 DEFINITIVE 18-05-2009 0.000848889 The Shareholders Meeting was informed of the Agreement of Esval S.A.’s 2009 PROVISIONAL 20-08-2009 0.000250000 Board of Directors on provisional dividend policy, which consists in the 2009 PROVISIONAL 02-02-2010 0.000250000 distribution of up to two provisional dividends of 0.00025 per share as maximum – each time - charging it to the profits of financial year 2011 2009 DEFINITIVE 24-05-2010 0.001002960 under the condition that said provisional dividends do not exceed 80% 2010 PROVISIONAL 27-08-2010 0.000250000 of the profits of financial year 2011, and that have been verified as at 2010 PROVISIONAL 04-02-2011 0.000250000 the closure of June and September 2011. If said dividends are to be distributed, they will be paid in August 2011 and February 2011. 2010 OBLIG MIN DEF 27-05-2011 0.000655786 2010 DEFINITIVE ADDITIONAL 27-05-2011 0.000339432 Regarding the definite dividends related to that same financial year, the 2011 PROVISIONAL 06-09-2011 0.000250000 shareholders were informed that the purpose of the Board of Directors is to distribute at least 80% of the profits of financial year 2011. However, 1.- In nominal currency upon the payment date. the respective Ordinary Meeting will decide on the distribution of said definitive dividends.

It was left on record that the aforementioned policy, both regarding provisional dividends and definite dividends, corresponds to an intention of the Board of Directors of the Company; therefore, their compliance 23 ANNUAL REPORT

Risk Classification

In 2011, ESVAL hired the risk classification services for their shares, bonds and lines of bonds from Feller Rate Clasificadora de Riesgo Limitada and ICR Clasificadora de Riesgo Limitada.

Classification Valid Issues Inscription Serie No. Feller Rate ICT Distributable Profit 2011 2010 2009(**)

Shares - A, B, C Level 4 Level 4

PROFIT OF FINANCIAL YEAR 15,324,326 17,293,187 22,476,545 Negotiable Instruments 43 * --- AA- / Level 1+ AA / Level 1+ DEFINITIVE DIVIDEND 17,293,187 22,476,545 Negotiable 44 * --- AA- / Level 1+ AA / Level 1+ PROVISIONAL DIVIDENDS 7,481,138 Instruments % SHARED AS DIVIDENDS (*) 100% 100% Negotiable Instruments 87 13A AA- / Level 1+ AA / Level 1+ (*) This amount will be agreed on the next Ordinary Meeting of Shareholders Bonds 232 A AA- AA (**) Values estimated according to the accounting regulation in force during that annual period Line of Bonds 293 D AA- AA Line of Bonds 375 E AA- AA Line of Bonds 419 H AA- AA Line of Bonds 493 J AA- AA Line of Bonds 561 K AA- AA Line of Bonds 562 M AA- AA

On 31 December 2011, the lines of negotiable instruments 43 and 44 do not have series issued with valid debt. 24 Line of business and Activities

Esval is a drinking water production and distribution company engaged The body that regulates the activity of Esval and the sanitary sector in in the collection, treatment, and disposal of wastewater, which also its totality is the Superintendence of Sanitary Services, created in 1990, renders services regarding said activities, under the conditions stated by through Law No. 18.902, to guarantee the population that the rendering ANNUAL REPORT the Law authorizing its creation and other applicable norms. of sanitary services - in terms of amount, quality and price - corresponds to the one offered and can be maintained in the long term, and that The operational territory of the Company includes the urban areas of the water, once used, will be treated and disposed in keeping with the Region of Valparaíso, which former Empresa de Obras Sanitarias sustainable development. of the Region used to attended until 27 January 1986 - except the areas franchised to private or municipal services - plus the expansion areas included within the development plans approved by the Superintendence of Sanitary Services, according to what is stipulated Operation Data 2011 by Law No. 18.777 and decree No. 2.166/78 and 69/89 of the Ministry of Public Works. ESVAL Aguas del Valle Consolidated Additionally, the company renders drinking water services to other locations outside the awarded area in the commune of Algarrobo based on agreements signed with the communities of Algarrobo Norte, Urban population * 1,502,584 573,855 2,076,439 Mirasol and Las Brisas. Drinking Water Clients 536,420 193,657 730,077 On 25 November 2003, Esval took over, by public bidding, the right of Sewerage Clients 484,951 185,005 669,956 exploitation for 30 years of the awardings, holder of which is ECONSSA Drinking Water Coverage (%) * 99.3 99.9 99.5 CHILE S.A. (at that time ESSCO S.A.), water supply and sanitary company of the Region of Coquimbo. For such effects, a subsidiary public limited Sewerage Coverage (%) * 92.3 96.4 93.5 company was incorporated, called Aguas del Valle S.A., on 4 December Drinking Water Invoicing (000m3) 100,305 35,282 135,586 2003, under the regulations for joint-stock companies. Aguas del Sewage Invoicing (000m3) 87,976 31,955 119,932 Valle produces and distributes drinking water and collects, treats and disposes wastewater. For this, it also renders services related to those * Sanitary Sector Management Report 2010, published by SISS activities, under the terms stated in DFL No. 382 of 1988, of the Ministry [Superintendence of Sanitary Services]. of Public Works, and other applicable norms. Valparaíso Region 25 Province of of Marga Marga Province of Elqui Petorca, La Ligua, Cabildo, Papudo, Limache, Villa Alemana, Quilpué. La Serena, Coquimbo, Vicuña, Paihuano, Andacollo. Zapallar. Province of Valparaíso Province of Limarí Province of Los Andes Puchuncaví, Viña del Mar, Valparaíso, Ovalle, Monte Patria, Punitaqui, Combarbalá.

Calle Larga, Los Andes, . ANNUAL REPORT Concón, Quintero. Province of of San Felipe Province of San Antonio Canela, Illapel, Salamanca, Los Vilos. San Felipe, San Esteban, Santa María, Algarrobo, Casablanca, , , Llay Llay, Putaendo. , Cartagena, San Antonio. Locations outside the awarded area (*): La Higuera, Río Hurtado. Province of Quillota La Cruz, La Calera, , Quillota, Locations outside the awarded area (*): Nogales. Sto. Domingo, Olmué, .

(*)

Valparaiso Region

Province of of Petorca (*)

Province (*) Province of (*) of Limarí Valparaíso

Province of Los Andes Province of San Antonio Province of San Felipe Province of Marga Marga Coquimbo Region

(*) Province of Quillota Province of Choapa 26

DIRECTORS Board of Stacey Leanne Purcell 48.121.218-9, Bachelor of Commerce, Directors and Dalhousie University Olivia Penelope Steedman Management 48.120.868-8, Civil Engineer, Queen’s University

ANNUAL REPORT As at 31 December 2011, the board of directors Nicolás Navarrete Hederra of Esval was constituted by the following 11.947.222-9, Industrial Civil Engineer members: Juan Pablo Armas Mac Donald PRESIDENT 6.198.258-2, Industrial Civil Engineer Jorge Lesser García Huidobro 6.443.633-3, Industrial Civil Engineer Alejandro Ferreiro Yazigi 6.362.223-0, Lawyer VICE-PRESIDENT Juan Ignacio Parot Becker 7.011.905-5, Industrial Civil Engineer Directors’ Committee Remuneration of the Board of Directors 27 Since the Company does not comply with the requirements stated During financial year 2011, the directors did not receive direct in sub-paragraph 1 of article 50 bis of the Law of Limited Companies remunerations from Aguas del Valle S.A. – which was modified by Law No. Nº20.382 – Directors’ Committee constituted in Esval S.A. ceased its functions on 31 December 2009. From the headquarters, the directors received the following gross remunerations for expenses, fees and meetings of the board of directors. ANNUAL REPORT

Expenses for Board of Directors and Committee of Directors

In 2011, the Board of Directors and the Directors’ Committee recorded expenses for TH$2,947. Allowances and Payments for Committees of Directors

Year 2011 Year 2010 Allowances Fees Committees Allowances Fees Committees TH$ TH$ TH$ TH$ TH$ TH$

Kevin David Kerr - - - 11,353 - - Pedro Pablo Errázuriz Domínguez 7,732 - 515 76,463 15,087 5,098 Jorge Lesser García Huidobro 89,682 - 1,817 34,332 - 3,052 Stacey Leanne Purcell 27,572 - - 13,443 - - Carlos Williamson Banaprès 3,770 - 2,611 7,658 - 2,046 Olivia Steedman 23,629 - - 22,888 - - Alexander Galetovic Potsch 15,652 - 4,174 15,344 - 4,092 Nicolás Navarrete Hederra 23,629 - 782 15,344 - - Juan Pablo Armas Mac Donald 15,862 - 4,230 - - - Alejandro Reyes Vergara - 7,544 2,012 Mónica Singer González - 7,544 1,006 Rodrigo Pérez Mackenna - 7,544 1,006 Alejandro Ferreiro Yazigi 9,954 - 2,127 - - - Juan Ignacio Parot Becker ------General Total 217,482 - 16,256 219,457 15,087 18,312 Main 28 Executives ANNUAL REPORT

8 7 6 5 4 3 2 1. CEO 4. Engineering Manager Rodrigo Azócar Hidalgo Leonel Fuentes Espinoza 1 6.444.699-1, Civil Engineer 4.899.487-3, Civil Engineer

2. Planning and Studies Manager 5. Legal Advisor 7. Finance and Administration Manager Francisco Ottone Vigorena Domingo Tapia Navarro Agustín Benavente Font de la Vall 7.523.281-0, Civil Engineer 6.645.077-5, Lawyer 7.067.713-k, Business Administrator

3. Human Resources Manager 6. Operations Manager 8. Commercial and Development Manager Sergio Pinto Fernández George Seal Comte Mauricio Coll Olivares 8.018.789-0, Psychologist 5.390.299-5, Civil Engineer 11.471.960-9, Industrial Civil Engineer 29 Esval S.A.

Organizational Chart ANNUAL REPORT

Board of Directors

General Management

Public Corporate Internal Relations Management Audit

Commercial Planning Management Operations and Studies and Development Management Management

Human Administration Engineering Resources and Finance Legal Management Management Management Advisor 30 ANNUAL REPORT 31 ANNUAL REPORT

Management Report 32 Investment 2011

During this financial year, the Company continued to expand the meters. The works required an investment of $1,741 million, including services of production and distribution of drinking water, collection and the installation of fire faucets, valves, air relief valves and drains in its decontamination of waste waters and maintenance of assets. For this, respective chambers. investments for TH$ 18,640,370.- were made in the Region of Valparaíso. Additionally, with an investment higher than 754 million Chilean pesos, ANNUAL REPORT Replacement of Avenida Alemania’s water main between Cerro Las the reinforcement of San Antonio-Algarrobo’s drinking water piping Cañas and Cerro Mariposas. This iron main with polyethylene inner and system was carried out. The work consisted in replacing and expanding outer coating, with a diameter of 700 millimeters, stretches for 2,678 the 700 millimeter spun concrete water main stretch for a 900 and 800 mm iron pipe with a total length of 1,247 lineal meters. These works were needed to increase the drinking water conduction capacity from San Antonio to Algarrobo in order to back up the urban growth due to the population increase and to face the increasingly growing demand of drinking water in summer time. With this work, the availability of drinking water increased in 15% for the South Coast area. 33 We must highlight the agreement signed by the Programa de for the production of drinking water, increase of the pre and post Recuperación y Desarrollo Urbano de Valparaíso (PRDUV) [Urban chlorination of the interconnection with the existing filters and related Recuperation and Development Program for Valparaíso], the Illustrious electric works. Municipality of Valparaíso, Serviu and Esval, to carry out the Public Spaces

Improvement Project in Cerro Alegre and Concepción. Upon request by This work was carried out in a period of 150 days and its investment ANNUAL REPORT the authorities, Esval invested in six years over $500 million to change the amounted to $674,754,210. drinking water mains and the sewage water collector of these two world heritage hills. During this financial year, several road paving, rainwater collector improvement, lighting and landscaping works were financed ESVAL’s Investment as with contributions from Banco Interamericano de Desarrollo (BID). It was very wise to join urban redevelopment and sanitary infrastructure per Stage-Gate Process modernization, because this will encourage tourism and the services area in these historical neighborhoods of our city.

Drinking Water La Viuda-Villa Italia Drinking Water Equipment, Production Construction/Conduction Technology, Others and Distribution This work is the constructive stage of the project “San Juan-Villa Italia Drinking Water Conduction Reinforcement” and entails the 8,0% 69,9% reinforcement of the construction of a stretch between pool La Viuda Bajo and ring road Los Romos in the Llo-Leo area. The length of the Reinforcement is 1,247 meters. This work was carried out in a period of 180 days and its investment amounted to $665,925,176.

Production Capacity Increase Distribution and Construction South Coast Drinking Water 22,1% Sewage Water The drinking water production plant of San Juan Llo-Lleo stretches Treatment along the northern bank of river Maipú, approximately 6 km away from the river mouth. and collection

The works included the increase of drinking water treatment from the current design capacity of 750 liters per second. This ambitious project entailed the construction of three new filtering units, the improvement of the 11 existing filtering units and the expansion of the dosing systems 34 Esval and its Clients

Esval’s main management aim is satisfying its clients. For this reason, its actions are focused on continuously improving its services, keeping permanent communication with the Valparaíso Region and maintaining constant participation of the company in the different activities of the region to strengthen the links and communication channels between Esval and its clients. ANNUAL REPORT 35

Meetings with the Community San San No. of Meetings Quillota Valparaíso Total ANNUAL REPORT During 2011, 159 meetings and activities were held in relation to the Antonio Felipe delivery of information and contact with the community. In general, this process is carried out with the participation of social organizations, clients, neighborhood organization leaders and local authorities. Meeting with the 6 2 17 4 29 The topics addressed in these meetings are related to the needs and authorities concerns stated by neighbors, clients and neighborhood leaders Meeting with UNCOS and through service fairs and other on-site activities. The most discussed Neighborhood Committees 10 6 15 48 79 matters were: Care of sewage and fire faucets, works to be carried out, Workshop with drinking water subsidy and commercial information. organizations 9 18 2 18 47 Meetings for works 3 4 3 3 13 28 30 37 73 168

Esval’s Seminaries with the Community

During 2011, 4 Seminaries called “Esval together with the Community” with the participation of 415 community leaders were carried out. The objective of this activity was to train and prepare them to strengthen the strategic alliance created throughout the past recent years between the company and the community.

“Al Día con Esval” Recognition Ceremony

In order to recognize the effort of those families that regularized their debt situation with the company, a ceremony with more than 150 invitees was carried out in December. 36 ANNUAL REPORT

Workshops

45 workshops with neighborhood committees, communal councils and local Health councils were formed. The topics addressed water supply pressure and quality, drought and subsidies, among others. In addition, 27 workshops with municipal and regional authorities of Valparaíso, Quilpué, Villa Alemana and Quintero were conducted.

Guided Tours Coordination and Support

During 2011, educative and guided tours to different drinking water To strengthen the relationship and contact with the community, Esval treatment and production plants of the company were carried out. For participated together with other public services in several Service Fairs this, specialized signs to help the visitors follow the route and understand in the region. in a more didactic way the process and the importance of the works carried out by Esval were installed in Concón’s drinking water plant. Al Día con ESVAL 37

Agreements signed in 2011 No. of Education No. of Plumbing Areas for Consumption No. of Participants Workshops Workshops No. of Currently No. of Terminated Areas No. of Agreements Valid Agreements Agreements ANNUAL REPORT Gran Valparaíso 237 1.425 45 Litoral Sur 77 523 23 Gran Valparaíso 2,061 3,105 343 Quillota 77 309 22 Litoral Sur 580 583 105 San Felipe - Los Andes 52 317 19 Quillota 332 358 90 General Total 443 2,574 109 San Felipe - Los Andes 713 763 153 General Total 3,686 4,809 691 38 Rural Drinking Water Service

During 2011, the Directorate of Hydraulic Works extended in twelve Regarding the project management, new works and designs for an more months the agreement with ESVAL for technical assistance investment amount of 860 million pesos financed by the Chilean State and project management of rural drinking water systems projects. were conducted. Among the works carried out are the construction of Thus, the technical assistance has allowed assisting 150 rural drinking two semi-buried pools and the installation of 8,100 meters of network, water systems in 2011, benefiting an estimated population of with 170 new home drinking water connections. 200,000 inhabitants. In 2011, 237 scheduled visits to the services were performed. The purpose of this was to improve and consolidate their management as well as to provide technical, administrative and financial ANNUAL REPORT sustainability to the people in charge of management. Within the frame of the technical assistance, it is worth mentioning the legal assistance provided to the rural drinking water services, aimed at supporting the users in regularizing their water rights, land titles and water concessions. Thus, in 2011, 227 interviews with the technical assistance lawyer were carried out, regularizing 8 water right issues, 5 properties and 6 water concessions.

Additionally, seven unscheduled interventions to the services were carried out in order to solve operational emergencies. These interventions benefitted 8,000 people approximately.

We must also mention the training conferences provided to all the services. In 2011, three training workshops were carried out – one in each province of the 5th Region – with an attendance of 450 people approximately. The core topic in the workshops was Economy in the Management of the Drinking Water Resource. 39 ANNUAL REPORT 40 Image and Communication Esval is a regional company committed to providing a service of excellence to its clients and with this, contributing to the standard of living of the inhabitant’s of the Valparaíso Region.

Over the years, the company as worked closely with the regional, provincial and communal authorities as well as social organizations and the organized community in order to know their needs, problems and

ANNUAL REPORT possible solutions regarding issues related to the service rendered by Esval. 41 ANNUAL REPORT

Over time, this link has strengthened and today we can say that we are working together, taking into account the needs of our clients and the region, framed in a process of continuous improvement that we have adopted as a cornerstone in the development of our business.

The campaign “Agua Sana, Vida Sana” is one of our on-site strongholds. With 9 years of work experience, we have visited housewives, providing information on the campaign, our activities and willingness to listen and work together; to children in their school – thinking in them as future generations – we have taught about the water resource and its different and complex purification processes as well as about environmental care and our key role as humans regarding this duty.

Only in 2011, the campaign “Agua Sana, Vida Sana” contacted 237,163 During 2011, our campaign’ motto was “Contigo en Cada Gota”, an people and participated in 1,264 activities. They include massive activities expression that reflects the how important is water in our daily life and like: Family running and cycling events, communal fairs, street activities the appreciation of this vital resource. for children, carnivals and artistic-cultural events, among others. As a way of getting closer to the little ones, the visits of Las Gotitas to Among the sport activities carried out is the cycling event organized by schools this year brought an innovative element. This year they came Esval “A Pedalear por San Felipe” [Pedal for San Felipe], which gathered with games and a coloring book full of magic, which were well received more than 600 people from San Felipe. In it, bikers of all ages gathered by the children, who learnt in a didactic and fun way how to take care of in the Main Square of said city and enjoyed cycling along a stretch of the water, fire faucets and sanitary installations as well as how to recycle, 7.2 kilometers that included the city’s main avenues and streets with among other things. hydration stations and refreshing points. The launching of this campaign was carried out in two important events Another important event was Esval’s participation in the event Full in 2011. The first one took place in school Juana Ross de Edwards in Maratón de Viña del Mar, a 5 and 10 K running event that gathered Valparaíso, with the participation of Regional Secretariat of Education thousands of runners along Viña del Mar’s coastline. Esval participated Patricia Colarte and several other regional authorities. Same event was as one of the main sponsors and with providing hydration points for also carried out in Las Cruces, San Antonio, with the participation of the the runners. Mayor and many children of the area, who actively participated in the event. 42

As customary, we supported the Regional Congress of Science and Technology, organized by the Program Explora CONICYT, objective of which is to encourage the scientific research, promote learning and the use of the scientific method among primary and secondary school students.

This year, in December, the company organized the Contest “Paint and Recycle this Christmas Together with Las Gotitas de Esval”, which ANNUAL REPORT invited the children to soak up the Christmas spirit and capture in their drawings their artistic creations and send them to Las Gotitas. More than 3,400 drawings were received. The first 6 places were awarded and 30 prizes to the effort and beauty of the works made were recognized.

Number of Contacts in Campaign Number of Activities in Campaign “Agua Sana, Vida Sana” “Agua Sana, Vida Sana”

Area Community Education Office Door to Total of Community Education Door to Total of Area Area Door Contacts Area Area Area Office Door Contacts

Gran 85,101 37,337 7,645 1,150 131,233 Gran 77 15 604 Valparaíso Valparaíso 256 256 Quillota 21,303 7,860 4,615 818 34,596 Quillota 135 83 49 29 296 San Felipe - 7,150 6,256 1,325 305 15,036 San Felipe - 19 9 107 Los Andes Los Andes 26 53 South Coast 41,412 12,220 2,420 246 56,298 Litoral Sur 115 109 25 8 257 Total 154,966 63,673 16,005 2,519 237,163 Total 532 501 170 61 1,264 Human Resources 43

Professionals Staff and Technicians

As at 31 December 2011, Esval staff was made up by 372 employees. ANNUAL REPORT 71% According to its distribution in levels, it was made up as follows:

27% Administrators and operators 2% Executives

Prevention

In 2011, Risk Prevention has continued its work to prevent accidents and occupational diseases among our employees and continuously given support to the most risky works.

In March of this year the company re-certified its occupational Health and Safety management system in OHSAS 18001:2007, together with ISO 901 and ISO 14001, Quality and Environment Management, respectively, which together comprise the Company’s Integrated Management System (SIG in Spanish). 44

Risk Prevention, like in previous years, continues to perform a solidarity During the year, the “Headquarters, Bustamante and San Ignacio offices surveillance job with the companies that render services by supporting Health and Safety at work Joint Committee” was renewed and the more risky works such as the entrance to confined spaces, mainly waste “South Coast Health and Safety at work Joint Committee” was formed. water chambers. These support operations are carried out with special ANNUAL REPORT equipments and staff trained to perform these works. This year, the amount of occupational accidents increased, with lost time for the contractor companies, totalizing 75 accidents and 667 lost days. Continuous on-site inspections and check-ups to several works were carried out in order to: 1.- Verify compliance with the safety standards, 2.- Notify the remarks to the company and 3.- Follow up the remarks Training in order to check the solutions implemented. All of this was carried out to have the works comply with Esval’s requirements in the contractual During 2011, 156 courses, seminars and workshops were given, basis regarding risk prevention. amounting to 17,363 man hours of training, corresponding to 2.25% of the hours available in the year. This means that each employee of Esval In 2011, 9 employees had accidents, resulting in 183 days lost because received, as an average, 48.45 hours of training along the year. of accidents at work. In all the cases, the employees received timely and due medical attention, had a satisfactory recuperation and returned to Out of the total training hours, 38.44% hours were conducted in the their usual activities. Update Department. In this group, training courses such as Strategic Planning, SAP Finance Module, Estimation of Remunerations, Drinking The accidents that caused more days lost were: A left leg exposed Water Network Conduction, New Assistance System, Configuration of fibula fracture occurred while trying to open a stuck manhole cover the Material Management Module in SAP, English, Instruction Manual hammering with chisel and sledgehammer. This caused the chisel to jet on the Chilean Standard 409, Liquid Industrial Waste (RILES in Spanish), off towards the worker’s leg, causing the injury. This accident resulted in Compliance and Control system were performed. 136 days of medical leave (74.3% out of the total); a worker had his left hand trapped while replacing the retention valve of a pumping station. Secondly, 28.23% was spent in Professional Development. Within The trapping occurred while disassembling the tripod used to move the this area, we must highlight the diploma-level Training Course in valve. The worker spent 17 days with medical leave (9.3%), and a worker Rough Building Works and Sanitary Facilities aimed at improving the twisted her foot while approaching her workplace and stumbling with competence of Operations Management Supervisors, the diploma- a slot on the floor, twisting her ankle. This required 15 days of rest (8.2%). level Training Course in Logistics Management for professionals of The remaining accidents did not involve more than 6 days of lost days the Supply Department and the Professional Internship Program with and were mostly caused by falls or blows without serious consequences. shared funding, allowing our professionals to specialize themselves in postgraduate programs as Master’s Degree in Management, Master’s During the year, 1,846 man hours of training in Occupational Health and Safety were carried out. This year, the chlorine gas safe handling course was conducted in several sub-manager offices in the area for workers and contractor staff. 45 Degree in Business Administration, Post-graduate Course in Knowledge The training courses focused on the Quality and Environment Management and Organizational Processes and Diploma-level Course Management Integrated System are in fourth place with 10.83%. We in Marketing Management. must highlight the training courses in IsoEasy Improvement Awareness- Raising, IsoEasy Action and Audit Module, Integrated System Awareness

Thirdly, 11.87% were channeled to Personal Development issues, mainly Raising (SIG in Spanish) ISO 14.001, 9.001 and OHSAS 18.001, Continuous ANNUAL REPORT aimed at strengthening the work teams through Communications Improvement Supporting Management, Costs of Quality and Non- and Focusing workshops. In a more comprehensive ground, some Quality and Continuous Improvement Applied to Internal Auditors. The Conferences and Workshops on Welfare and Health Insurance SIG is in the Process Maintenance stage, incorporating as from 2011 the were carried out together with Management Planning and Savings Operational Risks issues in their Identification and Assessment Stages. Encouragement workshops. The group of training courses in Occupational Health and Safety Regarding the administration of benefits, the company has arranged 46 Integrated System, with a 10.63%, was trained in strengthening dental and optical care allowances for its workers and their families as Responsible Handling of Chlorine Gas (focused on the reinforcement well as allowances for marriage, birth and death in coordination with the of preventive knowledge), carried out in all the provinces, courses services rendered by Caja de Compensación 18 de Septiembre. in Hazardous Substances Storage and reinforcement of Hazard Identification Methods and Risk Assessment. In 2011, the Agreement with Clínica Reñaca was renewed. This alliance allows offering a wide variety of benefits for medical care and cover for the employees and their families, such as the preventive Health program. Law 20.454 of Pre-Contract Encouragement We must also mention the Vaccination campaigns for the company’s In 2011, after the approval of Law 20.454, which allowed the use of personnel against seasonal influenza and H1N1 in coordination with the an additional 0.25% of the Monthly Taxable Income for Training, Esval Medical Center of Caja 18 de Septiembre.

ANNUAL REPORT allocated resources for 9 training events, broken down in 4 courses with the participation of 40 people and 5 courses in Works in Public Spaces. This allowed training 109 people. In total, 1,352 hours of training were Outsourcing conducted. Esval widened its commitment with the Quality, Environment and In addition, in relation to the Pre-contract with allocation of franchisable Occupational Health and Safety Policy, establishing the need for: resources in the Normal Account of the year, a course of Water Meter “Gradually committing its contractors and suppliers so that their Reading was conducted to train 18 people for 360 hours in total. performance regarding quality, environment, occupational health and safety are consistent with the provisions of this policy in the activities and services they render to the organization”. Social Scholarships 2011 Considering the importance of the relationship with contractors, the In the scope of social responsibility - and in consistency with the Company gives clear and timely information regarding matters like company’s vision, which is to contribute to the development of the bidding processes, requirements and compliance as well as performance community surrounding it – like in recent years, resources from the assessments and requires from all the companies rendering services that remnants of the Sence [National Service of Employment and Training] their processes be measured according to quality standards, stipulating tax exemption were allocated to Social Scholarships, benefitting socially the termination of services and the requirements by the parties in a civil vulnerable sectors with Water Meter Reading and Pastry Making contract. courses, with the participation of 27 people and a total of 1080 man- hour of training. To guarantee proper performance of the work plan with contractors, Esval has a Contract Management System that centralizes the administration of contracts and demands from them special compliance with Esval’s Occupational Health and Safety Standards provided in the Welfare Special Regulation for Contractors and Subcontractors; in addition, the Company supports different training and updating programs. Regarding Welfare, in 2011 School Assistance benefits for students (dependant sons and daughters of the employees) in Kindergarten, Primary, Secondary and Special School, University and Technical Studies.

Likewise, the employees and their children who studied at the University or Professional Technician Education could apply to social welfare- related Study Scholarships for Academic Excellence. By means of on-site audits on compliance with the labor and safety legislation, the contractors have greatly improved their administrative 47 and risk prevention responsibility.

In 2011, Esval started relationships with 52 contractors, thus generating 1,307 indirect full-time jobs. ANNUAL REPORT Collective Bargaining

In August and September, the collective bargaining process with the three unions of the company was conducted, reaching two collective agreements, before the legal negotiation deadline expired, which will be in effect until 31 August 2013.

International Standards ISO 9.001, ISO 14001 and OHSAS 18001

The maintenance of managing systems certified under Quality standard ISO 9.001, Environmental standard 14.001 and Occupational Health and Safety standard OHSAS 18.001, which make up our Integrated Management System, comprising all the activities of the Organization, is one of the corner stones of our strategy.

In 2011, the commitment with the audit by an external institution, Bureau Veritas, was renewed for a period of 3 years together with the international certification of the 3 standards. This allow us to witness the commitment signed by the executives and employees of submitting our daily work to an external audit, six years ago, in the case of the environment preservation activities, and three years ago, in the case of the continuous effort focused on the client and safe work management for our workers. 48 ANNUAL REPORT Aguas del Valle 49 Subsidiary ANNUAL REPORT Process-Stage Investment Investments of Aguas del Valle

In 2011, Aguas del Valle invested a total of TH$8.256.832 in infrastructure Waste Water and operational improvement. Treatment 37,3% and Collection At an urban level, 72 works were carried out, intervening 15 meters of piping in the region to replace drinking water and sewage networks. These works, essential to improve the service and increase the coverage, also generated other benefits such as the renovation of pavement in streets and sidewalks, thus contributing to the growth of cities and locations of the region. In the province of Elqui, the Works benefitted La Serena, Coquimbo, Vicuña and Paihuano; in Limarí: Ovalle, Huamalata, Monte Patria, El Palqui and Combarbalá and in the province of Choapa: 14,4% 48,4% Illapel, Salamanca, Los Vilos, Canela Alta and Canela Baja. Equipment, Drinking Water Technology, Production Others and Distribution Another challenge in 2011 for Aguas del Valle was to face the water scarcity problem that affected some areas of the region. For this, important investments were made in order to secure the supply to all the locations. For this, the company allocated 1,203 million pesos in works intended to mitigate the impact of the draught and face the growth of population that arrive in the region for the summer season.

Infrastructure Communications

3,468 Km of Drinking Water and Sewage Networks Aguas del Valle has a close relationship with different kinds of publics 25 Drinking Water Production Systems of the region, joining and participating in several activities with the 22 Decontamination Plants community. Among them, we can highlight the visits made during 449 Motor Pumps the campaign “Agua Sana – Vida Sana” to schools, kindergartens and 80 Drinking Water Pools universities and colleges with presentations in which “Las Gotitas” of 173 Drinking Water (121) and Waste Water (52) Pumping Stations Aguas del Valle handed down didactic material encouraging the care of water, environment and healthy life. The company also participates in events organized by the neighborhood committees, sports clubs and social organizations, and receives permanent visits from 50 students and neighbors interested in knowing the processes that the Company develops in drinking water production and waste water decontamination plants. In 2011, campaign Agua Sana of Aguas del Valle took part in 2,317 activities, contacting more than 205,000 people around the entire region.

Drinking Water for Rural Areas

In 2011, through the Agreement with the Directorate of Hydraulic Works of the Coquimbo Region, Aguas del Valle

ANNUAL REPORT provided technical assistance for the project management of rural drinking water systems in the three provinces of the region. Thus, the technical assistance has allowed assisting 179 rural drinking water systems in 2011, benefiting an estimated population of 186,335 inhabitants.

Customers

Aguas del Valle’s users increased in 25 thousand clients between 2004 and 2011. This – for a proportion per house – represents around 100 thousand people.

These new clients have joined in due to the management and construction of 104 real state projects. With this, now there are more than 193,722 clients that the Company currently assists in the provinces of Elqui, Limarí and Choapa.

Subsidy Al Día con Aguas del Valle Program

Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Provinces No. of Workshops Agreements Signed 2004 2005 2006 2007 2008 2009 2010 2011

ELQUI 22 115 ALLOCATED 35,972 36,380 37,321 37,791 39,184 39,101 SUBSIDIES 35,646 35,132 LIMARÍ 11 50 % OF ALLOCATED 99.71 96.86 97.70 96.08 97.87 98.95 98.95 98.25 CHOAPA 11 29 SUBSIDIES Total YEAR 2010 44 194 % OF SUBSIDIZED 25.50 21.55 21.42 21.15 20.98 20.65 20.74 20.19 CLIENTS Human Resources 51 Administrative 33% Sta and Operators ANNUAL REPORT

Staff 1% As at 31 December 2011, the staff reached 155 Executives employees, distributed as follows: 66% Professionals and Technicians

Prevention

This year, several topic-specific training courses regarding Occupational We carried out the important work of making the Managers and Health and Safety issues – in terms of gaps – such as Electric Risks or Supervisors aware of their responsibilities in safekeeping the safety of Responsibility for serious or fatal accidents were conducted by specialists their workers they are in charge of and the consequences of serious of in order to improve the safety at work for in-house and contractor staff. fatal accidents.

In 2011, 6 employees had accidents with minor injuries resulting in Meetings with the Health and Safety specialists of the contractors were 111 days lost in the year. In all the cases, the employees received due coordinated in order to standardize work criteria and methods regarding medical attention, recovered satisfactorily and their cases generated Occupational Health and Safety. preventive actions. In May, for the third consecutive year, Aguas del Valle together with the The accidents that caused more days lost were: A car crash causing a Joint Committees, participated in the “Month of Occupational Health wrist injury to a worker, leading to 65 days of medical leave (58.56%) and and Safety”, awarding three people from different departments for a fall while the worker was descending from the rear of a truck, in which being “the worker with the safest job performance and care of others”. the worker twisted his right foot, causing muscular tear that required 30 days of medical leave (27.03%). The rest of the accidents are mainly falls Along the year, the Matrix for Hazard Identification, Risk Assessment and and twisting incidents that do not exceed 5 lost days and had no serious Control Determination was completely updated. consequences. 52 Training International Standards ISO 9.001, ISO14.001 and OHSAS 18.001 In 2011, 127 courses, seminars and workshops were conducted, totaling 9,909 man hours of training, corresponding to 2.98% of the hours In November 2011, Aguas del Valle S.A. underwent for the first time a available that year. This means that every employee of Aguas del Valle simultaneous re-certification of its integrated management system in was trained, as an average, 64.66 hours during the year. the three standards, obtaining the recommendation by the certifying company to maintain the certification of the three standards. From the total of training courses, the higher concentration of hours of training, with 36.52%, was conducted in the Occupational Health and This certifies the company’s dedication for the quality of the service, the Safety Integrated System formational area. In this area, we can highlight

ANNUAL REPORT respect for the environment and the health and safety of its employees, the training courses such as the Stress Handling Workshop, Gymnastics clients and the community. during Work Breaks, Seminar on Labor, Civil and Criminal Liability for Occupational Accidents and the Integrated Management System Course for Internal Auditors ISO 9.001, 14.001 and OHSAS 18.001. Outsourcing In second place, with 35.38%, were the topics related to Personal Aguas del Valle linked with 43 contractors, generating 441 full-time Development. In this area, it is worth mentioning the training courses indirect jobs. in Technical Report Draft and Effective Negotiation Techniques. Here we must also highlight the company’s Scholarship plan, which has allowed some workers to attend their studies as Constructor Technician, Industrial Electrician and Diploma-course in Business Administration, Drinking Water for Rural Areas among others. In 2011, the Directorate of Hydraulic Works extended in ten months In third place, amounting to 20.29%, are the Update-related training the agreement with Aguas del Valle for technical assistance and project courses such as Excel Intermediate level course, Water Fluoridation, management of rural drinking water systems projects. Thus, the technical Water Control Standardization and Operational Aspects and Efficacy of assistance has allowed assisting 179 rural drinking water systems in 2011, Water Control Systems. benefiting an estimated population of 186,335 inhabitants. In 2011, 279 scheduled visits to the services were performed. The purpose of this In fourth place, with 6.01%, is the Personal Development area, with the was to improve and consolidate their management as well as to provide courses Knowledge of the Welfare and Financial System for a Better technical, administrative and financial sustainability to the people in Future, Team Work and Strategic Planning. charge of management. Framed under the technical assistance, it is worth mentioning that the legal assistance provided to the rural drinking In addition, we can also highlight the training courses focused on water services, aimed at supporting the users in regularizing their water the Quality and Environment Management Integrated System and rights, land titles and water concessions. Thus, in 2011, 43 interviews the participation in the AIDIS 19th Chilean Congress of Sanitary and with the technical assistance lawyer were carried out, regularizing 16 Environmental Engineering. water right issues, 18 properties and 5 water concessions. 53 In addition, 141 emergency technical/operational assistance visits to the Regarding the project management, new works and designs were Rural Drinking Water services were made together with 18 unscheduled implemented for an investment amount of $2,292,193,000, financed visits in order to find a solution for serious community issues, election by the State. Among the works conducted we can highlight the of community leaders, neighborhood committees and/or accounting construction of 5 new systems, Emergency Works, Restoration Works

revisions due to ill management by the administration. and Prefeasibility Works. ANNUAL REPORT

These interventions benefitted 52,099 people approximately.

We must also mention the training conferences provided to all the services. In 2011, three training workshops were carried out – one in each province of the 4th Region – with an attendance of 369 people approximately. The main topics addressed in the workshop were: Gender-related Issues, Labor Law and 2012 Project Portfolio. 54 ANNUAL REPORT 55 ANNUAL REPORT

Administration Report 56 ANNUAL REPORT 57 ANNUAL REPORT

Consolidated Annual Report Consolidated Annual Report 1

In 2011, the ordinary income increased in 8.2%, from M$ 109.552 in 2010 to M$ 118.565 in 2011. This can be explained by an increase of the mean Financial Year Operational Result 2 Result of the Financial Year rate and a greater consumption of drinking water and sewage services compared to the former year. 2001 28,389 15,481 The EBITDA (calculated as the incomes of the ordinary activities less 2002 28,117 15,614 the costs for raw materials and consumables used, for benefits for the employees and other expenses, per nature) increased 3.1%, reaching 2003 30,302 15,867 M$61,078. These EBITDA costs increased 14.2%, with greater expenses 2004 39,804 21,434 in Services for $4,627 million (21.9%) and Energy and Fuels for $1,196 2005 41,241 22,823 million (17.2%) mainly due to the effects of the draught. 2006 42,755 24,904 The Non-Operational component of the Income Statement decreased 2007 41,205 23,893 21.3%, from M$18,684 recorded in 2010 to M$22,660 in 2011, mainly 2008 38,325 19,819 because of a greater re-evaluation of the financial debt than the previous year. As at December 2011, the UF increased 3.9% versus 2010, 2009 39,977 26,333 when it value decreased 2.4%. 2010 39,852 17,293 2011 41,625 15,354 The Net Result of 2011 was M$15,354, 11.2% less than that recorded in 2010. Figures of periods 2001 to 2008 under Accounting Principles Generally Accepted in Chile, in millions of Chilean pesos of December 2009.

Figures of 2009 and 2011 under IFRS Norm, in millions of Chilean pesos of each year.

1 Esval prepares Consolidated Financial Statements since December 2003. 2. In 2009, 2010 and 2011, the Operational Result is calculated as Ordinary Income minus raw materials and consumables used, minus benefits for the employees, minus depreciation and amortization minus other inherent expenses. Annual Report 58

Financial Year Operational Result 3 Result of the Financial Year

2004 8,139 4,841 2005 8,570 5,301 2006 9,159 6,181 2007 8,958 6,346 2008 8,614 5,822 ANNUAL REPORT 2009 9,058 7,691 2010 8,667 6,230 Aguas del Valle 2011 9,448 7,311

In 2011, the operational income reached M$29,087 (11.2% more than Figures of periods 2004 to 2008 under Accounting Principles Generally in 2010); the EBITDA was M$13,214 (7.1% more than in 2010) and the Accepted in Chile, in millions of Chilean pesos of December 2009. Net Result obtained profits for M$7,311 (17.4% more compared to 2010). Figures of 2009 and 2011 under IFRS Norm, in millions of Chilean pesos of each year.

3. From 2009 to 2011, the Operational Result was calculated as Ordinary Income minus raw materials and consumables used, minus benefits for the employees, minus depreciation and amortization minus other inherent expenses. EBITDA 59 EBITDA is calculated as the income from the ordinary activities, minus Figures of periods 2001 to 2008 under Accounting Principles Generally the costs for raw materials and consumables used, by the benefits to the Accepted in Chile, in millions of Chilean pesos of December 2009. employees and other inherent expenses. Figures of 2009 and 2011 under IFRS Norm, in millions of Chilean pesos

of each year. ANNUAL REPORT

65.000 2011 60.000 2010 2007 2008 2006 55.000 2009 2005 50.000 55.309 61.078

45.000 57.891 59.232 58.222 2004 58.916 2003 2002 40.000 56.010 2001 35.000 30.000 53.636 41.037 25.000 37.765 37.637 20.000 15.000 10.000 5.000 0 Financing Structure Remunerations of Managers 60 and Main Executives Negotiable Instruments The remunerations and benefits obtained in 2011 by the company’s On 25 February 2009, the company recorded in the Registry of Securities managers and main executives amount to $ 918,141,477. of the S.V.S., two lines of negotiable instruments, under Nos. 43 and 44.

On 1 June 2011, the placing of Series 9A was carried out, charged to line No. 44 for an amount of $12,850 million, obtaining $12,432 million as a Incentive Plans result of said operation. This way, an average interest of 0.54% per month is obtained. These documents expired on 5 December 2011. Esval has, for its executives, a plan of annual bonuses for the fulfillment of objectives and individual contribution to the company’s profits. This On 7 June 2011, a new line under No. 87 was registered with a maximum plan includes a definition of bonuses rank, according to the executives’ ANNUAL REPORT issuance amount of $14,900 million. hierarchy level. The bonuses that are eventually given consist of a certain number of monthly gross remunerations. On 2 August 2011, the placing of Series 13A was carried out, charged to line No. 87 for an amount of $7,450 million, obtaining $7,002 million as a result of said operation. This way, an average interest of 0.55% per month is obtained. These documents expire on 13 July 2012.

Bank Credit

On 21 October 2011, a bank credit was signed with Banco BBVA for UF 1,500,000.- This credit shall be entirely paid in a period of 5 years (bullet) in half-yearly payments with an annual interest rate of 3.85%. Subsidiaries and Affiliates 61 According to the concepts stipulated in articles 86 and 87 of Law No. 18.046, investments in other companies; for the effects of operating the franchises in the Region of Coquimbo, of which ESSCO S.A., today ECONSSA CHILE S.A., was titular, on 4 December 2003, Esval incorporated closed limited company Aguas del Valle S.A., subsidiary that abides by the norms applied to open held corporations, with the only purpose ANNUAL REPORT of producing and distributing drinking water; collecting, treating and disposing waste waters; and providing the other services established in the current sanitary legislation.

Esval S.A. participated in the formation of this company, with 99%, and Sociedad de Servicios Sanitarios Las Vegas Limitada, with 1%. The latter is also subsidiary of Esval S.A., and was incorporated on 1 December 2003 for said purpose. In this case, Esval S.A. participated with 99.99%.

99,99% 99,00%

Sanitary Services Las Vegas Ltda.

1,00% 62

Type of Company: Closed Limited Company Tax Card No.: 99.541.380-9 Equity: TH$71,263,023 ANNUAL REPORT Subscribed and paid up Capital: TH$20,441,842

Purpose

Produce and distribute drinking water; collect, treat and dispose waste waters, and provide the other services established in the current sanitary Aguas del Valle legislation.

(1) Board of Directors

President: Jorge Lesser García Huidobro Vice-President: Juan Ignacio Parot Becker Director: Stacey Purcell Director: Olivia Steedman Director: Nicolás Navarrete Hederra Director: Juan Pablo Armas Mac Donald Director: Alejandro Ferreiro Yazigi

(1) All the Directors hold the same position in the Parent Company.

Executives

CEO: Rodrigo Azócar Hidalgo (2) 4th Region Manager: Ricardo Lalanne Sáez (2) CEO of the Parent Company. 63 ANNUAL REPORT

Participation of Esval S.A.: 99,00% In 2011, 193,657 drinking water customers were served, with a sales volume of 35,281 million of cubic meters. Regarding waste waters, the Investment proportion figures reached 185,005 customers, with sales for 31,955 million of cubic on Esval S.A.’s assets: 11,1% meters.

Commercial relations with Esval S.A. Investments

The accounts payable to Esval S.A. correspond to money the Company As at 31 December 2011, Aguas del Valle made annual investments for has received from the Parent Company in order to cover its initial opera- an amount of TH$8,256,832. tional and investment costs. Related Companies Deeds and contracts with Esval S.A. Aguas del Valle S.A. does not have any investments in related companies. As from the taking over of the concession, Esval S.A. provides administrative, commercial and managerial services to Aguas del Valle S.A. This contract has an indefinite validity. Results

The net result of Aguas del Valle S.A. reached profits for $7,311 million for Market financial year 2011.

Aguas del Valle S.A. is engaged in water purification, comprising the processes of collection, treatment and distribution of the product; as well as the purification of waste waters, including collection, treatment and final disposal of said waters. Its coverage area comprises the urban areas of thirteen of the fifteen communes of the Region of Coquimbo.

In order to comply with their functions, they operate eighteen productive systems that serve the same quantity of drinking water distribution systems and have twenty two systems of treatment and disposal of waste waters that clean the residual waters collected from twenty two collection systems. 64

Type of Company: Limited Partnership Equity: TH$712,570 Subscribed and paid up Capital: TH$165,000 ANNUAL REPORT

Purpose

Produce and distribute drinking water, collect, treat and dispose waste waters and carry out any other related activity, directly or indirectly, Sanitary Services operating or rendering said services. Las Vegas Ltda. Administration

Rodrigo Azócar Hidalgo (1) Legal Representative of Las Vegas Ltda. (1) CEO of the Parent Company. 65 ANNUAL REPORT

Participation of Esval S.A.: 99,99%

Investment proportion on Esval S.A.’s assets: 0,1%

Investments

As at 31 December 2011 no investments are recorded.

Related Companies

Sociedad de Servicios Sanitarios Las Vegas Ltda. has a participation of 1.0% of Aguas del Valle.

Results TH$73,114 66 Highlights Esval

Date Document No.: Subject

17/01/11 CEO Letter No. 20 REPORTING ON CHANGES IN THE MANAGEMENT 25/01/11 CEO LETTER NO. 42 REPORTING ON CHANGES IN THE MANAGEMENT 25/01/11 CEO LETTER NO. 43 REPORTING ON CHANGES IN THE MANAGEMENT 29/04/11 CEO LETTER NO. 147 REPORTING ON THE PROFIT SHARE (DIVIDEND PAYMENT)

ANNUAL REPORT 29/04/11 CEO LETTER NO. 148 REPORTING ON ORDINARY SHAREHOLDER’S MEETING, SUMMONS, AGREEMENTS AND PROPOSALS 29/04/11 CEO LETTER NO. 151 REPORTING ON CHANGES IN THE MANAGEMENT 01/06/11 CEO LETTER NO. 203 REPORTING ON ALLOCATION OF VALUES IN INTERNATIONAL AND/OR DOMESTIC MARKETS 26/07/11 CEO LETTER NO. 275 REPORTING ON CHANGES IN THE MANAGEMENT 02/08/11 CEO LETTER NO. 284 REPORTING ON ALLOCATION OF VALUES IN INTERNATIONAL AND/OR DOMESTIC MARKETS 17/08/11 CEO LETTER NO. 295 REPORTING ON THE PROFIT SHARE (DIVIDEND PAYMENT) POLICY ON DIVIDENDS 26/08/11 CEO LETTER NO. 308 REPORTING ON EXTRAORDINARY SHAREHOLDER’S MEETING, SUMMONS, AGREEMENTS AND PROPOSALS 26/08/11 CEO LETTER NO. 309 REPORTING ON EXTRAORDINARY SHAREHOLDER’S MEETING, SUMMONS, AGREEMENTS AND PROPOSALS 29/09/11 CEO LETTER NO. 360 REPORTING ON CHANGES IN THE MANAGEMENT 30/09/11 CEO LETTER NO. 367 INFORMING ON THE AMENDMENT AGREEMENT TO THE BONUS ISSUANCE CONTRACT TO COMPLY WITH THE IFRS NORMS 07/10/11 CEO LETTER NO. 374 REPORTING ON CHANGES IN THE MANAGEMENT 24/10/11 CEO LETTER NO. 388 REPORTING ON THE SUBSCRIPTION AND RENEGOTIATION OF CREDITS 03/11/11 CEO LETTER NO. 401 INFORMING ON THE AMENDMENT AGREEMENT TO THE BONUS ISSUANCE CONTRACT TO COMPLY WITH THE IFRS NORMS 07/12/11 CEO LETTER NO. 451 REPORTING ON THE PROFIT SHARE (DIVIDEND PAYMENT)

These essential facts have not influenced or affected the operation and results of the Company.

Aguas del Valle

Date Document No.: Subject

17/01/2011 CEO LETTER No. 09 REPORTING ON CHANGES IN THE MANAGEMENT 25/01/2011 CEO LETTER NO. 12 REPORTING ON CHANGES IN THE MANAGEMENT 25/01/2011 CEO LETTER NO. 15 REPORTING ON CHANGES IN THE MANAGEMENT 29/04/2011 CEO LETTER NO. 56 REPORTING ON ORDINARY SHAREHOLDER’S MEETING, SUMMONS, AGREEMENTS AND PROPOSALS 29/04/2011 CEO LETTER NO. 57 REPORTING ON CHANGES IN THE MANAGEMENT 26/07/2011 CEO LETTER NO. 98 REPORTING ON CHANGES IN THE MANAGEMENT 26/08/2011 CEO LETTER NO. 112 REPORTING ON EXTRAORDINARY SHAREHOLDER’S MEETING, SUMMONS, AGREEMENTS AND PROPOSALS 29/09/2011 CEO LETTER NO. 125 REPORTING ON CHANGES IN THE MANAGEMENT 07/10/2011 CEO LETTER NO. 131 REPORTING ON CHANGES IN THE MANAGEMENT Statement 67 Comments and Proposals of the Shareholders of Liability

The shareholders representing 10% or more of the shares issued, with right to vote have not The undersigned declare under oath to be responsible for the ANNUAL REPORT made any comments or proposals regarding truthfulness of the information contained in the Annual Report Esval the progress of the social businesses, so com- corresponding to financial year 2011. ments and proposals in said respect are not in- cluded in this annual report. PRESIDENT, Jorge Lesser García-Huidobro 6.443.633-3

VICE-PRESIDENT, Juan Ignacio Parot Becker 7.011.905-6

DIRECTOR Olivia Penelope Steedman 48.120.868-8

DIRECTOR Alejandro Ferreiro Yazigi 6.362.223-0

DIRECTOR Juan Pablo Armas Mac Donald 6.198.258-2

CEO Rodrigo Azócar Hidalgo 6.444.699-1 68 ANNUAL REPORT

estados financieros 69 ANNUAL REPORT

Esval S.A. y filiales

States Financial 70 ANNUAL REPORT Consolidated 71 Financial Statements

Esval S.A. ans Subsidiaries ANNUAL REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2011 AND 2010 (In thousands of Chilean pesos - ThCh$)

Note 31/12/11 31/12/10 Assets N° ThCh$ ThCh$

CURRENT ASSETS: Cash and cash equivalents 4 14,915,169 17,073,589 Other current non-financial assets 1,883,809 1,814,016 Trade and other receivables, net 5 - 6 28,974,896 26,888,436 Inventories 8 473,005 453,903 Current tax assets 21 628,873 1,683,081 Total current assets 46,875,752 47,913,025

NON-CURRENT ASSETS: Other non-current financial assets 5 - 12 4,850,139 3,705,752 Non-current other non-financial assets 13 14,272,158 14,626,951 Non-current receivable 6 26,409 29,514 Intangible assets other than goodwill 9 121,258,374 117,929,042 Property, plant and equipment, net 20 472,562,572 470,849,917 Activos por impuestos diferidos 21 - - Total non-current assets 612,969,652 607,141,176

Total Assets 659,845,404 655,054,201

The accompanying notes are an integral part of these consolidated financial statements.

AS OF DECEMBER 31, 2011 AND 2010 (In thousands of Chilean pesos - ThCh$)

72 Note 31-12-2011 31-12-2010 Equity And Liabilities N° ThCh$ ThCh$

CURRENT LIABILITIES: Other current financial liabilities 5 34,292,805 47,885,459 Trade and other payable 5 12,450,965 10,957,968 Account payable to related companies 7 - 646 Other current provisions 14 492,748 434,297

ANNUAL REPORT Current tax liabilities 21 458,158 788,214

Current provisions for employee benefits 14 2,954,897 3,008,656

Other current non-financial liabilities 15 13,751,221 14,324,587 Total current liabilities 64,400,794 77,399,827

NON-CURRENT LIABILITIES: Other non-current financial liabilities 5 253,625,087 231,756,666 Deferred tax liabilities 21 48,539,629 46,866,797 Non-current provisions for employee benefits 14 430,498 535,123 Total non-current liabilities 302,595,214 279,158,586

EQUITY: Issued capital 15 196,176,015 196,207,284 Retained earnings 15 80,746,979 86,323,943 Share premium 15 11,112,721 11,150,887 Other reserves 15 4,813,610 4,813,610

Equity attributable to owners of the Parent Company 292,849,325 298,495,724 Non-controlling interest 16 71 64 Total equity 292,849,396 298,495,788

Total Equity And Liabilities 659,845,404 655,054,201

The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements 73 Of Comprehensive Income per Nature ANNUAL REPORT

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (In thousands of Chilean pesos - ThCh$)

from 01/01/2011 from 01/01/2010 Note to 12/31/2011 to 12/31/2010 N° ThCh$ ThCh$

Revenues 18 118,565,474 109,552,694 Raw material and consumable used (15,331,403) (13,455,298) Employee benefits expense (10,429,087) (10,125,797) Depreciation and amortization expense (19,453,517) (19,379,699) Other expenses 2.6 (31,726,548) (26,739,653) Other gains (losses) 2.6 (754,491) (476,730)

Financial income 947,720 401,246

Financial costs (13,181,096) (12,301,097)

Results for readjustment units (9,672,479) (6,307,116)

Profit before tax 18,964,573 21,168,550

Tax income (expense) 21 (3,610,240) (3,875,357)

Profit from continuing operations 15,354,333 17,293,193 Profit from discontinuing operations - -

Profit 15,354,333 17,293,193 (Continued)

Note from 01/01/2011 from 01/01/2010 74 to 12/31/2011 to 12/31/2010 N° ThCh$ ThCh$

Profit from: Profit from owners of the Parent Company 15,354,326 17,293,187 Profit from minority interests 16 7 6 Profit 15,354,333 17,293,193

Profit per Share: Basic earnings per share: ANNUAL REPORT Basic earnings per share from continuining operations 22 0.0010 0.0012 Basic earnings per share from discontinuining operations 0.0000 0.0000 Basic earnings per share 0.0010 0.0012

Diluted earnings per share Diluted earnings per share from continuinig operations 0.0010 0.0012 Diluted earnings per share from discontinuinig operations 0.0000 0.0000 Diluted earnings per share 0.0010 0.0012

The accompanying notes are an integral part of these consolidated financial statements.

from 01/01/2011 from 01/01/2010 Consolidated Statement Of to 12/31/2011 to 12/31/2010 Comprehensive Income ThCh$ ThCh$

Profit 15,354,333 17,293,193 Total comprehensive income 15,354,333 17,293,193

Comprehensive income attributable to Owners of the Parent Company 15,354,326 17,293,187 Non-controlling interest 7 6 Total comprehensive income 15,354,333 17,293,193

The accompanying notes are an integral part of these consolidated financial statements. Statements Of Changes 75 In Net Equity ANNUAL REPORT FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (In thousands of Chilean pesos - ThCh$)

Equity Issues Share Shares In Own Other Retained Attributable To Non-Controlling Total Capital Premiums Portfolio Reserves Earnings/(Losses) Owners Of The Interests Equity Parent Company ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Equity at beginning of current period 01/01/2011 196,207,284 11,150,887 - 4,813,610 86,323,943 298,495,724 64 298,495,788 Profit - - - - 15,354,326 15,354,326 7 15,354,333 Dividends - - - - (20,931,290) (20,931,290) - (20,931,290) Increase (decrease) through transfers and other changes (31,269) (38,166) - - - (69,435) - (69,435) Total increase (decrease) in equity (31,269) (38,166) - - (5,576,964) (5,646,399) 7 (5,646,392)

Equity at end of current period 12/31/2011 196,176,015 11,112,721 - 4,813,610 80,746,979 292,849,325 71 292,849,396

Equity at end of current period 01/01/2010 196,207,284 11,150,887 - 4,813,610 97,882,276 310,054,057 58 310,054,115 Profit - - - - 17,293,187 17,293,187 6 17,293,193 Dividends - - - - (28,851,520) (28,851,520) - (28,851,520) Increase (decrease) through transfers and other changes ------Total increase (decrease) in equity - - - - (11,558,333) (11,558,333) 6 (11,558,327) Equity at end of prior period 12/31/2010 196,207,284 11,150,887 - 4,813,610 86,323,943 298,495,724 64 298,495,788

The accompanying notes are an integral part of these consolidated financial statements. 76 Consolidated Direct Statements Of Cash Flows

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (In thousands of Chilean pesos - ThCh$)

from 01/01/2011 from 01/01/2010 Note to 12/31/2011 to 12/31/2010

ANNUAL REPORT Net cash flows from (used in) operating activities N° ThCh$ ThCh$

Classes of cash receipts from operating activities: Receipts from sales of goods and rendering of services 138,517,747 130,450,360 Other cash receipts from operating activities 4,465,160 2,442,135 Classes of payments from operating activities: Payments to suppliers for good and services (56,180,461) (48,067,342) Payments to and on behalf of a employees (10,513,584) (9,578,885)

Other cash payments from operating activities (14,147,371) (13,229,660)

Interest paid (10,322,243) (10,700,645)

Interest received 702,376 169,008 Net cash flows from operating activities 52,521,624 51,484,971

Net cash flows from (used in) investing activities Amounts received from sale of property, plant and equipment 13,848 -

Purchase of property, plant and equipment and intangible assets (27,647,400) (28,350,588) Other inflows (outflows) of cash (315,454) (259,467) Net cash flow used in investing activities (27,949,006) (28,610,055) 77 ANNUAL REPORT

(Continued)

Net cash flows from (used in) financing activities Proceeds from long-term borrowings - - Proceeds from long-term borrowings 33,730,319 479,960 Total proceeds from borrowings 33,730,319 479,960 Repayments of borrowings (57,894,501) (32,391,582) Dividends paid (22,364,015) (22,487,725) Other inflows (outflows) of cash 19,797,159 25,360,440 Net cash flow used in financing activities (26,731,038) (29,038,907)

Net decrease in cash and cash equivalents (2,158,420) (6,163,991) Cash and cash equivalents at the beginning of period 17,073,589 23,237,580 Cash and cash equivalents at the end of period 4 14,915,169 17,073,589

The accompanying notes are an integral part of these consolidated financial statements.

78 Notes To The Consolidated Financial Statements

1. General Information

Esval S.A. and its subsidiaries make up the Esval Group. Its legal domicile is Cochrane 751, Valparaiso, Chile and its taxpayer number is 89.900.400-0 ANNUAL REPORT Esval SA. was incorporated as a corporation by means of a public deed dated June 12, 1989, in Santiago, drawn up and executed before Notary Public Raúl Undurraga Laso. An excerpt of its by-laws was published in the Official Gazette on June 15, 1989, and it was registered on page (verso) 449, No. 469 of the 1989 Business Register. It is also registered with the Superintendency of Securities and Insurance under registration number 0348, and, therefore, is subject to inspection by that Superintendency.

The Company’s corporate purpose is to produce and distribute drinking water and to collect, treat and dispose of sewage. Additionally, it renders other services related to such activities, in the manner and subject to the terms and conditions stipulated in the law that authorized its incorporation and any other applicable regulations. With the exception of sectors granted to private or municipal services, the Company currently maintains the rights of distribution throughout the urban areas of the Valparaiso Region previously serviced by the Region’s former Sanitation Company as of January 27, 1986, in addition to expansion zones considered in the development plans of the Ministry of Public Works approved by the Superintendendency of Sanitary Services, as stipulated in Law 18777 and decrees 2166/78 and 69/89. The Company’s service area additionally includes urban locations whose sanitary concessions have been awarded to Esval S.A. by the Authorities after that date, either by regularizing the expansion areas considered in its development plans or by expanding its concession zones. The Company also provides drinking water services in other locations, outside the concession area, in the Community of Algarrobo, based on agreements signed with the communities of Algarrobo Norte, Mirasol and Las Brisas.

On November 25, 2003, in a competitive bidding, the Company was awarded the right to exploit the concessions held by ECCONSA CHILE S.A. (at that time ESSCO S.A.), the sanitary company in the Region of Coquimbo, for 30 years. To that end, it incorporated a closely- held subsidiary corporation called Aguas del Valle S.A., on December 4, 2003, registered under number 88 of the Special Record of Reporting Entities (REEI) of the Superintendency of Securities and Insurance, which is therefore subject to the inspection of such Superintendency. Aguas del Valle produces and distributes drinking water, and collects, treats and disposes of sewage, and also renders other services related to such activities, under the terms and conditions stipulated in Statutory Decree 382 of 1988 by the Ministry of 79 Public Works and other applicable regulations.

The direct controlling entity is Inversiones OTPPB Chile III Limitada, which is in turn is controlled by Inversiones Southwater Limitada (“ISL”), a subsidiary of AndesCan SpA., an investment vehicle in Chile of the Canadian institution Ontario Teachers’ Pension Plan Board (OTPPB). ANNUAL REPORT

Esval S.A. and subsidiaries have a staff of 527 workers, comprised of 65 managers, assistant managers and department heads.

2. Basis Of Preparation And Accounting Policies

2.1 Basis of Preparation

The consolidated financial statements of Esval S.A. and subsidiaries as of December 31, 2011 have been prepared in conformity with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (hereinafter “IASB”), and were approved by its Board of Directors at their meeting held on March 21, 2012. The Company is fully in compliance without exception with IFRS.

These consolidated financial statements faithfully reflect the financial position of Esval S.A. and subsidiaries as of December 31, 2011 y 2010 and the results of its operations, changes in net equity and cash flows for the year ended December 31, 2011.

The financial statements as of December 31, 2010, include a reclassification of a portion of the item “Intangible assets” to the item “Other financial assets” for an amount of ThCh$3,705,752, related to a revised calculation performed during 2011of the estimated value of accounts receivable pertaining to Aguas del Valle S.A. upon termination of the concession with Ecconsa Chile S.A. – See note 12.

The Company and its subsidiaries comply with all legal requirements of the environment in which activities are developed under normal operating conditions in all areas of the business. Projections show that the Company will continue to be profitable and has the ability to access the financial system to finance its operations. As such, in the opinion of management, the Company has the ability to continue as a going concern in accordance with the accounting standards under which these financial statements are issued.

Functional currency

The balances included in the financial statements of each of the consolidated entities are measured using the currency of the main economic environment in which the entity oper- ates (Functional currency), in accordance with IAS 21. The consolidated financial statements are presented in Chilean pesos, which is the Com- 80 pany’s functional and presentation currency.

Changes to Accounting Standards As of 2011, the Group has adopted International Financial Reporting Standards (IFRS) for the first time and this is the first presentation of the comparative financial statements under these standards.

These consolidated financial statements for the year ended December 31, 2011 and 2010 comply with each of the international financial reporting standards enforced at this date.

2.2 New accounting pronouncements ANNUAL REPORT

a) New and revised IFRS effective in the current year The following new and revised IFRS have been adopted in these financial statements:

Amendments to IFRSs Effective date

IAS 24, Related Party Disclosures – Revised definition of related parties Annual periods beginning on or after January 1, 2011. IAS 32, Financial Instruments: Presentation – Amendments relating to classification of rights issues Annual periods beginning on or after February 1, 2010. Annual Improvements to IFRS 2010 – A collection of amendments to seven IFRSs Mostly for annual periods beginning on or after January 1, 2011.

New Interpretations Effective date

IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments Annual periods beginning on or after July 1, 2010.

Amendments to Interpretations Effective date

IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. Annual periods beginning on or after January 1, 2011.

The application of these new and revised IFRS has not had any material impact to the financial statements of the Group. b) New and revised IFRS in issue but not yet effective As of the date of issuance of these consolidated financial statements, the following 81 accounting pronouncements have been issued by the IASB but there are not yet effective:

New Standards, Interpretations and Amendments Effective date ANNUAL REPORT

IFRS 9, Financial Instruments – Classification and Measurement Annual periods beginning on or after January 1, 2015. IFRS 10, Consolidated Financial Statements Annual periods beginning on or after January 1, 2013 IFRS 11, Joint Arrangements Annual periods beginning on or after January 1, 2013 IFRS 12, Disclosure of Involvement with Other Entities Annual periods beginning on or after January 1, 2013 IAS 27 (2011), Separate Financial Statements Annual periods beginning on or after January 1, 2013 IAS 28 (2011), Investments in Associates and Joint Ventures Annual periods beginning on or after January 1, 2013 IFRS 13, Fair Value Measurements Annual periods beginning on or after January 1, 2013

Amendments to Standards Effective date:

IAS 1, Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income Annual periods beginning on or after July 1, 2012 IAS 12, Income Taxes – Limited scope amendment (recovery of underlying assets) Annual periods beginning on or after January 1, 2012. IAS 19, Employee benefits (2011) Annual periods beginning on or after January 1, 2013 IAS 32, Financial instruments: presentation – Clarified requirements for offsetting of financial assets and financial liabilities and amends disclosures Annual periods beginning on or after January 1, 2014 IFRS 1 (Revised), First Time Adoption of IFRS – (i)Replacement of ‘fixed dates’ for certain exceptions with ‘the date of transition to IFRSs’ – (ii) Additional exemption for entities ceasing to suffer from Annual periods beginning on or after July 1, 2011. severe hyperinflation IFRS 7, Financial Instruments: Disclosures – Amendments enhancing disclosures about transfers of financial assets Annual periods beginning on or after July 1, 2011.

New Interpretations Effective date

IFRIC 20, Stripping costs in the production phase of a surface mine Annual periods beginning on or after January 1, 2013

Management of Esval S.A. and subsidiaries estimates that the adoption of the Standards and Interpretations above will not have a significant impact in the Group’s consolidated financial statements. 2.3 Responsibility for the Information and Estimates made 82 The information contained in these consolidated financial statements is the responsibility of the Company’s Board of Directors who expressly states that the principles and criteria included in IFRS have been fully applied.

In preparing these financial statements the following estimates have been used:

• Vida útil de activos fijos e intangibles • Losses for impairment of assets • Assumptions used in the actuarial calculation of employee benefits • Unbilled revenue estimates

ANNUAL REPORT • Provisions for commitments with third parties • Risks arising from current litigations

These estimates and judgments were made based on the best information available about the events analyzed as of December 31, 2011 and 2010. Any event that may occur in the future requiring changes (upwards or downwards) in estimates in future years will be recognized when they are known and the effects of such changes will be recognized within the statement of income or equity accounts in the financial statements, as appropriate.

2.4 Accounting policies

The following are the main accounting principles which have been consistently applied in the preparation and presentation of the financial statements as of December 31, 2011.

A. Basis for consolidation

Subsidiaries are those entities over which the Company has the power to direct their financial and operating policies. Such power is generally accompanied by ownership of more than 50% of the voting rights.

The consolidated financial statements include the assets, liabilities, revenue and expenses and results of the parent and the subsidiaries of Aguas del Valle S.A. and Servicios Sanitarios Las Vegas Limitada.

As of December 31, 2011 and 2010, the parent owns a 99% interest in Aguas del Valle S.A., and 99.99% interest in Servicios Sanitarios Las Vegas Limitada. Additionally, Servicios Sanitarios Las Vegas Limitada owns a 1% interest in Aguas del Valle S.A. Participation percentage Tax ID Name Country of origen Functional currency 83 Origen Currency Total % % 99.541.380-9 Aguas del Valle S.A. Chile Pesos Chilenos 99.00 0.99 99.99 76.027.490-9 Servicios Sanitarios Las Vegas Ltda. Chile Pesos Chilenos 99.99 0 99.99 ANNUAL REPORT

The effects of transactions between consolidated companies have been eliminated and the ownership interest related to non-controlling shareholders is presented in the consolidated financial statements under Non-controlling Interests.

The accounting policies adopted by the subsidiaries are consistent with the policies adopted by the Parent.

B. Transactions and non-controlling interests

The Group´s transactions with non-controlling interests are considered transactions with third parties unrelated to the Company.

C. Operating segments

The Group discloses information by segment in accordance with IFRS 8, Operating Segments, which establishes the reporting requirements for operating segments and disclosures related to products and services. Operating segments are defined as components of an entity for which there is discrete financial information regularly reviewed by Management to make decisions about resources to be allocated and assess their performance. The Group manages and measures the performance of its operations by business segment. The following are the operating segments internally reported:

• Operations related to transactions within the Valparaiso Region. • Operations related to transactions within the Coquimbo Region.

D. Intangibles Assets

The Company and its subsidiaries recognize an identifiable intangible asset when they can demonstrate that it is probable that the future economic benefits attributed to the asset will flow to the entity and the cost can be measured reliably. Esval S.A. and its subsidiaries measure their intangible assets using the cost model defined 84 in IAS 38.

The main intangible assets with indefinite useful lives are water rights and easements, whereas the main intangible assets with finite useful lives are the right to exploit the sanitary concession in the Coquimbo Region, software applications and other rights.

In measuring water rights with indefinite useful lives, Esval and its subsidiaries have elected to measured them at their fair value at December 31, 2008, defined as deemed cost at the transition date to IFRS.

The remaining intangible assets with definite useful lives are measured at the price-level restated acquisition cost, net of amortization, at December 31, 2008, which became the ANNUAL REPORT attributed deemed cost, under the exemption allowed in IFRS 1.

The following factors, among others, should be considered in estimating the useful life:

• Legal, regulatory or contractual limitations. • Foreseeable life of the business or industry. • Economic factors (obsolescence of the products, changes in demand). • Natural, climate and technology change factors affecting the ability to generate benefits.

The useful life may require modifications over time due to changes in estimates resulting from changes in the assumptions related to the above factors.

Intangible assets with finite useful live

The amortization method applied by the Company reflects the pattern in which the asset’s future economic benefits are expected to be used by the entity. To that end, the Company uses the straight-line method of depreciation.

The main intangible asset with a finite useful life is the right to exploit the sanitary concession in the Region of Coquimbo. Its initial useful life is for the term of the concession contract, which is 30 years beginning in December of 2003. For software applications, the estimated useful life determined is 4 years.

Assets related to the right of exploitation of the Sanitary Concession in the Coquimbo region are additionally recognized as intangible assets which are amortized according to their technical specifications and individually assigned. Estimated useful lives or amortization rates used for identifiable intangible assets with finite useful lives are as follows: 85

The estimated useful life of software applications is 4 years. For other intangibles assets with finite useful lives, the amortization period corresponds to the period established in the contracts or rights from which they originate, which is 30 years in the case of the contract related to the right of exploitation of the sanitary concession in the Coquimbo region. ANNUAL REPORT

Intangibles with indefinite useful lives: These mainly related to water rights and easements, which were obtained for an indefinite period.

The cost of some intangibles includes direct remunerations, consultancy services and other inherent identifiable costs.

Service concessions: The Aguas del Valle S.A. subsidiary owns the rights to exploit the sanitary concessions in the Coquimbo Region that were awarded through a public bidding by Empresa de Servicios Sanitarios de Coquimbo (ESSCO) (currently ECONSSA Chile Ltda.). These service concession arrangements are measured in accordance with the requirements of IFRIC 12, Service Concession Arrangements, as they correspond to public-to-private service concession arrangements, where: (i) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom and at what price, and; (ii) the grantor controls through ownership the beneficial entitlement or any other significant residual interest in the infrastructure at the end of the term of the agreement.

The infrastructure under the scope of this Interpretation is not recognized as property, plant and equipment of Aguas del Valle (the ‘operator’), independently from the degree at which the operator assumes the incidental risk and rewards to ownership and regardless of which party of the contracts has legal title to ownership during the agreement, given that the asset is ‘controlled’ by the grantor. Rather, the operator recognizes a financial asset when it has an unconditional right to receive cash or another financial asset from the grantor (‘Financial Asset Model’); and/or an intangible asset when it has a right to charge users of the public service (‘Intangible Asset Model’). Under both models, the operator accounts for revenue and costs related to the construction services in accordance with IAS 11, Construction Contracts. Revenue and costs relating to operating services are accounted for in accordance with IAS 18, Revenue. In addition, the contractual obligations establish that as a condition of the concession received the operator should comply with the following: (a) maintain the infrastructure to a specified level of operability, and (b) restore the infrastructure to a specified condition before it is handed over to the grantor at the end of the concession agreement. The contractual obligations to maintain or restore infrastructure shall be recognized and measured in accordance with IAS 37, i.e. at the best estimate of the expenditure that would be required to settle the present obligation at the end of the reporting period. 86 Finally, in accordance with IAS 23, borrowing costs attributable to the arrangement shall be recognized as an expense in the period in which they are incurred unless the operator has a contractual right to receive an intangible asset (a right to charge users of the public service). In this case, borrowing costs attributable to the arrangement shall be capitalized during the construction phase of the arrangement. In conformity with the concession contract signed by the Company, it has the right to recover the value of the investments that are not repaid upon termination of the concession, generating an account receivable presented in the item “Other non-current financial assets” and the detail shown in Note No. 12 “Other non- current financial assets”. An intangible asset has been recorded for the investments made (in infrastructure) that shall be transferred to ECONSSA CHILE S.A. upon termination of the term of the concession contract, or 30 years as of December 2003. ANNUAL REPORT Information to be disclosed on internally generated intangible assets:

The Company does not have any internally-generated intangible assets.

E. Property, plant and equipment

Basis for measurement of property, plant and equipment:

The Company and its subsidiaries measure their property, plant and equipment under the cost model in accordance with IAS 16. Nevertheless, upon first-time adoption of IFRS certain land was revalued and that value was recognized at deemed cost. The historical cost includes all expenses directly attributable to the acquisition of the assets.

Expansion, modernization and improvement costs that represent an increase in productivity, capability or efficiency or an increase in the useful lives of the assets are accounted for as costs of the corresponding assets.

Direct remunerations, advisory fees and other inherent and identifiable costs as well as borrowing costs are included in the cost of certain projects in progress.

Repair and maintenance costs are recorded as an expense in the period in which they are incurred.

Borrowing costs incurred during the construction of any qualifying asset are capitalized over the period necessary to complete and prepare the asset for its intended use. Other borrowing costs are expensed when incurred. Construction works in progress are transferred to assets in service once the testing period has been completed and the assets are available for use, which is the date depreciation of 87 the asset begins.

Subsequent costs are included in the carrying amount of the initial asset or are recognized as a separate asset only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any item replaced is derecognized from the accounting records. All ANNUAL REPORT other repairs and maintenance costs are expensed in the period when they are incurred.

Due to the nature of the assets constructed by the Company and as there are no contractual obligations, such as those mentioned in the IFRS, the recognition requirements for dismantling costs are not applicable to the Company.

Depreciation method for property, plant and equipment: The depreciation method used by the Company corresponds to the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. In this regard, the Company uses the straight-line method of depreciation over the technical useful life of the asset, which has been determined by studies carried out by independent valuation experts. The residual value and useful lives of the assets are reviewed and revised if necessary at the end of each reporting period.

Estimated useful lives for property, plant and equipment: The useful lives considered in calculating depreciation were estimated via studies carried out by independent valuation experts. Useful lives of assets are reviewed in the event that there is any new information indicating that useful life of an asset might have changed. The useful lives applied by the Company are the following: 88 Minimum useful life Maximum useful life Item (In years) (In years)

Useful life for buildings 20 80 Useful life for plant and equipament 5 50 Useful life for equipament and It 4 5 Useful life forfixed facilities and accessories 5 80 Useful life for motor vehicles 7 10

ANNUAL REPORT Useful life for other property, plant and quipament 10 50

The useful lives of the assets are determined based on several factors, which generally include:

• Nature of the material components used in the equipment and construction • Means of operation of the equipment • Intensity of use • Legal, regulatory or contractual limits on the use of the asset.

The Company and its subsidiaries depreciate their assets using the straight-line method over the estimated useful lives.

Policy for disposal of property, plant and equipment: The gain or loss on disposal of property, plant and equipment is determined as the difference between the net proceeds received and the carrying amount and is recognized in comprehensive income. When disposing of assets measured at revalued amounts, the revaluation surplus included in equity is transferred to retained earnings.

Policy for impairment of property, plant and equipment: The Company and its subsidiaries, based on the results of the impairment test described in Note 2.2.f, have determined that the carrying amount of assets does not exceed their recoverable amount.

The recoverable amount of assets is determined in accordance with IAS 16. Assets are tested for impairment on an ongoing basis by estimating whether there will be sufficient future economic benefits to cover all the costs including the depreciation of the property, plant and equipment in accordance with IAS 36. Assets for Urbanizations: Included in the line item for property, plant and equipment are payments made for 89 urbanizations financed by third parties in the development of their projects designed for the purpose of connecting their customers to Esval S.A.’s sanitary service network.

These assets mainly correspond to drinking and sewage water networks that are required in order to provide sanitary services to newly incorporated customers. According to the Sanitary Services Law, these assets neither represent assets of the sanitary companies for ANNUAL REPORT purposes of establishing tariffs, nor do they give rise to any obligation for the Company with those making such urbanizations.

Articles 36 to 43 and 53 of Decree Law No. 382/1998 of the Ministry of Public Works (the General Law on Sanitary Services’) establish the responsibilities related to the installation, for the developer, and also state that the sanitary service provider is responsible for the maintenance and replacement of these assets.

The Company recognizes such assets at fair value and with a corresponding credit to a complementary account named “Assets financed from developers”. The assets are recorded as property, plant and equipment and the complementary accounts are amortized over the same useful life associated with the corresponding assets.

F. Impairment of assets

Impairment of assets is determined based on the level of the related contribution expected to generate financial resources for the company.

As such, based on performance of continuous service, the capacity to generate financial resources in the Company is bundled within the operating assets, to form the aggregate value of the “cash generating units” of Esval and Aguas del Valle, respectively.

In testing the above Cash Generating Units for impairment, the Company estimates the present value of the expected future cash flows by using a discount rate that reflects both the time value of money and the specific risks associated with the asset. The present value amount is then compared to the carrying amount of the assets comprising the cash generating unit.

Based on the comparison mentioned in the preceding paragraph, the Company has determined that the carrying amount of the assets composing the cash-generating units is less than the present value of the expected future cash flows. Therefore, no impairment loss has been recognized in the period.

When the recoverable amount of an asset is less than its carrying amount, the difference is recognized as an “Impairment loss of assets” in comprehensive income. Impairment losses are reversed in the event of a change in estimate of the recoverable amount. Reversals of impairment losses are recognized immediately in profit or loss by increasing the carrying 90 amount of the asset. The increased carrying amount of an asset attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.

G. Financial assets

Current and non-current financial investments are classified in the following categories:

Financial assets held-for-trading These are assets acquired principally for the purpose of generating benefits as a result of fluctuations in their value. Financial assets included in this category are measured in the ANNUAL REPORT consolidated statement of financial position at fair value. Changes in fair value are recognized as an expense or income in the income statement accounts, as appropriate.

Loans and receivables Loans and receivables are initially are measured at amortized cost using the effective interest method.

Investments held-to-maturity These are financial investments held by the Company until maturity. They are measured at their amortized cost using the effective interest method.

Available-for-sale financial assets These include all of Esval’s financial assets not included in the three previous categories. These investments are measured in the consolidated statement of financial position at their fair value. Highly liquid short-term investments that are readily convertible into known amounts of cash which are subject to insignificant risk of change in value, such as time deposits, repurchase agreements and mutual funds, are considered as cash equivalents in accordance with IAS 7.

H. Inventories

Inventories are measured at the lower of cost and net realizable value. I. Trade and other receivables 91 Trade and other receivables are recognized initially at their fair value; subsequently, they are measured at amortized cost. This item also includes a provision for impairment losses due to uncollectible receivables from third parties.

Policy for Uncollectible Accounts The provision for uncollectible accounts is determined based on the following factors: ANNUAL REPORT

• Aging of the unpaid balance • Type of customer • Compliance with repayment agreements

The analysis of payment behavior from the different classes of debtors is affected by: i) the classification as subsidized and non-subsidized debtors and ii) the fact that the Company is legally entitled to suspend the service provided to customers who do not make payments.

The carrying amount of the asset is reduced in the same amount as that increasing the provision for uncollectible accounts that is recognized as an expense in the statement of income within the line item “finance costs”. When a receivable is determined to be uncollectible, it is written off against the provision for uncollectible accounts.

J. Basis of translation of foreign currency

Assets and liabilities in Unidades de Fomento (UF = inflation index-linked unit of account) and/or foreign currencies are measured at each corresponding date as follows:

12/31/2011 12/31/2010 Currency ThCh$ ThCh$

Unidad de Fomento 22,294.03 21,455.55 US dollar 519.20 468.01 Euro 675.20 627.61

Exchange differences are recognized in profit or loss for the period, within the line item “Results for readjustment” K. Financial obligations 92 Borrowings and bonds payable are initially recognized at their fair value, which corresponds to the value of the proceeds received, net of transaction costs incurred. Subsequently, they are measured at amortized cost using the effective interest method.

L. Derivative financial instruments and hedge accounting

The Company has not entered into any derivative or hedging relationships.

M. Provisions and contingent liabilities ANNUAL REPORT

Provisions are measured taking into account the best information available about events and their probable outcome. Provisions are revised at the end of each reporting period. The Company recognizes a provision when there is a present obligation of uncertain timing or amount with third parties arising from past events for which it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Contingent liabilities are possible obligations that arise from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent liabilities are not recognized in the financial statements.

N. Unearned income

This item essentially includes amounts of cash received from customers or government agencies to finance the construction or acquisition of certain facilities and, in some cases, the facilities directly received from them.

These amounts are recorded as unearned income within the liability section in the statement of financial position and are recognized through profit or loss over the useful life of the corresponding assets within the line item “Other operating income”, thereby offsetting depreciation expense in the statement of comprehensive income. O. Income tax and deferred taxes 93 Income tax expense for the period includes both current tax from applying the tax regulations on the taxable income for the year, once all applicable tax additions and deductions have been made, as well as the variation in deferred tax assets and liabilities and tax credits arising from taxable losses.

Deferred tax assets and liabilities include all deductible and taxable temporary differences ANNUAL REPORT arising from the differences between the carrying amount of assets and liabilities and their tax base, as well as unused tax credits arising from taxable losses and other tax deductions. Deferred tax assets and liabilities are recognized by applying the tax rate at which the temporary differences are expected to be realized or settled.

Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are only recognized to the extent it is probable that sufficient taxable income will be available in the future against which the deductible temporary differences can be utilized.

Current tax assets and liabilities (in each consolidated company), as well as deferred taxes, are offset in the consolidated statement of financial position.

P. Employee benefits

The Company recognizes in the financial statements obligations arising from employee benefits included in collective or individual contract agreements.

The severance indemnity obligation recognized as a liability in the Company’s financial statements corresponds to employees whose individual work contracts establish this severance indemnity in any event and is recorded at the actuarial value. The positive or negative effect on severance indemnities caused by changes in estimates or deviations in turnover, mortality, early retirement due to dismissal, salary increases, inflation, discount rate or number of employees is recognized directly in profit or loss. Q. Revenue and expenses 94 Revenue and expenses are recognized on an accrual basis, which is when the transfer of the goods or the rendering of the services takes place, regardless of when payment is made.

Revenue from regulated sales is recognized based on each customer’s reading and billing consumption and is measured using the tariff rates stipulated in the respective decrees. Tariff rates are applied over a five-year period plus an estimate of unbilled sales at the end of the reporting period. The unbilled sales estimate is determined based on the proportion of the last reading in each billing group and measured at the tariff rates effective at the end of the period which is quarterly adjusted.

The Company’s service area is divided into billing groups, which determine the reading ANNUAL REPORT dates and subsequent billing. This process is carried out based on a monthly calendar.

R. Environmental information

Assets of an environmental nature are considered to be those that are used on a permanent manner in the Company’s activity and whose main purposes are to minimize adverse environmental impacts and to protect and improve the environment, including the reduction or elimination of any future contamination by the Group’s operations. For these purposes the Company has an ISO 14.001 environmental certification.

S. Earnings-per-share

Basic earnings-per-share is calculated by dividing profit or loss attributed to equity holders of the parent company by the weighted average number of shares outstanding during the period.

During the years ended December 31, 2011 and December 31, 2010, the Group has not performed any kind of operation with potential dilutive effects that led to a diluted gain per share differing from the basic earnings per share.

T. Dividends

Article 79 of the Chilean Corporations Law establishes that, unless otherwise unanimously agreed in the respective shareholders’ meeting by all of the shares issued, corporations shall distribute a cash dividend to their shareholders every year, on a pro rata basis to their shares or in the proportion stipulated in the by-laws if there are any preferential shares, equivalent to at least 30% of the net profits from each year, except when accumulated losses from prior 95 years need to be absorbed.

Interim and final dividends are recorded as a deduction to “Equity” when approved by the respective body, which typically for interim dividends is the Company’s Board of Directors and, and for final dividends is at the General Shareholders’ Meeting. ANNUAL REPORT As of December 31, 2011, dividends payable is presented in the item “Other financial liabilities, current” in the amount of ThCh$8,669,820 that will be paid in the months of February 2012 (interim dividend decided in November 2011 for ThCh$3,740,569) and May 2012 (ThCh$4,929,251 determined in order to adjust in compliance with the dividend distribution policy agreed upon by the Shareholders’ Meeting in 2011, under which the Company is to distribute 80% of net income for the year, reduced by the interim dividends paid in August 2011 for ThCh$3,740,569 and the dividend that will be paid in February 2012 of ThCh$3,740,569), as per the established in the dividends policy for 2011.

U. Statement of Cash Flows

The cash flow statement uses the terms defined below:

Cash and cash equivalents: inflows and outflows of cash and equivalent financial assets, with the latter being understood as short-term highly liquid investments subject to a low risk of changes in value.

Operating activities: principal revenue-producing activities from the normal operations of Esval and subsidiaries, and other activities that are not investing or financing activities.

Financing activities: activities that result in changes in the size and composition of the equity and liabilities that are not part of ordinary activities.

Investing activities: the acquisition, sale, or disposal by other means of non-current assets and other investments not included in cash equivalents. 2.5 Issued capital and equity 96 The Company’s capital is divided into 14,962,276,336,000 registered, no-par-value shares distributed as follows:

No. Of Shares Serie Subscribed Paid-In With Voting Right

A 3,553,436,546 3,553,436,546 3,553,436,546 B 187,132,538 187,132,538 187,132,538 C 14,958,535,766,916 14,958,535,766,916 14,958,535,766,916 ANNUAL REPORT Total 14,962,276,336,000 14,962,276,336,000 14,962,276,336,000

During the Extraordinary Shareholders’ Meeting held on August 26, 2011, an extension of five additional years for the structure of the share capital established in the by-laws was agreed upon. Under this structure, the Series C shares have the privilege to call for an Extraordinary Shareholders’ Meeting upon the request of at least 5% of these shares, and they will not have the right to choose Directors. Accordingly, the text of article five of the Social By-laws was modified, informing the shareholders that this agreement grants to the rights of withdrawal, as per the indicated in Law No. 18.046.

Due to this change of the by-laws, some shareholders have exercised their right for withdrawal conferred to them in Article 69 of Law 18.046, for a total of 1,439,791 Series A shares, and 2,383,059,200 Series C shares, paying them a total amount of ThCh$69,435, of which ThCh$31,269 have been reduced from the account Paid-in Capital and ThCh$38,166 from the account Issuance Premium, considering that the value paid to the former shareholders is higher than the book value of the shares. This repurchase of shares was performed during October 2011. The mentioned shares, from parting shareholders, are available for placement in the stock market as of January 1, 2012, 97 as follows:

Repurchase of Shares Reason for Repurchase of shares Date of repurchase of share Amount paid Number of Shares Series ThCh$ ANNUAL REPORT

Change of by-laws October 25, 2011 1,439,791 A 29 Change of by-laws October 25, 2011 2,383,059,200 C 69,406 Shares in portafolio as of December 31, 2011 2,384,498,991 69,435

2.6 Other income and expenses

Additional information to be disclosed as specified in IAS 1, with regard to other income and expenses is as follows:

from 01/01/2011 from 01/01/2010 Other income and expenses to 12/31/2011 to 12/31/2010 ThCh$ ThCh$

Other expenses per nature 31,726,548 26,739,653 Services 28,094,732 23,283,146 Overhead 3,034,762 2,895,073 Doubtful accounts 597,054 561,434

Other income (expenses) (754,491) (476,730) Other non-operating income 1,330,323 1,528,225 (-) Other non-operating expenses (2,084,814) (2,004,955)

2.7 Current and non-current classification

In the accompanying statement of financial position, balances are classified according to their maturities; that is, those with a maturity less than twelve months are classified as current and those with a maturity more than twelve months are classified as non-current. Obligations with a maturity of less than twelve months, but whose long-term refinancing 98 can be ensured by the Company’s discretion through unconditionally available credit agreements with long-term maturities could be classified as long-term liabilities.

3. Consolidated And Separate Financial Statements

The Company considers investments in subsidiaries to be those investments made in other companies intented to be kept as a long-term investment and over which it exercises control or significant influence.

The Company does not present separate financial statements in accordance with IFRS. ANNUAL REPORT Summarized Financial Information Of Subsidiaries As Of December 31, 2011:

Current Non-current Current Non-current Equity 12/31/2011 Subsidiaries assets assets liabilities liabilities ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Aguas del Valle S.A. 6,845,486 98,266,604 7,935,954 25,913,113 71,263,023 Servicios Sanitarios Las Vegas Ltda. - 712,263 60 - 712,203

Profit or loss Ordinary Ordinary (-) Other expenses 12/31/2010 Subsidiaries for the year income expenses (+) Other income ThCh$ ThCh$ ThCh$ ThCh$

Aguas del Valle S.A. 7,311,353 29,086,570 (9,581,319) (9,515,884) Servicios Sanitarios Las Vegas Ltda. 73,114 0 0 0

Summarized Financial Information Of Subsidiaries As Of December 31, 2010:

Current Non-current Current Non-current Equity 12/31/2011 Subsidiaries assets assets liabilities liabilities ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Aguas del Valle S.A. 5,891,758 93,259,131 6,862,632 28,336,587 63,951,670 Servicios Sanitarios Las Vegas Ltda. - 639,516 60 - 639,456

Profit or loss Ordinary Ordinary (-) Other expenses 12/31/2010 Subsidiaries for the year income expenses (+) Other income 99 ThCh$ ThCh$ ThCh$ ThCh$

Aguas del Valle S.A. 6,230,013 26,168,429 (8,837,461) (8,408,345)

Servicios Sanitarios Las Vegas Ltda. 62,300 0 0 0 ANNUAL REPORT

4. Cash And Cash Equivalents

The composition of this item is as follows:

12/31/2011 12/31/2010 Cash and cash equivalent ThCh$ ThCh$

Cash and banks 157,723 158,500 Mutual fund units - - Repurchase agreements 14,757,446 16,915,089 Total 14,915,169 17,073,589

There are no restrictions in the availability or use of cash and cash equivalents.

No investing or financing transactions were carried out that do not require the use of cash and cash equivalents.

Cash equivalents correspond to financial assets, time deposits, marketable securities, and repurchase agreements with maturities of less than 90 days from their date of acquisition.

Details of certain cash flow statement items are as follows:

- Other inflows or outflows from other operating activities correspond to services additional to the operation of the business.

- Income from financing sources: These correspond to the issue of Reimbursable Financial Contributions used in the construction of infrastructure works, which will be reimbursed in the short and long term, as stipulated in current legislation (Statutory Decree 70 of 1988).

- Reimbursement of other financial liabilities: Payment and prepayment of promissory notes issued as Reimbursable Financial Contributions. 5. Financial Instruments 100

I. Financial instrument detail

The Group’s financial instruments consist of:

31/12/2011 31/12/2010 Kind of financial instruments Category ThCh$ ThCh$

ASSETS

ANNUAL REPORT Cash and cash equivalents 157,723 158,500 Cash and checking accounts

Financial Investments 14,757,446 16,915,089 Investments in Mutual Funds - - Financial asset at fair value with changes in income Resale agreements 14,757,446 16,915,089 Loans and accounts receivable

Trade debtors 29,149,355 26,917,950 Trade and other receivables, current 29,122,946 26,888,436 Loans and accounts receivable Trade and other receivables, non-current 26,409 29,514 Loans and accounts receivable

Other non-current financial assets 4,850,139 3,705,752 Loans and accounts receivable Due from related companies - - Loans and accounts receivable

LIABILITIES Loans Current 34,292,805 47,885,459 Bank loans, current 247,396 - Financial liabilities measured at amortized cost Other loans, current 34,045,409 47,885,459 Financial liabilities measured at amortized cost

Non-Current 253,625,087 231,756,666 Bank loans, non-current 33,441,045 - Financial liabilities measured at amortized cost Other loans, non-current 220,184,042 231,756,666 Financial liabilities measured at amortized cost

Trade accounts payable 12,450,965 10,957,968 Trade and other accounts payable, current 12,450,965 10,957,968 Financial liabilities measured at amortized cost Trade and other accounts payable, non-current - - Due to related companies - 646 Financial liabilities measured at amortized cost

II. Financial Instrument Accounting Policies 101 A. Hedging Instruments Policy: The Group does not have any hedging instruments.

B. Trade and other receivables policy: Trade receivables, corresponding to billings for the consumption of drinking water, sewerage services, sewage treatment and other services, are recorded at the net value of the estimate ANNUAL REPORT for uncollectible or doubtful accounts.

Trade receivables are subject to the Company’s credit policy, which stipulates the terms and conditions of payment, as well as the different scenarios to renegotiate with past due customers. Interest on past due customers is also charged as required by the law.

C. Policy for uncollectible or doubtful accounts: La estimación de deudores incobrables se efectúa a través de un análisis dependiendo de The estimate of uncollectible accounts is made based on an aging analysis of the outstanding receivables, their collection history, and collection of accounts receivable from customers and other debtors, all of which are specifically identified.

The analysis for different groups of debtors’ behavior is affected by: i) the type of customer; ii) classification between renegotiation or non-renegotiation term debtors; and iii) aging of debt. A provision of 100% has been made for withdrawn or suspended customers.

D. Cash and cash equivalent policy: Cash surpluses are invested in instruments with a high-risk rating standard. E. Bank overdraft policy: 102 The Company keeps lines of credit and overdraft facilities and/or working capital in banking institutions for any possible cash shortages and to finance short-term working capital.

There is also planning, supervision and follow- p in place for both short- and long-term strategic and budgetary objectives to detect and, if applicable, correct any risks arising from deviations that could affect achievement of the objectives.

The company invests in low risk instruments that meet the rating standards stipulated in its investment policies. Thus, mutual investment funds must have an AAfm / M1 rating (Units with a high protection against loss, associated with credit risks / units with the lowest sensitivity to changes in economic conditions). Fixed term deposits and agreements contracted are N-1 rated instruments (Instruments with the highest capacity to pay capital ANNUAL REPORT and interest under the conditions and terms agreed to).

The institutions issuing these instruments are Banks or Bank subsidiaries with N-1 risk rating, with instruments with at least an AA rating (with a very high capacity to pay the capital and interest under the conditions and terms agreed to, which would not be significantly affected by any possible changes in the issuer, the industry to which it belongs or the economy).

F. Dividend policy: The dividend policy is approved every year at the Ordinary Shareholders’ Meeting.

G. Financial instrument policy: The Group’s financial instruments consist of:

• Financial assets: Mutual funds are valued at fair value (fund unit), while fixed term deposits, repurchase agreements and trade debtors and other receivables are measured at amortized cost using the effective interest method.

• Financial Liabilities: Bank borrowings, commercial papers, bonds, reimbursable financial contributions (RFC) and trade and other payables are measured at amortized cost using the effective interest method.

Financial instruments are subject to risk control policies, as specified below:

i. For liquidity risk, the Company keeps reasonable debt leverage, complying with the financial covenants stipulated in its debt contracts. It maintains a local market risk rating equivalent to AA- and AA for Bonds and N1 for commercial papers. ii. Interest rate risk, resulting from possible impact on profit or loss from changes in interest rates, is mitigated by the Company’s fixed rate debt structure. 103

H. Basis for recognition and measurement of income and expenses from financial assets and liabilities: Instruments quoted actively in the market, whose market price is observable and which are available to the general public, are measured at fair value. ANNUAL REPORT

Instruments with no active market are measured at cost.

I. Criterion to determine whether there is any objective evidence of impairment loss: Financial assets are assessed each period to determine whether there is any objective evidence of impairment. A financial asset is considered to be impaired if there is objective evidence indicating that one or more events have had a negative effect on the future cash flow estimate for the asset.

III. Information to Be Disclosed on Financial Assets and Liabilities

A. Financial Liabilities: Reimbursable Financial Borrowings, current portion:

Current Nominal Amount Periodicity Book Value Debtor Bank Or Indexation Nominal Effective 31.12.2011 31.12.2010 Interest Interest Maturity Interest Amortization 31.12.2011 31.12.2010 Company Institution Unit Rate Rate Uf Uf Payments Payments ThCh$ ThCh$

ESVAL S.A. BANCO BBVA - - U.F. 3.85% 3.98% 10-21-2016 6-MONTHLY BULLET 247,396 0 Reimbursable Financial Borrowings, non-current portion: 104 Current Nominal Amount Periodicity Book Value Nominal Effective Debtor Bank Or Indexation 31.12.2011 31.12.2010 Company Institution 31.12.2011 31.12.2010 Unit Interest Interest Maturity Interest Amortization Rate Rate Payments Payments Uf Uf Thch$ Thch$

ESVAL S.A. BANCO BBVA 1,500,000 - U.F. 3.85% 3.98% 21-10-2016 6-MONTHLY BULLET 33,182,998 0

Reimbursable financial contributions, current portion ANNUAL REPORT

Nominal Amount Book Value Inscription Nº or Currency identification Adjustment 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Nominal Issuing Secured of the Instrument rate Rate Company (YES/NO) UF UF ThCh$ ThCh$

Promissory note UF 18,386.72 394,497 1.99% ESVAL S.A. NO Promissory note UF 1,687.82 36,213 2.58% ESVAL S.A. NO Promissory note UF 122,551.69 2,732,171 2.98% ESVAL S.A. NO 122,551.69 20,074.54 2,732,171 430,710

Reimbursable Financial Contributions, non-current portion

Nominal Amount U.F. Book Value Regis. Nr. Currency or ident. Adjustment 31/12/2011 31/12/2010 Nominal Issuer Secured of Instrum. rate 31/12/2011 31/12/2010 Rate (YES/NO) ThCh$ ThCh$

Promissory Note UF 94,517.19 75,686.43 2.107.169 1,623,894 2.19% ESVAL S.A. NO Promissory Note UF 10,249.35 10,015.99 228.499 214,899 2.32% ESVAL S.A. NO Promissory Note UF 2,975.90 2,907.86 66.345 62,390 2.33% ESVAL S.A. NO Promissory Note UF 107.09 104.63 2.387 2,245 2.35% ESVAL S.A. NO Promissory Note UF 5,932.43 5,794.52 132.258 124,325 2.37% ESVAL S.A. NO Promissory Note UF 57,137.48 51,546.77 1.273.825 1,105,964 2.39% ESVAL S.A. NO Promissory Note UF 10,924.00 10,658.59 243.540 228,686 2.47% ESVAL S.A. NO Promissory Note UF 18,765.20 11,461.82 418.352 245,920 2.48% ESVAL S.A. NO Promissory Note UF 3,958.28 3,861.36 88.246 82,848 2.49% ESVAL S.A. NO Promissory Note UF 5,183.58 5,053.70 115.563 108,430 2.55% ESVAL S.A. NO (Continued)

Nominal Amount U.F. Book Value Regis. Nr. Currency 105 or ident. Adjustment 31/12/2011 31/12/2010 Nominal Issuer Secured of Instrum. rate 31/12/2011 31/12/2010 Rate (YES/NO) ThCh$ ThCh$

Promissory Note UF 9,976.23 222,410 2.58% ESVAL S.A. NO

Promissory Note UF 4,346.50 4,235.53 96,901 90,876 2.60% ESVAL S.A. NO ANNUAL REPORT

Promissory Note UF 51,687.53 50,348.45 1,152,323 1,080,254 2.64% ESVAL S.A. NO Promissory Note UF 5,180.71 5,045.48 115,499 108,254 2.66% ESVAL S.A. NO Promissory Note UF 38,292.84 35,284.73 853,702 757,053 2.68% ESVAL S.A. NO Promissory Note UF 11,545.09 11,240.49 257,387 241,171 2.69% ESVAL S.A. NO Promissory Note UF 2,210.51 2,150.93 49,281 46,149 2.75% ESVAL S.A. NO Promissory Note UF 12,969.25 12,616.00 289.137 270,683 2.78% ESVAL S.A. NO Promissory Note UF 7,120.27 6,924.98 158,740 148,579 2.80% ESVAL S.A. NO Promissory Note UF 2,841.59 2,763.38 63,350 59,290 2.81% ESVAL S.A. NO Promissory Note UF 2,185.14 2,124.39 48,716 45,580 2.84% ESVAL S.A. NO Promissory Note UF 62,019.33 54,077.46 1,382,661 1,160,262 2.88% ESVAL S.A. NO Promissory Note UF 3,712.11 3,606.08 82,758 77,371 2.92% ESVAL S.A. NO Promissory Note UF 90,990.00 207,322.80 2,028,534 4,448,225 2.98% ESVAL S.A. NO Promissory Note UF 1,673.06 37,299 3.06% ESVAL S.A. NO Promissory Note UF 7,514.59 7,282.98 167,530 156,260 3.16% ESVAL S.A. NO Promissory Note UF 17,011.49 16,484.01 379,255 353,673 3.17% ESVAL S.A. NO Promissory Note UF 3,249.78 72,451 3.18% ESVAL S.A. NO Promissory Note UF 4,430.13 4,289.85 98,766 92,041 3.24% ESVAL S.A. NO Promissory Note UF 4,236.64 4,102.10 94,452 88,013 3.25% ESVAL S.A. NO Promissory Note UF 68,916.44 66,714.88 1,536,425 1,431,404 3.27% ESVAL S.A. NO Promissory Note UF 4,303.30 4,164.62 95,938 89,354 3.30% ESVAL S.A. NO Promissory Note UF 2,992.49 2,894.10 66,715 62,095 3.37% ESVAL S.A. NO Promissory Note UF 2,013.60 1,946.64 44,891 41,766 3.41% ESVAL S.A. NO Promissory Note UF 2,127.84 2,056.48 47,438 44,123 3.44% ESVAL S.A. NO Promissory Note UF 1,343.67 29,956 3.46% ESVAL S.A. NO Promissory Note UF 36,221.41 34,996.53 807,521 750,870 3.47% ESVAL S.A. NO Promissory Note UF 2,647.49 2,557.22 59,023 54,867 3.50% ESVAL S.A. NO Promissory Note UF 645.51 14,391 3.51% ESVAL S.A. NO Promissory Note UF 7,024.54 6,782.41 156,605 145,520 3.54% ESVAL S.A. NO Promissory Note UF 4,282.33 4,130.33 95,470 88,619 3.65% ESVAL S.A. NO (Continued)

Nominal Amount U.F. Book Value 106 Regis. Nr. Currency or ident. Adjustment 31/12/2011 31/12/2010 Nominal Issuer Secured of Instrum. rate 31/12/2011 31/12/2010 Rate (YES/NO) ThCh$ ThCh$

Promissory Note UF 10,949.12 10,558.47 244,100 226,538 3.67% ESVAL S.A. NO Promissory Note UF 4,118.52 3,970.42 91,818 85,188 3.70% ESVAL S.A. NO Promissory Note UF 5,566.71 5,366.01 124,104 115,131 3.71% ESVAL S.A. NO Promissory Note UF 2,421.15 2,333.18 53,977 50,060 3.74% ESVAL S.A. NO Promissory Note UF 6,400.88 6,167.15 142,701 132,320 3.75% ESVAL S.A. NO

ANNUAL REPORT Promissory Note UF 2,302.80 2,217.65 51,339 47,581 3.80% ESVAL S.A. NO Promissory Note UF 4,739.92 4,560.25 105,672 97,843 3.90% ESVAL S.A. NO Promissory Note UF 8,887.90 8,543.61 198,147 183,308 3.99% ESVAL S.A. NO Promissory Note UF 2,209.84 2,120.56 49,266 45,498 4.17% ESVAL S.A. NO Promissory Note UF 1,290.18 1,237.82 28,763 26,558 4.19% ESVAL S.A. NO Promissory Note UF 3,637.58 3,489.29 81,096 74,865 4.21% ESVAL S.A. NO Promissory Note UF 3,570.81 3,423.92 79,608 73,462 4.24% ESVAL S.A. NO Promissory Note UF 6,129.75 5,868.04 136,657 125,902 4.41% ESVAL S.A. NO Promissory Note UF 3,529.32 3,371.20 78,683 72,331 4.64% ESVAL S.A. NO Promissory Note UF 2,659.55 2,539.44 59,292 54,485 4.68% ESVAL S.A. NO Promissory Note UF 1,355.22 1,291.43 30,213 27,708 4.88% ESVAL S.A. NO Promissory Note UF 2,764.54 2,633.14 61,633 56,496 4.93% ESVAL S.A. NO Promissory Note UF 1,536.80 1,461.52 34,261 31,358 5.09% ESVAL S.A. NO Promissory Note UF 4,325.13 4,107.05 96,425 88,119 5.24% ESVAL S.A. NO Promissory Note UF 25,389.91 24,079.96 566,043 516,649 5.37% ESVAL S.A. NO Promissory Note UF 5,192.17 4,923.83 115,754 105,643 5.38% ESVAL S.A. NO Promissory Note UF 18,721.57 17,725.40 417,379 380,308 5.54% ESVAL S.A. NO Promissory Note UF 11,272.92 10,664.01 251,319 228,802 5.63% ESVAL S.A. NO Promissory Note UF 23,695.86 22,400.24 528,276 480,609 5.70% ESVAL S.A. NO Promissory Note UF 12,217.37 11,500.87 272,374 246,757 6.14% ESVAL S.A. NO Promissory Note UF 4,592.90 4,311.77 102,394 92,511 6.42% ESVAL S.A. NO Promissory Note UF 8,750.86 8,155.52 195,092 174,981 7.17% ESVAL S.A. NO Promissory Note UF 7,860.54 7,274.23 175,243 156,073 7.90% ESVAL S.A. NO Promissory Note UF 2,542.29 2,323.00 56,679 49,841 9.23% ESVAL S.A. NO 884.094,01 921,853,48 19,710,019 19,778,874 Commercial papers, current: 107 Carrrying Value Nominal Maturity Instrument Series Adjustment Value Promissory Note Interest 1231/2011 31/12/2010 Placement In Reg. No. Unit ThCh$ Or Line Of Credit Rate Chile Or Abroad ThCh$ ThCh$ ANNUAL REPORT 43 5A 0 12,850,000 22-11-2011 0.49 12,208,245 DOMESTIC 44 9A 0 12,850,000 05-12-2011 0.54 12,547,992 DOMESTIC 87 13A 0 7,450,000 13-07-2012 0.55 7,196,975 DOMESTIC 33,150,000 7,196,975 24,756,237

Bonds

Total Current Portion.

Current Nominal Value Periodicity Carrying Value Regis. Nr. Nomin. Efect. Placement Adjst Maturity 12.31.2011 31.12.2010 Instrument Series 12.31.2011 31.12.2010 Unit Ints. Ints. Date Payment Payment In Chile Rate Rate Of Inter Amortiz. Or Abroad UF UF ThCh$ ThCh$

232 A 37,232 35,094 UF 7.00% 7.60% 15-10-2021 Semester Semester 927,606 1,050,646 Nacional 293 D 87,820 82,779 UF 6.00% 6.87% 01-06-2027 Semester Semester 2,145,400 2,370,610 Nacional 348 E 537,500 537,500 UF 3.80% 4.13% 15-07-2012 Semester Semester 12,207,994 12,069,618 Nacional 419 H 166,667 83,333 UF 3.50% 3.75% 15-02-2026 Semester Semester 4,465,149 2,712,470 Nacional 493 J 121,053 121,053 UF 3.40% 3.73% 15-03-2028 Semester Semester 3,091,234 3,323,933 Nacional 561 K - - UF 4.95% 4.83% 27-01-2014 Semester Semester 257,330 237,193 Nacional 562 M - - UF 4.90% 4.72% 27-01-2030 Semester Semester 1,021,550 934,042 Nacional 950,271 859,759 24,116,263 22,698,512 Total Non-Current Portion 108 Current Nominal Value PERIODICITY CARRYING VALUE Placement Regis. Nr. Adjst Nomin. Efect. Maturity Series 12.31.2011 31.12.2010 Ints. Ints. Payment Payment 12.31.2011 31.12.2010 In Chile Instrument Unit Rate Rate Date Of Inter Amortiz. Or Abroad UF UF ThCh$ ThCh$

232 A 455,590 492,822 UF 7.00% 7.60% 15-10-2021 SEMESTER SEMESTER 9,939,982 10,113,885 DOMESTIC 293 D 2,075,345 2,163,165 UF 6.00% 6.87% 01-06-2027 SEMESTER SEMESTER 43,916,816 43,537,922 DOMESTIC 348 E - 537,500 UF 3.80% 4.13% 15-07-2012 SEMESTER SEMESTER - 11,374,730 DOMESTIC

ANNUAL REPORT 419 H 2,250,000 2,416,667 UF 3.50% 3.75% 15-02-2026 SEMESTER SEMESTER 49,475,679 50,926,309 DOMESTIC 493 J 1,876,316 1,997,368 UF 3.40% 3.73% 15-03-2028 SEMESTER SEMESTER 40,942,861 41,574,613 DOMESTIC 561 K 500,000 500,000 UF 4.95% 4.83% 27-01-2014 SEMESTER SEMESTER 11,164,370 10,767,232 DOMESTIC 562 M 2,000,000 2,000,000 UF 4.90% 4.72% 27-01-2030 SEMESTER SEMESTER 45,292,361 43,683,100 DOMESTIC 9,157,252 10,107,522 200,732,070 211,977,791

Summary of Financial Liabilities:

Current Portion

Nominal amount U.F. Carrying value Registrion or Currency identification Nr. adjustment 12/31/2011 12/31/2010 Nominal of instrument index 12/31/2011 12/31/2010 rate ThCh$ ThCh$

Bank borrowings UF - - 247,396.00 - 3.85% Promissory note AFR UF 122,551.69 20,074.54 2,732,171 430,710 2.98% Commercial paper ThCh$ 7,450,000 25,700,000 7,196,975 24,756,237 0.00% Bonds UF 950,270.64 859,758.93 24,116,263 22,698,512 4.03% 34,292,805 47,885,459 Non-current Portion 109 Nominal amount U.F. Carrying value Registrion or Currency identification Nr. adjustment 12/31/2011 12/31/2010 Nominal of instrument index 12/31/2011 12/31/2010 rate ThCh$ ThCh$ ANNUAL REPORT Bank borrowings UF 1,500,000 - 33,182,998 - 3.85% Promissory note AFR UF 884,094.01 921,853.48 19,710,019 19,778,874 3.34% Bonds UF 9,157,251.57 10,107,522.20 200,732,070 211,977,792 4.61% 253,625,087 231,756,666

The company has complied with payment of all liabilities according to the corresponding maturities and there have been no renegotiations of debt.

B. Risks

B.1 Business Risk The sanitary market is a regulated market, including the pricing processes for drinking water distribution and sewer systems. The regulatory authority, in addition to establishing the tariff rates, issues product and operating quality regulations that are necessary to provide these services. The business risks are related to the current regulatory framework, where the regulatory authority establishes tariff rates after a process of seeking optimal operations and investment in each system, establishing tariff rates that allow the recovery of the initial investment and the necessary costs to operate in agreement with current regulations.

B.2 Financial Risk The principal objectives of financial risk management are ensuring the availability of funds in order to comply with financial commitments, and protecting the economic flow of value of the Group’s assets and liabilities.

Such management is performed by identifying risks, determining each risk’s tolerance, hedging of such financial risks and controling established hedge operations. In order to achieve the objectives, financial risk management is based on hedging all significant exposures to the extent there are adequate instruments and the cost is reasonable.

In addition, financial risks exist related to the financing of investments, the recovery periods of such investments, as well as the costs of financing. i. Credit Risk 110 Credit risk refers to the possibility of financial loss from failing to discharge obligations by the Company’s counterparties (customers).

The Company has a dispersed market, which means that the credit risk of a particular customer is not significant.

The objective is to maintain minimum levels of uncollectible amounts. There is a credit policy in place stipulating the terms and conditions and methods of payment, and also the terms and conditions for reaching agreements with past due customers. Management has developed processes to control, estimate and evaluate uncollectible accounts for the purpose of taking corrective actions to achieve the proposed fulfillments. One of the main ANNUAL REPORT actions performed to maintain a low level of uncollectible accounts is the suspension of the provision of services. The method of analysis is based on historical records of accounts receivable from customers and other debtors.

31/12/2011 31/12/2010 Current plus non-current credit risk ThCh$ ThCh$

Exposure according to Balance Sheet for the following risks: Trade and other Receivables, (gross) 36,963,845 34,340,314 Estimates for uncollectible accounts -7,988,949 -7,451,878 Net exposure, risk concentrations 28,974,896 26,888,436

Trade accounts receivable and other accounts receivable 31/12/2011 31/12/2010 (by aging) ThCh$ ThCh$

Under three months 26,433,194 24,914,595 Between three and twelve months 1,691,141 1,172,301 Over twelve months 8,839,510 8,253,418 Estimates for uncollectible accounts -7,988,949 -7,451,878 Total 28,974,896 26,888,436 ii. Liquidity risk 111 Liquidity risk is the possibility of adverse market situations denying the Group access to sources of financing and failure to finance its acquired commitments, such as long-term investments and working capital needs, at reasonable market prices.

Management follows up on provisions for the Group’s liquidity reserve in light of expected ANNUAL REPORT cash flows.

Various preventive measures, such as diversifying financing sources and instruments, are used to manage liquidity risk.

Liquidity risk is controlled regularly so as to perceive, detect and correct deviations to minimize any possible effects on profit or loss.

Maturity profiles

Other Current Financial Liabilities: Unsecured obligations (commercial paper) that accrue interests as of 12/31/2011:

Tax Numer Name Registration Interest Effective 1 to 90 91 days to Company Nominal Final Payment of days 1 year Issuing Issuing Instrument Currency value Number rate interest Term interests creditor Company Company SVS contract rate ThCh$ ThCh$ company

Commercial bills Ch$ pesos 89.900.400-0 ESVAL S.A. Serie 13A not indexed 7,450,000 87 0.55% 0.55% 13-07-2012 Semester 7,450,000 Chile 7,450,000 7,450,000 Unsecured obligations (commercial paper) that accrue interests as of 12/31/2010: 112

Tax Numer Name Registration Interest Effective 1 to 90 91 days to 1 Company Nominal Final Payment of days year Issuing Issuing Instrument Currency value Number rate interest Term interests creditor Company Company SVS contract rate ThCh$ ThCh$ company

Commercial bills Ch$ pesos 89.900.400-0 ESVAL S.A. Serie 5A not indexed 12,850,000 43 0.49% 0.49% 22-11-2011 Anual 12,850,000 Chile Commercial bills Ch$ pesos 89.900.400-0 ESVAL S.A. Serie 7A not indexed 12,850,000 44 0.46% 0.46% 06-06-2011 Semester 12,850,000 Chile 25,700,000 25,700,000 ANNUAL REPORT

Unesecured obligations (bonds) that accrue interests as of 12/31/2011:

Tax Numer Name Registration Interest Effective 91 days to 1 Company Nominal Final Payment of 1 to 90 days year Issuing Issuing Instrument Currency value Number rate interest Term interests creditor Company Company SVS contract rate ThCh$ ThCh$ company

Bonds Serie A 89.900.400-0 ESVAL S.A. of 15/10/2000 U.F. 70,674 232 7.00% 7.60% 15-10-2021 Semester 0 1,572,056 Chile Bonds Serie D 89.900.400-0 ESVAL S.A. of 01/06/2002 U.F. 214,403 293 6.00% 6.87% 01-06-2027 Semester 0 4,780,738 Chile Bonds Serie E 89.900.400-0 ESVAL S.A. of 15/07/2004 U.F. 552,746 348 3.80% 4.13% 15-07-2012 Semester 6,218,947 6,103,986 Chile Bonds Serie H 89.900.400-0 ESVAL S.A. of 15/02/2005 U.F. 249,077 419 3.50% 3.75% 15-02-2026 Semester 2,792,578 2,760,346 Chile Bonds Serie J 89.900.400-0 ESVAL S.A. of 15/03/2007 U.F. 187,375 493 3.40% 3.73% 15-03-2028 Semester 2,100,050 2,077,304 Chile Bonds Serie K 89.900.400-0 ESVAL S.A. of 27/01/2009 U.F. 24,451 561 4.95% 4.83% 27-01-2014 Semester 272,556 272,556 Chile Bonds Serie M 89.900.400-0 ESVAL S.A. of 27/01/2009 U.F. 96,828 562 4.90% 4.72% 27-01-2030 Semester 1,079,343 1,079,343 Chile 1,395,554 12,463,474 18,646,329 Unsecured obligations (bonds) that accrue interests as of 12/31/2010: 113 Tax Numer Name Registration Interest Effective 91 days to 1 Company Nominal Final Payment of 1 to 90 days year Issuing Issuing Instrument Currency value Number rate interest Term interests creditor Company Company SVS contract rate ThCh$ ThCh$ company

Bonds Serie A of ANNUAL REPORT 89.900.400-0 ESVAL S.A. 15/10/2000 U.F. 70,829 232 7.00% 7.60% 15-10-2021 Semester 0 1,519,668 Chile Bonds Serie D of 89.900.400-0 ESVAL S.A. 01/06/2002 U.F. 214,367 293 6.00% 6.87% 01-06-2027 Semester 0 4,599,358 Chile Bonds Serie E of 89.900.400-0 ESVAL S.A. 15/07/2004 U.F. 572,952 348 3.80% 4.13% 15-07-2012 Semester 6,203,924 6,089,086 Chile Bonds Serie H of 89.900.400-0 ESVAL S.A. 15/02/2005 U.F. 170,081 419 3.50% 3.75% 15-02-2026 Semester 930,608 2,718,568 Chile Bonds Serie J of 89.900.400-0 ESVAL S.A. 15/03/2007 U.F. 191,457 493 3.40% 3.73% 15-03-2028 Semester 2,064,854 2,042,963 Chile Bonds Serie K of 89.900.400-0 ESVAL S.A. 27/01/2009 U.F. 24,451 561 4.95% 4.83% 27-01-2014 Semester 262,305 262,305 Chile Bonds Serie M of 89.900.400-0 ESVAL S.A. 27/01/2009 U.F. 96,828 562 4.90% 4.72% 27-01-2030 Semester 1,038,749 1,038,749 Chile 1,340,965 10,500,440 18,270,697

Reimbursable Financial Contributions (Promissory Notes) as of 31/12/2011:

Tax Numer Name Average Effective 1 to 90 days 91 days to 1 year Company Issuing Issuing Instrument Currency Kind of Basis Interest Interest creditor Company Company Rate Rate Rate ThCh$ ThCh$ company

89.900.400-0 ESVAL S.A. Promissory notes UF Fixed Half-year 3.00% 3.00% 444,913 2,331,554 Chile 444,913 2,331,554 Reimbursable Financial Contributions (Promissory Notes) at 31/12/2010: 114 Tax Numer Name Average Effective 1 to 90 days 91 days to 1 year Company Issuing Issuing Instrument Currency Kind of Basis Interest Interest creditor Company Company Rate Rate Rate ThCh$ ThCh$ company

89.900.400-0 ESVAL S.A. Promissory notes UF Fija Half-year 2.04% 2.04% 0 434,263 Chile 434,263

Loans from financial entities at 01/01/2011:

ANNUAL REPORT Tax Numer Name Country Tax Nr. Name Interest Effective 91 days to 1 Company Kind of 1 to 90 days year Issuing Issuing Debtor Creditor Creditor Currency Rate Basis rate Interest creditor Company Company Company Institution Institution contract Rate ThCh$ ThCh$ company

89.900.400-0 ESVAL S.A. CHILE 97.032.000-8 Banco BBVA UF Fixed Semester 3.85% 3.98% 1,275,308 Chile 0 1,275,308

Other Non-Current Financial Liabilities:

Unguaranteed obligations (bonds) that accrue interests at 31/12/2011:

Tax Numer Name Registration Interest Effective Payment More than More than More than Company Nominal Final 1 year to 3 3 years to 5 5 years Issuing Issuing Instrument Currency value Number rate interest Term of creditor Company Company SVS contract rate interests ThCh$ ThCh$ ThCh$ company

Bonos Serie A del 89.900.400-0 ESVAL S.A. 15/10/2000 U.F. 652,142 232 7.00% 7.60% 15-10-2021 Semester 3,121,377 3,087,909 7,544,471 Chile Bonos Serie D del 89.900.400-0 ESVAL S.A. 01/06/2002 U.F. 3,228,295 293 6.00% 6.87% 01-06-2027 Semester 9,566,790 9,574,616 50,439,711 Chile Bonos Serie E del 89.900.400-0 ESVAL S.A. 15/07/2004 U.F. - 348 3.80% 4.13% 15-07-2012 Semester 0 0 0 Chile Bonos Serie H del 89.900.400-0 ESVAL S.A. 15/02/2005 U.F. 2,796,510 419 3.50% 3.75% 15-02-2026 Semester 10,719,048 10,203,337 41,423,088 Chile Bonos Serie J del 89.900.400-0 ESVAL S.A. 15/03/2007 U.F. 2,382,410 493 3.40% 3.73% 15-03-2028 Semester 8,081,740 7,717,781 37,314,008 Chile Bonos Serie K 89.900.400-0 ESVAL S.A. del 27/01/2009 U.F. 536,677 561 4.95% 4.83% 27-01-2014 Semester 11,964,682 0 0 Chile Bonos Serie M 89.900.400-0 ESVAL S.A. del 27/01/2009 U.F. 3,186,143 562 4.90% 4.72% 27-01-2030 Semester 4,317,373 4,317,373 62,397,231 Chile 12,782,177 47,771,010 34,901,015 199,118,509 Unguaranteed obligations (bonds) that accrue interests as of 12/31/2010: 115

Tax Numer Name Registration Interest Effective Payment More than More than More than Company Nominal Final 1 year to 3 3 years to 5 5 years Issuing Issuing Instrument Currency value Number rate interest Term of creditor Company Company SVS contract rate interests ThCh$ ThCh$ ThCh$ company

Bonos Serie A ANNUAL REPORT 89.900.400-0 ESVAL S.A. del 15/10/2000 U.F. 687,440 232 7.00% 7.60% 15-10-2021 Semester 3,018,714 2,988,354 8,742,342 Chile Bonos Serie D 89.900.400-0 ESVAL S.A. del 01/06/2002 U.F. 3,335,505 293 6.00% 6.87% 01-06-2027 Semester 9,203,538 9,210,637 53,150,924 Chile Bonos Serie E 89.900.400-0 ESVAL S.A. del 15/07/2004 U.F. 552,746 348 3.80% 4.13% 15-07-2012 Semester 11,859,467 Chile Bonos Serie H 89.900.400-0 ESVAL S.A. del 15/02/2005 U.F. 3,045,587 419 3.50% 3.75% 15-02-2026 Semester 10,564,069 10,067,749 44,712,916 Chile Bonos Serie J del 89.900.400-0 ESVAL S.A. 15/03/2007 U.F. 2,569,786 493 3.40% 3.73% 15-03-2028 Semester 7,952,920 7,602,650 39,580,599 Chile Bonos Serie K 89.900.400-0 ESVAL S.A. del 27/01/2009 U.F. 561,128 561 4.95% 4.83% 27-01-2014 Semester 1,049,219 10,990,080 Chile Bonos Serie M 89.900.400-0 ESVAL S.A. del 27/01/2009 U.F. 3,282,971 562 4.90% 4.72% 27-01-2030 Semester 4,154,996 4,154,996 62,127,965 Chile 14,035,163 47,802,923 45,014,465 208,314,745

Reimbursable Financial Contributions (Promissory Notes) at 31/12/2011:

More than More than More than Tax Numer Name Identification Kind of Interest Effective 1 year to 3 3 years to 5 5 years Company Issuing Issuing of the Currency Rate Basis rate interest creditor Company Company Instruments contract rate ThCh$ ThCh$ ThCh$ company

89.900.400-0 Esval S.A. Promissory Notes UF Fixed Half-Year 3,44% 3,44% 4.146.034 9.229.900 10.243.282 Chile 4.146.034 9.229.900 10.243.282 -

Reimbursable Financial Contributions (Promissory Notes) at 31/12/2010:

Tax Numer Name Identification Interest Effective More than More than More than Company Kind of 1 year to 3 3 years to 5 5 years Issuing Issuing of the Currency Rate Basis rate interest creditor Company Company Instruments contract rate ThCh$ ThCh$ ThCh$ company

89.900.400-0 ESVAL S.A. Promissory notes UF Fixed Half-year 3.33% 3.33% 3,964,375 6,133,979 13,890,866 Chile 3,964,375 6,133,979 13,890,866 - Loans from financial entities at 12/31/2011: 116 Más de 1 Más de 3 Company Tax Numer Name Country Tax Nr. Name Kind of Interest Effective año a 3 años a 5 creditor Issuing Issuing Debtor Creditor Creditor Currency Rate Basis rate Interest company Company Company Company Institution Institution contract Rate ThCh$ ThCh$

89.900.400-0 ESVAL S.A. CHILE 97.032.000-8 Banco BBVA UF Fixed Semester 3.85% 3.98% 2,550,615 35,991,660 Chile 2,550,615 35,991,660

iii. Interest Rate Risk ANNUAL REPORT The Company has a fixed rate debt structure as specified in the table below:

12/31/2011 12/31/2010 Debt Instruments Interest Rate % %

Bank Borrowings Fixed 11.61% 0.00% Commercial Papers Fixed 2.50% 8.85% Bonds Fixed 78.10% 83.92% AFR Fixed 7.79% 7.23% Total 100.00% 100.00%

Total other financial assets by company are:

12/31/2011 12/31/2010 Company Instruments ThCh$ ThCh$

Esval S.A. Cash and banks 157,723 158,500 Esval S.A. Mutual Fund - - Esval S.A. Covenants 14,757,446 16,915,089 Total Investments (other assets) 14.915.169 17.073.589 IV. Risk UF variation 117 97.5% of the financial debt is structured in UF, which is consistent with the cash flows of the Company.

The revenues of the Company correspond 100% to Chilean pesos and are mostly related with tariff indexations. Sales tariff rates include in indicators associated to the economy (CPI and IPMN), which indicate an adequate hedging between revenues and liabilities. ANNUAL REPORT

C. Derivative instruments The Company does not have any derivative instruments.

D. Fair Value of Financial Instruments Fair value of financial instruments measured at amortized cost is as follows:

12/31/2011 12/31/2010 Amort. Cost Fair Value Amort. Cost Fair Value ThCh$ ThCh$ ThCh$ ThCh$

Financial Assets Investments held at amortized cost 43,912,312 43,912,312 43,803,525 43,803,525 Investments in marketable securities - - - - Trade and other accounts receivable, net 29,154,866 29,154,866 26,888,436 26,888,436 Resale agreements 14,757,446 14,757,446 16,915,089 16,915,089

Financial Liabilities Financial liabilities held at amortized cost 300,368,121 310,366,227 290,600,093 290,600,093 Bank borrowings 33,430,394 33,403,923 - - Trade and other accounts payable 12,450,229 12,450,229 10,957,968 10,957,968 Commercial papers 7,196,975 6,942,922 24,756,237 24,756,237 Bonds 224,848,333 235,856,334 234,676,303 234,676,303 AFR 22,442,190 21,712,819 20,209,585 20,209,585 Methodology and assumptions used in determining fair value. 118 Fair value of financial assets and liabilities is determined using the following methodology:

The fair value of the financial assets (Trade debtors and other receivables and the Repurchase agreements), as these are of short-term, is considered to be similar in value to the amortized cost of such assets.

The fair value of trade and other payables, as these are short-term, is considered to be similar in value to the amortized cost of such liabilities.

The fair value of bank loans is determined by comparison with investments in financial credit institutions with similar characteristics, at the date of the financial statements. ANNUAL REPORT

The fair value of trade securities is determined by the value of the transactions of such instruments published as of December 30, 2011 by the Superintendency of Pension Fund Administrators.

The fair value of bonds is determined by the value of the transactions of these instruments published in December of 2011 by the Santiago Stock Exchange.

As there exists no active market for these instruments and all transactions are not informed to the public, the fair value of reimbursable financial contributions is determined based on the following characteristics:

• Assimilation at market value of the J Bonds, as these have similar average rates and company risk.

• Consideration of a higher risk effect of the J Bond, representing approximately 0.5% as they do not count on backup clauses as those of J Bonds. 6. Trade And Other Receivable 119 The detail of this item is as follows:

12/31/2011 12/31/2010 Current Esval S.A. Aguas del Valle S.A. Total Esval S.A. Aguas del Valle S.A. Total ANNUAL REPORT ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Trade accounts receivable 25,229,549 7,254,122 32,483,671 23,547,484 6,386,475 29,933,959 Provision for uncollectible accounts (5,575,057) (1,201,275) (6,776,332) (5,127,210) (1,141,746) (6,268,956) Trade accounts receivable, net 19,654,492 6,052,847 25,707,339 18,420,274 5,244,729 23,665,003

Notes receivable 128,383 44,488 172,871 83,032 38,628 121,660 Provision for uncollectible accounts (71,892) (32,655) (104,547) (45,610) (29,242) (74,852) Notes receivable, net 56,491 11,833 68,324 37,422 9,386 46,808

Sundry debtors 3,884,733 422,569 4,307,302 4,044,489 240,206 4,284,695 Provision for uncollectible accounts (1,084,940) (23,129) (1,108,069) (1,084,941) (23,129) (1,108,070) Sundry debtors, net 2,799,793 399,440 3,199,233 2,959,548 217,077 3,176,625

Total trade receivables and other receivables, current, net 22,510,776 6,464,120 28,974,896 21,417,244 5,471,192 26,888,436

12/31/2011 12/31/2010 Non Current Esval S.A. Aguas del Valle S.A. Total Esval S.A. Aguas del Valle S.A. Total M$ M$ M$ M$ M$ M$

Long-term accounts receivable 203,764 0 203,764 206,869 0 206,869 Provision for uncollectible accounts (177,355) 0 (177,355) (177,355) 0 (177,355)

Total trade receivables and other receivables, non current, net 26,409 0 26,409 29,514 0 29,514

In general, balances included in this item do not bear interest. There are no significant restrictions on disposing of this kind of account receivable. 120 There are individually no customers that maintain significant balances in relation to the Group’s total revenues or receivables.

See Note 7 for amounts, and terms and conditions related to accounts receivable from related parties.

Average period of collection:

Esval S.A. : 1.82 months Aguas del Vallle S.A. : 1.52 months ANNUAL REPORT The analysis of trade and other receivable at the end of each reporting period is as follows:

12/31/2011 12/31/2010 Detail ThCh$ ThCh$

Aged less than one month 14,143,247 12,346,715 Aged from one to three months 3,486,472 3,110,469 Aged from four to six months 523,944 474,852 Aged from seven to eleven months 1,167,198 697,449 Aged more than twelve months 7,438,314 7,146,662 Suspended clients 1,401,195 1,106,756 Clients from other services 8,803,475 9,457,411 Total 36,963,845 34,340,314

Changes in the debtor impairment provision were as follows:

Initial balance al January 1 7,451,878 7,069,992 Increase in the provision during the year 537,071 381,886 Final balance 7,988,949 7,451,878 Trade and Other Receivables, Net, Current 28,974,896 26,888,436 7. Related Party Disclosures 121 Identification Of Subsidiaries:

Direc % Indirect % Total 2011 Total 2010 Taxpayer No. Name of company

% % % % ANNUAL REPORT

99.541.380-9 Aguas del Valle S.A. 99.0000 0.9999 99.9999 99.9999 76.027.490-9 Servicios Sanitarios Las Vegas Ltda. 99.9900 0.0000 99.9900 99.9900

Balances and Transactions with related parties:

Transactions between the Company and its subsidiaries are performed under market conditions. These transactions have been eliminated in the process of consolidation and are not broken down in this note.

At December 31, 2010, accounts payable to the related company Lago Peñuelas S.A. of ThCh$646 has been recorded.

Remuneration to Board of Directors and Directors Committee:

Fee For Directors Esval S.A. attendance Remuneration Committe Other At December 31, 2011 ThCh$ ThCh$ ThCh$ ThCh$

Pedro Pablo Errazuriz Domínguez 7,732 - 515 - Jorge Lesser García Huidobro 89,682 - 1,817 - Stacey Leanne Purcell 27,572 - - - Carlos Williamson Banaprès 3,770 - 2,611 - Olivia Steedman 23,629 - - - Alexander Galetovic Potsch 15,652 - 4,174 - Nicolás Navarrete Hederra 23,629 - 782 - Juan Pablo Armas Mac Donald 15,862 - 4,230 - Alejandro Ferreiro Yazigi 9,954 - 2,127 - Juan Ignacio Parot Becker - - - - Total 217,482 - 16,256 - Fee For Remuneration Directors Other 122 Esval S.A. attendance Committe At December 31, 2010 ThCh$ ThCh$ ThCh$ ThCh$

Kevin Davi Kerr 11,353 - - - Pedro Pablo Errazuriz Domínguez 76,463 - 5,098 15,087 Jorge Lesser García Huidobro 34,332 - 3,052 - Stacey Leanne Purcell 13,443 - - - Carlos Williamson Banaprès 7,658 - 2,046 - Olivia Steedman 22,888 - - - ANNUAL REPORT Alexander Galetovic Potsch 15,344 - 4,092 - Nicolás Navarrete Hederra 15,344 - - - Juan Pablo Armas Mac Donald - - - - Alejandro Reyes Vergara 7,544 - 2,012 Mónica Singer González 7,544 - 1,006 - Rodrigo Pérez Mackenna 7,544 - 1,006 - Total 219,457 - 18,312 15,087

The fees paid to Directors and Directors Committee are presented in the Statements of Income under the item Other Expenses.

Details of Related Parties and Transactions with Related Parties between Directors and Executives:

- The Company’s management is not aware of any transactions between related parties and directors and/or executives.

Key management personnel incentive plans:

Esval S.A. has set up an annual bonus plan for its key executives based on to accomplishment of goals and the level of their individual contribution to the company’s profit or loss. 8. Inventories 123 Inventory Measurement Policy:

Inventories are measured at the lower of cost and net realizable value. The cost method is the weighted average cost. ANNUAL REPORT 12/31/2011 12/31/2010 Classes of inventories ThCh$ ThCh$

Domestic material in warehouse 323,397 317,139 Chemical products 87,513 82,920 Fuel (petrol cards) 20,967 20,587 Fuel (petroleum cards) 47,295 34,583 Provision for obsolescence -6,167 -1,326 Total inventories 473,005 453,903

The cost of inventories recognized as an expense during the year ended to December 2011 was ThCh$1,725,281 (ThCh$1,825,613 in 2010).

9. Intangible Assets

The table below presents movements in intangible assets for the reported periods, measured as described in Note 2.4 letter d.

TABLE OF INTANGIBLE MOVEMENTS JANUARY TO DECEMBER 2011 (Consolidated)

Opening Additions Transfers Sales Amortization Other Increases Total Changes Closing Item Balance Expenses (derecognitions) Balance ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

WATER RIGHTS (Indefinite useful life) 25,139,666 252,974 (467,846) 0 0 0 (214,872) 24,924,794 EASEMENTS (Indefinite useful life) 2,775,142 178,515 467,846 0 0 0 646,361 3,421,503 SOFTWARE AND LICENSES NET 939,051 936,217 0 0 (339,908) 0 596,309 1,535,360 OTHER INTAGIBLE NET 2,519,522 61,930 0 0 (202,742) 0 (140,812) 2,378,710 INTANGIBLES COQUIMBO SANITATION CONCESSION NET - (Initial payment) 42,749,971 0 0 0 (1,861,133) 0 (1,861,133) 40,888,838 INTANGIBLES COQUIMBO SANITATION CONCESSION NET - (Operating assets) 43,805,690 5,794,263 0 0 (1,490,784) 0 4,303,479 48,109,169 Total Intangibles 117,929,042 7,223,899 0 0 (3,894,567) 0 3,329,332 121,258,374 TABLE OF INTANGIBLE MOVEMENTS JANUARY TO DECEMBER 2010 (Consolidated) 124

Opening Additions Transfers Sales Amortization Other Increases Total Changes Closing Balance Expenses (derecognitions) Balance Item ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

WATER RIGHTS (Indefinite useful life) 24,997,555 159,737 (17,626) 0 0 0 142,111 25,139,666

EASEMENTS (Indefinite useful life) 2,753,489 71,311 (49,658) 0 0 0 21,653 2,775,142 SOFTWARE AND LICENSES NET 1,542,710 112,386 0 0 (716,045) 0 (603,659) 939,051 OTHER INTAGIBLE NET 2,430,664 543,547 (111,904) 0 (342,785) 0 88,858 2,519,522 ANNUAL REPORT INTANGIBLES COQUIMBO SANITATION CONCESSION NET - (Initial payment) 44,657,746 0 (25,198) 0 (1,882,577) 0 (1,907,775) 42,749,971 INTANGIBLES COQUIMBO SANITATION CONCESSION NET - (Operating assets) 43,227,373 4,637,854 204,386 0 (558,171) (3,705,752) 578,317 43,805,690 Total Intangibles 119,609,537 5,524,835 0 0 (3,499,578) (3,705,752) (1,680,495) 117,929,042

As of December 31, 2011, the Company and its subsidiaries do not keep contractual agreements for the acquisition of new intangible assets.

10. Property, Plant And Equipment

The following information is related to Property, Plant and Equipment:

Net Values:

12/31/2011 12/31/2010 Property, Plant And Equipment ThCh$ ThCh$

Construction in Progress, Net 12,910,834 20,253,389 Land, Net 30,277,521 29906296 Buildings, Net 14,007,861 14,241,139 Plant and Equipment, Net 16,881,816 17,498,251 IT Equipment, Net 436,602 471,827 Fixtures and Fittings, Net 394,114,200 384,750,250 Motor Vehicles, Net 404,507 371,651 Plant and Equipment, Net 1,206,602 1,229,370 Other Property, Plant and Equipment, Net 1,049,246 1,079,993 Other Allocations Support Activities 1,273,383 1,047,751 Property, Plant and Equipment, Net 472,562,572 470,849,917 Gross values: 125 12/31/2011 12/31/2010 Property, Plant And Equipment ThCh$ ThCh$

Construction in Progress, Gross 12,910,834 20,253,389 ANNUAL REPORT

Land, gross 30,227,521 29,906,296 Buildings, gross 20,626,974 20,422,559 Plant and Equipment, gross 42,547,967 40,502,545 IT Equipment, gross 2,922,675 2,668,084 Fixtures and Fittings, gross 572,188,910 551,648,382 Motor Vehicles, gross 1,646,593 1,578,425 Plant and Equipment, gross 4,499,714 4,316,844 Other Property, Plant and Equipment, gross 1,518,760 1,520,366 1,273,383 1,047,751 Property, Plant and Equipment, gross 690,413,331 673,864,641

Detail of Accumulated depreciation:

12/31/2011 12/31/2010 Property, Plant And Equipment ThCh$ ThCh$

Buildings, 6,619,113 6,181,420

Plant and Equipment 25,666,151 23,004,294 IT Equipment, 2,486,073 2,196,257 Fixtures and Fittings, 178,074,710 166,898,132 Motor Vehicles, 1,242,086 1,206,774 Furniture and Equipment, 3,293,112 3,087,474 Other Property, Plant and Equipment 469,514 440,372 Accumulated Depreciation 217,850,759 203,014,723

Reconciliation of changes to property, plant and equipment by class:

As specified in IAS 16, paragraph 73, information is provided for each class of the entity’s Property, Plant and Equipment. Movement Chart Consolidated Fixed Assets January And December 2011: 126 Other Initial Additions Transfers Netting Sales Depreciation increases Changes Final Balance balance Urbanizations expenses Total Concept (decreases) ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$

Construction in Progress, Net 20,253,388 13,077,154 (20,321,906) 0 0 0 (97,802) (7,342,554) 12,910,834

Land, Net 29,906,297 304,700 81,524 0 0 0 (15,000) 371,224 30,277,521 Buildings, Net 14,241,155 129,533 74,883 0 0 (437,710) 0 (233,294) 14,007,861

ANNUAL REPORT Plant and Equipment, Net 17,492,285 1,302,981 758,544 0 0 (2,658,142) (13,852) (610,469) 16,881,816 IT Equipment, Net 472,070 164,266 76,931 0 0 (206,198) 0 34,999 507,069 Fixes installations and accessories, Net 384,758,198 6,793,462 19,385,322 (5,296,437) 0 (11,293,507) (303,306) 9,285,534 394,043,732 Motor vehicles, Net 371,651 205,373 19,494 0 (21,695) (139,800) 0 63,372 435,023 Furniture and equipment, Net 1,230,581 111,728 8,044 0 0 (174,121) (146) (54,495) 1,176,086 Other property, plant and equipment, Net 1,078,388 1,605 0 0 0 (30,747) 0 (29,142) 1,049,246 Other Charges Supporting Activities 1,045,904 409,250 (82,836) 0 0 0 (98,934) 227,480 1,273,384 Total Operating Assets in Concession Coquimbo 0 0 0 0 0 0 0 0 0 Total Assets Esval 470,849,917 22,500,052 0 (5,296,437) (21,695) (14,940,225) (529,040) 1,712,655 472,562,572 Movement Chart Consolidated Fixed Assets January And December 2010: 127 Other Initial Additions Transfers Netting Ventas Depreciation increases Changes Final Balance balance Urbanizations expenses Total Concept (decreases) ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ANNUAL REPORT

Construction in Progress, Net 13,740,670 14,337,401 (7,809,483) 0 0 0 (15,200) 6,512,718 20,253,388

Land, Net 29,763,200 141,766 1,331 0 0 0 0 143,097 29,906,297 Buildings, Net 12,616,819 141,101 1,908,776 0 0 (416,496) (9,061) 1,624,320 14,241,139 Plant and Equipment, Net 18,285,008 1,297,054 488,301 0 0 (2,525,816) (46,296) (786,757) 17,498,251 IT Equipment, Net 488,250 152,757 22,089 0 0 (305,217) 0 (130,371) 357,879 Fixes installations and accessories, Net 388,629,665 12,765,142 6,891,887 (12,786,894) 0 (10,645,142) (104,408) (3,879,415) 384,750,250 Motor vehicles, Net 338,989 36,758 20,201 0 0 (87,429) (1,227) (31,697) 307,292 Furniture and equipment, Net 938,610 180,472 49,049 0 0 (211,800) (1,214) 16,507 955,117 Other property, plant and equipment, Net 1,634,904 0 (237,978) 0 0 (316,932) 0 (554,910) 1,079,994 Other Charges Supporting Activities 898,448 1,096,471 (1,284,148) 0 0 0 0 (187,677) 710,771 Total Operating Assets in Concession Coquimbo 806,668 161,048 (50,025) 0 0 (128,152) 0 (17,129) 789,539 Total Assets Esval 468,141,231 30,309,970 0 (12,786,894) 0 (14,636,984) (177,406) 2,708,686 470,849,917

The fixed assets contributed by third parties and which are associated to urbanizations, at each year-end, are stated net of the complementary account associated with its capitalization.

The capitalization costs during the periods ended December 31, 2011 and December 31, 2010 are as follows:

Year 2011: Esval S.A. : ThCh$241,147 Aguas del Valle S.A. : ThCh$255,987

Year 2010: Esval S.A. : ThCh$309.242 Aguas del Valle S.A. : ThCh$211.454

For the year ended December 31, 2011, restrictions and commitments for the Company and its Subsidiaries are as follows:

- There are no restrictions on the ownership of the property, plant and equipment, nor are they subject to any kind of guarantees for the compliance of obligations;

- No commitments for the acquisition of property, plant and equipment that need to be disclosed exist. 11. Impairment Of Assets

128 Information to be disclosed on impairment of the value of the assets by cash generating unit:

Each Company separately, i.e. Esval S.A. y Aguas del Valle S.A., is defined as a Cash Generating Unit, since each is individually capable of generating future economic benefits. As specified in the standard, the Company will assess whether there is any indication of impairment of the value of any asset at each year-end. If there is any such indication, the Company will estimate the recoverable amount of the asset. Indefinite-lived assets will be tested for impairment at each year-end.

According to the impairment tests performed upon the first-time adoption of the international standards, there was no impairment of either of the two companies. ANNUAL REPORT Esval S.A. y Aguas del Valle S.A. perform annual impairment tests on their indefinite-lived intangible assets, and property, plant and equipment.

The respective impairment tests were performed at December 31, 2011 and 2010 based on the estimates and projections available to the Company, with no impairment occurring in either of the Company’s two Cash Generating Units.

Comparison of the value of the property, plant and equipment and the projected future flows:

12/31/2011 12/31/2010 ThCh$ ThCh$

PROJECTED FUTURE FLOWS 722,034 722,034

Fixed assets gross 690,414 673,865 Accumulated depreciations -217,851 -203,015 Carrying value 472,563 470,850

Intangible assets gross 150,237 147,879 Accumulated amortization -28,978 -26,244 Carrying values 121,259 121,635

ASSETS IFRS 593,822 592,485 Construction in progress 12,911 33,405 IMPAIRMENT ADJUSTED ASSETS 580,911 559,080 24% 29% Difference (if negative, there is impairment) 141,123 162,954 12. Other Non-Current Financial AssetS 129

Accounts receivable from ECONSA CHILE S.A.:

The Aguas del Valle S.A. subsidiary owns exploitation rights of the sanitary concessions of the Coquimbo region awarded through public bid by Empresa de Servicios Sanitarios de Coquimbo (ESSCO) (currently ECONSSA CHILE S.A.). This concession agreement is valued as ANNUAL REPORT established in IFRIC 12.

According to the criteria defined in Note 2.4 d) and pursuant to the concession contract signed by Aguas del Valle S.A., the latter will be entitled to recover the value of the investments that are not paid through tariffs at the end of the concession. Therefore, Aguas del Valle S.A. has recognized accounts receivable that is expected to be recovered upon termination of the concession (in 2033), considering the following parameters for its determination:

• All actual investments in infrastructure have been considered (whose useful life exceeds the concession period) incurred in the years corresponding from 2004 to 2011, and which were informed on an annual basis to Econssa Chile S.A. through Appendix 24 of the Concession Contract.

• The indexation of the account receivable has been determined as per the established in the contract signed by the parties.

• The present value of the account receivable has been determined, considering a discount rate of 7%.

The amount of this account receivable for the years ended 2011 and 2010, is as follows:

2011: Amount of accounts receivable valued upon termination of the concession contract (December 2033) ThCh$ 22,992,228

Present value of the account receivable ThCh$ 4,850,139 (*)

2010: Amount of accounts receivable valued upon termination of the concession contract (December 2033) ThCh$ 17,567,230

Present value of hte account receivable ThCh$ 3,705,752 (*)

(*) = A discount rate equivalent to the expected performance rate (7% per annum) of the business and the expected collection period is considered for these accounts receivable. 13. Other Non-Current Non-Financial Assets 130 Other non-current non-financial assets as of December 31, 2010 and 2011 is as follows:

12/31/2011 12/31/2010 ThCh$ ThCh$

Recovery contract management Litoral Sur 12,769,705 13,535,300 Sanitary study Esval S.A. 664,843 945,076 Tariff study Aguas del Valle S.A. 837,610 0

ANNUAL REPORT Other assets - 146,575 Totals 14,272,158 14,626,951

14. Provisions And Contingent Liabilities

A. Provisions

The detail of this item is as follows:

12/31/2011 12/31/2010 Clases de provisiones ThCh$ ThCh$

Other provisions, current Provision for legal claims 242,931 141,702 Other provisions, current 249,817 292,595 Total other provisions, current 492,748 434,297

Provisions for employee benefits, current: Participation in income and expenses 2,954,897 3,008,656 Total provisions for employee benefits, current: 2,954,897 3,008,656

Provisions for employee benefits, non-current: Severance indemnity provision 430,498 535,123 Total provisions for employee benefits, non-current: 430,498 535,123 As of December 31, 2011 and 2010, movement in current provisions is as follows: 131 Interests Legal Other in profits and Total claims provisions bonds ThCh$ ThCh$ ThCh$ ThCh$ ANNUAL REPORT

Initial balance provisions 141,702 292,595 3,008,656 3,442,953

Changes to provisions - - - 0 Increases (decreases) in existing provisions 101,229 -42,778 1,666,667 1,725,118 Provision used - - -1,703,244 -1,703,244 Other increase (decrease) - - -17,182 -17,182 Total changes to provisions 101,229 -42,778 -53,759 4,692 End balance provisions 242,931 249,817 2,954,897 3,447,645

B. Contingent liabilities

ESVAL S.A.:

- Lawsuits or other legal actions in which the Company is involved:

As of December 31, 2011, the Company is involved in lawsuits that, in aggregate could result in an estimated loss of ThCh$242.931 (ThCh$141.702 at December 31, 2010), which has been reserved for as shown in Letter A of this note.

The Company has various civil lawsuits principally related to compensation for damages that are currently in process. The most significant lawsuits represent in aggregate a possible contingency of approximately ThCh$6.065.938 in total. The most significant legal proceedings are as follows: 132 Case No. Court Parties Amount Origin Current Status and Evaluation

First appealable sentence favorable. Appeal for annulment in the form and appeal lodged by the plaintiff dismissed and Euro América Seguros vs. 5.765 UF There are Compensation for damages first appealable sentence confirmed. 350-2000 1st Civil Valparaíso Esval S.A. insurance covers with for alleged drop in pressure Appeal for annulment in form and substance filed by the a deductible of 350 UF in fire hydrants in a fire plaintiff. The sentence appealed against is expected to be validated

ThCh$1,011,857,118 plus First appealable sentence favorable. Appeal for annulment interest, Compensation for damages in the form and appeal lodged by the plaintiff dismissed and 1952-2002 1st Civil Valparaíso Herrera and others vs. indexation and costs. for alleged non-contractual first appealable sentence confirmed.

ANNUAL REPORT Esval Appeal for annulment in form and substance filed There are insurance covers with liability in a fire by the plaintiff. The sentence appealed against a deductible of UF 350. is expected to be validated ThCh$111,092,505, plus Municipality interests (Arts. 47 and 48 L. Executive lawsuits for charges of 3027-2010 2º Civil Valparaìso of Viña del Mar Municipal Income municipal rights due In first instance filed execution exceptions with Esval S.A. in relation to Arts. 53, to breakdown of pavement and which are pending of resolution 54 and 55 of the Tax Code). occupation of public road Compensation for damages Fernández Toro vs. ThCh$105.000 plus indexation, non-contractual liability in In first instance and the period of discussion is ongoing. 2550-2006 5th Civil Valparaíso Esval S.A. interest and costs presence of sewer in premises of Probable sentence favorable to Esval S.A. plaintiff ThCh$274.116 plus indexation, Selame vs. interest and costs, with Compensation for damages In first instance. Perìodo probatorio extraordinario en 2108-2002 2nd Civil Viña del Mar Constructora CRY and others insurance covers with a for flooding of houses desarrollo. Sentence probably favourable to Esval S.A. deductible of US$10.000. Compensation for damages Lea (Cubillos) vs. ThCh$774.529 plus indexation, for non-contractual liability 1946-2008 1st Civil Valparaíso Esval S.A. interest and costs stemming from alleged In first instance Probable sentence favorable to Esval S.A. non-performance by Esval S.A. Ch$ 394,517 plus indexation, interest and costs plus Riberas del Aconcagua affirmative covenant. There are Compensation for damages In first instance the discussion stage has been 2026-2007 4th Civil Valparaíso vs insurance covers for damage to property completed. Evidence stage being developed. Probable Esval S.A. with a deductible of 10% of from overflow of sewer sentence favorable to ESVAL S.A. the loss with a minimum of UF 1400 compensation for damages 1304-2009 5th Civil Valparaiso Stella S.A. vs. Esval S.A. ThCh$3.765.972, plus interest, for alleged non-performance In first instance. Probable indexation and costs of contract sentence favorable to Esval S.A. Executive lawsuit, for municipal 3011- 2010 1st Civil of Valparaíso Municipality of Viña del Mar vs. $485.189.877, plus interests, rights due to rupture and Appeals have been files to the execution, with are currently Esval S.A. indexation and costs replacement of pavement. pending resolution. (Continued)

Ch$167.000.000, plus interests, Ordinary lawsuits for indexation and costs. There are 133 Pérez Romero Valentina vs. insurance covres for the claim compensation of damages for In first instance. Extraordinary proof period pending. Probable 4375-2009 5th Civil of Valparaíso Esval S.A. with a deductible of 10% of the death in a traffic accident of sentence favorable to Esval S.A.. the loss with a minimum of a company employee, Mr. Jaime UF 1400. Santibáñez Campos

1º de Letras de San Ch$106,200,000,plus interest, Indemnity for damages caused 65.604-2009 Antonio Jiménez y otros con Esval S.A. adjustments and court costs by the entry of wastewater to Pending in first instance. different premises. ANNUAL REPORT Indemnity for damages for contractual responsibility and Singecom Limitada con in subsidy, extracontractual, 2736-2007 1º Civil de Valparaíso Esval S.A. Ch$506,168,583.- for the nullity and breach of Pending in first instance. contracts that plaintiff signed with Esval S.A.

In addition, the Company expects a favorable outcome in the following minor lawsuits grouped by subject matter as follows:

Matter Amount Procedural Stage Total Amount Involved

16 in first instance, 4 in second ThCh$825,907,943 plus and Compensation for damages 22 instannce and 2 in cassation undetermined amount Ch$294,847,915 pluse an Easements 3 All in first instace undetermined amount Municipal Fees 2 2 in first instance ThCh$95,773,199 5 of undetermined amount and 2 for Restitution of property 7 All in first instance ThCh$48.700.000 Collection of pesos 3 All in first instance ThCh$87,814,300 Enviromental action 1 In first instance Undetermined amount Total cases 38

Total Amounts Involved Ch$1,353,043,357

In addition, at December 31, 2011, the Company is subject to the following embargos and precautionary measures under the terms and conditions specified in each particular case: a) Ordinary proceedings entitled “Illustrious Municipality deLimache vs. ESVAL S.A.”, heard by the Fourth Civil Court of Valparaiso, case number 3.069-2003, for collection of municipal fees for execution of works on public thoroughfares. In this proceeding in which nolle prosequi was declared Ch$75,194,142 in funds deposited in a checking account held by Esval S.A. at Banco Santiago were seized. b) Ordinary proceedings entitled “Le Roy vs. Esval S.A.” for restitution of property. This case 134 resulted in the establishment of a precautionary measure to prohibit the negotiation of acts or contracts on the same property which forms part of the El Rebaño Farm in Quilpué. These proceedings have concluded and Esval S.A. petitioned for, and the Court granted, the removal of the precautionary measure. Such action currently needs to be registered in the Real Estate Register in Quilpué.

Aguas del Valle S.A.:

The Company currently faces two civil lawsuits for an undetermined amount and one labor lawsuit for compensation of damages for approximately ThCh$772,200. ANNUAL REPORT If these lawsuits, identified in the two tables below, result in an unfavorable decision, provided that such resolution is final and enforceable, at that time a determination will be made in regards to the the appropriate treatment in the equity of ECONSSA CHILE (formerly ESSAN S.A) or Aguas del Valle S.A. as provided by the “Contract of Transfer of the Right to Exploit Sanitary Concessions” and its respective appendices, signed by Empresa de Servicios Sanitarios de Coquimbo S.A., ECONSSA CHILE (formerly ESSCO S.A.) and Aguas del Valle S.A., on December 22, 2003.

The significant lawsuits of a determinable amount that are included in the regulation indicated in the previous paragraph, with the except for the last one, are as follows:

Report On Proceedings Aguas Del Valle S.A. Case No. Court Parties Amount Origin Current Status and Evaluation

Unfavorable first appealable sentence issued. Appeal sentence reduces Compensation for damages compensation to be paid be Aguas del Valdés Chirinos vs Ch$100,000,000 in non-contractual setting due to Valle S.A. from Ch$142,560,000, to 10-2007 3rd Civil Coquimbo Aguas del Valle S.A. plus insurance for existence of drinking water Ch$100,000,000 Aguas del Valle S.A. 30.000 UF and costs piping on the premises of the makes cassation appeal that is rejected plaintiff by sentence dated 11.04.11 Waiting for the execution of sentence González Saint Loup Adjustment of easement and Evidence stage concluded. Parts 452-2010 3rd Court of Ovalle vs. Aguas del Valle Ch$265,000,000 compensation for damages summoned for sentencing Hernández Juarez, Teresa vs. 22-2009 Civil court of Illapel Rojas Espinoza and Aguas Ch$407,200,000.- Damage indemnity for labor accident Awaiting for notification to the main del Valle defendant, archived on 03.23.11 In addition, the following lawsuits related to the application of the standard mentioned above for which the Company expects a favorable result are as follows: 135

Ch$50,000,000, plus an undetermined Easement 2 All in first instance amount Total Law suits 2

Total Amount Ch$50,000,000 ANNUAL REPORT

Further, the following table presents lawsuits which only affect the results of Aguas del Valle S.A. grouped according to the nature of the case . Such lawsuits include three immaterial judgments that are expected to have a favorable result for the Company.

Matter Amount Procedural Stage Amount Involved

Damage Indemnity 2 In first instance Ch$43,000,000 Indetermined. Request return of amounts Collective or diffused interest 1 In first instance charged and the application of fines Consumer Protection 1 In first instance Ch$44,605,000 Easement 1 In first instance Ch$50,000,000 Total Lawsuits 5 Monto total $ 93.000.000.-

TOTAL AMOUNTS INVOLVED Ch$187,605,000

In certain of the Parent Company’s debt contracts Aguas del Valle S.A. is prohibited from pledging the exploitation rights of the sanitary concessions of Essco S.A.(currently ECONSSA CHILE) and also the rights derived from such contract related to the use and benefit of the exploitation rights, as well as those from current or future revenues or cash flows. 15. Net Equity 136

15.1 Equity of the Parent

15.1.1 Subscribed and paid-in capital and number of shares At December 31, 2011, the issued capital stock of Esval S.A. was ThCh$196.176.015 (ThCh$196.207.284 at December 31, 2010), comprised of 14.962.276.336.000 face value shares fully registered and paid (as detailed in note 2.5) which have listed with the Santiago Stock Exchange of Santiago de Chile, Electronic Stock Exchange of Chile, and the Stock Exchange of Valparaíso.

ANNUAL REPORT These amounts decreased due to the effect of the share repurchase exercised by the shareholders during 2011, whose shares will be given a preferential option as of January 2, 2012. See detail of this transaction in note 2.5.

15.2 Dividends:

The dividends payment policy is determined on an annual basis. Dividends approved and paid by Esval S.A. during 2011 and 2010 were as follows:

At the Ordinary Shareholders’ Meeting held on April 29, 2011, shareholders agreed to distribute 100% of 2010net income, equivalent to Ch$0.00115578584 per Company share, reduced by the interim dividends paid on August 27, 2010 and February 3, 2011. The remainder was paid to the shareholders on May 27, 2011, comprising an aggregate balance of Ch$17,293,187, equivalent to Ch$0.00115578584 per Company share. At the same meeting, shareholders approved the distribution of an additional divided of Ch$0.00033943157 per share, equivalent to Ch$5,078,669, recorded as a reduction to prior year retained earnings. This additional dividend was paid as of May 27, 2011.

At the Meeting, Shareholders were informed of the decision of the Board of Esval S.A. with respect to 2011 net income and the interim dividend policy which includes the possible distribution of up to a maximum of two interim distribution of Ch$0.00025 per share, respectively, recorded as a reduction to 2011 net income, as long as such interim dividends are not in excess of 80% of 2011 income verified at the close of June and September 2011, respectively. The amount of ThCh$3,740,569 accrued in June 2011 was paid in September 2011.

At December 31, 2011, “Other financial liabilities, current” includes ThCh$8,669,820 of dividends payable in the months of February 2012 (interim dividend approved in November 2011 for ThCh$3,740,569) and May 2012 for ThCh$4,929,251, in accordance with the dividend distribution policy decided at the Shareholders’ Meeting of 2011. The Board has informed Shareholders of its intent to distribute at least 80% of 2011 income, however a final determination will be made at the Ordinary Meeting. 137

At the Ordinary Shareholders’ Meeting held on April 30, 2010, shareholders agreed to distribute 100% of 2009 net income, equivalent to Ch$0.00150221 per Company share, reduced by interim dividends paid on August 20, 2009 and the final dividend paid on February 2, 2010. The remainder was paid to the shareholders on May 24, 2010, comprising an aggregatel amount of ThCh$22,476,481, equivalent to Ch$0.001502214 per Company ANNUAL REPORT share.

Details of dividends paid at December 31, 2011 and 2010 are as follows:

Year 2010:

Amount paid Dividend No. Type of Dividend Date of Payment Pesos per Share Charged to Year ThCh$

30 Interim 02.02.2010 0.000250000 2009 3,740,569 31 Final 05.24.2010 0.001002960 2009 15,006,565 32 Interim 08.27.2010 0.000250000 2010 3,740,569 Total paid 22,487,703

Year 2011:

Date of Amount paid Dividend No. Type of Dividend Payment Pesos per Share Charged to Year ThCh$

33 Interim 02.03.2011 0.000250000 2010 3,740,569 34 Final 05.27.2011 0.000655786 2010 9,812,049 35 Additional 05.27.2011 0.000339432 2010 5,078,669 36 Interim 09.06.2011 0.000250000 2011 3,740,569 Total paid 22,371,856 15.3 Other reserves: 138 The nature and purpose of the Other reserves is as follows:

31/12/2011 31/12/2010 ThCh$ ThCh$

Other opening movements 195,942 195,942 Adjustment for monetary correction of capital 2009 (1) 4,617,668 4,617,668 Total Other Reserves 4,813,610 4,813,610 ANNUAL REPORT (1) This balance corresponds mainly to the price-level restatement of 2009 paid-in capital(ThCh$4,617,668), as indicated in Circular Letter No. 456 of the Superintendency of Securities and Insurance.

15.4 Retained earnings:

The movement of retained earnings is as follows:

31/12/2011 31/12/2010 ThCh$ ThCh$

Opening balance (does not include IFRS convergence adjustments) 59,249,870 70,808,203 Initial adjustments for IFRS implementation (1) (9,510,588) (9,510,588) Initial adjustments for IFRS implementation (2) 36,584,661 36,584,661 Dividends (20,931,290) (28,851,520) Income for the period 15,354,326 17,293,187 Total Retained Earnings 80,746,979 86,323,943 (1) Corresponds to the adjustment determined at the date of convergence to IFRS (January 01, 2009), with the exception of revaluations of fixed assets and intangible assets, presented 139 under the following item (2).

31/12/2011 31/12/2010 ThCh$ ThCh$ ANNUAL REPORT

Adjustment for aplication of effective rate to obligations (775,680) (775,680) Adjustment to deferred taxes complimentary account (2,862,210) (2,862,210) Adjustment for deflation in litoral sur contract (5,494,166) (5,494,166) Taxes for fixed asset depreciation (378,532) (378,532) (9,510,588) (9,510,588)

(2) Corresponds to the adjustment determined at the date of convergence to IFRS (January 01, 2009), corresponding to the revaluation of fixed assets and intangible assets, net of deferred taxes. This amount is not distributable to the shareholders, until it is realized. The detail is as follows:

12/31/2011 12/31/2010 ThCh$ ThCh$

Adjustment for land revaluation 23,084,472 23,084,472 Adjustment for water rights revaluation 20,993,433 20,993,433 Adjustment value of fixed and intagible assets 308,044 308,044 Associated deferred taxes -7,801,288 -7,801,288 Total Revaluation of Assets 36,584,661 36,584,661

Disclosures related to Retained Earnings:

The following reserves are included in Retained Earnings:

1. Revaluation of land and intangibles 2. Contribution from third parties 3. Share premium 4. Other reserves due to adjustments related to the intial adoption of IFRS The reserves for revaluation have distribution restrictions, as this balance corresponds to the 140 application of such amounts through the use or sale in order for distribution, as indicated in IAS 16, IFRS 7 and Official Letter No 456 June 29, 2008 of the Securities and Insurance Superintendency.

15.5 Issuance premiums:

Issuance premiums as of December 31, 2011 and 2010 are as follows:

12/31/2011 12/31/2010 ThCh$ ThCh$ ANNUAL REPORT

Initial balance 11,150,887 11,150,887 Movements -38,166 0 Total issuance premiums 11,112,721 11,150,887

Issuance premiums correspond to the surcharge for the investment in the Company’s own shares generated in the 1996, 1997, 1998, 1999 and 2004. In 2011, a charge of ThCh$38,166 was recorded, corresponding to the higher value paid in the repurchase of shares performed in October 2011, due to the dissidence of shareholders.

16. Non-controlling interest

Non-controlling interest is as follows:

Rodrigo Bezanilla Pumarino Taxpayer Number: 7.658.247-5 Ownership interest in Servicios Sanitarios Las Vegas Limitada: 0,01%

12/31/2011 12/31/2010 ThCh$ ThCh$

Minority interest of equity 71 64 Minority interest of profit or loss 7 6 17. Guarantees and Restrictions 141

17.1) Direct guarantees

Guarantee policies and performance bonds have been issued by various institutions, including the following principal parties: The Superintendency of Sanitary Services to ANNUAL REPORT guarantee the conditions for provision of services and development programs in the Company’s concession areas; SERVIU to guarantee replacement of pavement; and to other institutions, in the amount of ThCh$15,430,147 at December 31, 2011, and ThCh12,236,110 at December 31, 2010, respectively

The grantors of these performance bonds do not have the power to sell or pledge these documents

Details of the direct guarantees furnished are as follows:

12/31/2011 12/31/2010 Creditor of the Guarantee Name of Debtor Type of Guarantee ThCh$ ThCh$

S.I.S.S. Esval S.A. Performance bond 7,444,489 5,075,954 SERVIU V REGION Esval S.A. Performance bond 372,117 620,139 DIRECC.REG.VIALIDAD Esval S.A. Performance bond 11,571 10,728 DIRECTOR OBRAS HIDR. Esval S.A. Performance bond 250,312 187,336 I. MUNIC. QUILPUE Esval S.A. Performance bond - 2,462 EMP. DE FERROCARRILES Esval S.A. Performance bond - 6,437 S.I.S.S. Aguas del Valle S.A. Performance bond 2,486,141 2,307,308 SERVIU IV REGION Aguas del Valle S.A. Performance bond 1,015,991 653,959 ESSAN S.A. Aguas del Valle S.A. Performance bond 3,310,382 3,185,879 DIRECC.REG.VIALIDAD Aguas del Valle S.A. Performance bond 10,344 17,551 DIRECTOR OBRAS HIDR. Aguas del Valle S.A. Performance bond 187,572 158,195 SERV.SALUD.COQMBO. Aguas del Valle S.A. Performance bond - 10,162 CIA. MINERA DELPACÍFICO Aguas del Valle S.A. Performance bond 22,294 - MINIST. OBRAS PUBLICAS Aguas del Valle S.A. Performance bond 207,602 - DIR. GRAL. TERR. MARIT. Aguas del Valle S.A. Performance bond 111,332 - Total in Thousands of Ch$ 15,430,147 12,236,110 17.2) Restriction on bond issues 142 La Sociedad mantiene restricciones y obligaciones producto de las emisiones de bonos efectuadas en el mercado nacional y son las siguientes:

a) Submit to the representative of the Bond Holders, in the same term in which these have to be delivered to the Superintendence of Securities and Insurances, a copy of its quarterly and annual financial statements, and all other public information, without exception, that must be sent to such institution.

b) Submit to the bond-holders’ representative a copy of the risk rating reports, within no more than ten working days after receipt from the risk rating agencies. ANNUAL REPORT c) Inform the bond-holders’ representative of the sale, assignment, transfer, contribution or disposal in any other mannner, whether for valuable consideration or not, of the Essential Assets, as soon as such action takes place.

d) Submit to the bond-holders’ representative information on any reduction in its share in the capital of subsidiaries, within no more than thirty working days after such reduction is made.

e) Maintain in its financial statements a ratio between Net Consolidated Financial Debt and the Consolidated Adjusted EBITDA of the last twelve months less than 5.50 times (applicable to the bond series K and M).

f) Maintain a current liability to adjusted equity ratio of no more than 1.5 in the consolidated balance sheet, when this balance shall be prepared under the circumstances indicated in article ninety of the Law on Corporations (applicable to the bond series A, E, H, J).

g) Maintain a Coverage Ratio of Net Financial Assets no less than 2.0 in the Financial Statements (applicable to Bonds Series K and M).

h) Maintain a Coverage Ratio of Net Financial Expenses no less than 2.0 in the Financial Statements (applicable to Bonds Series A, D, E, H, J, K and M).

i) Submit to the bond-holders’ representative, together with the information specified in letter a) above, the available information to verify compliance with the financial indicators specified in letters e), f), g) and h).

j) Inform the bond-holders’ representative of any breach of the obligations specified in the above letters, as soon as the event or infraction occurs or is made known.

k) Do not perform transactions with persons related to Esval S.A. in conditions of equality different from those commonly prevailing in the market, as provided for in article 89 of the Law on Corporations. l) Maintain insurance covers that protect the operating assets of Esval S.A., understood to be the fixed assets subject to the sanitary concessions where Esval S.A. is the holder or which 143 are exploited by Esval S.A. m) Make provisions for all adverse contingencies that might occur, which shall be reflected in the financial statements of Esval S.A. and subsidiaries, according to generally accepted accounting criteria. ANNUAL REPORT n) Esval S.A. or its subsidiaries must not become insolvent or be in a situation in which they recognize their inability to pay their obligations at their respective maturities, or reach agreements with their creditors to avoid bankruptcy. o) With regard to Aguas del Valle S.A., (i) maintain, directly or indirectly, ownership of at least two thirds of its shares or of each of the series of shares, if applicable; and (ii) maintain control of the company; p) Do not furnish collateral or liens or prohibitions of any kind on the shares of Aguas del Valle S.A. owned by the Issuer, without the prior consent of the bond-holders’ representative. q) Aguas del Valle S.A. must not furnish collateral or liens or prohibitions of any kind on (i) the ESSCO Contract; (ii) the right to exploit the sanitary concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; (iii) the use and possession of the right to exploit the sanitary concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; and (iv) the rights granted to Aguas del Valle S.A. from the ESSCO Contract, with regard to present or future cash flows or revenues from the collection of tariffs and the income earned and/or that might be earned by Aguas del Valle S.A. from the ESSCO Contract; r) Do not contract preferential obligations related to those originated from the Bond Issues, unless the Bond Holders participate in the guarantees furnished under the same terms and conditions and with the same degree of preference as the other creditors. 17.3) Restriction due to the issue of the Commercial Papers 144 a) Maintain in its financial statements, a ratio between Net Consolidated Financial Debt and the Consolidated Adjusted EBITDA of the last twelve months less than 5.75 times during 2011 and less than 5.50 times as of 2012 and thereafter. This ratio shall be verified in the quarterly financial statements, as of the date of the Issuance Deed.

b) Maintain a Coverage Ratio of Net Financial Expenses, no less than 2.0 and a Coverage Ratio of Financial Expenses no less than 2.0 in the financial statements.

c) Maintain insurance coverage protecting the operating assets of Esval S.A., understood to be the fixed assets subject to the sanitary concessions where Esval S.A. is the holder or which Esval S.A. exploits, insofar as such insurance coverage is available and the cost is economically ANNUAL REPORT reasonable in relation to the value of the asset, the coverage and the insurable risk.

d) Do not perform transactions with persons related to Esval S.A. in conditions of equality different from those commonly prevailing in the market, as provided for in article 89 of the Law on Corporations.

e) With regard to Aguas del Valle S.A. (i) maintain, directly or indirectly, ownership of at least two thirds of its shares or of each of the series of shares, if applicable; and (ii) maintain control of the company;

f) Aguas del Valle S.A. must not furnish collateral or liens or prohibitions of any kind on (i) the ESSCO Contract; (ii) the right to exploit the sanitary concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; (iii) the use and enjoyment of the right to exploit the sanitary concessions acquired by Aguas del Valle pursuant to the ESSCO Contract; and (iv) the rights issuing for Aguas del Valle S.A. from the ESSCO Contract, with regard to present or future cash flows or revenues from the collection of tariffs and the income earned and/or that might be earned by Aguas del Valle S.A. from the ESSCO Contract;

17.4) Restriction for Credit Bank BBVA:

a) Submit a copy of the Consolidated Financial Statements of the Debtor to the Bank within sixty days of the delivery of such information to the Superintendence of Securities and Insurance.

b) Submit to the Bank a certificate issued by the general manager and/or finance manager of the Debtor or their replacements certifying that no Non-Compliance Clause has been infringed, or any non-compliance, together with the delivery of the Financial Statements referred to above. c) Inform the Bank in writing, as soon as possible, but at the latest within five working days after the date on which any Senior Executive of the Debtor, becomes aware of a) the occurrence 145 of any Non-Compliance Clause or of any non-compliance; b) any related pending legal or administrative action, lawsuit or proceeding that could generate a Significant Adverse Effect; c) any circumstance or situation that could lead to Significant Adverse Effect in the business, activities, operations or financial situation of the Debtor or its subsidiaries. d) The Debtor shall maintain, and ensure that each of its subsidiaries maintain, all necessary ANNUAL REPORT assets for the conduct of its business and operations in good state of preservation and maintenance, except for the wear caused by normal use. Further, the Debtor shall maintain, and ensure that each of its Subsidiaries maintain, adequate insurance to cover such assets in conformity with industry practices. e) The Debtor and/or its Subsidiaries shall ensure that all operations performed with related parties, as defined in Law No. 18,045, whether directly or through other related parties, are performed on an arm’s length basis. f) Maintain in its Financial Statements a ratio between Net Consolidated Financial Debt and Adjusted Consolidated EBITDA of the last twelve months less than or equal to 5.50 times. g) Maintain a Financial Expense Hedge, greater than or equal to 2.0 times.

h) The Debtor shall not issue, grant or allow the existence of, and ensure that its Subsidiaries will not issue, grant or allow the existence of, personal guarantees to guarantee third party obligations and/or pledges over their real estate, copyrights or any other tangible or intangible asset for its property as of the date of this document or that will be acquired in the future, with the sole exception of Allowed Pledges and the personal guarantees and/or Pledges granted to guarantee obligations of Subsidiaries as of the date of the instrument. i) The Debtor shall not sign or allow the existence of, and ensure that its Subsidiaries do not sign or allow the existence of, any contract, agreement or convention that limits, restricts or conditions the grant of actual guarantees over any of its goods or assets, unless such contracts, agreements or conventions allow the Debtor or its subsidiaries to grant actual guarantees in favor of the Bank for the total of the owed amounts, in capital and interests, except for the clauses included in the contracts for the issuance of bonds and securities currently enforced or which will be signed in the future by the Debtor as follows: (1) Maintain assets free of liens, based on the Financial Statements, for an amount of at least 1.5 times the amount of the total issuance of debt included in each of the corresponding issuance contracts of bonds and securities; (2) Refrain from granting actual pledge rights or issue liens or prohibitions of any nature over the shares of the Subsidiary Aguas del Valle S.A. owned by the Debtor; and (3) The Subsidiary Aguas del Valle S.A. must not grant pledge rights or 146 issue liens or prohibitions of any nature over (i) the ESSCO Contract (Transfer Contract of exploitation right of sanitary concessions of Empresa de Servicios Sanitarios de Coquimbo S.A.(”ESSCO”), signed by Aguas del Valle S.A., as operator, and by Empresa de Servicios Sanitarios de Coquimbo S.A., per public deed dated December 22, 2003; (ii) the exploitation right of the sanitary concessions acquired by Aguas del Valle S.A. per the ESSCO Contract; (iii) the use and benefit of the exploitation right of the sanitary concessions acquired by Aguas del Valle S.A. per the ESSCO Contract; and, (iv) the rights arising for Aguas del Valle S.A. from the ESSCO Contract, related to the current or future income or cash flows from the collection of tariffs and the income perceived and/or that could perceive Aguas del Valle S.A. in conformity with the ESSCO Contract.

j) The Debtor will not dispose of or transfer, and will ensure that its Relevant Subsidiaries do ANNUAL REPORT not dispose of or transfer, directly or indirectly, its Essential Assets.

17.5) Compliance with covenants

Based on the information at December 31, 2011, the Company is in compliance with each and every one of the covenants established in the contracts referenced above related to the issuance of bonds and contracts for the issuance of commercial paper, in conformity with the provisions of each of the corresponding contracts and their ammendments. 1. 147 Financial Debt Consolidated Dic-11 Dic-11 Other Financial Liabilities - Current 34,292,805

Plus: Other Financial Liabilities - Non-Current 253,625,087 ANNUAL REPORT Plus: Financial Costs of Debt Issue 3,644,703 Less: AFR Promissory Notes 22,442,191 Financial Debt 269,120,404

Cash and Cash-Equivalent 14,915,169 Plus: Other financial Assets - Current 0 Financial Assets 14,915,169

Financial Debt - Net 254,205,235

2.

EBITDA And Individual Financial Costs - Net (See 1) dic-11

Revenue from Ordinary Activities 89,478,904 Less: Raw materials and Fuel Used 11,993,338 Less: Employee Benefits Expenses 7,952,033 Less: Other Expenses by Nature 23,625,502 INDIVIDUAL EBITDA 45,908,031

dic-11

Financial Costs 13,096,221 Less: Financial Revenue 1,390,650 INDIVIDUAL FINANCIAL COSTS - NET 11,705,571 (1) See information of these individual financial statements of Esval S.A. in Note 21 Operating 148 Segments.

Information related to calculation of Covenants (Bonds Series A, D, E, H and J):

dec-11 Debt To Equity Ratio ThCh$

Total Current Liabilities 64,400,794 Total Non-Current Liabilities 302,595,214 ANNUAL REPORT Total Liabilities in IFRS 366,996,008 Dividends Provisiones and not Declared (4,923,251) Financial Costs of Debt Issue - Current 682,275 Financial Costs of Debt Issue - Non-Current 2,962,428 Net Deferred Tax Assets - Current 2,487,737 Net Deferred Tax Assets - Non-Current 0 Balance of deferred tax rappraissals in the implementation of IFRS (7,493,244) Total Current Liabilities 360,711,953 Adjusted Equity To determine Adjusted Equity, the adjusted equity determined the previous quarter must be adjusted by the variation in the CPI of the quarter and to this amount add the IFRS equity of the last quarter, determined as follows: Equity under IFRS Current Quarter 292,849,396 Dividends Provisioned and not Declared 4,923,251

Equity under IFRS Current Quarter 297,772,647 Equity under IFRS Previous Quarter (discounting dividends not declared) 296,786,867 Equity Variation for the Quarter 985,780

According to the idicated methodology, the Debt to Eauity covenant at the December 31, 2011 closure is 1.30 dec-11 Relationship Debt-Equity (12 mobile months) 149 ThCh$

Revenue from Ordinary Activities 118,565,474 Other Revenue by Nature 0

Raw materials and Fuel Used (15,331,403) ANNUAL REPORT Employee Benefits Expenses (10,429,087) Other Expenses by Nature (31,726,548) EBITDA Calculated 61,078,436 Financial Costs According To Financial Statements (13,181,096) Financial Costs Coverage 4.63

18. Ordinary Income

Revenue from all normal operations and other events is recorded at the fair value of the payment received or receivable, in consideration of the terms and conditions of payment, deductions and credit memorandums.

Revenue from the sale of services is measured at fair value. Invoicing is done based on actual consumption or work performed, net of returns, trade discounts and deductions. Therefore, revenue is recognized when it is transferred to the buyer, recovery is considered probable, and associated costs and possible discounts for erroneous charges may be estimated reliably.

Information based on metered consumption readings is available for the various different billing groups and the respective rate is applied to such consumption. When days of consumption are left out of the reading at month-end, an estimate is made based on the historical data from the prior month valued at the current rate, for which the rate for normal or excess consumption is considered, as applicable. Any difference between current and estimated consumption is adjusted in the following month.

The provisions for services and all of their associated collections are made according to actual consumption, and a monthly provision is made for consumption readings based on prior billings rather than actual billings. Policy for recognizing revenue from sales of Potable water and Sewerage services: 150

from 01/01/2011 from 01/01/2010 Classes of Ordirnary Income to 12/31/2011 to 12/31/2010 ThCh$ ThCh$

Ordinary Income Sale of potable water 67,642,360 63,873,836 Sewarage System Service 46,588,053 42,243,509 Other Ordinary Income 4,335,061 3,435,349 ANNUAL REPORT Total 118,565,474 109,552,694

19. Employee Benefits

The company, at consolidated level, has a workforce of 527 employees, 65 of which are Managers and executives.

There are 338 (Esval 219 and ADV 119) employees that participate in collective agreements at consolidated level .

Disclosures related to benefits upon termination of contractual relationships:

Severance indemnities for termination of labor relationships are governed by the provisions of the Labor Code, except for in special clauses of the respective collective or individual work contracts.

Actuarial assumptions related to the individual terms and conditions of the employees are used for calculating the severance indemnity provision.

The collective and individual work contracts of non-executive personnel of Esval and Aguas del Valle do not include an all-event severance indemnity. 20. Borrowing Costs 151 Policy of interest-accruing loans:

The borrowing costs directly attributable to the acquisition, construction or production of assets that comply with the conditions for qualification are capitalized as part of the cost of such assets. ANNUAL REPORT

Capitalization policy: Interest paid or accrued from debt that finances exclusively qualified assets is capitalized, as stipulated in IAS 23.

Capitalized interest costs, Property, plant and equipment 12/31/2011 12/31/2010

Interest cost capitalization rate Capitalized, Property, plant and equipment 4.21% 4.23% Amount of capitalized interest costs, Property, plant and equipment ThCh$497,134 ThCh$520,696

21. Income Tax

Income tax and deferred taxes

Income tax is recorded based on the net taxable income calculated under in the provisions of Income Tax Law. Deferred taxes are recognized based on current regulations, considering all of the existing temporary differences, tax loss benefits and other events.

Income tax

As of December 31, 2011, Esval S.A. has recorded a provision for income taxes of ThCh$164,594 (ThCh$30,891 at December 31, 2010).

As of December 31, 2011, Aguas del Valle S.A. has recorded a provision for income taxes of ThCh$1,664,935 (ThCh$715,314 at December 31, 2010). As of December 31, 2011 and 2010, the company Servicios Sanitarios Las Vegas Ltda. does 152 not present Net Taxable Income.

The detail of recoverable taxes is as follows, which is presented “net” for each company of the Esval Group:

12/31/2011 12/31/2010 Concepts: ThCh$ ThCh$

Monthly provisional payments, net 1,940,140 1,626,280 Credits for training expenses 68,611 56,801 ANNUAL REPORT Remainder VAT fiscal credit 0 0 Total Recoverable Taxes 2,008,751 1,683,081

The detail of taxes payable is as follows, presented “net” for each company of Esval Group:

12/31/2011 12/31/2010 Concepts: ThCh$ ThCh$

Provision for income tax, net 1,829,529 746,205 Other taxes payable 8,507 42,009 Total recoverable taxes 1,838,036 788,214

The net position of recoverable (payable) taxes, per consolidated entity, is as follows:

12/31/2011 12/31/2010 Concepts: ThCh$ ThCh$

Total recoverable taxes - ESVAL 628,873 1,683,081 Total taxes aqpyable - AGV -458,158 -788,214 Deferred taxes 153 Balances of non-current tax assets and liabilities is as follows:

Deferred tax assets Deferred tax liabilities CONCEPTS Temporary differences 12/31/2011 12/31/2010 12/31/2011 12/31/2010 ThCh ThCh ThCh ThCh ANNUAL REPORT

Trade and other Receivables, net, current 1,477,955 1,268,064 - - Inventories 1,140 265 - - Intangible Assets, net - - (8,954,938) (8,239,525) Revaluation of intangibles - - (3,568,884) (3,568,884) Depreciation and MC Property, Plant and Equipment - Net - - (33,100,442) (29,552,348) Capitalized Interest - - (3,384,628) (3,352,777) Revaluation Plant and Equipment - - (3,924,360) (3,924,360) Other Assets - Non-Current - - (2,461,746) (2,301,001) Deferred Effects From Bond Issues and Effective Rate Differences - - (83,089) (525,980) Uncollectible Accounts - Non-Current 32,812 35,471 - - Vacations Provision 239,966 203,975 - - Accounts Payable Provision 515,800 187,686 - - Other Provisions - Current 333,303 293,288 - - Tax Loss - - - - Other Liabilities - Non-Current 4,337,482 2,609,329 - - Other Events - - - - Subtotal 6,938,458 4,598,078 (55,478,087) (51,464,875) Netting of Balances (6,938,458) (4,598,078) 6,938,458 4,598,078 Total - Net - - (48,539,629) (46,866,797) Reconciliation of tax expense using the legal rate and tax expense using the effective rate: 154 31-12-2011 31-12-2010 Current and deferred income tax expense (income) ThCh$ ThCh$

Current income tax expense 1,829,529 746,205 Income tax on disallowed expenses 44,150 42,009 Current income tax expense, net, total 1,873,679 788,214 Adjustment to Prior Period Current Tax 0 0 Deferred income tax expense 1,736,561 3,087,143 ANNUAL REPORT Total tax expense 3,610,240 3,875,357

Numerical reconciliation of tax expense (income) and the result of multiplying accounting gains by applicable tax rate or rates:

31-12-2011 31-12-2010 ThCh$ ThCh$

Tax expenses using the legal rate 3,792,915 3,598,654 Adjustments to tax expenses using the legal rate, total -182,675 276,703 Tax expenses using the effective rate 3,610,240 3,875,357

Reconciliation of the legal tax rate and the effective tax rate:

31-12-2011 31-12-2010 ThCh$ ThCh$

Legal tax rate 20.00% 17.00% Other increases (decreases) in the legal tax rate -1.00% 1.3% Effective tax rate 19.0% 18.3% 22. Earnings Per Share 155 The basic earnings per share is calculated by dividing profit or loss attributed to equity holders of the parent company by the weighted average number of shares outstanding during the period.

Information to be disclosed on diluted earnings per share: ANNUAL REPORT

The Company has not performed any operations with potential dilutive effects that lead to a diluted gain per share differing from the basic earnings per share.

12/31/2011 12/31/2010 ThCh$ ThCh$ ThCh$ ThCh$ Net profit or loss for the year ThCh$ 15,354,333 17,293,193 Number of shares at year-end 14,959,891,837,009 14,962,276,336,000 Gains (losses) per share ThCh$ 0.0000010 0.0000012

23. Business Segments

Description of the types of products and services providing the ordinary income of each reportable segment:

The Coquimbo Region Segment involves sanitary services to allow for the delivery of production Products and Services , distribution of drinking water, together with collection and treatment of sewage, developed operationally in Region IV. It also includes other services such as Cut-off and Restoration, Fixed Charge for Faucets, Postal Dispatch, Sales of Drinking Water in Water Trucks, Treatment of Excess Liquid Industrial Waste, and sales of sanitary solutions (for people, companies and institutions) etc. Aguas del Valle S.A. is classified in this segment.

The Valparaiso Region Segment includes sanitary services to allow for the delivery of production Products and Services, distribution of drinking water, together with collection and treatment of sewage, developed operationally in Region V. It also includes other services such as Cut-off and Restoration, Fixed Charge for Faucets, Postal Dispatch, Sales of Drinking Water in Water Trucks, Treatment of Excess Liquid Industrial Waste, and sales of sanitary solutions (for people, companies and institutions) etc. Esval S.A. is classified in this segment. Significant Income and Expense Items by segment 156 Coquimbo Region and Valparaiso Region Segment Significant items of ordinary income and expenses are mainly those related to the activity of the segment. There are also significant amounts related to depreciation, personnel and other sundry expenses, included in those relavant to Power and Utilities.

Income

Our income mainly derives from the regulated services that we provide involving: Production and distribution of drinking water and the collection, treatment and disposal of sewage. ANNUAL REPORT

Rates

The most important factor in determining the results of our operations and our financial situation are the rates set for our regulated sales and services. As a natural monopoly, we are regulated by the SISS, and our rates are set in accordance with the Sanitary Services Rates Law - Statutory Decree 70 of 1988.

Our rate levels are reviewed every five years and, during that period, they are subject to additional adjustments linked to an indexation polynomial, if the accumulated change since the previous adjustment is 3.0% or more (rate increase), or -3.0% or less (rate decrease), according to calculations made as a function of various inflation indices. Tariffs Segment Region of Coquimbo 157 In 2011, the tariffs’ negotiation process of Aguas del Valle concluded for the period 2011- 2016. The tariffs were approved by Decree No. 117 (31.08.2011) of the Ministry of Economy, Development and Tourism, effective as of September 14, 2011 through September 13, 2016.

Valparaiso Region Segment Rates ANNUAL REPORT

In 2010, the rate negotiation process for the 2010-2015 period concluded. The new rates approved by Decree 59 (29.01.2010) for Esval S.A., by the Ministry of Economy, Development and Reconstruction came into effect on March 01, 2010.

Details of significant expense items

Coquimbo Region Segments The significant expense items are mainly those related to Payroll, Utilities and Amortization of Intangibles.

Valparaiso Region Segment The significant expense items are mainly those related to Payroll, Power, Depreciation of Fixed Assets and Financial Expenses.

Details of the explanation of measurements of profit or loss, assets and liabilities of each segment:

The measurement applicable to each segment corresponds to the company directly related to the respective region.

The accounting criterion is the accounting record of the economic events from which rights and obligations arise in the same way as they arise in economic relations with third parties. In particular, such records will generate committed balances in an asset and liability account according to the nature of the transaction in each related company, in light of the segment in which it participates. This account is known as Account due to or from Related Companies. Upon consolidation such balances must be netted according to the same consolidation rules explained in IAS 27.

There are no differences in the nature of the measurement of the profit or loss in the various operating segments.

There are no differences in the nature of the measurement of assets and liabilities in the various operating segments. Information to be disclosed on the entity as a whole 158 Information on the main customers: The information on main customers is not relevant, as they are dispersed in a very large number of clients in both segments.

Types of products Coquimbo Region – Valparaiso Region Segments:

Coquimbo Region Segment

The types of products and services for the Water segment are:

Production and distribution of drinking water.

ANNUAL REPORT • •Collection and treatment of sewage. •Aguas del Valle S.A. Segment.

Valparaiso Region Segment

The types of products and services for the water segment are:

• Production and distribution of drinking water. • Collection and trealment of sewage. • Esval S.A. Segment. As of December 31, 2011: 159

Financial situation statement per Esval Aguas del Valle Las Vegas Addition Adjustments Esval Consolidated business segment dec-11 dec-11 dec-11 dec-11 dec-11 dec-11

Assets ANNUAL REPORT Total current assets 40,310,428 6,845,486 0 47,155,914 -132,112 47,023,802 Total non-current assets 604,218,348 98,266,604 712,630 703,197,582 -90,375,980 612,821,602 Total assets 644,528,776 105,112,090 712,630 750,353,496 -90,508,092 659,845,404

Equity and liabilities Liabilities Current liabilities Total current liabilities 56,596,394 7,935,954 60 64,532,408 -132,112 64,400,296 Total non-current liabilities 295,082,559 25,913,113 0 320,995,672 -18,400,458 302,595,214 Total liabilities 351,678,953 33,849,067 60 385,528,080 -18,532,570 366,995,510

Equity Paid-in capital 196,138,347 20,441,842 209,232 216,789,421 -20,651,074 196,138,347 Retained earnings 80,746,979 50,339,950 469,353 131,556,282 -50,809,303 80,746,979 Share premiums 11,150,887 0 0 11,150,887 0 11,150,887 Treasury shares 0 0 0 0 0 0 Other equity interest 0 0 0 0 0 0 Other reserves 4,813,610 481,231 33,985 5,328,826 -515,216 4,813,610 Equity attributable to owners of the parent company 292,849,823 71,263,023 712,570 364,825,416 -71,975,593 292,849,823 Minority interests 0 0 0 0 71 71 Total equity 292,849,823 71,263,023 712,570 364,825,416 -71,975,593 292,849,823 Total equity and liabilities 644,528,776 105,112,090 712,630 750,353,496 -90,508,163 659,845,333 Statemet of income result per business segment Esval Aguas del Valle Las Vegas Addition Adjustments Esval Consolidated 160 In thousand of Chilean pesos

Statement of income Gains (losses) Income fromordinary activities 89,478,904 29,086,570 0 118,565,474 0 118,565,474 Raw material and consumables used -11,993,338 -3,338,066 0 -15,331,404 0 -15,331,404 Expense from employees' benefits -7,952,033 -2,477,054 0 -10,429,087 0 -10,429,086 Expense from depreciation and amortization -15,687,318 -3,766,199 0 -19,453,517 0 -19,453,517 Other expenses -23,625,502 -10,056,972 0 -33,682,474 1,459,671 -32,222,803 ANNUAL REPORT Other gains (losses) 660,348 541,088 0 1,201,436 -1,459,671 -258,235 Financial income 1,390,650 0 0 1,390,650 -326,722 1,063,928 Financial costs -13,096,221 -527,805 0 -13,624,026 326,722 -13,297,303 Gain (loss) in associates and joint-ventures accounted for using the equity method of accounting 7,311,346 0 73,114 7,384,460 -7,384,460 0 Exchange differences 0 0 0 0 0 0 Income from readjustment units -9,055,889 -616,590 0 -9,672,479 0 -9,672,479 Gain (loss) before taxes 17,430,947 8,844,972 73,114 26,349,033 -7,384,460 18,964,574 Expense from income tax -2,076,621 -1,533,619 0 -3,610,240 0 -3,610,241 Gain (loss) from continuing operations 15,354,326 7,311,353 73,114 22,738,793 -7,384,460 15,354,333 Gain (loss) from minoritary interest 0 0 0 0 -7 -7 Gain (loss) 15,354,326 7,311,353 73,114 22,738,793 -7,384,467 15,354,326 As of December 31, 2010: 161

Financial situation statement per Esval Aguas del Valle Las Vegas Addition Adjustments Esval Consolidated business segment dec-10 dec-10 dec-10 dec-10 dec-10 dec-10

Assets ANNUAL REPORT Non-current assets Total current assets 42,004,992 6,040,067 0 48,045,059 -132,033 47,913,025 Total non-current assets 597,679,525 94,033,577 639,516 692,352,618 -85,211,441 607,141,176 Total assets 639,684,517 100,073,644 639,516 740,397,677 -85,343,474 655,054,201

Equity and liabilities Liabilities Current liabilities Total current liabilities different to the liabilities included in the groups of assets for disposal classified as 70,520,859 7,010,941 60 77,531,800 -132,033 77,399,827 held for sale. Total non-current liabilities 270,667,932 29,111,032 0 299,778,964 -20,620,379 279,158,586 Total liabilities 341,188,791 36,121,973 60 377,310,764 -20,752,412 356,558,013

Equity Paid-in capital 196,207,284 20,441,842 209,232 216,858,358 -20,651,074 196,207,284 Retained earnings 59,249,870 43,028,598 396,239 102,674,707 -43,424,837 59,249,870 Share premiums 11,150,887 0 0 11,150,887 0 11,150,887 Treasury shares 0 0 0 0 0 0 Other equity interest 0 0 0 0 0 0 Other reserves 31,887,683 481,231 33,985 32,402,899 -515,216 31,887,683 Equity attributable to owners of the parent company 298,495,725 63,951,670 639,456 363,086,851 -64,591,126 298,495,725 Minority interests 0 0 0 0 64 64 Total equity 298,495,725 63,951,670 639,456 363,086,851 -64,591,062 298,495,789 Total equity and liabilities 639,684,516 100,073,643 639,456 740,397,615 -85,343,474 655,054,201 Consolidation Statement of Income per Nature Esval Aguas del Valle Las Vegas Sum Adjustments Esval 162 In thousand of Chilean pesos - ThCh$ Consolidated

Statement of Income Income (loss) Revenues from ordinary activities 83,384,264 26,168,429 0 109,552,693 0 109,552,693 Used raw material and supplies -10,714,933 -2,740,366 0 -13,455,299 0 -13,455,299 Expenses for employee benefits -7,697,566 -2,428,231 0 -10,125,797 0 -10,125,797 Expense for depreciation and amortization -15,710,835 -3,668,864 0 -19,379,699 0 -19,379,699 Other expenses, per function: -19,970,349 -8,663,853 0 -28,634,202 1,894,549 -26,739,653 ANNUAL REPORT Other income (losses) 1,162,311 255,508 0 1,417,819 -1,894,549 -476,730 Financial income 1,068,782 0 0 1,068,782 -667,536 401,246 Financial expenses 12,168,484 -800,148 0 -12,968,632 667,536 -12,301,096 Participation in income (losses) of investees and joint ventures that are recorded using the equity method 6,230,007 0 62,300 6,292,307 6,292,307 12,584,614 Results per adjustment units -5,760,441 -546,674 0 -6,307,115 0 -6,307,115 Income (loss) before taxes 19,822,757 7,575,800 62,300 27,460,857 -6,292,307 21,168,550 Income tax expense -2,529,570 -1,345,787 0 -3,875,357 0 -3,875,357 Income (loss) from continued operations 17,293,187 6,230,013 62,300 23,585,500 -6,292,307 17,293,193 Income (loss) of minority interest 0 0 0 -6 -6 Income (loss) 17,293,187 6,230,013 62,300 23,585,500 -6,292,313 17,293,187

24. Environment

Since 2005, Esval S.A. has certified its processes under standard ISO 14001:2004, whose environmental management system includes capturing and distributing drinking water up to collection, treatment and final disposal of waste water, including trading and support processes for rendering services.

The compliance of environmental sustainability objectives in the Company depends on each corresponding area, for which management is directly responsible for actions taken in order to reach goals for the Company’s commitments related to this matter. Esval’s voluntary commitment has achieved improvements in its environmental performance. Actions taken to improve the Environmental Performance are: 163 • Adopting a permanent improvement strategy in the Company’s processes.

• Avoiding pollution by pouring residual liquids from the Company’s processes.

• Avoiding pollution by controlling residuals by recycling or proper disposal. ANNUAL REPORT The Environmental Management System is part of the Integrated System of management of quality, environment, Safety and Occupational health which is based on the Integral System Management Policy (“SIG”).

To comply with commitments in the SIG policy, the Company has established objectives associated with a number of indicators, goals and control points, which allow the monitoring and evaluation of compliance. The Company has established programs to be developed, including the assignment of responsibilities, means and terms in order to achieve its environmental objectives and goals..

In March 2011, Esval S.A. was re-certified under the standards of ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007, by the company Bureau Veritas Certification-Chile.

Disbursements committed in environmental material:

Esval:

Adjustments to be made for environmental aspects About 58 million

Aguas del Valle:

Handling of sludge generated in Sewage Water Treatment Plants: 288 (millions approximately).

Environmental Monitoring:

The Company performs regular control testing over the sanitation systems in the various coastal towns and locations with treatment facilities near ocean shores. The environmental monitoring campaigns defined by the Maritime Authorities are performed on a monthly basis and include taking samples and performing analyses in: Effluents in the sea water by taking samples at different depths, on beaches and along the coastline, as well as taking samples of the benthonic communities and sediments on the sea floor, in order to determine how the diversity, uniformity and richness of the species have changed. Oceanographic 164 studies are also performed in the areas where the emissions discharge into the sea. All of this monitoring and analysis is performed in order to ensure compliance with the environmental quality standards stipulated by authorities. The cost of these contracts at December 31, 2011 was ThCh$504,829 (ThCh$406,860 at December 31, 2010).

Furthermore, control of the existing sewage treatment plants in locations and towns located mainly in the inland regions, based on activated sludge and full mixture aerated ponds, includes the implementation of monthly monitoring initiatives as defined by the Superintendency of Sanitary Services and the Ministerio del Medio Ambiente in order to ensure compliance with the emissions discharged into surface water, as required by Supreme Decree 90/00. ANNUAL REPORT Likewise, control is exercised over liquid industrial waste entering our sewage collectors to control and verify compliance with Supreme Decree 609/98. To that end, the company has rates approved by the Superintendency of Sanitary Services for monitoring these emissions, which are paid by industrial clients.

The Company has a modern laboratory equipped for microbiological and physical-chemical analyses both of the drinking water mains and the sewage collectors. The lab is accredited under the INN-SISS Agreement as a Testing Lab according to NCh-ISO 17025 Of. 2001. 25. Subsequent Events 165 On February 1, 2012, concluded the period of first refusal to the sale of the Series A and C shares of the Company, as described in note 15.1, according to the following detail:

N° Shares Series % Avance Issue Suscribed Surplus ANNUAL REPORT

A 1.439.791 3.277 1.436.514 0,23 C 2.383.059.200 5.787.971 2.377.271.229 0,24

The remainder of the shares series A and C were placed on the stock exchange, in accordance with the provisions of Article 27 of the Law 18.046.

On March 1, 2012, it was reported that Mr. Nicolas Navarrete Hederra, has resigned as Director of the Company.

On March 8, 2012, it was reported that Ms. Stacey Purcell, submitted his resignation as Director of the Company.

Between January 1, 2012 and the date of issuance of these financial statements have been other events of a financial or otherwise, significantly affecting stocks or interpretation of these consolidated financial statements.

Rodolfo Toro Carrasco Rodrigo Azócar Hidalgo General Accountan CEO 166 ANNUAL REPORT